UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended ~~October 3, 2021~~July 10, 2022


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

For the transition period from to

Commission File Number: 001-34851

RED ROBIN GOURMET BURGERS, INC.

(Exact name of registrant as specified in its charter)


Delaware						84-1573084
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

~~6312 S. Fiddlers Green Circle,~~10000 E. Geddes Avenue, Suite ~~200N~~500
~~Greenwood Village,~~Englewood, Colorado ~~80111~~80112

(Address of principal executive offices) (Zip Code)

(303) 846-6000

(Registrant's telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☐

Accelerated Filer

☒

Non-accelerated Filer

☐

Smaller Reporting Company

☐

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value

RRGB

~~NASDAQ~~Nasdaq

(Global Select Market)

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

As of ~~November~~August 8, ~~2021,~~2022, there were ~~15,716,181~~15,893,807 shares of the registrant's common stock, par value of $0.001 per share outstanding.

Table of Contents

RED ROBIN GOURMET BURGERS, INC.

Table of Contents

PART I — FINANCIAL INFORMATION

ITEM 1. Financial Statements (unaudited)

RED ROBIN GOURMET BURGERS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(in thousands, except for per share amounts)	(in thousands, except for per share amounts)	October 3, 2021		December 27, 2020		(in thousands, except for per share amounts)	July 10, 2022		December 26, 2021
Assets:	Assets:					Assets:
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	17,757	$	16,116	Cash and cash equivalents	$	50,338	$	22,750
Accounts receivable, net	Accounts receivable, net	11,939		16,510		Accounts receivable, net	12,578		21,400
Inventories	Inventories	23,769		23,802		Inventories	25,216		25,219
Income tax receivable	Income tax receivable	16,165		16,662		Income tax receivable	681		15,824
Prepaid expenses and other current assets	Prepaid expenses and other current assets	12,439		13,818		Prepaid expenses and other current assets	14,155		16,963
Restricted cash						Restricted cash	8,676		—
Total current assets	Total current assets	82,069		86,908		Total current assets	111,644		102,156
Property and equipment, net	Property and equipment, net	388,881		427,033		Property and equipment, net	354,199		386,336
Right of use assets, net		419,788		425,573
Operating lease assets, net						Operating lease assets, net	383,500		400,825

Intangible assets, net	Intangible assets, net	22,419		24,714		Intangible assets, net	19,848		21,292
Other assets, net	Other assets, net	8,567		10,511		Other assets, net	15,188		18,389
Total assets	Total assets	$	921,724	$	974,739	Total assets	$	884,379	$	928,998
Liabilities and stockholders' equity:	Liabilities and stockholders' equity:					Liabilities and stockholders' equity:
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	34,638	$	20,179	Accounts payable	$	32,419	$	32,510
Accrued payroll and payroll-related liabilities	Accrued payroll and payroll-related liabilities	32,555		27,653		Accrued payroll and payroll-related liabilities	33,070		32,584
Unearned revenue	Unearned revenue	42,621		50,138		Unearned revenue	37,832		54,214
Current portion of lease obligations		49,894		55,275
Current portion of operating lease obligations						Current portion of operating lease obligations	48,080		48,842
Current portion of long-term debt	Current portion of long-term debt	9,692		9,692		Current portion of long-term debt	2,000		9,692
Accrued liabilities and other	Accrued liabilities and other	42,240		39,617		Accrued liabilities and other	53,161		45,458
Total current liabilities	Total current liabilities	211,640		202,554		Total current liabilities	206,562		223,300
Long-term debt	Long-term debt	147,471		160,952		Long-term debt	189,373		167,263
Long-term portion of lease obligations		450,673		465,233
Long-term portion of operating lease obligations						Long-term portion of operating lease obligations	413,278		435,136
Other non-current liabilities	Other non-current liabilities	15,775		25,287		Other non-current liabilities	13,591		26,325
Total liabilities	Total liabilities	$	825,559	$	854,026	Total liabilities	822,804		852,024
Commitments and contingencies (see note 8)	Commitments and contingencies (see note 8)					Commitments and contingencies (see note 8)
Stockholders' equity:	Stockholders' equity:					Stockholders' equity:
Common stock; $0.001 par value: 45,000 shares authorized; 20,449 shares issued; 15,722 and 15,548 shares outstanding as of October 3, 2021 and December 27, 2020		$	20	$	20
Preferred stock, $0.001 par value: 3,000 shares authorized; no shares issued and outstanding as of October 3, 2021 and December 27, 2020		—		—
Treasury stock 4,727 and 4,901 shares, at cost, as of October 3, 2021 and December 27, 2020		(192,819)		(199,908)
Common stock; $0.001 par value: 45,000 shares authorized; 20,449 shares issued; 15,899 and 15,722 shares outstanding as of July 10, 2022 and December 26, 2021						Common stock; $0.001 par value: 45,000 shares authorized; 20,449 shares issued; 15,899 and 15,722 shares outstanding as of July 10, 2022 and December 26, 2021	20		20
Preferred stock, $0.001 par value: 3,000 shares authorized; no shares issued and outstanding as of July 10, 2022 and December 26, 2021						Preferred stock, $0.001 par value: 3,000 shares authorized; no shares issued and outstanding as of July 10, 2022 and December 26, 2021	—		—
Treasury stock 4,550 and 4,727 shares, at cost, as of July 10, 2022 and December 26, 2021						Treasury stock 4,550 and 4,727 shares, at cost, as of July 10, 2022 and December 26, 2021	(184,205)		(192,803)
Paid-in capital	Paid-in capital	240,445		243,407		Paid-in capital	239,607		242,560
Accumulated other comprehensive income (loss), net of tax		10		(4)
Accumulated other comprehensive (loss) income, net of tax						Accumulated other comprehensive (loss) income, net of tax	(6)		1
Retained earnings	Retained earnings	48,509		77,198		Retained earnings	6,159		27,196
Total stockholders' equity	Total stockholders' equity	96,165		120,713		Total stockholders' equity	61,575		76,974
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	921,724	$	974,739	Total liabilities and stockholders' equity	$	884,379	$	928,998

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

RED ROBIN GOURMET BURGERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)


		Twelve Weeks Ended				Forty Weeks Ended					Twelve Weeks Ended				Twenty-Eight Weeks Ended
(in thousands, except for per share amounts)	(in thousands, except for per share amounts)	October 3, 2021		October 4, 2020		October 3, 2021		October 4, 2020		(in thousands, except for per share amounts)	July 10, 2022		July 11, 2021		July 10, 2022		July 11, 2021
Revenues:	Revenues:									Revenues:
Restaurant revenue	Restaurant revenue	$	270,202	$	197,009	$	861,036	$	658,587	Restaurant revenue	$	288,657	$	272,157	$	669,269	$	590,834
Franchise and other revenues	Franchise and other revenues	5,242		3,469		17,658		9,078		Franchise and other revenues	5,433		4,818		20,371		12,416

Total revenues	Total revenues	275,444		200,478		878,694		667,665		Total revenues	294,090		276,975		689,640		603,250
Costs and expenses:	Costs and expenses:									Costs and expenses:
Restaurant operating costs (excluding depreciation and amortization shown separately below):	Restaurant operating costs (excluding depreciation and amortization shown separately below):									Restaurant operating costs (excluding depreciation and amortization shown separately below):
Cost of sales	Cost of sales	62,671		46,037		193,754		155,243		Cost of sales	72,702		61,917		163,643		131,083
Labor	Labor	99,725		74,344		310,333		255,652		Labor	101,643		98,949		239,751		210,608
Other operating	Other operating	51,462		37,631		156,102		124,585		Other operating	52,003		46,928		119,867		104,640
Occupancy	Occupancy	22,519		22,099		74,233		76,514		Occupancy	22,980		21,614		53,579		51,714
Depreciation and amortization	Depreciation and amortization	18,881		19,173		63,984		68,053		Depreciation and amortization	17,637		19,215		41,556		45,103
General and administrative expenses		17,691		15,190		57,664		56,054
Selling expenses		12,652		6,094		31,635		26,429
Selling, general and administrative expenses										Selling, general and administrative expenses	32,095		28,346		66,475		58,956
Pre-opening costs	Pre-opening costs	418		89		792		245		Pre-opening costs	235		374		297		374
Other charges		1,561		4,416		9,228		138,296
Other charges, net										Other charges, net	8,146		2,196		13,453		7,667
Total costs and expenses	Total costs and expenses	287,580		225,073		897,725		901,071		Total costs and expenses	307,441		279,539		698,621		610,145

Loss from operations	Loss from operations	(12,136)		(24,595)		(19,031)		(233,406)		Loss from operations	(13,351)		(2,564)		(8,981)		(6,895)
Other expense:	Other expense:									Other expense:
Interest expense, net and other	Interest expense, net and other	2,870		2,280		9,986		7,629		Interest expense, net and other	4,147		2,786		11,560		7,116

Loss before income taxes	Loss before income taxes	(15,006)		(26,875)		(29,017)		(241,035)		Loss before income taxes	(17,498)		(5,350)		(20,541)		(14,011)
Income tax benefit		(26)		(20,696)		(328)		(4,297)
Income tax provision										Income tax provision	434		(354)		496		(302)
Net loss	Net loss	$	(14,980)	$	(6,179)	$	(28,689)	$	(236,738)	Net loss	$	(17,932)	$	(4,996)	$	(21,037)	$	(13,709)
Loss per share:	Loss per share:									Loss per share:
Basic	Basic	$	(0.95)	$	(0.40)	$	(1.83)	$	(16.98)	Basic	$	(1.13)	$	(0.32)	$	(1.33)	$	(0.88)
Diluted	Diluted	$	(0.95)	$	(0.40)	$	(1.83)	$	(16.98)	Diluted	$	(1.13)	$	(0.32)	$	(1.33)	$	(0.88)
Weighted average shares outstanding:	Weighted average shares outstanding:									Weighted average shares outstanding:
Basic	Basic	15,709		15,540		15,647		13,945		Basic	15,830		15,665		15,783		15,617
Diluted	Diluted	15,709		15,540		15,647		13,945		Diluted	15,830		15,665		15,783		15,617

Other comprehensive (loss) income:
Other comprehensive loss:										Other comprehensive loss:
Foreign currency translation adjustment	Foreign currency translation adjustment	$	(6)	$	9	$	14	$	(1,121)	Foreign currency translation adjustment	$	(18)	$	(1)	$	(7)	$	20
Other comprehensive (loss) income, net of tax	Other comprehensive (loss) income, net of tax	(6)		9		14		(1,121)		Other comprehensive (loss) income, net of tax	(18)		(1)		(7)		20
Total comprehensive loss	Total comprehensive loss	$	(14,986)	$	(6,170)	$	(28,675)	$	(237,859)	Total comprehensive loss	$	(17,950)	$	(4,997)	$	(21,044)	$	(13,689)

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

RED ROBIN GOURMET BURGERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)


		Common Stock			Treasury Stock					Accumulated Other Comprehensive (Loss) Income, net of tax								Common Stock			Treasury Stock					Accumulated Other Comprehensive (Loss) Income, net of tax
								Paid-in Capital					Retained Earnings											Paid-in Capital					Retained Earnings
(in thousands)	(in thousands)	Shares	Amount		Shares	Amount						Total			Accumulated Other Comprehensive (Loss) Income, net of tax		(in thousands)	Shares	Amount		Shares	Amount						Total			Accumulated Other Comprehensive (Loss) Income, net of tax
Balance, December 27, 2020		20,449	$	20	4,901	$	(199,908)	$	243,407	$	(4)		$	77,198
Balance, December 26, 2021																	Balance, December 26, 2021	20,449	$	20	4,727	$	(192,803)	$	242,560	$	1		$	27,196
Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan	Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan	—	—		(74)	3,025		(3,640)		—			—		(615)		Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan	—	—		(64)	2,781		(2,846)		—			—		(65)

Non-cash stock compensation	Non-cash stock compensation	—	—		—	—		880		—			—		880		Non-cash stock compensation	—	—		—	—		3,042		—			—		3,042
Net loss	Net loss	—	—		—	—		—		—			(8,713)		(8,713)		Net loss	—	—		—	—		—		—			(3,105)		(3,105)
Other comprehensive income	Other comprehensive income	—	—		—	—		—		21			—		21		Other comprehensive income	—	—		—	—		—		11			—		11

Balance, April 18, 2021		20,449	$	20	4,827	$	(196,883)	$	240,647	$	17		$	68,485	$	112,286

Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan		—	—		(95)	3,844		(3,547)		—			—		297

Non-cash stock compensation		—	—		—	—		1,577		—			—		1,577
Net loss		—	—		—	—		—		—			(4,996)		(4,996)
Other comprehensive (loss)		—	—		—	—		—		(1)			—		(1)
Balance, July 11, 2021		20,449	$	20	4,732	$	(193,039)	$	238,677	$	16		$	63,489	$	109,163
Balance, April 17, 2022																	Balance, April 17, 2022	20,449	$	20	4,663	$	(190,022)	$	242,756	$	12		$	24,091	$	76,857

Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan	Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan	—	—		(5)	220		(280)		—			—		(60)		Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan	—	—		(113)	5,817		(5,691)		—			—		126

Non-cash stock compensation	Non-cash stock compensation	—	—		—	—		2,048		—			—		2,048		Non-cash stock compensation	—	—		—	—		2,542		—			—		2,542
Net loss	Net loss	—	—		—	—		—		—			(14,980)		(14,980)		Net loss	—	—		—	—		—		—			(17,932)		(17,932)
Other comprehensive loss	Other comprehensive loss	—	—		—	—		—		(6)			—		(6)		Other comprehensive loss	—	—		—	—		—		(18)			—		(18)
Balance, October 3, 2021		20,449	$	20	4,727	$	(192,819)	$	240,445	$	10		$	48,509	$	96,165
Balance, July 10, 2022																	Balance, July 10, 2022	20,449	$	20	4,550	$	(184,205)	$	239,607	$	(6)		$	6,159	$	61,575


	Common Stock			Treasury Stock					Accumulated Other Comprehensive Loss, net of tax
							Paid-in Capital				Retained Earnings
(in thousands)	Shares	Amount		Shares	Amount								Total
Balance, December 27, 2020	20,449	$	20	4,901	$	(199,908)	$	243,407	$	(4)	$	77,198	$	120,713
Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan	—	—		(74)	3,025		(3,640)		—		—		(615)


Non-cash stock compensation	—	—		—	—		880		—		—		880
Net loss	—	—		—	—		—		—		(8,713)		(8,713)
Other comprehensive income	—	—		—	—		—		21		—		21

Balance, April 18, 2021	20,449	$	20	4,827	$	(196,883)	$	240,647	$	17	$	68,485	$	112,286
Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan	—	—		(95)	3,844		(3,547)		—		—		297


Non-cash stock compensation	—	—		—	—		1,577		—		—		1,577
Net loss	—	—		—	—		—		—		(4,996)		(4,996)
Other comprehensive loss	—	—		—	—		—		(1)		—		(1)

Balance July 11, 2021	20,449	$	20	4,732	$	(193,039)	$	238,677	$	16	$	63,489	$	109,163

See Notes to Condensed Consolidated Financial Statements.

~~Table of Contents~~

~~RED ROBIN GOURMET BURGERS, INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS~~'~~EQUITY~~

~~(Unaudited)~~
Common Stock Treasury Stock Accumulated
Other
Comprehensive
Loss,
net of tax
Paid-in
Capital Retained
Earnings
(in thousands) Shares Amount Shares Amount Total
Balance, December 29, 2019 17,851 $ 18 4,928 $ (202,313) $ 213,922 $ (4,373) $ 353,266 $ 360,520
Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan — — (39) 1,605 (1,388) — — 217
Acquisition of treasury stock — — 72 (1,635) — — — (1,635)
Non-cash stock compensation — — — — 712 — — 712
Net loss — — — — — — (174,298) (174,298)
Other comprehensive loss — — — — — (1,147) — (1,147)
Balance, April 19, 2020 17,851 $ 18 4,961 $ (202,343) $ 213,246 $ (5,520) $ 178,968 $ 184,369
Issuance of common stock, $0.001 par value, net of stock issuance costs 2,598 2 — — 28,723 — — 28,725
Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan — — (59) 2,398 (2,228) — — 170
Non-cash stock compensation — — — — 1,071 — — 1,071
Net loss — — — — — — (56,261) (56,261)
Other comprehensive income — — — — — 17 — 17
Balance July 12, 2020 20,449 $ 20 4,902 $ (199,945) $ 240,812 $ (5,503) $ 122,707 $ 158,091
Issuance of common stock, $0.001 par value, net of stock issuance costs (7) (7)
Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan — — (1) 37 (73) — — (36)
Non-cash stock compensation — — — — 1,316 — — 1,316
Net loss — — — — — — (6,179) (6,179)
Other comprehensive income — — — — — 9 — 9
Balance, October 4, 2020 20,449 $ 20 4,901 $ (199,908) $ 242,048 $ (5,494) $ 116,528 153,194

~~See Notes to Condensed Consolidated Financial Statements.~~

Table of Contents

RED ROBIN GOURMET BURGERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


		Forty Weeks Ended					Twenty-Eight Weeks Ended
(in thousands)	(in thousands)	October 3, 2021		October 4, 2020		(in thousands)	July 10, 2022		July 11, 2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net loss	Net loss	$	(28,689)	$	(236,738)	Net loss	$	(21,037)	$	(13,709)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Adjustments to reconcile net loss to net cash provided by operating activities:						Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	63,984		68,053		Depreciation and amortization	41,556		45,103
Gift card breakage	Gift card breakage	(3,231)		(2,329)		Gift card breakage	(8,099)		(2,793)
Goodwill and asset impairment		1,357		116,193
Non-cash other charges		319		(2,438)
Deferred income tax provision		—		52,439
Restaurant asset impairment						Restaurant asset impairment	10,861		1,357
Non-cash other charges, net						Non-cash other charges, net	(190)		509

Stock-based compensation expense	Stock-based compensation expense	4,501		3,082		Stock-based compensation expense	5,571		2,457
Other, net	Other, net	2,228		639		Other, net	2,783		1,913
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable	Accounts receivable	4,544		13,250		Accounts receivable	8,825		5,159
Income tax receivable	Income tax receivable	520		(57,756)		Income tax receivable	15,242		334

Inventories						Inventories	(146)		(594)
Prepaid expenses and other current assets	Prepaid expenses and other current assets	1,014		11,229		Prepaid expenses and other current assets	2,707		1,454
Lease assets, net of liabilities		(12,628)		19,194
Operating lease assets, net of liabilities						Operating lease assets, net of liabilities	(7,547)		(8,927)
Trade accounts payable and accrued liabilities	Trade accounts payable and accrued liabilities	16,948		(9,864)		Trade accounts payable and accrued liabilities	4,360		17,358
Unearned revenue	Unearned revenue	(4,286)		(9,331)		Unearned revenue	(8,283)		(3,814)
Other operating assets and liabilities, net	Other operating assets and liabilities, net	(8,964)		11,976		Other operating assets and liabilities, net	(10,164)		(8,623)
Net cash provided by (used in) operating activities		37,617		(22,401)
Net cash provided by operating activities						Net cash provided by operating activities	36,439		37,184
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of property and equipment		(19,987)		(14,870)
Purchases of property, equipment, and intangible assets						Purchases of property, equipment, and intangible assets	(15,893)		(10,854)
Proceeds from sales of real estate and property, plant, and equipment and other investing activities	Proceeds from sales of real estate and property, plant, and equipment and other investing activities	20		739		Proceeds from sales of real estate and property, plant, and equipment and other investing activities	269		20
Net cash used in investing activities	Net cash used in investing activities	(19,967)		(14,131)		Net cash used in investing activities	(15,624)		(10,834)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Borrowings of long-term debt	Borrowings of long-term debt	109,500		168,000		Borrowings of long-term debt	282,151		68,300
Payments of long-term debt and finance leases	Payments of long-term debt and finance leases	(125,216)		(159,004)		Payments of long-term debt and finance leases	(265,744)		(85,164)
Purchase of treasury stock		—		(1,635)

Debt issuance costs	Debt issuance costs	(870)		(2,952)		Debt issuance costs	(4,869)		(616)
Proceeds from issuance of common stock, net of stock issuance costs		—		28,945
Proceeds from exercise of stock options and employee stock purchase plan		549		666
Net cash (used in) provided by financing activities		(16,037)		34,020
Proceeds related to real estate sale						Proceeds related to real estate sale	3,856		—
Proceeds from other financing activities, net						Proceeds from other financing activities, net	61		549
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	15,455		(16,931)
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	28		(166)		Effect of exchange rate changes on cash	(6)		34
Net change in cash and cash equivalents		1,641		(2,678)
Net change in cash and cash equivalents, and restricted cash						Net change in cash and cash equivalents, and restricted cash	36,264		9,453
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	16,116		30,045		Cash and cash equivalents, beginning of period	22,750		16,116
Cash and cash equivalents, end of period		$	17,757	$	27,367
Cash and cash equivalents, and restricted cash, end of period						Cash and cash equivalents, and restricted cash, end of period	$	59,014	$	25,569

Supplemental disclosure of cash flow information	Supplemental disclosure of cash flow information					Supplemental disclosure of cash flow information
Income tax refunds received, net	Income tax refunds received, net	$	(840)	$	(2,391)	Income tax refunds received, net	$	(14,761)	$	(628)
Interest paid, net of amounts capitalized	Interest paid, net of amounts capitalized	$	7,586	$	7,514	Interest paid, net of amounts capitalized	$	7,462	$	5,423

See Notes to Condensed Consolidated Financial Statements.

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RED ROBIN GOURMET BURGERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation and Recent Accounting Pronouncements

Red Robin Gourmet Burgers, Inc., a Delaware corporation, together with its subsidiaries ("Red Robin" or the "Company"), primarily operates, franchises, and develops full-service restaurants in North America. As of ~~October 3, 2021,~~July 10, 2022, the Company owned and operated ~~430~~426 restaurants located in 38 states. The Company also had ~~101~~102 franchised full-service restaurants in 16 states and 1 Canadian province. The Company operates its business as 1 operating and 1 reportable segment.

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of Red Robin and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The Company's financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The results of operations for any interim period are not necessarily indicative of results for the full year.

The accompanying Condensed Consolidated Financial Statements of Red Robin have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"), including the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in the Company's annual consolidated financial statements on Form 10-K have been condensed or omitted. The Condensed Consolidated Balance Sheet as of December ~~27, 2020~~26, 2021 has been derived from the audited consolidated financial statements as of that date, but does not include all disclosures required for audited annual financial statements. For further information, please refer to and read these interim Condensed Consolidated Financial Statements in conjunction with the Company's audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December ~~27, 2020~~26, 2021 filed with the SEC on March ~~3, 2021.~~10, 2022.

Our current, prior, and ~~prior~~upcoming year periods, period end dates, and number of weeks included in the period are summarized in the table below:

Periods

Period End Date

Number of Weeks in Period

Current and Prior Fiscal Quarters:

First Quarter 2022

April 17, 2022

First Quarter 2021

April 18, 2021

~~First~~Second Quarter ~~2020~~2022

~~April 19, 2020~~July 10, 2022

1612

Second Quarter 2021

July 11, 2021

~~Second Quarter 2020~~

~~July 12, 2020~~

~~Third Quarter 2021~~

~~October 3, 2021~~

~~Third Quarter 2020~~

~~October 4, 2020~~

Current and Prior Fiscal Years:

Fiscal Year 2022

December 25, 2022

Fiscal Year 2021

December 26, 2021

Upcoming fiscal year:

Fiscal Year ~~2020~~2023

December ~~27, 2020~~31, 2023

5253

Reclassifications

Certain amounts presented have been reclassified within the ~~October 4, 2020~~July 11, 2021 Condensed Consolidated Statement of Cash Flows to conform with the current period presentation, including prior year reclassifications ~~within Changes in~~from Lease assets, net of liabilities to Other operating assets and liabilities. The reclassifications had no effect on the Company’s cash flows from operations.

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~~Certain amounts presented have been reclassified within~~
Change in Accounting Estimate - Gift Card Breakage

As part of its annual assessment of gift card breakage and during the ~~October 4, 2020 Condensed Consolidated Statements Of Operations And Comprehensive Loss~~twenty-eight weeks ended July 10, 2022, the Company re-evaluated the estimated redemption pattern related to ~~present General~~gift cards and aligned the recognition of gift card breakage to the updated estimated redemption pattern. As a result, the Company recognized $5.9 million of additional gift card breakage in Franchise and other revenues, partially offset by $0.6 million of associated commissions costs recognized in Selling, general and administrative expenses, in the first quarter of 2022. This change in accounting estimate decreased net loss by $5.2 million, or $0.33 per basic and ~~Selling expenses separately~~diluted share for ~~improved comparability and alignment with industry presentation.~~the twenty-eight weeks ended July 10, 2022. The ~~reclassifications had no effect on~~Company does not expect the ~~Company’s Total costs and expenses, Loss from operations, or Net loss.~~

~~Recent Accounting Pronouncements~~

~~Reference Rate Reform~~

~~In March 2020, FASB issued Update 2020-04, Reference Rate Reform (Topic 848): Facilitation~~impact of the Effects of Reference Rate Reform on Financial Reporting. This update provides temporary optional expedients to applying the reference rate reform guidance to contracts that reference LIBOR or another reference rate expectedthis change in estimate to be discontinued. Under this update, contract modifications resulting in a new reference rate may be accounted for as a continuation of the existing contract. This guidance is effective upon issuance of the update and appliesmaterial to ~~contract modifications made through December 31, 2022. We are currently evaluating the full impact this guidance will have on our consolidated~~its future financial statements.

We reviewed all other recently issued accounting pronouncements and concluded they were either not applicable or not expected to have a significant impact on the Company's Condensed Consolidated Financial Statements.

2. Revenue

Disaggregation of revenue

In the following table, revenue is disaggregated by type of good or service (in thousands):

Twelve Weeks Ended Forty Weeks Ended
October 3, 2021 October 4, 2020 October 3, 2021 October 4, 2020
Restaurant revenue $ 270,202 $ 197,009 $ 861,036 $ 658,587
Franchise revenue 4,303 2,584 13,123 5,861
Gift card breakage 438 523 3,231 2,329
Other revenue 501 362 1,304 888
Total revenues $ 275,444 $ 200,478 $ 878,694 $ 667,665

~~———————————————————~~


	Twelve Weeks Ended				Twenty-Eight Weeks Ended
	July 10, 2022		July 11, 2021		July 10, 2022		July 11, 2021
Restaurant revenue	$	288,657	$	272,157	$	669,269	$	590,834
Franchise revenue	4,362		3,944		10,642		8,820
Gift card breakage(1)	280		500		8,099		2,793
Other revenue	791		374		1,630		803
Total revenues	$	294,090	$	276,975	$	689,640	$	603,250

(1) During the twenty-eight weeks ended July 10, 2022, the Company re-evaluated the estimated redemption pattern related to gift cards and aligned the recognition of gift card breakage revenue to the updated estimated redemption pattern. See Footnote 1, Basis of Presentation and Recent Accounting Pronouncements.

Contract liabilities

Components of Unearned revenue in the accompanying Condensed Consolidated Balance Sheets are as follows (in thousands):

October 3, 2021 December 27, 2020
Unearned gift card revenue $ 29,599 $ 38,309
Deferred loyalty revenue $ 13,022 $ 11,829


	July 10, 2022		December 26, 2021
Unearned gift card revenue	$	25,260	$	41,128
Deferred loyalty revenue	$	12,572	$	13,086

Revenue recognized in the Condensed Consolidated Statements of Operations and Comprehensive Loss for the redemption and breakage of gift cards that were included in the liability balance at the beginning of the fiscal year was as follows (in thousands):

Forty Weeks Ended
October 3, 2021 October 4, 2020
Gift card revenue $ 14,448 $ 16,191


	Twenty-Eight Weeks Ended
	July 10, 2022		July 11, 2021
Gift card revenue	$	20,639	$	10,945

~~3. Leases~~

Leases are included in right-of-use assets, net, current portion of lease obligations, and long-term portion of lease liabilities on our Condensed Consolidated Balance Sheet as of October 3, 2021 and December 27, 2020 as follows (in thousands):

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October 3, 2021 Finance Operating Total
Right of use assets, net $ 9,774 $ 410,014 $ 419,788
Current portion of lease obligations 1,140 48,754 49,894
Long-term portion of lease obligations 10,813 439,860 450,673
Total $ 11,953 $ 488,614 $ 500,567
December 27, 2020 Finance Operating Total
Right of use assets, net $ 9,644 $ 415,929 $ 425,573
Current portion of lease obligations 1,078 54,197 55,275
Long-term portion of lease obligations 10,937 454,296 465,233
Total $ 12,015 $ 508,493 $ 520,508
3. Leases

The Company's finance and operating lease assets and liabilities as of July 10, 2022 and December 26, 2021 were as follows (in thousands):


July 10, 2022	Finance(1)		Operating(2)
Lease assets, net(3)	$	7,494	$	383,500

Current portion of lease obligations	1,029		48,080
Long-term portion of lease obligations	8,873		413,278
Total	$	9,902	$	461,358

December 26, 2021	Finance(1)		Operating(2)
Lease assets, net(3)	$	9,664	$	400,825

Current portion of lease obligations	1,194		48,842
Long-term portion of lease obligations	10,765		435,136
Total	$	11,959	$	483,978

(1) Finance lease assets and obligations are included in Other assets, net, Accrued liabilities and other current liabilities, and Other non-current liabilities on our July 10, 2022 and December 26, 2021 Consolidated Balance Sheets.

(2) Operating lease assets and obligations are included in Operating lease assets, net, Current portion of operating lease liabilities, and Long-term portion of operating lease liabilities on our July 10, 2022 and December 26, 2021 Consolidated Balance Sheets.

(3) The Lease assets, net caption includes the right of use assets associated with the Company's Finance and Operating leases, net of the associated amortization of these right of use assets.

The components of lease expense, including variable lease costs primarily consisting of common area maintenance charges and real estate taxes, are included in Occupancy on our Condensed Consolidated Statement of Operations and Comprehensive Loss as follows (in thousands):


		Twelve Weeks Ended				Forty Weeks Ended					Twelve Weeks Ended				Twenty-Eight Weeks Ended
		October 3, 2021		October 4, 2020		October 3, 2021		October 4, 2020			July 10, 2022		July 11, 2021		July 10, 2022		July 11, 2021
Operating lease cost	Operating lease cost	$	16,061	$	14,992	$	53,765	$	51,931	Operating lease cost	$	16,422	$	16,243	$	38,111	$	37,704
Finance lease cost:	Finance lease cost:									Finance lease cost:
Amortization of right of use assets	Amortization of right of use assets	197		227		657		615		Amortization of right of use assets	238		197		580		460
Interest on lease liabilities	Interest on lease liabilities	131		150		407		412		Interest on lease liabilities	153		117		298		276
Total finance lease cost	Total finance lease cost	328		$	377	$	1,064	$	1,027	Total finance lease cost	$	391	$	314	$	878	$	736
Variable lease cost	Variable lease cost	4,496		5,902		15,271		19,207		Variable lease cost	4,682		4,359		11,007		10,775
Total	Total	$	20,885	$	21,271	$	70,100	$	72,165	Total	$	21,495	$	20,916	$	49,996	$	49,215

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Maturities of our lease liabilities as of ~~October 3, 2021~~July 10, 2022 were as follows (in thousands):
Finance Leases Operating Leases Total
Remainder of 2021 $ 550 $ 14,740 $ 15,290
2022 1,327 79,038 80,365
2023 1,244 76,303 77,547
2024 1,264 74,575 75,839
2025 1,283 69,959 71,242
Thereafter 9,441 377,685 387,126
Total future lease liability $ 15,109 $ 692,300 $ 707,409
Less imputed interest 3,156 203,686 206,842
Carrying value of lease liability $ 11,953 $ 488,614 $ 500,567

~~Table of Contents~~


	Finance Leases		Operating Leases
Remainder of 2022	$	621	$	33,689
2023	1,387		77,092
2024	1,480		75,483
2025	1,190		71,411
2026	1,246		65,683
Thereafter	6,440		325,096
Total future lease payments	$	12,364	$	648,454
Less imputed interest	2,462		187,096
Total lease liability	$	9,902	$	461,358

Supplemental cash flow and other information related to leases is as follows (in thousands, except other information):


		Forty Weeks Ended							Twenty-Eight Weeks Ended
		October 3, 2021			October 4, 2020				July 10, 2022			July 11, 2021
Cash flows from operating activities	Cash flows from operating activities							Cash flows from operating activities
Cash paid related to lease liabilities	Cash paid related to lease liabilities							Cash paid related to lease liabilities
Operating leases	Operating leases	$	68,036		$	33,034		Operating leases	$	46,194		$	47,727
Finance leases	Finance leases	406			412			Finance leases	298			276
Cash flows from financing activities	Cash flows from financing activities							Cash flows from financing activities
Cash paid related to lease liabilities	Cash paid related to lease liabilities							Cash paid related to lease liabilities
Finance leases	Finance leases	1,447			196			Finance leases	1,017			1,018
Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:	$	69,889		$	33,642		Cash paid for amounts included in the measurement of lease liabilities:	$	47,509		$	49,021

Right of use assets obtained in exchange for operating lease obligations	Right of use assets obtained in exchange for operating lease obligations	$	27,483		$	31,731		Right of use assets obtained in exchange for operating lease obligations	$	7,773		$	7,784
Right of use assets obtained in exchange for finance lease obligations	Right of use assets obtained in exchange for finance lease obligations	$	988		$	4,581		Right of use assets obtained in exchange for finance lease obligations	$	541		$	751

Other information related to operating leases as follows:	Other information related to operating leases as follows:							Other information related to operating leases as follows:
Weighted average remaining lease term		9.9 years			10.3 years
Weighted average remaining lease term (years)								Weighted average remaining lease term (years)	9.39			10.01
Weighted average discount rate	Weighted average discount rate	7.01		%	7.12		%	Weighted average discount rate	7.20		%	7.01		%

Other information related to finance leases as follows:	Other information related to finance leases as follows:							Other information related to finance leases as follows:
Weighted average remaining lease term		11.0 years			11.9 years
Weighted average remaining lease term (years)								Weighted average remaining lease term (years)	10.70			11.25
Weighted average discount rate	Weighted average discount rate	4.56		%	4.93		%	Weighted average discount rate	4.89		%	4.56		%

On June 8, 2022 the Company closed on an agreement to sell a real estate property that the Company owned and lease it back on a short-term basis. The Company collected initial net proceeds from the purchaser-lessor of $3.9 million, which represents a portion of the total consideration to be received from the sale. The Company did not recognize a sale in the second quarter of 2022 as certain criteria to recognize a sale in accordance with ASC Topic 842, Leases, and ASC Topic 606, Revenue from Contracts with Customers, were not met. The Company did not derecognize the property, and the proceeds have been recorded on the Condensed Consolidated Balance Sheet in Accrued liabilities and other, and are included within cash flows from financing activities on the Condensed Consolidated Statements of Cash Flows for the twenty-eight weeks ended July 10, 2022. The Company expects to recognize a gain on this transaction when sale recognition criteria have been met.

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4. Loss Per Share

Basic loss per share amounts are calculated by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted loss per share amounts are calculated based upon the weighted-average number of shares of common stock and potentially dilutive shares of common stock outstanding during the period. Potentially dilutive shares are excluded from the computation in periods in which they have an anti-dilutive effect. Diluted loss per share reflects the potential dilution that could occur if holders of options exercised their options into common stock. As the Company was in a net loss position for both the ~~twelve week~~twenty-eight weeks ended July 10, 2022 and ~~forty week periods ended October 3,~~July 11, 2021, ~~and October 4, 2020,~~ all potentially dilutive common shares are considered anti-dilutive.

The Company uses the treasury stock method to calculate the effect of outstanding stock options and awards. Basic weighted average shares outstanding is reconciled to diluted weighted average shares outstanding as follows (in thousands):


		Twelve Weeks Ended		Forty Weeks Ended			Twelve Weeks Ended		Twenty-Eight Weeks Ended
		October 3, 2021	October 4, 2020	October 3, 2021	October 4, 2020		July 10, 2022	July 11, 2021	July 10, 2022	July 11, 2021
Basic weighted average shares outstanding	Basic weighted average shares outstanding	15,709	15,540	15,647	13,945	Basic weighted average shares outstanding	15,830	15,665	15,783	15,617
Dilutive effect of stock options and awards	Dilutive effect of stock options and awards	—	—	—	—	Dilutive effect of stock options and awards	—	—	—	—
Diluted weighted average shares outstanding	Diluted weighted average shares outstanding	15,709	15,540	15,647	13,945	Diluted weighted average shares outstanding	15,830	15,665	15,783	15,617

Awards excluded due to anti-dilutive effect on diluted loss per share	Awards excluded due to anti-dilutive effect on diluted loss per share	545	895	390	480	Awards excluded due to anti-dilutive effect on diluted loss per share	983	241	806	308

~~Table of Contents~~

5. Other Charges, net

Other charges, ~~consist~~net consisted of the following (in thousands):
Twelve Weeks Ended Forty Weeks Ended
October 3, 2021 October 4, 2020 October 3, 2021 October 4, 2020
Restaurant closure costs $ 1,102 $ 3,982 $ 5,301 $ 12,990
Asset impairment — — 1,357 20,779
Litigation contingencies 160 — 1,330 4,500
COVID-19 related costs 299 430 1,112 1,279
Board and stockholder matter costs — 4 128 2,453
Goodwill impairment — — — 95,414
Severance and executive transition — — — 881
Other charges $ 1,561 $ 4,416 $ 9,228 $ 138,296


	Twelve Weeks Ended				Twenty-Eight Weeks Ended
	July 10, 2022		July 11, 2021		July 10, 2022		July 11, 2021
Asset Impairment	$	8,739	$	115	$	10,861	$	1,357
Litigation contingencies	(1,806)		85		(86)		1,170
Restaurant closure and refranchising costs	930		1,752		1,879		4,199
Other financing costs	61		—		370		—
COVID-19 related charges	93		244		300		813
Executive transition	129		—		129		—



Board and stockholder matter costs	—		—		—		128
Other charges, net	$	8,146	$	2,196	$	13,453	$	7,667

The Company recognized non-cash impairment charges primarily related to restaurant assets at 6 and 9 Company-owned restaurants during the twelve and twenty-eight weeks ended July 10, 2022, respectively, and 1 Company-owned restaurant for the twenty-eight weeks ended July 11, 2021.

Restaurant closure costs ~~represent costs incurred for permanently closed restaurants, including lease termination costs, as well as~~include the ongoing restaurant operating costs of the Company-owned restaurants that remained temporarily closed due to the COVID-19 ~~pandemic.~~pandemic, as well as any costs incurred for permanently closed restaurants including lease termination costs.

During the forty weeks ended October 3, 2021, Asset impairment primarily related to the impairment of long-lived assets at 1 Company-owned restaurant with a carrying value of $3.8 million (including right of use assets), recognizing an impairment expense of $1.2 million related to the net book value of long-lived restaurant assets for this restaurant. DuringLitigation contingencies during the twelve and ~~forty~~twenty-eight weeks ended ~~October 4, 2020~~July 10, 2022 include the impact of cash proceeds received by the Company ~~recognized non-cash impairment charges~~ related to ~~restaurant assets at 2~~certain legal claims. Litigation contingencies during the twelve and ~~NaN Company-owned restaurants, respectively, resulting from quantitative impairment analyses.~~

~~Litigation contingencies~~twenty-eight weeks ended July 10, 2022 and July 11, 2021 include legal settlement costs accrued ~~within the period presented~~ related to ~~class action employment cases and other employment matters.~~pending or threatened litigation.

Other financing costs include fees related to the entry by the Company into the New Credit Agreement (as defined below) on March 4, 2022 that were not capitalized with the closing of the New Credit Facility. See Footnote 6. Borrowings.

COVID-19 related costs include the costs of purchasing personal protective equipment for restaurant Team Members and Guests and emergency sick pay provided to restaurant Team Members ~~during~~related to the COVID-19 pandemic.

Executive transition costs include costs associated with transitioning to a new Chief Executive Officer.

Board and stockholder matters costs were primarily related to the recruitment and appointment of a new board ~~members, and other board and stockholder matters.~~

~~We performed a goodwill impairment analysis during~~member in the first quarter of ~~2020 resulting in full impairment~~2021.

Table of ~~our goodwill balance. The goodwill impairment was measured as the amount by which the carrying amount of the reporting unit, including goodwill, exceeded its fair value.~~Contents

~~Severance and executive transition in 2020 primarily relates to severance costs associated with the reduction in force of restaurant support center Team Members in April 2020.~~

6. Borrowings

Borrowings as of ~~October 3, 2021~~July 10, 2022 and December ~~27, 2020~~26, 2021 are summarized below (in thousands):

October 3, 2021 December 27, 2020
Borrowings Weighted
Average
Interest Rate Borrowings Weighted
Average
Interest Rate
Revolving credit facility, term loan, and other long-term debt $ 157,163 6.80 % $ 170,644 4.50 %
Total debt 157,163 170,644
Less current portion 9,692 9,692
Long-term debt $ 147,471 $ 160,952
Amounts issued under letters of credit $ 8,600 $ 8,700


	July 10, 2022		Weighted Average Interest Rate		December 26, 2021		Weighted Average Interest Rate
Revolving line of credit	$	—			$	57,000
Term loan	199,500		8.70	%	119,080		7.10	%
Notes payable, non-current	875				875
Total borrowings	200,375				176,955
Less: unamortized debt issuance costs and discounts(1)	9,002				—
Less: current portion of long-term debt	2,000				9,692
Long-term debt	$	189,373			$	167,263

Revolving line of credit unamortized deferred financing charges(1):	$	0.9			$	2.0

(1) Loan origination costs associated with the Company's credit facility are included as deferred costs in Other assets, net for financing charges allocated to the Revolving line of credit, and Long-term debt for financing charges associated with the term loan in the accompanying Condensed Consolidated Balance Sheets.

Credit Agreement

On March 4, 2022, the Company replaced its prior amended and restated credit agreement (the "Prior Credit Agreement") with a new Credit Agreement (the "Credit Agreement") by and among the Company, Red Robin International, Inc., as the borrower, the lenders from time to time party thereto, the issuing banks from time to time party thereto, Fortress Credit Corp., as Administrative Agent and as Collateral Agent and JPMorgan Chase Bank, N.A., as Sole Lead Arranger and Sole Bookrunner. The five-year $225.0 million Credit Agreement provides for a $25.0 million revolving line of credit and a $200.0 million term loan. The borrower maintains the option to increase the Credit Agreement in the future, subject to lenders’ participation, by up to an additional $40.0 million in the aggregate on the terms and conditions set forth in the Credit Agreement.

The Credit Facility will mature on March 4, 2027. No amortization is required with respect to the revolving Credit Agreement. The term loans require quarterly principal payments in an aggregate annual amount equal to 1.00% of the original principal amount of the term loan. The Credit Agreement's interest rate references SOFR, a new index calculated by short-term repurchase agreements and backed by U.S. Treasury securities, or the Alternate Base Rate ("ABR"), which represents the highest of (a) the Prime Rate, (b) the Federal Funds Rate plus 0.50% per annum, or (c) one-month term SOFR plus 1.00% per annum.

Red Robin International, Inc. is the borrower under the Credit Agreement, and certain of its subsidiaries and the Company are guarantors of borrower’s obligations under the Credit Agreement. Borrowings under the Credit Agreement are secured by substantially all of the assets of the borrower and the guarantors, including the Company, and are available to: (i) refinance certain existing indebtedness of the borrower and its subsidiaries, (ii) pay any fees and expenses in connection with the Credit Agreement, and (iii) provide for the working capital and general corporate requirements of the Company, the borrower and its subsidiaries, including permitted acquisitions and capital expenditures, but excluding restricted payments.

On March 4, 2022, Red Robin International, Inc., the Company, and the guarantors also entered into a Pledge and Security Agreement (the “Security Agreement”) granting to the Administrative Agent a first priority security interest in substantially all of the assets of the borrower and the guarantors to secure the obligations under the Credit Agreement. This new Security Agreement replaces the existing security agreement, dated January 10, 2020, which was entered into in connection with the Prior Credit Agreement.

Red Robin International, Inc. as the borrower is obligated to pay customary fees to the agents, lenders and issuing banks under the Credit Agreement with respect to providing, maintaining, or administering, as applicable, the credit facilities.

In connection with entry into the new Credit Agreement, the Company’s Prior Credit Agreement was terminated. In connection with such termination and new borrowings under the new Credit Agreement, the Company paid off all outstanding borrowings, accrued interest, and fees under the Prior Credit Agreement.

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~~Loan origination costs associated with~~The summary descriptions of the ~~Company's Amended and Restated~~ Credit Agreement ~~(the "Credit Facility")~~and the Security Agreement do not purport to be complete and are ~~included as deferred costs~~qualified in ~~Other assets, net in the accompanying Condensed Consolidated Balance Sheets. Unamortized debt issuance costs were $2.0 million and $3.3 million as of October 3, 2021 and December 27, 2020.~~

~~Third Amendment to Credit Agreement~~

~~In response~~their entirety by reference to the ~~continued uncertainty around~~full text of the impact of industry labor and supply chain challenges as well as the COVID-19 Delta variant, the Company amended its current credit facility on November 9, 2021 (the "Third Amendment") to obtain additional flexibility to continue to implement our business strategy. The Company anticipates refinancing its Credit Facility in 2022. The Third Amendment further amends the Company’s Amended and Restated Credit Agreement ~~(as amended, the "Credit Facility") to, among other things:~~

•~~waive the application of the lease adjusted leverage ratio financial covenant (the "Leverage Ratio Covenant") for the third fiscal quarter of 2021~~

•~~increase the maximum leverage permitted for purposes of the Leverage Ratio Covenant for the fourth fiscal quarter of 2021~~ and the ~~first, second and third fiscal quarters of 2022, with~~Security Agreement, respectively.

During the definition of the Leverage Ratio Covenant also being amended to provide that it shall not be calculated on a basis that gives effect to a seasonally adjusted annualized consolidated EBITDA in future periods;

•~~decrease the minimum fixed charge coverage ratio required for purposes of the fixed charge coverage ratio financial covenant (the “FCCR Covenant”) for the~~ first ~~fiscal~~ quarter of 2022, the Company expensed approximately $1.7 million of deferred financing charges related to the extinguishment of the Prior Credit Agreement on March 4, 2022. These charges were recorded to interest expense, net and other on the Condensed Consolidated Statements of Operations and Comprehensive Loss for the twenty-eight weeks ended July 10, 2022. In association with the ~~definition~~issuance of the FCCR Covenant also being amended to account for cash tax refunds received in any future period and certain capital expenditures constituting "Expansion Capital Expenditures" being excluded from the calculation thereof;

•~~decrease the minimum liquidity required for purposes of the minimum liquidity covenant and provide for the testing of such minimum liquidity covenant at all times;~~

•~~make certain amendments to the~~new Credit Facility to (i) provide that certain additional capital expenditures shall constitute "Expansion Capital Expenditures" and (ii) provide that "Expansion Capital Expenditures" shall be permitted for all periods on or prior to the last day of the fiscal quarter ofAgreement, the Company ~~ending on or about October 2, 2022, so long as (1) there is no default or event~~recognized $4.8 million of ~~default, (2) on a pro forma basis, Liquidity shall exceed a certain amount~~deferred financing charges, and ~~(3) such "Expansion Capital Expenditures" do not exceed certain agreed amounts in each fiscal quarter (with carryforward~~$6.1 million of unused amounts to the immediately succeeding fiscal quarter), and, for all periods thereafter, so long as (1) there is no default or event of default, (2) on a pro forma basis, Liquidity shall exceed a certain amount and (3) on a pro forma basis, lease adjusted leverage ratio shall not exceed 5.00x;

•increase the pricing under the Credit Facility for (a) the period from the Third Amendment Effective Date through the first interest determination date occurring after the last day of the fiscal quarter of the Company ending on or about April 17, 2022 to LIBOR (subject to a 1.00% floor) plus 6.00% and (b) periods thereafter to LIBOR (to which a 1.00% LIBOR floor shall apply) plus 6.50%;

•provide that the previously agreed utilization fee of 0.75% per annum of the daily outstanding principal amount of term loans, revolving loans, swingline loans and letter of credit obligations under the Credit Facility shall be owing solely in respect of the period commencing on February 25, 2021 and ending on the Third Amendment Effective Date, with all such amounts payable on the Third Amendment Effective Date;

•~~reduce the aggregate revolving commitment to $75,000,000 on the last day of the fiscal quarter of the Company ending on or about April 17, 2022;~~

•amend the anti-cash hoarding provision to require revolver repayments (but with no associated permanent reduction in the revolving commitment) to the extent that the Company’s consolidated cash on hand exceeds $30,000,000 at any time;

•revise the requirement that the annual audited financial statements be delivered without a "going concern qualification" to permit such a qualification solely relating to (i) any impending debt maturity (whether under the Credit Facility or otherwise) or (ii) any actual or prospective inability to satisfy a financial maintenance covenant; and

•~~make certain amendments to the Credit Facility to address LIBOR transition matters.~~

~~Table of Contents~~

The description above is a summary of the Third Amendment and is qualified in its entirety by the complete text of the agreement, which is incorporated herein by reference. In conjunction with the Third Amendment, the Company paid certain customary amendment fees to the lenders under the Credit Facility totaling approximately $0.8 million, which will be capitalized as deferred loan fees and amortized over the remaining term of the Credit Facility.original issuance discount.

7. Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The carrying amounts of the Company's cash and cash equivalents, accounts receivable, accounts payable, and current accrued expenses and other liabilities approximate fair value due to the short term nature or maturity of the instruments.

The Company maintains a rabbi trust to fund obligations under a deferred compensation plan. Amounts in the rabbi trust are invested in mutual funds, which are designated as trading securities and carried at fair value and are included in Other assets, net in the accompanying consolidated balance sheets. Fair market value of mutual funds is measured using level 1 inputs (quoted prices for identical assets in active markets).

The following tables present the Company's assets measured at fair value on a recurring basis included in Other assets, net on the accompanying Condensed Consolidated Balance Sheets as of ~~October 3, 2021~~July 10, 2022 and December ~~27, 2020~~26, 2021 (in thousands):


		October 3, 2021		Level 1		Level 2		Level 3			July 10, 2022		Level 1		Level 2		Level 3
Assets:	Assets:									Assets:
Investments in rabbi trust	Investments in rabbi trust	$	5,999	$	5,999	$	—	$	—	Investments in rabbi trust	$	4,261	$	4,261	$	—	$	—
Total assets measured at fair value	Total assets measured at fair value	$	5,999	$	5,999	$	—	$	—	Total assets measured at fair value	$	4,261	$	4,261	$	—	$	—

		December 27, 2020		Level 1		Level 2		Level 3			December 26, 2021		Level 1		Level 2		Level 3
Assets:	Assets:									Assets:
Investments in rabbi trust	Investments in rabbi trust	$	6,740	$	6,740	$	—	$	—	Investments in rabbi trust	$	6,276	$	6,276	$	—	$	—
Total assets measured at fair value	Total assets measured at fair value	$	6,740	$	6,740	$	—	$	—	Total assets measured at fair value	$	6,276	$	6,276	$	—	$	—

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Assets and liabilities recognized or disclosed at fair value on the Condensed Consolidated Financial Statements on a nonrecurring basis include items such as property, plant and equipment, right of use assets, ~~goodwill,~~ and other intangible assets. These assets are measured at fair value if determined to be impaired.

The Company has measured non-financial assets for impairment using continuing and projected future cash flows, which were based on significant inputs not observable in the market and thus represented a level 3 fair value measurement. See ~~footnote~~Note 5, Other Charges, net.

We impaired long-lived restaurant assets with a carrying value (including right of ~~this Quarterly Report on Form 10-Q for additional detail.~~use lease assets) of $18.5 million and $21.6 million, recognizing an impairment expense of $8.7 million and $10.9 million during the twelve and twenty-eight weeks ended July 10, 2022, respectively, related to the net book value of these long-lived restaurant assets. We determined the fair value of these long-lived assets to be $9.8 million and $10.7 million in the twelve and twenty-eight weeks ended July 10, 2022, respectively. The impairment was recorded as a result of quantitative impairment analyses.

Disclosures of Fair Value of Other Assets and Liabilities

The Company's liability under its ~~Credit Facility~~credit facility is carried at historical cost in the accompanying Condensed Consolidated Balance Sheets. As of ~~October 3, 2021,~~July 10, 2022, the ~~carrying value of the liability under the Company's Credit Facility approximated fair value. As of December 27, 2020, the carrying value and~~ fair value of the ~~Credit Facility were $169.8~~credit facility was approximately $195.1 million and ~~$172.6~~the principal amount carrying value was $199.5 million. The credit facility term loan is reported net of $9.0 million in unamortized discount and debt issuance costs in the Condensed Consolidated Balance Sheet as of July 10, 2022. The carrying value approximated the fair value of the credit facility as of December 26, 2021, as the interest rate on the instrument approximated current market rates. The interest rate on the ~~Credit Facility~~credit facility represents a level 2 fair value input.

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8. Commitments and Contingencies

Because litigation is inherently unpredictable, assessing contingencies related to litigation is a complex process involving highly subjective judgment about potential outcomes of future events. When evaluating litigation contingencies, we may be unable to provide a meaningful estimate due to a number of factors, including the procedural status of the matter in question, the availability of appellate remedies, insurance coverage related to the claim or claims in question, the presence of complex or novel legal theories, and the ongoing discovery and development of information important to the matter. In addition, damage amounts claimed in litigation against us may be unsupported, exaggerated, or unrelated to possible outcomes, and as such are not meaningful indicators of our potential liability or financial exposure. Accordingly, we review the adequacy of accruals and disclosures each quarter in consultation with legal counsel, and we assess the probability and range of possible losses associated with contingencies for potential accrual in the consolidated financial statements. However, the ultimate resolution of litigated claims may differ from our current estimates.

In the normal course of business, there are various claims in process, matters in litigation, and other contingencies. These include employment related claims and claims from Guests or Team Members alleging illness, injury, food quality, health, or operational concerns. To date, none of these claims, certain of which are covered by insurance policies, have had a material effect on the Company. While it is not possible to predict the outcome of these suits, legal proceedings, and claims with certainty, management is of the opinion that adequate provision for potential losses associated with these matters has been made in the financial statements and that the ultimate resolution of these matters will not have a material adverse effect on our financial position and results of operations. However, a significant increase in the number of these claims, or one or more successful claims resulting in greater liabilities than we currently anticipate, could materially and adversely affect our business, financial condition, results of operations, and cash flows.

As of July 10, 2022, we had a balance of $4.4 million for loss contingencies included within Accrued liabilities and other on our Condensed Consolidated Balance Sheet. We ultimately may be subject to greater or less than the accrued amount.

As of July 10, 2022, we had non-cancellable purchase commitments to certain vendors who provide food and beverages and other supplies to our restaurants, for an aggregate of $135.4 million. We expect to fulfill our commitments under these agreements in the normal course of business, and as such, no liability has been recorded.

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ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations provides a narrative of our financial performance and condition that should be read in conjunction with the accompanying Condensed Consolidated Financial Statements. All comparisons under this heading between ~~2021~~2022 and ~~2020~~2021 refer to the twelve and ~~forty~~twenty-eight weeks ended ~~October 3,~~July 10, 2022 and July 11, 2021, ~~and October 4, 2020,~~ unless otherwise indicated.

Overview

Description of Business

Red Robin Gourmet Burgers, Inc., a Delaware corporation, together with its subsidiaries ("Red Robin," "we," "us," "our," or the "Company"), primarily operates, franchises, and develops full-service restaurants with ~~531~~528 locations in North America. As of ~~October 3, 2021,~~July 10, 2022, the Company owned ~~430~~426 restaurants located in 38 states. The Company also had ~~101~~102 franchised full-service restaurants in 16 states and one Canadian province. The Company operates its business as one operating and one reportable segment.

~~COVID-19 Impact~~

The COVID-19 pandemic continues to create unprecedented challenges for our industry including government mandated restrictions, changing consumer behavior, labor and supply chain challenges, and wide spread inflationary costs. Even as government restrictions were lifted, and dining rooms returned to full capacity, the surge in the Delta variant continued to highlight the critical importance of providing a safe environment for our Team Members and Guests.

In response to these COVID-19 challenges, the Company limited dining hours and seating capacity in order to preserve the consistent quality experience our Guests expect from us. Our disciplined Guest focus is delivered through our Total Guest Experience hospitality model ("TGX"), off-premises enhancements, and our management labor model.

Our ability to attract and retain Team Members has become more challenging in the current competitive job market. Staffing is our number one priority; we have supported our staffing efforts through technology enhancements to the application and hiring process, improving our wage policies, holding national hiring days, and deploying internal and external resources to augment recruiting, hiring, and training efforts. The challenges in hiring and retention and global supply chain disruptions have affected many of our vendor partners, resulting in intermittent product and distribution shortages.

~~We remain focused on proactively addressing these industry challenges, while delivering a great Guest experience and continuing to prioritize the satisfaction and retention of our Team Members.~~

~~Table of Contents~~

Financial and Operational Highlights

The following summarizes the operational and financial highlights during the twelve weeks ended ~~October 3, 2021:~~July 10, 2022:

Restaurant Revenue, compared to the same period in the prior year, is presented in the table below:

(millions)

Restaurant Revenue for the twelve weeks ended ~~October 4, 2020~~July 11, 2021

~~197.0~~272.2

~~Increase~~Increase/(decrease) in comparable restaurant revenue(1)

~~67.0~~18.1

~~Increase~~Increase/(decrease) from non-comparable restaurants

~~6.2~~ (1.6)

Total ~~increase~~increase/(decrease)

~~73.2~~16.5

Restaurant Revenue for the twelve weeks ended ~~October 3, 2021~~July 10, 2022

~~270.2~~288.7

The following summarizes the operational and financial highlights during the ~~forty~~twenty-eight weeks ended ~~October 3, 2021:~~July 10, 2022:

~~Restaurant Revenue, compared to the same period in the prior year, is presented in the table below:~~

(millions)

Restaurant Revenue for the ~~forty~~twenty-eight weeks ended ~~October 4, 2020~~July 11, 2021

~~658.6~~590.8

~~Increase~~Increase/(decrease) in comparable restaurant revenue(1)

~~200.6~~79.5

~~Decrease~~Increase/(decrease) from non-comparable restaurants

~~1.8~~ (1.0)

Total ~~increase~~increase/(decrease)

~~202.4~~78.5

Restaurant Revenue for the ~~forty~~twenty-eight weeks ended ~~October 3, 2021~~July 10, 2022

~~861.0~~669.3

(1) Comparable restaurant revenue represents revenue from Company-owned restaurants that have operated five full quarters as of the end of the period presented.

Restaurant revenues and operating costs as a percentage of restaurant revenue for the period are detailed in the table below:
Twelve weeks ended 2021 compared to 2020 Twelve Weeks Ended
2021 compared to 2019(1)
October 3, 2021 October 4, 2020 Increase/(Decrease)
October 6, 2019(1)
Increase/(Decrease)
Restaurant revenue (millions) $ 270.2 $ 197.0 37.2 % $ 289.9 (6.8) %
Restaurant operating costs: (Percentage of Restaurant Revenue) (Basis Points) (Percentage of Restaurant Revenue) (Basis Points)
Cost of sales 23.2 % 23.4 % (20) 23.8 % (60)
Labor 36.9 % 37.7 % (80) 36.2 % 70
Other operating 19.0 % 19.1 % (10) 15.3 % 370
Occupancy 8.3 % 11.2 % (290) 8.6 % (30)
Total 87.5 % 91.4 % (390) 83.9 % 360

~~(1)~~ ~~Presented for improved comparability to pre-COVID-19 operations.~~

Forty weeks ended 2021 compared to 2020 Forty Weeks Ended
2021 compared to 2019(1)
October 3, 2021 October 4, 2020 Increase/(Decrease)
October 6, 2019(1)
Increase/(Decrease)
Restaurant revenue (millions) $ 861.0 $ 658.6 30.7 % $ 992.8 (13.3) %
Restaurant operating costs: (Percentage of Restaurant Revenue) (Basis Points) (Percentage of Restaurant Revenue) (Basis Points)
Cost of sales 22.5 % 23.6 % (110) 23.7 % (120)
Labor 36.0 % 38.8 % (280) 35.7 % 30
Other operating 18.1 % 18.9 % (80) 14.4 % 370
Occupancy 8.6 % 11.6 % (300) 8.6 % —
Total 85.3 % 92.9 % (760) 82.4 % 280

~~(1)~~ ~~Presented for improved comparability to pre-COVID-19 operations.~~


	Twelve Weeks Ended
	July 10, 2022			July 11, 2021			Increase/(Decrease)
Restaurant revenue (millions)	$	288.7		$	272.2		6.1	%
Restaurant operating costs:	(Percentage of Restaurant Revenue)						(Basis Points)
Cost of sales	25.2		%	22.8		%	240
Labor	35.2			36.4			(120)
Other operating	18.0			17.2			80
Occupancy	8.0			7.9			10
Total	86.4		%	84.3		%	210

1413

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	Twenty-eight Weeks Ended
	July 10, 2022			July 11, 2021			Increase/(Decrease)
Restaurant revenue (millions)	$	669.3		$	590.8		13.3	%
Restaurant operating costs:	(Percentage of Restaurant Revenue)						(Basis Points)
Cost of sales	24.5		%	22.2		%	230
Labor	35.8			35.6			20
Other operating	17.9			17.7			20
Occupancy	8.0			8.8			(80)
Total	86.2		%	84.3		%	190

Certain percentage and basis point amounts in the table above do not total due to rounding as well as restaurant operating costs being expressed as a percentage of restaurant revenue and not total revenues.

The following table summarizes Net ~~loss,~~Loss, loss per diluted share, and adjusted loss per diluted share for the twelve and ~~forty~~twenty-eight weeks ended ~~October 3, 2021~~ and ~~October 4, 2020;~~July 10, 2022 and July 11, 2021;


		Twelve Weeks Ended				Forty Weeks Ended					Twelve Weeks Ended				Twenty-eight Weeks Ended
		October 3, 2021		October 4, 2020		October 3, 2021		October 4, 2020			July 10, 2022		July 11, 2021		July 10, 2022		July 11, 2021
Net loss as reported	Net loss as reported	$	(14,980)	$	(6,179)	$	(28,689)	$	(236,738)	Net loss as reported	$	(17,932)	$	(4,996)	$	(21,037)	$	(13,709)

Loss per share - diluted:	Loss per share - diluted:									Loss per share - diluted:
Net loss as reported	Net loss as reported	$	(0.95)	$	(0.40)	$	(1.83)	$	(16.98)	Net loss as reported	$	(1.13)	$	(0.32)	$	(1.33)	$	(0.88)
Asset impairment										Asset impairment	0.55		0.01		0.69		0.09
Change in accounting estimate, gift card breakage revenue, net of commissions(1)										Change in accounting estimate, gift card breakage revenue, net of commissions(1)	—		—		(0.33)		—
Restaurant closure costs	Restaurant closure costs	0.07		0.26		0.34		0.93		Restaurant closure costs	0.06		0.11		0.12		0.27
Asset impairment		—		—		0.09		1.49
Other financing costs(3)										Other financing costs(3)	—		—		0.02		—
COVID-19 related charges										COVID-19 related charges	0.01		0.02		0.02		0.05
Write-off of unamortized debt issuance costs(2)										Write-off of unamortized debt issuance costs(2)	—		—		0.11		—
Executive transition										Executive transition	0.01		—		0.01		—
Litigation contingencies	Litigation contingencies	0.01		—		0.08		0.32		Litigation contingencies	(0.11)		—		(0.01)		0.07
COVID-19 related costs		0.02		0.03		0.07		0.09
Board and stockholder matter costs	Board and stockholder matter costs	—		—		0.01		0.18		Board and stockholder matter costs	—		—		—		0.01
Severance and executive transition		—		—		—		0.06
Goodwill impairment		—		—		—		6.84

Income tax effect		(0.03)		(0.08)		(0.16)		(2.57)

Income tax expense										Income tax expense	(0.14)		(0.04)		(0.17)		(0.13)
Adjusted loss per share - diluted	Adjusted loss per share - diluted	$	(0.88)	$	(0.19)	$	(1.40)	$	(9.64)	Adjusted loss per share - diluted	$	(0.75)	$	(0.22)	$	(0.87)	$	(0.52)

Weighted average shares outstanding	Weighted average shares outstanding									Weighted average shares outstanding
Basic	Basic	15,709		15,540		15,647		13,945		Basic	15,830		15,665		15,783		15,617
Diluted	Diluted	15,709		15,540		15,647		13,945		Diluted	15,830		15,665		15,783		15,617

(1) During the twenty-eight weeks ended July 10, 2022, the Company re-evaluated the estimated redemption pattern related to gift cards. See Footnote 1, Basis of Presentation and Recent Accounting Pronouncements included in Part I. Financial Information in this quarterly report on form 10-Q.

(2) Write-off of unamortized debt issuance costs related to the remaining unamortized debt issuance costs related to our Prior Credit Agreement (as defined below) with the completion of the refinancing of our Prior Credit Agreement in the first quarter of fiscal year 2022.

(3) Other financing costs includes legal and other charges related to the refinancing of our Prior Credit Agreement in the first quarter of 2022.

We believe the non-GAAP measure of adjusted loss per diluted share gives the reader additional insight into the ongoing operational results of the Company, and it is intended to supplement the presentation of the Company's financial results in accordance with GAAP. Adjusted loss per diluted share excludes the effects of changes in accounting estimates, asset impairment, litigation contingencies, the write-off of unamortized debt issuance costs, restaurant closure costs, other financing costs, COVID-19 related costs, executive transition costs, and related income tax effects. Other companies may define adjusted net loss per diluted share differently, and as a result our measure of adjusted loss per diluted share may not be directly comparable to those of other companies. Adjusted loss per diluted share should be considered in addition to, and not as a substitute for, net loss as reported in accordance with U.S. GAAP as a measure of performance.

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Restaurant Data

The following table details restaurant unit data for our Company-owned and franchised locations for the periods indicated:


		Twelve Weeks Ended		Forty Weeks Ended			Twelve Weeks Ended		Twenty-Eight Weeks Ended
		October 3, 2021	October 4, 2020	October 3, 2021	October 4, 2020		July 10, 2022	July 11, 2021	July 10, 2022	July 11, 2021
Company-owned:	Company-owned:					Company-owned:
Beginning of period	Beginning of period	430	450	443	454	Beginning of period	426	440	430	443

Closed during the period	Closed during the period	—	(6)	(13)	(10)	Closed during the period	—	(10)	(4)	(13)
End of period	End of period	430	444	430	444	End of period	426	430	426	430
Franchised:	Franchised:					Franchised:
Beginning of period	Beginning of period	101	102	103	102	Beginning of period	101	103	101	103
Opened during the period	Opened during the period	—	1	—	1	Opened during the period	1	—	1	—
Closed during the period		—	—	(2)	—
Sold or closed during the period						Sold or closed during the period	—	(2)	—	(2)
End of period	End of period	101	103	101	103	End of period	102	101	102	101
Total number of restaurants	Total number of restaurants	531	547	531	547	Total number of restaurants	528	531	528	531

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The following table presents total Company-owned and franchised restaurants by state or province as of ~~October 3, 2021:~~July 10, 2022:

Company-Owned Restaurants Franchised Restaurants
State:
Arkansas 2 2
Alaska — 3
Alabama 4 —
Arizona 18 1
California 59 —
Colorado 22 —
Connecticut — 3
Delaware — 5
Florida 19 —
Georgia 6 —
Iowa 5 —
Idaho 8 —
Illinois 22 —
Indiana 13 —
Kansas — 4
Kentucky 4 —
Louisiana 2 —
Massachusetts 4 2
Maryland 13 —
Maine 2 —
Michigan — 20
Minnesota 4 —
Missouri 8 3
Montana — 2
North Carolina 17 —
Nebraska 4 —
New Hampshire 3 —
New Jersey 12 1
New Mexico 3 —
Nevada 6 —
New York 14 —
Ohio 18 2
Oklahoma 5 —
Oregon 15 5
Pennsylvania 11 21
Rhode Island 1 —
South Carolina 4 —
South Dakota 1 —
Tennessee 11 —
Texas 20 9
Utah 1 6
Virginia 20 —
Washington 38 —
Wisconsin 11 —
Province:
British Columbia — 12
Total 430 101

~~———————————————————~~


	Company-Owned Restaurants	Franchised Restaurants

State:
Arkansas	2	2
Alaska	—	3
Alabama	4	—
Arizona	17	1
California	58	—
Colorado	22	—
Connecticut	—	3
Delaware	—	5
Florida	19	—
Georgia	6	—
Iowa	5	—
Idaho	8	—
Illinois	21	—
Indiana	13	—
Kansas	—	5
Kentucky	4	—
Louisiana	2	—
Massachusetts	4	2
Maryland	12	—
Maine	2	—
Michigan	—	20
Minnesota	4	—
Missouri	8	3
Montana	—	2
North Carolina	17	—
Nebraska	4	—
New Hampshire	3	—
New Jersey	12	1
New Mexico	3	—
Nevada	6	—
New York	14	—
Ohio	18	2
Oklahoma	5	—
Oregon	15	5
Pennsylvania	11	21
Rhode Island	1	—
South Carolina	4	—
South Dakota	1	—
Tennessee	11	—
Texas	20	9
Utah	1	6
Virginia	20	—
Washington	38	—
Wisconsin	11	—

Province:
British Columbia	—	12
Total	426	102

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Results of Operations

Operating results for each fiscal period presented below are expressed as a percentage of total revenues, except for the components of restaurant operating costs, which are expressed as a percentage of restaurant revenue.

This information has been prepared on a basis consistent with our audited ~~2020~~2021 annual financial statements, and, in the opinion of management, includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the information for the periods presented. Our operating results may fluctuate significantly as a result of a variety of factors, and operating results for any period presented are not necessarily indicative of results for a full fiscal year.

Twelve Weeks Ended Forty Weeks Ended
October 3, 2021 October 4, 2020
October 6, 2019(1)
October 3, 2021 October 4, 2020
October 6, 2019(1)
Revenues:
Restaurant revenue 98.1 % 98.3 % 98.5 % 98.0 % 98.6 % 98.1 %
Franchise and other revenues 1.9 % 1.7 % 1.5 % 2.0 % 1.4 % 1.9 %
Total revenues 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Costs and expenses:
Restaurant operating costs (exclusive of depreciation and amortization shown separately below):
Cost of sales 23.2 % 23.4 % 23.8 % 22.5 % 23.6 % 23.7 %
Labor 36.9 % 37.7 % 36.2 % 36.0 % 38.8 % 35.7 %
Other operating 19.0 % 19.1 % 15.3 % 18.1 % 18.9 % 14.4 %
Occupancy 8.3 % 11.2 % 8.6 % 8.6 % 11.6 % 8.6 %
Total restaurant operating costs 87.5 % 91.4 % 83.9 % 85.3 % 92.9 % 82.4 %
Depreciation and amortization 6.9 % 9.6 % 7.2 % 7.3 % 10.2 % 7.0 %
General and administrative expenses 6.4 % 7.6 % 6.5 % 6.6 % 8.4 % 7.0 %
Selling expenses 4.6 % 3.0 % 6.0 % 3.6 % 4.0 % 4.8 %
Pre-opening and acquisition costs 0.2 % — % — % 0.1 % — % — %
Other charges 0.6 % 2.2 % (0.6) % 1.1 % 20.7 % 1.7 %
Loss from operations (4.4) % (12.3) % (1.8) % (2.2) % (35.0) % (1.4) %
Interest expense, net and other 1.0 % 1.1 % 0.6 % 1.1 % 1.1 % 0.7 %
Loss before income taxes (5.4) % (13.4) % (2.4) % (3.3) % (36.1) % (2.2) %
Income tax benefit 0.0 % (10.3) % (1.8) % — % (0.6) % (2.1) %
Net loss (5.4) % (3.1) % (0.6) % (3.3) % (35.5) % — %


	Twelve Weeks Ended				Twenty-Eight Weeks Ended
	July 10, 2022		July 11, 2021			July 10, 2022		July 11, 2021
Revenues:
Restaurant revenue	98.2	%	98.3	%		97.0	%	97.9	%
Franchise and other revenues	1.8		1.7			3.0		2.1
Total revenues	100.0		100.0			100.0		100.0

Costs and expenses:
Restaurant operating costs (exclusive of depreciation and amortization shown separately below):
Cost of sales	25.2		22.8			24.5		22.2
Labor	35.2		36.4			35.8		35.6
Other operating	18.0		17.2			17.9		17.7
Occupancy	8.0		7.9			8.0		8.8
Total restaurant operating costs	86.4		84.3			86.2		84.3
Depreciation and amortization	6.0		6.9			6.0		7.5
Selling, general and administrative	10.9		10.2			9.7		9.8
Pre-opening and acquisition costs	0.1		0.1			—		0.1
Other charges, net	2.8		0.8			2.0		1.3
Loss from operations	(4.5)		(0.9)			(1.3)		(1.1)

Interest expense, net and other	1.4		1.0			1.7		1.2
Loss before income taxes	(5.9)		(1.9)			(3.0)		(2.3)
Income tax benefit	0.1		(0.1)			0.1		(0.1)
Net loss	(6.1)	%	(1.8)	%		(3.1)	%	(2.3)	%

~~(1)~~ ~~Presented for improved comparability to pre-COVID-19 operations.~~

~~Certain percentage amounts in the table above do not total due to rounding as well as restaurant operating costs being expressed as a percentage of restaurant revenue and not total revenues.~~

Revenues


	Twelve Weeks Ended						Twenty-Eight Weeks Ended
(Revenues in thousands)	July 10, 2022		July 11, 2021		Percent Change		July 10, 2022		July 11, 2021		Percent Change
Restaurant revenue	$	288,657	$	272,157	6.1	%	$	669,269	$	590,834	13.3	%
Franchise royalties, fees and other revenue	5,433		4,818		12.8	%	20,371		12,416		64.1	%
Total revenues	$	294,090	$	276,975	6.2	%	$	689,640	$	603,250	14.3	%
Average weekly net sales volumes in Company-owned restaurants	$	56,633	$	53,135	6.6	%	$	56,123	$	49,347	13.7	%
Total operating weeks	5,097		5,122		(0.5)	%	11,925		11,973		(0.4)	%
Net sales per square foot	$	109	$	102	6.7	%	$	251	$	221	13.7	%

Table of Contents

~~Revenues~~
Twelve Weeks Ended Forty Weeks Ended
(Revenues in thousands) October 3, 2021 October 4, 2020 Percent Change October 3, 2021 October 4, 2020 Percent Change
Restaurant revenue $ 270,202 $ 197,009 37.2 % $ 861,036 $ 658,587 30.7 %
Franchise royalties, fees and other revenue 5,242 3,469 51.1 % 17,658 9,078 94.5 %
Total revenues $ 275,444 $ 200,478 37.4 % $ 878,694 $ 667,665 31.6 %
Average weekly net sales volumes in Company-owned restaurants $ 52,599 $ 39,418 33.4 % $ 50,324 $ 38,352 31.2 %
Total operating weeks 5,137 4,998 2.8 % 17,110 17,172 (0.4) %
Net sales per square foot $ 101 $ 75 33.6 % $ 322 $ 247 30.4 %

Restaurant revenue for the twelve weeks ended ~~October 3, 2021,~~July 10, 2022, which comprises primarily food and beverage sales, increased ~~$73.2~~$16.5 million, or ~~37.2%~~6.1%, as compared to the ~~twelve weeks ended October 4, 2020.~~second quarter of 2021. The increase was due to a ~~$67.0~~$18.1 million, or ~~34.3%~~6.7%, increase in comparable restaurant revenue, and a ~~$6.2~~$1.6 million ~~increase primarily from reopened~~decrease at non-comparable restaurants, ~~that were temporarily closed during third quarter 2020.~~including the impact of restaurant closures. The comparable restaurant revenue increase was driven by a ~~22.5% increase in Guest count and a 11.8%~~9.6% increase in average Guest ~~check.~~check, and a 2.9% decrease in Guest count. The increase in average Guest check resulted from a ~~3.5%~~3.7% increase in menu mix, a 6.0% increase in pricing, and ~~a 8.4% increase in menu mix,~~was partially offset by a 0.1% decrease from higher ~~discounting.~~discounts. The increase in menu mix was primarily driven by ~~higher sales of beverages and~~ our limited time menu ~~offerings.~~offerings and higher dine-in sales volumes. Off-premises sales decreased 6.3% and comprised ~~30.8%~~28.6% of total food and beverage sales during ~~third~~the second quarter ~~2021,~~of 2022, as compared to ~~40.7% in~~ the same period in ~~2020.~~2021.

Restaurant revenue for the ~~forty~~twenty-eight weeks ended ~~October 3, 2021,~~July 10, 2022, increased ~~$202.4~~$78.4 million, or ~~30.7%~~13.3%, as compared to the ~~forty~~twenty-eight weeks ended ~~October 4, 2020.~~July 11, 2021. The increase was due to a ~~$200.6~~$79.5 million, or ~~31.5%~~13.8%, increase in comparable restaurant revenue, and a ~~$1.8~~$1.0 million ~~increase primarily from reopened~~decrease at non-comparable restaurants, ~~that were temporarily closed during 2020.~~including the impact of restaurant closures. The comparable restaurant revenue increase was driven by a ~~21.1% increase in Guest counts and a 10.5%~~11.3% increase in average Guest ~~check.~~check, and a 2.5% increase in Guest count. The increase in average Guest check resulted from a ~~3.5%~~5.0% increase in menu mix, a 5.6% increase in pricing, and a ~~6.6% increase~~0.7% decrease in ~~menu mix, and a 0.4% increase from lower discounting.~~discounts. The increase in menu mix was primarily driven by ~~higher sales of beverages, appetizers, and~~our limited time menu ~~offerings.~~offerings and higher dine-in sales volumes. Off-premises sales decreased 10.3% and comprised 29.7% of total food and beverage sales during the twenty-eight weeks ended July 10, 2022, as compared to the same period in 2021.

Average weekly net sales volumes represent the total restaurant revenue for all Company-owned Red Robin restaurants for each time period presented, divided by the number of operating weeks in the period. Comparable restaurant revenues are comprised of Company-owned restaurants that have operated five full quarters as of the end of the period presented. The Company-owned restaurants that were temporarily closed due to the COVID-19 pandemic were not included in the comparable base for the ~~twelve and forty~~twenty-eight weeks ended ~~October 3, 2021~~July 10, 2022 or ~~October 4, 2020.~~July 11, 2021. Fluctuations in average weekly net sales volumes for Company-owned restaurants reflect the effect of comparable restaurant revenue changes as well as the performance of reopened, new and acquired restaurants during the period, the average square footage of our restaurants, as well as the impact of changing capacity limitations in response to COVID-19 levels in a given locality. Net sales per square foot represents the total restaurant revenue for Company-owned restaurants included in the comparable base divided by the total square feet of Company-owned restaurants included in the comparable base.

Franchise and other revenue increased ~~$1.8~~$0.6 million for the twelve weeks ended ~~October 3, 2021~~July 10, 2022 compared to the twelve weeks ended ~~October 4, 2020, due~~July 11, 2021. Our franchisees reported a comparable restaurant revenue increase of 3.8% for the twelve weeks ended July 10, 2022 compared to ~~improved comparable franchise sales performance during~~ the ~~third fiscal quarter of~~same period in 2021.

Franchise and other revenue increased ~~$8.6~~$8.0 million for the ~~forty~~twenty-eight weeks ended ~~October 3, 2021~~July 10, 2022 compared to the ~~forty~~twenty-eight weeks ended ~~October 4, 2020,~~July 11, 2021, primarily due to ~~improved comparable franchise sales performance, charging and collecting royalty payments and advertising contributions from our franchisees during~~ the ~~third fiscal quarter of 2021. During 2020, the Company had temporarily abated franchisee royalty and advertising contribution payments in mid-March, and resumed collection during the latter half~~re-evaluation of the ~~second fiscal quarter of 2020, and increased~~estimated redemption pattern related to gift cards resulting in a $5.8 million adjustment to gift card ~~breakage.~~breakage from aligning our estimate to the updated estimated redemption pattern. Our franchisees reported a comparable restaurant revenue increase of 11.7% for the twenty-eight weeks ended July 10, 2022 compared to the same period in 2021.

~~Table of Contents~~

Cost of Sales


		Twelve Weeks Ended						Forty Weeks Ended							Twelve Weeks Ended								Twenty-Eight Weeks Ended
(In thousands, except percentages)	(In thousands, except percentages)	October 3, 2021		October 4, 2020		Percent Change		October 3, 2021		October 4, 2020		Percent Change		(In thousands, except percentages)	July 10, 2022			July 11, 2021			Percent Change		July 10, 2022			July 11, 2021			Percent Change
Cost of sales	Cost of sales	$	62,671	$	46,037	36.1 %		$	193,754	$	155,243	24.8 %		Cost of sales	$	72,702		$	61,917		17.4	%	$	163,643		$	131,083		24.8	%
As a percent of restaurant revenue	As a percent of restaurant revenue	23.2 %		23.4 %		(0.2)	%	22.5 %		23.6 %		(1.1)	%	As a percent of restaurant revenue	25.2		%	22.8		%	2.4	%	24.5		%	22.2		%	2.3	%

Cost of sales, which comprises of food and beverage costs, is variable and generally fluctuates with sales volume. Cost of sales as a percentage of restaurant revenue ~~decreased 20~~increased 240 basis points for the twelve weeks ended ~~October 3, 2021~~July 10, 2022 as compared to the same period in ~~2020.~~2021. The ~~decrease~~increase was primarily driven by ~~pricing, favorable mix shifts, lower waste, and higher rebates,~~commodity inflation, partially offset by ~~commodity inflation.~~pricing and rebates.

Cost of sales as a percentage of restaurant revenue ~~decreased 110~~increased 230 basis points for the ~~forty~~twenty-eight weeks ended ~~October 3, 2021~~July 10, 2022 as compared to the same period in ~~2020.~~2021. The ~~decrease~~increase was primarily driven by ~~pricing,~~commodity inflation, partially offset by favorable mix shifts, pricing, and rebates.

Table of Contents

Labor


		Twelve Weeks Ended						Forty Weeks Ended							Twelve Weeks Ended								Twenty-Eight Weeks Ended
(In thousands, except percentages)	(In thousands, except percentages)	October 3, 2021		October 4, 2020		Percent Change		October 3, 2021		October 4, 2020		Percent Change		(In thousands, except percentages)	July 10, 2022			July 11, 2021			Percent Change		July 10, 2022			July 11, 2021			Percent Change
Labor	Labor	$	99,725	$	74,344	34.1 %		$	310,333	$	255,652	21.4 %		Labor	$	101,643		$	98,949		2.7	%	$	239,751		$	210,608		13.8	%
As a percent of restaurant revenue	As a percent of restaurant revenue	36.9 %		37.7 %		(0.8)	%	36.0 %		38.8 %		(2.8)	%	As a percent of restaurant revenue	35.2		%	36.4		%	(1.2)	%	35.8		%	35.6		%	0.2	%

Labor costs include restaurant-level hourly wages and management salaries as well as related taxes and benefits. For the twelve weeks ended ~~October 3, 2021,~~July 10, 2022, labor as a percentage of restaurant revenue decreased 80120 basis points compared to the same period in ~~2020.~~2021. The decrease was primarily driven by ~~industry staffing shortages~~sales leverage and ~~sales leverage,~~lower group insurance and management incentive compensation costs, partially offset by ~~higher~~ wage ~~rates, staffing costs and increased restaurant management compensation costs in 2021.~~

$3.1 million of transitory labor and other operating costs were incurred due to staffing challenges, including hiring and training costs, temporarily outsourced janitorial costs, one time bonuses, and overtime pay.rate inflation.

For the ~~forty~~twenty-eight weeks ended ~~October 3, 2021,~~July 10, 2022, labor as a percentage of restaurant revenue ~~decreased 280~~increased 20 basis points compared to the same period in ~~2020.~~2021. The ~~decrease~~increase was primarily driven by higher wage rate inflation and staffing ~~shortages, and sales leverage,~~costs, partially offset by ~~higher wage rates, staffing costs~~sales leverage and ~~increased restaurant~~lower group insurance and management incentive compensation ~~costs in 2021.~~costs.

Other Operating

Twelve Weeks Ended Forty Weeks Ended
(In thousands, except percentages) October 3, 2021 October 4, 2020 Percent Change October 3, 2021 October 4, 2020 Percent Change
Other operating $ 51,462 $ 37,631 36.8 % $ 156,102 $ 124,585 25.3 %
As a percent of restaurant revenue 19.0 % 19.1 % (0.1) % 18.1 % 18.9 % (0.8) %


	Twelve Weeks Ended								Twenty-Eight Weeks Ended
(In thousands, except percentages)	July 10, 2022			July 11, 2021			Percent Change		July 10, 2022			July 11, 2021			Percent Change
Other operating	$	52,003		$	46,928		10.8	%	$	119,867		$	104,640		14.6	%
As a percent of restaurant revenue	18.0		%	17.2		%	0.8	%	17.9		%	17.7		%	0.2	%

Other operating costs include costs such as equipment repairs and maintenance costs, restaurant supplies, utilities, restaurant technology, and other miscellaneous costs. For the twelve weeks ended ~~October 3, 2021,~~July 10, 2022, other operating costs as a percentage of restaurant revenue decreased 10 basis points as compared to the same period in 2020. The decrease was primarily driven by sales leverage and lower utilities, and lower supplies due to lower off-premises sales mix, partially offset by increased ~~hiring advertisement costs and janitorial and maintenance expenses.~~

~~For the forty weeks ended October 3, 2021, other operating costs as a percentage of restaurant revenue decreased~~ 80 basis points as compared to the same period in ~~2020.~~2021. The ~~decrease~~increase was primarily driven by ~~sales leverage and lower~~increases in maintenance costs, utilities and ~~supplies due~~third party commissions, partially offset by lower hiring costs and sales leverage.

For the twenty-eight weeks ended July 10, 2022, other operating costs as a percentage of restaurant revenue increased 20 basis points as compared to the same period in 2021. The increase was primarily driven by increases in maintenance costs, utilities, and third party commissions, partially offset by lower supply costs driven by lower off-premises sales, ~~mix, partially offset by increased~~lower hiring ~~costs.~~

~~Table of Contents~~

costs, and sales leverage.

Occupancy


		Twelve Weeks Ended						Forty Weeks Ended							Twelve Weeks Ended								Twenty-Eight Weeks Ended
(In thousands, except percentages)	(In thousands, except percentages)	October 3, 2021		October 4, 2020		Percent Change		October 3, 2021		October 4, 2020		Percent Change		(In thousands, except percentages)	July 10, 2022			July 11, 2021			Percent Change		July 10, 2022			July 11, 2021			Percent Change
Occupancy	Occupancy	$	22,519	$	22,099	1.9 %		$	74,233	$	76,514	(3.0)	%	Occupancy	$	22,980		$	21,614		6.3	%	$	53,579		$	51,714		3.6	%
As a percent of restaurant revenue	As a percent of restaurant revenue	8.3 %		11.2 %		(2.9)	%	8.6 %		11.6 %		(3.0)	%	As a percent of restaurant revenue	8.0		%	7.9		%	0.1	%	8.0		%	8.8		%	(0.8)	%

Occupancy costs include fixed rents, property taxes, common area maintenance charges, general liability insurance, contingent rents, and other property costs. ~~Occupancy costs incurred prior to opening our new restaurants are included in pre-opening costs.~~ For the twelve weeks ended ~~October 3,~~July 10, 2022, occupancy costs as a percentage of restaurant revenue increased 10 basis points compared to the same period in 2021 primarily driven by higher insurance costs, partially offset by sales leverage.

For the twenty-eight weeks ended July 10, 2022, occupancy costs as a percentage of restaurant revenue decreased ~~290~~80 basis points compared to the same period in ~~2020~~2021 primarily driven by sales leverage, ~~and restructured leases.~~

~~For the forty weeks ended October 3, 2021, occupancy costs as a percentage of restaurant revenue decreased 300 basis points compared to the same period in 2020 primarily driven~~partially offset by ~~sales leverage, savings from permanently closed restaurants and restructured leases.~~higher insurance costs.

Our fixed rents for the twelve weeks ended ~~October 3,~~July 10, 2022 and July 11, 2021 ~~and October 4, 2020~~ were ~~$15.8~~$16.1 million and ~~$14.7~~$16.0 million, an increase of $1.1 million due to recognizing ongoing fixed rents of Company-owned restaurants that were temporarily closed due to the COVID-19 pandemic in Closed restaurant expense (a component of Other Charges) in 2020, compared to Occupancy in 2021.

$0.1 million. Our fixed rents for the ~~forty~~twenty-eight weeks ended ~~October 3,~~July 10, 2022 and July 11, 2021 ~~and October 4, 2020~~ were ~~$52.8~~$37.4 million and ~~$51.0 million, an increase~~$37.0 million.

Table of $1.8 million due to recognizing ongoing fixed rents of Company-owned restaurants that were temporarily closed due to the COVID-19 pandemic in Closed restaurant expense (a component of Other Charges) in 2020, compared to Occupancy in 2021, partially offset by a net decrease in store count resulting from 13 locations permanently closed during the period.Contents

Depreciation and Amortization


		Twelve Weeks Ended						Forty Weeks Ended							Twelve Weeks Ended								Twenty-Eight Weeks Ended
(In thousands, except percentages)	(In thousands, except percentages)	October 3, 2021		October 4, 2020		Percent Change		October 3, 2021		October 4, 2020		Percent Change		(In thousands, except percentages)	July 10, 2022			July 11, 2021			Percent Change		July 10, 2022			July 11, 2021			Percent Change
Depreciation and amortization	Depreciation and amortization	$	18,881	$	19,173	(1.5)	%	$	63,984	$	68,053	(6.0)	%	Depreciation and amortization	$	17,637		$	19,215		(8.2)	%	$	41,556		$	45,103		(7.9)	%
As a percent of total revenues	As a percent of total revenues	6.9 %		9.6 %		(2.7)	%	7.3 %		10.2 %		(2.9)	%	As a percent of total revenues	6.0		%	6.9		%	(0.9)	%	6.0		%	7.5		%	(1.5)	%

Depreciation and amortization includes depreciation on capital expenditures for restaurants and corporate assets as well as amortization of acquired franchise rights, leasehold interests, and certain liquor licenses. For the twelve weeks ended ~~October 3, 2021,~~July 10, 2022, depreciation and amortization expense as a percentage of revenue decreased ~~270~~90 basis points over the same period in ~~2020.~~ 2021 primarily due to net closed Company-owned restaurants, and sales leverage.

For the ~~forty~~twenty-eight weeks ended ~~October 3, 2021,~~July 10, 2022, depreciation and amortization expense as a percentage of revenue decreased ~~290~~150 basis points over the same period in ~~2020. The decreases are~~2021 primarily due to net closed Company-owned restaurants, and sales leverage.

Selling, General, and Administrative ~~expenses~~


	Twelve Weeks Ended								Twenty-Eight Weeks Ended
(In thousands, except percentages)	July 10, 2022			July 11, 2021			Percent Change		July 10, 2022			July 11, 2021			Percent Change
Selling, general, and administrative	$	32,095		$	28,346		13.2	%	$	66,475		$	58,956		12.8	%
As a percent of total revenues	10.9		%	10.2		%	0.7	%	9.7		%	9.8		%	(0.1)	%

Twelve Weeks Ended Forty Weeks Ended
(In thousands, except percentages) October 3, 2021 October 4, 2020 Percent Change October 3, 2021 October 4, 2020 Percent Change
General, and administrative expenses $ 17,691 $ 15,190 16.5 % $ 57,664 $ 56,054 2.9 %
As a percent of total revenues 6.4 % 7.6 % (1.2) % 6.6 % 8.4 % (1.8) %

~~General,~~Selling, general, and administrative costs include all corporate and administrative ~~functions, excluding Selling expenses discussed below.~~functions. Components of this category include ~~our~~marketing and advertising costs; restaurant support center, regional, and franchise support salaries and benefits; travel; professional and consulting fees; corporate information systems; legal expenses; office rent; training; and board of directors expenses.

General, and administrative ~~expenses~~costs in the twelve weeks ended ~~October 3, 2021~~July 10, 2022 increased ~~$2.5~~$1.0 million, or ~~16.5 %,~~5.7%, as compared to the same period in ~~2020.~~2021. The increase ~~in general and administrative expenses in 2021~~ was primarily driven by increased stock based compensation expense, merit increases, and ~~lapping temporary salary reductions~~increased manager-in-training costs, partially offset by a decrease in ~~2020, increased travel costs, and higher professional services spend.~~

~~Table of Contents~~

incentive compensation costs.

General, and administrative ~~expenses~~costs in the ~~forty~~twenty-eight weeks ended ~~October 3, 2021~~July 10, 2022 increased ~~$1.6~~$3.2 million, or ~~2.9 %,~~8.0%, as compared to the same period in ~~2020.~~2021. The increase ~~in general and administrative expenses in 2021~~ was primarily driven by ~~higher Team Member benefit costs,~~increased stock based compensation expense, merit increases, and ~~lapping temporary salary reductions in 2020, partially offset by decreased travel costs and other corporate~~increased manager-in-training costs.

Selling ~~expenses~~

Twelve Weeks Ended Forty Weeks Ended
(In thousands, except percentages) October 3, 2021 October 4, 2020 Percent Change October 3, 2021 October 4, 2020 Percent Change
Selling expenses $ 12,652 $ 6,094 * $ 31,635 $ 26,429 19.7 %
As a percent of total revenues 4.6 % 3.0 % 1.6 % 3.6 % 4.0 % (0.4) %

~~Selling expenses include all marketing and advertising~~ costs ~~associated with the Company's marketing strategy.~~

~~Selling expenses~~ in the twelve weeks ended ~~October 3, 2021~~July 10, 2022 increased ~~$6.6~~$2.7 million, or 25.8%, as compared to the same period in ~~2020.~~2021. The increase ~~in selling expenses in 2021~~ was primarily driven by ~~the return of~~increased marketing ~~spend closer to a more normalized level in 2021.~~spend.

Selling ~~expenses~~costs in the ~~forty~~twenty-eight weeks ended ~~October 3, 2021~~July 10, 2022 increased ~~$5.2~~$4.3 million, or ~~19.7 %,~~22.8%, as compared to the same period in ~~2020.~~2021. The increase ~~in selling expenses in 2021~~ was primarily driven by ~~the return of~~increased marketing ~~spend closer to a more normalized level in 2021.~~spend.

Pre-opening Costs


	Twelve Weeks Ended								Twenty-Eight Weeks Ended
(In thousands, except percentages)	July 10, 2022			July 11, 2021			Percent Change		July 10, 2022			July 11, 2021			Percent Change
Pre-opening costs	$	235		$	374		(37.2)	%	$	297		$	374		(20.6)	%
As a percent of total revenues	0.1		%	0.1		%	—	%	—		%	0.1		%	(0.1)	%

* Percentage increases and decreases over 100 percent were not considered ~~meaningful.~~

~~Pre-opening Costs~~meaningful
Twelve Weeks Ended Forty Weeks Ended
(In thousands, except percentages) October 3, 2021 October 4, 2020 Percent Change October 3, 2021 October 4, 2020 Percent Change
Pre-opening costs $ 418 $ 89 * $ 792 $ 245 *
As a percent of total revenues 0.2 % — % 0.2 % 0.1 % — % 0.1 %

* Percentage increases and decreases over 100 percent were not considered meaningful.

Pre-opening costs, which are expensed as incurred, comprise the costs related to preparing restaurants to introduce Donatos®, and other initiatives, as well as direct costs, including labor, occupancy, training, and marketing, incurred related to opening new restaurants and hiring the initial work force. Our pre-opening costs fluctuate from period to period, depending upon, but not limited to, the number of restaurants where Donatos® has been introduced, the number of restaurant openings, the size of the restaurants being opened, and the location of the restaurants. Pre-opening costs for any given quarter will typically include expenses associated with restaurants opened during the quarter as well as expenses related to restaurants opening in subsequent quarters.

We incurred pre-opening costs during the twelve and ~~forty~~twenty-eight weeks ended ~~October 3, 2021 and October 4, 2020~~July 10, 2022 related to the rollout of Donatos®. The Company ~~completed the rollout of 38 restaurants during the twelve weeks ended October 3, 2021, and~~ expects to continue its roll out of Donatos® in 2022 to approximately ~~40 restaurants in the fourth quarter~~50 restaurants.

Table of ~~fiscal year 2021.~~Contents

Interest Expense, Net and Other

Interest expense, net and other was ~~$2.9~~$4.1 million for the twelve weeks ended ~~October 3, 2021,~~July 10, 2022, an increase of ~~$0.6~~$1.4 million, or ~~26.1%~~48.9%, compared to the same period in ~~2020.~~2021. The increase was primarily related to higher outstanding debt and a higher weighted average interest rate for the ~~quarter due to increased rates associated with the Second Amendment, partially offset by a lower average outstanding debt balance compared to the same period in 2020.~~quarter. Our weighted average interest rate on our credit facility debt was ~~6.8%~~8.7% for the twelve weeks ended ~~October 3, 2021~~July 10, 2022 as compared to ~~5.0%~~7.4% for the same period in ~~2020.~~2021.

Interest expense, net and other was ~~$10.0~~$11.6 million for the ~~forty~~twenty-eight weeks ended ~~October 3, 2021,~~July 10, 2022, an increase of ~~$2.4~~$4.4 million, or ~~31.6%~~62.5%, ~~from~~compared to the same period in ~~2020.~~2021. The increase was primarily related to higher outstanding debt and a higher weighted average interest rate ~~for the period~~ as well as the ~~partial~~ write off of approximately ~~$1.2~~$1.7 million of deferred financing charges related to the ~~modification of our revolver in conjunction with~~Company's Prior Credit Facility upon the execution of the ~~Second Amendment~~Credit Agreement on ~~February 25, 2021, partially offset by a lower average outstanding debt balance compared to the same period in 2020.~~March 4, 2022. Our weighted average interest rate on our credit facility debt was ~~6.6%~~8.4% for the ~~forty~~twenty-eight weeks ended ~~October 3, 2021~~July 10, 2022 as compared to ~~4.5%~~6.7% for the same period in ~~2020.~~2021.

~~Table of Contents~~

~~Provision for~~ Income ~~Taxes~~Tax Provision

The effective tax rate for the twelve weeks ended ~~October 3, 2021~~July 10, 2022 was a ~~0.2% benefit,~~2.5% expense, compared to a ~~77.0%~~6.6% benefit for the twelve weeks ended ~~October 4, 2020.~~ July 11, 2021.

The effective tax rate for the twenty-eight weeks ended July 10, 2022 was a 2.4% expense, compared to a 2.2% benefit for the ~~forty~~twenty-eight weeks ended ~~October 3, 2021 was 1.1%, compared to a 1.8% benefit for the forty weeks ended October 4, 2020. The decrease in tax benefit for~~July 11, 2021.

During the twelve and ~~forty~~twenty-eight weeks ended ~~October 3, 2021 is primarily due to~~July 10, 2022, the ~~change in full valuation allowance recognition.~~

~~The~~ Company ~~has filed~~received $12.3 million and $14.8 million of federal and state ~~cash tax~~ refund claims, ~~totaling approximately $16~~respectively, and expects to receive an additional $0.6 million during ~~2021 from net operating loss carrybacks. While we expect to receive a portion~~the second half of ~~the refunds in 2021, due to government delays in processing these claims we do not expect to receive the majority until~~ 2022.

Liquidity and Capital Resources

Cash and cash equivalents, and restricted cash increased ~~$1.6~~$36.3 million to ~~$17.8~~$59.0 million as of ~~October 3, 2021,~~July 10, 2022, from ~~$16.1~~$22.8 million at the beginning of the fiscal year. As the Company continues to recover from the COVID-19 pandemic and generates operating cash flow, the Company is using available cash flow from operations to ~~pay down debt,~~ maintain existing restaurants and infrastructure, ~~and~~ execute on its long-term strategic ~~initiatives.~~initiatives, and pay down debt. As of ~~October 3, 2021,~~July 10, 2022, the Company had approximately ~~$75.2~~$75.3 million in liquidity, ~~including the impact of a $30 million capacity reduction on our revolving line of credit pursuant to the Second Amendment,~~ including cash on hand and available borrowing ~~capacity.~~capacity under its credit facility.

Cash Flows

The table below summarizes our cash flows from operating, investing, and financing activities for each period presented (in thousands):

Forty Weeks Ended
October 3, 2021 October 4, 2020
Net cash provided by (used in) operating activities $ 37,617 $ (22,401)
Net cash used in investing activities (19,967) (14,131)
Net cash (used in) provided by financing activities (16,037) 34,020
Effect of exchange rate changes on cash 28 (166)
Net change in cash and cash equivalents $ 1,641 $ (2,678)


	Twenty-Eight Weeks Ended
	July 10, 2022		July 11, 2021
Net cash provided by operating activities	$	36,439	$	37,184
Net cash used in investing activities	(15,624)		(10,834)
Net cash provided by (used in) financing activities	15,455		(16,931)
Effect of exchange rate changes on cash	(6)		34
Net change in cash and cash equivalents, and restricted cash	$	36,264	$	9,453

Operating Cash Flows

Net cash flows provided by ~~(used in)~~ operating activities ~~increased $61.0~~decreased $0.7 million to ~~$37.6~~$36.4 million for the ~~forty~~twenty-eight weeks ended ~~October 3, 2021.~~July 10, 2022. The ~~changes~~change in net cash provided by ~~(used in)~~ operating activities ~~are~~is primarily attributable to ~~a $103.3 million increase in profit~~increased loss from operations, (defined as the change in operating margins from comparable and non-comparable restaurants), lower accounts receivable and higher accounts payable balances due to the timing of operational receipts and payments,partially offset by increased non-cash items as well as other changes in working capital, including the tax refunds received in 2022, as presented in the Condensed Consolidated Statements of Cash Flows.

Investing Cash Flows

Net cash flows used in investing activities increased ~~$5.8~~$4.8 million to ~~$20.0~~$15.6 million for the ~~forty~~twenty-eight weeks ended ~~October 3, 2021,~~July 10, 2022, as compared to ~~$14.1~~$10.8 million for the same period in ~~2020.~~2021. The increase is primarily due to increased ~~spend~~spending on ~~Donatos~~® ~~associated with adding 38 restaurants~~restaurant improvements, and investments in ~~the third fiscal quarter.~~technology.

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The following table lists the components of our capital expenditures, net of currency translation, for the ~~forty~~twenty-eight weeks ended ~~October 3,~~July 10, 2022 and July 11, 2021 ~~and October 4, 2020~~ (in thousands):


		Forty Weeks Ended					Twenty-Eight Weeks Ended
		October 3, 2021		October 4, 2020			July 10, 2022		July 11, 2021
Donatos® expansion		$	7,687	$	—
Restaurant improvement capital and other	Restaurant improvement capital and other	6,467		8,433		Restaurant improvement capital and other	$	7,379	$	6,184
Investment in technology infrastructure and other		5,355		6,437
Investment in technology, infrastructure, and other						Investment in technology, infrastructure, and other	4,877		2,878
Donatos® expansion						Donatos® expansion	2,872		1,792
New restaurants and restaurant refreshes	New restaurants and restaurant refreshes	478		—		New restaurants and restaurant refreshes	765		—

Total capital expenditures	Total capital expenditures	$	19,987	$	14,870	Total capital expenditures	$	15,893	$	10,854

Financing Cash Flows

Net cash flows ~~used in~~provided by financing activities increased ~~$51.0~~$32.4 million to ~~$16.0~~$15.5 million for the ~~forty~~twenty-eight weeks ended ~~October 3, 2021,~~July 10, 2022, as compared to net cash flows ~~provided by~~used in financing activities of ~~$34.0~~$16.9 million in the same period in ~~2020.~~2021. The ~~decrease~~increase is primarily due to ~~a $28.9~~$16.4 million ~~decrease in proceeds from the issuance of common stock, net of issuance costs, and a $24.7 million increase~~ in net ~~repayments~~draws made on long-term debt as a result of the Company's refinancing of debt on March 4, 2022 and $3.9 million in proceeds received related to a real estate sale, partially offset by ~~a decrease~~an increase in cash used for debt issuance costs, compared to a net paydown of debt of $16.9 million in 2021.

New Credit Agreement

On March 4, 2022 the Company entered into a new Credit Agreement (the "Credit Agreement"), which replaced its prior amended and restated credit agreement (the "Prior Credit Agreement"). The new Credit Agreement references the Secured Overnight Financing Rate ("SOFR"), a ~~decrease in cash used to~~new index calculated by short-term repurchase agreements and backed by U.S. Treasury securities, or the ~~Company's common stock due to~~Alternate Base Rate ("ABR"), which represents the ~~temporary suspension~~highest of (a) the ~~Company's share repurchase program beginning in 2020.~~

~~Credit Facility~~Prime Rate, (b) the Federal Funds Rate plus 0.50% per annum, or (c) one-month term SOFR plus 1.00% per annum.

As of ~~October 3, 2021,~~July 10, 2022, the Company had outstanding borrowings under the Credit ~~Facility~~Agreement of ~~$156.3~~$190.5 million net of unamortized deferred financing charges and discounts, of which ~~$9.7~~$2.0 million was classified as current, in addition to amounts issued under letters of credit of $8.6 million. Amounts issued under letters of credit reduce the amount available under the Credit Facility but are not recorded as debt.current. As of ~~October 3, 2021,~~July 10, 2022, the Company had ~~$57.4~~$25.0 million of available borrowing capacity under its Credit ~~Facility, including~~Agreement.

As of July 10, 2022, the ~~impact~~Company had $8.4 million of ~~a $30 million capacity reduction on our revolving line~~letters of credit ~~pursuant~~issued against cash collateral, compared to ~~the Second Amendment. Net payments during the forty weeks ended October 3, 2021 totaled $14.3~~$8.6 million ~~and net draws during~~for the same period in ~~2020 totaled $9.2 million. We have made net repayments~~2021. The Company's cash collateral is recorded in Restricted cash on our ~~Credit Facility of $50.5 million since December 29, 2019.~~

~~As discussed in Footnote~~6, ~~Borrowings, in the Notes to the~~ Condensed Consolidated ~~Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q, In response to~~Balance Sheets for the continued uncertainty around the impact of industry labor and supply chain challenges, as well as the COVID-19 Delta variant, the Company amended its current Credit Facility on November 9, 2021 to obtain additional flexibility to continue to implement our business strategy. The Company anticipates refinancing its Credit Facility inquarter ended July 10, 2022.

Covenants

We are subject to a number of customary covenants under our new Credit Facility, including limitations on additional borrowings, acquisitions, stock repurchases, sales of assets, and dividend ~~payments. As discussed in Footnote~~6, ~~Borrowings~~, in the Notes to the Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q, we entered into the Third Amendment on November 9, 2021, which waives compliance with thepayments, as well as a Total Net Leverage Ratio Covenant for the third fiscal quarter of 2021, and provides for adjustments during fourth fiscal quarter of 2021, and the first, second, and third fiscal quarters of 2022. Additionally, the Third Amendment provides for adjustments to the calculation of the FCCR Covenant when it becomes applicable in the first fiscal quarter of 2022. See Footnote 6, ~~Borrowings~~ ~~for additional details.~~

As of October 3, 2021, the Company is in compliance with all applicable covenants applicable to our Credit Facility, as amended. Due to an anticipated delay in the timing of receipt of cash tax refunds, during the third fiscal quarter and in addition to the Third Amendment, the Company obtained a waiver from our lenders, waiving the application of our FCCR Covenant for the third and fourth fiscal quarters of 2021.ratio covenant.

Debt Outstanding

Total debt outstanding ~~decreased $13.4~~increased $23.4 million to ~~$157.2~~$200.4 million at ~~October 3, 2021~~,July 10, 2022, from ~~$170.6~~$177.0 million at December ~~27, 2020,~~26, 2021, primarily ~~due to~~driven by net ~~payments~~proceeds from the issuance of ~~$14.3 million on~~ the ~~Credit Facility, offset by accruing utilization fees on the~~New Credit Facility during the ~~forty~~twenty-eight weeks ended ~~October 3, 2021~~.

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July 10, 2022.

Working Capital

We typically maintain current liabilities in excess of our current assets which results in a working capital deficit. We are able to operate with a working capital deficit because restaurant sales are primarily conducted on a cash or credit card basis. Rapid turnover of inventory results in limited investment in inventories, and cash from sales is usually received before related payables for food, supplies, and payroll become due. In addition, receipts from the sale of gift cards are received well in advance of related redemptions. Rather than maintain higher cash balances that would result from this pattern of operating cash flows, we typically utilize operating cash flows in excess of those required for currently-maturing liabilities to pay for capital expenditures, debt repayment, or to repurchase stock as allowed. When necessary, we utilize our ~~Credit Facility~~credit facility to satisfy short-term liquidity requirements. We believe our future cash flows generated from restaurant operations combined with our remaining borrowing capacity under the ~~Credit Facility~~credit facility will be sufficient to satisfy any working capital deficits and our planned capital expenditures.

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Share Repurchase

On August 9, 2018, the Company's board of directors authorized the Company's current share repurchase program of up to a total of $75 million of the Company's common stock. The share repurchase authorization was effective as of August 9, 2018, and will terminate upon completing repurchases of $75 million of common stock unless otherwise terminated by the board. Pursuant to the repurchase program, purchases may be made from time to time at the Company's discretion and the Company is not obligated to acquire any particular amount of common stock. From the date of the current program approval through ~~October 3, 2021,~~July 10, 2022, we have repurchased a total of 226,500 shares at an average price of $29.14 per share for an aggregate amount of $6.6 million. Accordingly, as of ~~October 3, 2021,~~July 10, 2022, we had $68.4 million of availability under the current share repurchase program.

Effective March 14, 2020, the Company ~~temporarily~~ suspended its share repurchase program to provide additional liquidity during the COVID-19 pandemic. Our ability to repurchase shares is limited to conditions set forth by our lenders in the ~~Second Amendment to our~~ Credit ~~Facility prohibiting us from repurchasing additional shares until~~Agreement; repurchases shall not exceed (in any fiscal year) the ~~first fiscal quarter~~greater of ~~2022 at~~$2,500,000 and 4% of Consolidated EBITDA calculated on a Pro Forma Basis for the ~~earliest and not until we deliver a covenant compliance certificate demonstrating a lease adjusted leverage ratio less than or equal to 5.00:1.00.~~then most recently ended period.

Inflation

The primary inflationary factors affecting our operations are food, labor costs, energy costs, and materials used in the construction of new restaurants. Increases in wage rates have directly affected our labor costs in recent years. Additionally, many of our leases require us to pay taxes, maintenance, repairs, insurance, and utilities, all of which are generally subject to inflationary increases. Labor cost and commodity cost inflation had a negative impact on our financial condition and results of operations during the twelve and twenty-eight weeks ended July 10, 2022. Uncertainties related to fluctuations in costs, including energy costs, commodity prices, annual indexed ~~or potential minimum~~and other wage increases, and construction materials make it difficult to predict what impact, if any, inflation may continue to have on our business, but it is anticipated inflation will have a negative impact on labor and commodity costs for the remainder of ~~2021.~~2022.

Seasonality

Our business is subject to seasonal fluctuations. Prior to the COVID-19 pandemic, sales in most of our restaurants have been higher during the summer months and winter holiday season and lower during the fall season. As a result, our quarterly operating results and comparable restaurant revenue may fluctuate significantly as a result of seasonality. Accordingly, results for any one quarter are not necessarily indicative of results to be expected for any other quarter, and comparable restaurant sales for any particular future period may decrease.

Contractual Obligations

There were no other material changes outside the ordinary course of business to our contractual obligations since the filing of the Company's Annual Report on Form 10-K for the fiscal year ended December 26, 2021, except for long-term debt obligations resulting from the refinancing of our Credit Agreement in March 2022 as previously discussed above and in Note 6, Borrowings, of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q, Contractual long-term debt payments as of July 10, 2022 are as follows (in thousands):


	Payments Due by Period
	Total		2022		2023-2024		2025-2026		2027 and Thereafter
Long-term debt obligations(1)	$	269,350	$	7,999	$	33,950	$	33,341	$	194,060
Purchase obligations(2)	$	182,566	$	30,888	$	66,326	$	38,848	$	46,504

(1) Long-term debt obligations primarily represent minimum required principal payments under our Credit Facility including estimated interest of $69.0 million based on a 7.50% average borrowing interest rate.

(2)Purchase obligations includes the Company's share of expected system-wide fixed price commitments for food, beverage, equipment, and restaurant supply items. These amounts are estimates based on both purchase commitments for contracts, as well as anticipated inventory needed for the ~~fiscal quarter ended April 18, 2021, except for lease obligations as a result~~Company's restaurants, and could vary due to the timing of ~~contractual rent concessions negotiated by the Company during the fiscal quarter ended October 3, 2021.~~ anticipated volumes.

See the maturity of lease liabilities table in Note 3, Leases, in the Notes to the Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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Critical Accounting Policies and Estimates

Critical accounting policies and estimates are those we believe are both significant and that require us to make difficult, subjective, or complex judgments, often because we need to estimate the effect of inherently uncertain matters. We base our estimates and judgments on historical experiences and various other factors we believe to be appropriate under the circumstances. Actual results may differ from these estimates, including our estimates of future restaurant level cash flows, which are subject to the current economic environment and future impact from the COVID-19 pandemic, and we might obtain different results if we use different assumptions or conditions. We had no significant changes in our critical accounting policies and estimates which were disclosed in our Annual Report on Form 10-K for the fiscal year ended December ~~27, 2020.~~

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26, 2021.

Recently Issued and Recently Adopted Accounting Standards

~~See Note 1,~~ ~~Basis of Presentation and Recent Accounting Pronouncements, of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.~~None noted.

Forward-Looking Statements

Certain information and statements contained in this report are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "PSLRA") codified at Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Exchange Act. Forward-looking statements include statements regarding our expectations, beliefs, intentions, plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements which are other than statements of historical facts. These statements may be identified, without limitation, by the use of forward-looking terminology such as "anticipate," "assume," "believe," "could," "estimate," "expect," "future," "intend," "may," "plan," "project," "will," "continue," and similar expressions. Forward-looking statements may relate to, among other things: (i) ~~our ability to re-finance our Credit Facility in 2022, (ii)~~ anticipated impacts of litigation, including employment-related claims, on our financial position and results of operations, ~~(iii)~~(ii) anticipated impacts of COVID-19 on our business, our financial position and results of operations, ~~(iv)~~(iii) expectations regarding our ability to attract and retain Team Members, ~~(v)~~(iv) our business focus and strategy, ~~(vi) expectations regarding claims for tax refunds, (vii)~~(v) our ability to maintain our working capital position, ~~(viii)~~(vi) our ability to use our ~~Credit Facility~~credit facility to satisfy our working capital deficit, short-term liquidity requirements and capital expenditures, ~~(ix)~~(vii) anticipated impacts of inflation, and ~~(x)~~(viii) availability of food and supplies meeting our specifications from alternate ~~sources.g.~~sources.

Although we believe the expectations reflected in our forward-looking statements are based on reasonable assumptions, such expectations may prove to be materially incorrect due to known and unknown risks and uncertainties.

In some cases, information regarding certain important factors that could cause actual results to differ materially from a forward-looking statement appears together with such statement. In addition, the factors described under Risk Factors, as well as other possible factors not listed, could cause actual results to differ materially from those expressed in forward-looking statements, including, without limitation, the following:

•the impact of COVID-19 on our results of operations, supply chain, and liquidity;

•the effectiveness of the Company's strategic initiatives, including alternative labor models, service, and operational improvement initiatives;

•our ability to recruit staff, train, and retain our workforce for service execution;

•the effectiveness of the Company's marketing strategies and promotions;

•menu changes, including the anticipated sales growth, costs, and timing of the Donatos® expansion;

•the implementation, rollout, and timing of technology solutions in our restaurants and at our restaurant support center, in addition to digital platforms that are accessed by our Guests;

•our ability to achieve and sustain revenue and cost savings from off-premise sales and other initiatives;

•competition in the casual dining market and discounting by competitors;

•changes in consumer spending trends and habits;

•changes in the cost and availability of key food products and distribution, restaurant equipment, construction materials, labor, and energy, including the existence of alternate suppliers and the availability of supplies meeting our specification;

•general economic conditions, including changes in consumer disposable income, weather conditions, and related events in regions where our restaurants are operated;

•the adequacy of cash flows and the cost and availability of capital or ~~Credit Facility~~credit facility borrowings, including our ability to refinance our ~~Credit Facility,~~credit facility, on terms we expect or at all

•~~government delays in processing tax refund claims~~

•the level and impacts of inflation;

•the impact of federal, state, and local regulation of the Company's business;

•changes in federal, state, or local laws and regulations affecting the operation of our restaurants, including minimum wages, consumer health and safety, health insurance coverage, nutritional disclosures, and employment eligibility-related documentation requirements; and

•costs and other effects of legal claims by Team Members, franchisees, customers, vendors, stockholders, and others, including negative publicity regarding food safety or cyber security.

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All forward-looking statements speak only as of the date made. All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements. Except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances.

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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

There has been no material change in the interest rate risk, foreign currency exchange risk, or commodity price risk ~~or interest rate risk~~ since the ~~disclosures included in Item 7A. Quantitative and Qualitative Disclosures About Market Risk included in~~filing of the Company's Annual Report on Form 10-K for the fiscal year ended December ~~27, 2020, filed with the SEC on March 3,~~26, 2021.

We continue to monitor our interest rate risk on an ongoing basis and may use interest rate swaps or similar instruments in the future to manage our exposure to interest rate changes related to our borrowings as the Company deems appropriate. ~~During the quarter ended October 3, 2021,~~As of July 10, 2022, we had ~~an average of $154.7~~$199.5 million of borrowings subject to variable interest rates. A 1.0% change in the effective interest rate applied to these loans would have resulted in a pre-tax interest expense fluctuation of ~~$1.5~~$2.0 million on an annualized basis.

The Company's restaurant menus are highly dependent upon a few select commodities, including ground beef, poultry, and potatoes. We purchase food, supplies and other commodities for use in our operations based on prices established with our suppliers. Many of the commodities purchased by us are subject to volatility due to market supply and demand factors outside of our control, including the price of other commodities, weather, seasonality, production, trade policy, and other factors. As a result of the COVID-19 pandemic, we have experienced and expect to continue to experience distribution disruptions, commodity cost inflation, and certain food and supply shortages. To manage this risk in part, we enter into fixed-price purchase commitments for certain commodities; however, it may not be possible for us to enter into fixed-price purchase commitments for certain commodities, or we may choose not to enter into fixed-price contracts for certain commodities. We believe that substantially all of our food and supplies meeting our specifications are available from alternate sources, which we have identified to diversify our supply chain to mitigate our overall commodity risk. We may or may not have the ability to increase menu prices, or vary menu items, in response to commodity price increases. A 1.0% increase in food and beverage costs would negatively impact cost of sales by approximately ~~$2.0~~$3.0 million on an annualized basis.

ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's reports under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the management of the Company ("Management"), including the Company's Chief Executive Officer (CEO) and Chief Financial Officer (CFO), as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, Management recognizes that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives. The Company's CEO and CFO have concluded that, based upon the evaluation of disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Exchange Act), the Company's disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company's internal control over financial reporting that occurred during the Company's most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II — OTHER INFORMATION

ITEM 1. Legal Proceedings

Evaluating contingencies related to litigation is a complex process involving subjective judgment on the potential outcome of future events and the ultimate resolution of litigated claims may differ from our current analysis. Accordingly, we review the adequacy of accruals and disclosures each quarter in consultation with legal counsel and we assess the probability and range of possible losses associated with contingencies for potential accrual in the consolidated financial statements.

For further information related to our litigation contingencies, see Note 8, Commitments and Contingencies, in the Notes to the Condensed Consolidated Financial Statements in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

ITEM 1A. Risk Factors

Risk factors associated with our business are contained in Item 1A, "Risk Factors," of our Annual Report on Form 10-K for the fiscal year ended December ~~27, 2020 (“Annual Report”)~~26, 2021 filed with the SEC on March ~~3, 2021. Except as set forth below, there~~10, 2022. There have been no material changes ~~to the Company’s risk factors since the Annual Report.~~

~~We are supplementing~~from the risk factors disclosed in ~~our~~the fiscal year 2021 Annual Report ~~as follows:~~

~~We are susceptible to the impacts of labor shortages, which have and may continue to negatively impact our financial condition and results of operations.~~

~~Our ability to provide the experience our Guests expect and desire depends~~ on our ability to continue attracting and retaining a sufficient number of qualified management and operating Team Members. Labor shortages in our industry and in the broader economy have disrupted, and may further disrupt, our ability to maintain adequate staffing levels at our restaurants. Increasing competition in the market for Team Members may increase our labor costs, including by requiring us to take additional measures to ensure that our compensation and benefits for Team Members remain competitive within the restaurant industry and and with other industries that compete with us for workers, which could materially increase our expenses. During the third quarter of 2021 we took, and we may continue to take, certain measures to limit the impact of staffing shortages on the Guest experience. These measures included limiting operating hours and dine-in services at some of our restaurants. If labor shortages continue or worsen, we may be required to take similar or additional measures at a larger number of our restaurants. If we are not successful in implementing these measures, or if these measures are insufficient to mitigate the impacts of any labor shortages, our Guest experience may be negatively impacted, leading to a decline in traffic and sales, which may impact our financial condition and results of operations.

Additionally, in the third quarter of 2021, many of our vendor partners have experienced challenges in hiring and retention, which together with global supply chain disruptions have contributed to intermittent product and distribution shortages. We may be unable to mitigate the impacts of such disruptions by locating vendors who can provide us with supplies that meet our timing, quality, and cost requirements and expectations, or at all, particularly in the event of widespread supply chain disruptions. Sustained supply shortages have and could continue to adversely affect our revenue and profits.Form 10-K.

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

During the twelve ~~and forty~~ weeks ended ~~October 3, 2021,~~July 10, 2022, the Company did not have any sales of securities in transactions that were not registered under the Securities Act of 1933, as amended, that have not been reported in a Current Report on Form ~~8-K. No~~8-K, nor were any share repurchases ~~were~~ made by the ~~Company during the third fiscal quarter of 2021.~~Company. Our ability to repurchase shares is limited to conditions set forth by our lenders in the ~~Second Amendment prohibiting us from repurchasing additional shares until~~Credit Agreement; repurchases shall not exceed (in any fiscal year) the ~~first fiscal quarter~~greater of ~~2022 at~~$2,500,000 and 4% of Consolidated EBITDA calculated on a Pro Forma Basis for the ~~earliest and not until we deliver a covenant compliance certificate demonstrating a lease adjusted leverage ratio less than or equal to 5.00:1.00.~~then most recently ended period.

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ITEM 6. Exhibits


Exhibit Number						Description

~~(10.1)~~						Third Amendment to Credit Agreement, dated as of November 9, 2021, by and among Red Robin International, Inc., Red Robin Gourmet Burgers, Inc., the Guarantors, the Lenders party thereto and Wells Fargo Bank, National Association, as administration agent. Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on November 10, 2021.

31.1						Rule 13a-14(a) Certification of Chief Executive Officer

31.2						Rule 13a-14(a) Certification of Chief Financial Officer

32.1						Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer

101						The following financial information from the Quarterly Report on Form 10-Q of Red Robin Gourmet Burgers, Inc. for the quarter ended ~~October 3, 2021~~July 10, 2022 formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at ~~October 3, 2021~~July 10, 2022 and December ~~27, 2020;~~26, 2021; (ii) Condensed Consolidated Statements of Operations and Comprehensive Loss for the twelve and ~~forty~~twenty-eight weeks ended ~~October 3, 2021~~July 10, 2022 and ~~October 4, 2020;~~July 11, 2021; (iii) Condensed Consolidated Statements of Stockholders' Equity at ~~October 3, 2021~~July 10, 2022 and ~~October 4, 2020;~~July 11, 2021; (iv) Condensed Consolidated Statements of Cash Flows for the ~~forty~~twenty-eight weeks ended ~~October 3, 2021~~July 10, 2022 and ~~October 4, 2020;~~July 11, 2021; and (v) the Notes to Condensed Consolidated Financial Statements, tagged as blocks of text.

( ) Exhibits previously filed in the Company's periodic filings as specifically noted.

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SIGNATURE

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

RED ROBIN GOURMET BURGERS, INC.

(Registrant)

~~November~~August 10, ~~2021~~2022

By:

/s/ Lynn S. Schweinfurth

(Date)

Lynn S. Schweinfurth

(Chief Financial Officer)


		Page
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss	2
	Condensed Consolidated Statements of Stockholders' Equity	3
	Condensed Consolidated Statements of Cash Flows	54
	Notes to Condensed Consolidated Financial Statements	65
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 6.	Exhibits	28
	Signature	29


October 3, 2021	Finance		Operating		Total
Right of use assets, net	$	9,774	$	410,014	$	419,788

Current portion of lease obligations	1,140		48,754		49,894
Long-term portion of lease obligations	10,813		439,860		450,673
Total	$	11,953	$	488,614	$	500,567

December 27, 2020	Finance		Operating		Total
Right of use assets, net	$	9,644	$	415,929	$	425,573

Current portion of lease obligations	1,078		54,197		55,275
Long-term portion of lease obligations	10,937		454,296		465,233
Total	$	12,015	$	508,493	$	520,508


	October 3, 2021				December 27, 2020
	Borrowings		Weighted Average Interest Rate		Borrowings		Weighted Average Interest Rate
Revolving credit facility, term loan, and other long-term debt	$	157,163	6.80	%	$	170,644	4.50	%
Total debt	157,163				170,644
Less current portion	9,692				9,692
Long-term debt	$	147,471			$	160,952

Amounts issued under letters of credit	$	8,600			$	8,700


	Twelve weeks ended				2021 compared to 2020		Twelve Weeks Ended			2021 compared to 2019(1)
	October 3, 2021		October 4, 2020		Increase/(Decrease)		October 6, 2019(1)			Increase/(Decrease)
Restaurant revenue (millions)	$	270.2	$	197.0	37.2	%	$	289.9		(6.8)	%
Restaurant operating costs:	(Percentage of Restaurant Revenue)				(Basis Points)		(Percentage of Restaurant Revenue)			(Basis Points)
Cost of sales	23.2 %		23.4 %		(20)		23.8		%	(60)
Labor	36.9 %		37.7 %		(80)		36.2		%	70
Other operating	19.0 %		19.1 %		(10)		15.3		%	370
Occupancy	8.3 %		11.2 %		(290)		8.6		%	(30)
Total	87.5 %		91.4 %		(390)		83.9		%	360