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~~2, 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 8, 2021,~~October 31, 2022, there were ~~15,716,181~~15,928,045 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)	October 2, 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	$	50,040	$	22,750
Accounts receivable, net	Accounts receivable, net	11,939		16,510		Accounts receivable, net	11,915		21,400
Inventories	Inventories	23,769		23,802		Inventories	25,212		25,219
Income tax receivable	Income tax receivable	16,165		16,662		Income tax receivable	754		15,824
Prepaid expenses and other current assets	Prepaid expenses and other current assets	12,439		13,818		Prepaid expenses and other current assets	13,044		16,963
Restricted cash						Restricted cash	8,090		—
Total current assets	Total current assets	82,069		86,908		Total current assets	109,055		102,156
Property and equipment, net	Property and equipment, net	388,881		427,033		Property and equipment, net	342,386		386,336
Right of use assets, net		419,788		425,573
Operating lease assets, net						Operating lease assets, net	375,747		400,825

Intangible assets, net	Intangible assets, net	22,419		24,714		Intangible assets, net	19,320		21,292
Other assets, net	Other assets, net	8,567		10,511		Other assets, net	14,434		18,389
Total assets	Total assets	$	921,724	$	974,739	Total assets	$	860,942	$	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	$	33,814	$	32,510
Accrued payroll and payroll-related liabilities	Accrued payroll and payroll-related liabilities	32,555		27,653		Accrued payroll and payroll-related liabilities	34,040		32,584
Unearned revenue	Unearned revenue	42,621		50,138		Unearned revenue	37,539		54,214
Current portion of lease obligations		49,894		55,275
Current portion of operating lease obligations						Current portion of operating lease obligations	47,726		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	50,482		45,458
Total current liabilities	Total current liabilities	211,640		202,554		Total current liabilities	205,601		223,300
Long-term debt	Long-term debt	147,471		160,952		Long-term debt	189,320		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	401,274		435,136
Other non-current liabilities	Other non-current liabilities	15,775		25,287		Other non-current liabilities	13,120		26,325
Total liabilities	Total liabilities	$	825,559	$	854,026	Total liabilities	809,315		852,024
Commitments and contingencies (see note 8)
Commitments and contingencies (see Note 8. Commitments and Contingencies)						Commitments and contingencies (see Note 8. Commitments and Contingencies)
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; 15,900 and 15,722 shares outstanding as of October 2, 2022 and December 26, 2021						Common stock; $0.001 par value: 45,000 shares authorized; 20,449 shares issued; 15,900 and 15,722 shares outstanding as of October 2, 2022 and December 26, 2021	20		20
Preferred stock, $0.001 par value: 3,000 shares authorized; no shares issued and outstanding as of October 2, 2022 and December 26, 2021						Preferred stock, $0.001 par value: 3,000 shares authorized; no shares issued and outstanding as of October 2, 2022 and December 26, 2021	—		—
Treasury stock 4,549 and 4,727 shares, at cost, as of October 2, 2022 and December 26, 2021						Treasury stock 4,549 and 4,727 shares, at cost, as of October 2, 2022 and December 26, 2021	(184,169)		(192,803)
Paid-in capital	Paid-in capital	240,445		243,407		Paid-in capital	242,235		242,560
Accumulated other comprehensive income (loss), net of tax	Accumulated other comprehensive income (loss), net of tax	10		(4)		Accumulated other comprehensive income (loss), net of tax	(51)		1
Retained earnings		48,509		77,198
Retained earnings (deficit)						Retained earnings (deficit)	(6,408)		27,196
Total stockholders' equity	Total stockholders' equity	96,165		120,713		Total stockholders' equity	51,627		76,974
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	921,724	$	974,739	Total liabilities and stockholders' equity	$	860,942	$	928,998

See Notes to Condensed Consolidated Financial ~~Statements.~~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				Forty 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)	October 2, 2022		October 3, 2021		October 2, 2022		October 3, 2021
Revenues:	Revenues:									Revenues:
Restaurant revenue	Restaurant revenue	$	270,202	$	197,009	$	861,036	$	658,587	Restaurant revenue	$	282,449	$	270,202	$	951,718	$	861,036
Franchise and other revenues	Franchise and other revenues	5,242		3,469		17,658		9,078		Franchise and other revenues	4,439		5,242		24,810		17,658

Total revenues	Total revenues	275,444		200,478		878,694		667,665		Total revenues	286,888		275,444		976,528		878,694
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	70,640		62,671		234,283		193,754
Labor	Labor	99,725		74,344		310,333		255,652		Labor	100,522		99,725		340,273		310,333
Other operating	Other operating	51,462		37,631		156,102		124,585		Other operating	52,858		51,462		172,725		156,102
Occupancy	Occupancy	22,519		22,099		74,233		76,514		Occupancy	22,828		22,519		76,406		74,233
Depreciation and amortization	Depreciation and amortization	18,881		19,173		63,984		68,053		Depreciation and amortization	17,368		18,881		58,924		63,984
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	35,692		30,343		102,168		89,299
Pre-opening costs	Pre-opening costs	418		89		792		245		Pre-opening costs	217		418		514		792
Other charges		1,561		4,416		9,228		138,296
Other charges (gains), net										Other charges (gains), net	(5,217)		1,561		8,236		9,228
Total costs and expenses	Total costs and expenses	287,580		225,073		897,725		901,071		Total costs and expenses	294,908		287,580		993,529		897,725

Loss from operations	Loss from operations	(12,136)		(24,595)		(19,031)		(233,406)		Loss from operations	(8,020)		(12,136)		(17,001)		(19,031)
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	4,590		2,870		16,151		9,986

Loss on debt refinancing										Loss on debt refinancing
Interest income and other, net										Interest income and other, net
Total other expenses										Total other expenses	4,590		2,870		16,151
Loss before income taxes	Loss before income taxes	(15,006)		(26,875)		(29,017)		(241,035)		Loss before income taxes	(12,610)		(15,006)		(33,152)		(29,017)
Income tax benefit		(26)		(20,696)		(328)		(4,297)
Income tax provision (benefit)										Income tax provision (benefit)	(43)		(26)		453		(328)
Net loss	Net loss	$	(14,980)	$	(6,179)	$	(28,689)	$	(236,738)	Net loss	$	(12,567)	$	(14,980)	$	(33,605)	$	(28,689)
Loss per share:	Loss per share:									Loss per share:
Basic	Basic	$	(0.95)	$	(0.40)	$	(1.83)	$	(16.98)	Basic	$	(0.79)	$	(0.95)	$	(2.12)	$	(1.83)
Diluted	Diluted	$	(0.95)	$	(0.40)	$	(1.83)	$	(16.98)	Diluted	$	(0.79)	$	(0.95)	$	(2.12)	$	(1.83)
Weighted average shares outstanding:	Weighted average shares outstanding:									Weighted average shares outstanding:
Basic	Basic	15,709		15,540		15,647		13,945		Basic	15,892		15,709		15,816		15,647
Diluted	Diluted	15,709		15,540		15,647		13,945		Diluted	15,892		15,709		15,816		15,647

Other comprehensive (loss) income:
Other comprehensive income (loss):										Other comprehensive income (loss):
Foreign currency translation adjustment	Foreign currency translation adjustment	$	(6)	$	9	$	14	$	(1,121)	Foreign currency translation adjustment	$	(45)	$	(6)	$	(51)	$	14
Other comprehensive (loss) income, net of tax		(6)		9		14		(1,121)
Other comprehensive income (loss), net of tax										Other comprehensive income (loss), net of tax	(45)		(6)		(51)		14
Total comprehensive loss	Total comprehensive loss	$	(14,986)	$	(6,170)	$	(28,675)	$	(237,859)	Total comprehensive loss	$	(12,612)	$	(14,986)	$	(33,656)	$	(28,675)

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
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
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)
Non-cash stock compensation — — — — 2,048 — — 2,048
Net loss — — — — — — (14,980) (14,980)
Other comprehensive loss — — — — — (6) — (6)
Balance, October 3, 2021 20,449 $ 20 4,727 $ (192,819) $ 240,445 $ 10 $ 48,509 $ 96,165

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


	Common Stock			Treasury Stock					Accumulated Other Comprehensive Income/(Loss), net of tax
							Paid-in Capital				Retained Earnings (Deficit)
(in thousands)	Shares	Amount		Shares	Amount								Total
Balance, December 26, 2021	20,449	$	20	4,727	$	(192,803)	$	242,560	$	1	$	27,196	$	76,974
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	—	—		—	—		3,042		—		—		3,042
Net loss	—	—		—	—		—		—		(3,105)		(3,105)
Other comprehensive income (loss), net of tax	—	—		—	—		—		11		—		11

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	—	—		(113)	5,817		(5,691)		—		—		126


Non-cash stock compensation	—	—		—	—		2,542		—		—		2,542
Net loss	—	—		—	—		—		—		(17,932)		(17,932)
Other comprehensive income (loss), net of tax	—	—		—	—		—		(18)		—		(18)
Balance, July 10, 2022	20,449	$	20	4,550	$	(184,205)	$	239,607	$	(6)	$	6,159	$	61,575

Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan	—	—		(1)	36		(40)		—		—		(4)


Non-cash stock compensation	—	—		—	—		2,668		—		—		2,668
Net loss	—	—		—	—		—		—		(12,567)		(12,567)
Other comprehensive income (loss), net of tax	—	—		—	—		—		(45)		—		(45)
Balance, October 2, 2022	20,449	$	20	4,549	$	(184,169)	$	242,235	$	(51)	$	(6,408)	$	51,627

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


	Common Stock			Treasury Stock					Accumulated Other Comprehensive Income/(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 (loss), net of tax	—	—		—	—		—		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 income (loss), net of tax	—	—		—	—		—		(1)		—		(1)

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


Non-cash stock compensation	—	—		—	—		2,048		—		—		2,048
Net loss	—	—		—	—		—		—		(14,980)		(14,980)
Other comprehensive income (loss), net of tax	—	—		—	—		—		(6)		—		(6)
Balance, October 3, 2021	20,449	$	20	4,727	$	(192,819)	$	240,445	$	10	$	48,509	$	96,165

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					Forty Weeks Ended
(in thousands)	(in thousands)	October 3, 2021		October 4, 2020		(in thousands)	October 2, 2022		October 3, 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	$	(33,605)	$	(28,689)
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	58,924		63,984
Gift card breakage	Gift card breakage	(3,231)		(2,329)		Gift card breakage	(8,289)		(3,231)
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	13,048		1,357
Non-cash other charges, net						Non-cash other charges, net	(2,287)		319

Stock-based compensation expense	Stock-based compensation expense	4,501		3,082		Stock-based compensation expense	8,229		4,501
(Gain) loss on sale of property, plant, and equipment						(Gain) loss on sale of property, plant, and equipment	(9,204)		—
Other, net	Other, net	2,228		639		Other, net	3,240		2,228
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	9,487		4,544
Income tax receivable	Income tax receivable	520		(57,756)		Income tax receivable	15,163		520

Inventories						Inventories	(217)		—
Prepaid expenses and other current assets	Prepaid expenses and other current assets	1,014		11,229		Prepaid expenses and other current assets	2,183		1,014
Lease assets, net of liabilities		(12,628)		19,194
Operating lease assets, net of liabilities						Operating lease assets, net of liabilities	(10,562)		(12,711)
Trade accounts payable and accrued liabilities	Trade accounts payable and accrued liabilities	16,948		(9,864)		Trade accounts payable and accrued liabilities	9,621		16,948
Unearned revenue	Unearned revenue	(4,286)		(9,331)		Unearned revenue	(8,386)		(4,286)
Other operating assets and liabilities, net	Other operating assets and liabilities, net	(8,964)		11,976		Other operating assets and liabilities, net	(8,545)		(8,881)
Net cash provided by (used in) operating activities		37,617		(22,401)
Net cash provided by operating activities						Net cash provided by operating activities	38,800		37,617
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of property and equipment		(19,987)		(14,870)
Proceeds from sales of real estate and property, plant, and equipment and other investing activities		20		739
Purchases of property, equipment, and intangible assets						Purchases of property, equipment, and intangible assets	(27,036)		(19,987)
Proceeds from sales of property and equipment and other investing activities						Proceeds from sales of property and equipment and other investing activities	8,739		20
Net cash used in investing activities	Net cash used in investing activities	(19,967)		(14,131)		Net cash used in investing activities	(18,297)		(19,967)
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		109,500
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	(266,275)		(125,216)
Purchase of treasury stock		—		(1,635)

Debt issuance costs	Debt issuance costs	(870)		(2,952)		Debt issuance costs	(4,869)		(870)
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	58		549
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	14,921		(16,037)
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	28		(166)		Effect of exchange rate changes on cash	(44)		28
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	35,380		1,641
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	$	58,130	$	17,757

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	$	(14,729)	$	(840)
Interest paid, net of amounts capitalized	Interest paid, net of amounts capitalized	$	7,586	$	7,514	Interest paid, net of amounts capitalized	$	11,387	$	7,586

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,~~2, 2022, the Company owned and operated ~~430~~424 restaurants located in 38 states. The Company also had 101 franchised full-service restaurants in 16 states and 1one Canadian province. The Company operates its business as 1one operating and 1one 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

July 10, 2022

~~April 19, 2020~~

1612

Second Quarter 2021

July 11, 2021

~~Second~~Third Quarter ~~2020~~2022

~~July 12, 2020~~October 2, 2022

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~~3, 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 forty weeks ended October ~~4, 2020 Condensed Consolidated Statements Of Operations And Comprehensive Loss~~2, 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 forty weeks ended October 2, 2022. The ~~reclassifications had no effect on~~Company does not expect the ~~Company’s Total costs and expenses, Loss from operations, or Net loss.~~impact of this change in estimate to be material to its future financial statements.

Recent ~~Accounting Pronouncements~~Tax Legislation

~~Reference Rate Reform~~

~~In March 2020, FASB issued Update 2020-04, Reference Rate Reform (Topic 848): Facilitation~~The CHIPS and Science Act of 2022 (CHIPS) and the ~~Effects~~Inflation Reduction Act (IRA) of ~~Reference Rate Reform~~2022 were signed into law by President Biden 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 expected to be discontinued. Under this update, contract modifications resulting inAugust 9, 2022 and August 16, 2022, respectively. The legislation introduces new options for monetizing certain credits, a ~~new reference rate may be accounted for as~~corporate alternative minimum tax, and a ~~continuation of the existing contract. This guidance~~stock repurchase excise tax. The Company is ~~effective upon issuance of the update and applies to contract modifications made through December 31, 2022. We are~~ currently evaluating the ~~full~~ impact ~~this guidance will have on~~of CHIPS and IRA, but at present does not expect that any of the provisions included in these acts would result in a material impact to our ~~consolidated financial statements.~~

~~We reviewed all other recently issued accounting pronouncements and concluded they were either not applicable~~deferred tax assets, liabilities, or ~~not expected to have a significant impact on the Company's Condensed Consolidated Financial Statements.~~income taxes payable.

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				Forty Weeks Ended
	October 2, 2022		October 3, 2021		October 2, 2022		October 3, 2021
Restaurant revenue	$	282,449	$	270,202	$	951,718	$	861,036
Franchise revenue	4,249		4,303		14,891		13,123
Gift card breakage(1)	190		438		8,290		3,231
Other revenue	—		501		1,629		1,304
Total revenues	$	286,888	$	275,444	$	976,528	$	878,694

(1) During the forty weeks ended October 2, 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 Note 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


	October 2, 2022		December 26, 2021
Unearned gift card revenue	$	23,971	$	41,128
Deferred loyalty revenue	$	13,568	$	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


	Forty Weeks Ended
	October 2, 2022		October 3, 2021
Gift card revenue	$	19,788	$	14,448

~~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):

Table of Contents

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 October 2, 2022 and December 26, 2021 were as follows (in thousands):


October 2, 2022	Finance(1)		Operating(2)
Lease assets, net(3)	$	7,233	$	375,747

Current portion of lease obligations	1,015		47,726
Long-term portion of lease obligations	8,630		401,274
Total	$	9,645	$	449,000

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 October 2, 2022 and December 26, 2021 Condensed 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 October 2, 2022 and December 26, 2021 Condensed 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
October 3, 2021 October 4, 2020 October 3, 2021 October 4, 2020
Operating lease cost $ 16,061 $ 14,992 $ 53,765 $ 51,931
Finance lease cost:
Amortization of right of use assets 197 227 657 615
Interest on lease liabilities 131 150 407 412
Total finance lease cost 328 $ 377 $ 1,064 $ 1,027
Variable lease cost 4,496 5,902 15,271 19,207
Total $ 20,885 $ 21,271 $ 70,100 $ 72,165

~~Maturities of our lease liabilities as of October 3, 2021 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


	Twelve Weeks Ended				Forty Weeks Ended
	October 2, 2022		October 3, 2021		October 2, 2022		October 3, 2021
Operating lease cost	$	15,793	$	16,061	$	53,904	$	53,765
Finance lease cost:
Amortization of right of use assets	261		197		841		657
Interest on lease liabilities	111		131		408		407
Total finance lease cost	$	372	$	328	$	1,249	$	1,064
Variable lease cost	4,130		4,496		15,136		15,271
Total	$	20,295	$	20,885	$	70,289	$	70,100

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Maturities of our lease liabilities as of October 2, 2022 were as follows (in thousands):


	Finance Leases		Operating Leases
Remainder of 2022	$	260	$	13,829
2023	1,386		76,978
2024	1,479		76,047
2025	1,189		71,921
2026	1,245		66,078
Thereafter	6,454		323,647
Total future lease payments	$	12,013	$	628,500
Less imputed interest	2,368		179,500
Total lease liability	$	9,645	$	449,000

Supplemental cash flow and other information related to leases is as follows (in thousands, except other information):
Forty Weeks Ended
October 3, 2021 October 4, 2020
Cash flows from operating activities
Cash paid related to lease liabilities
Operating leases $ 68,036 $ 33,034
Finance leases 406 412
Cash flows from financing activities
Cash paid related to lease liabilities
Finance leases 1,447 196
Cash paid for amounts included in the measurement of lease liabilities: $ 69,889 $ 33,642
Right of use assets obtained in exchange for operating lease obligations $ 27,483 $ 31,731
Right of use assets obtained in exchange for finance lease obligations $ 988 $ 4,581
Other information related to operating leases as follows:
Weighted average remaining lease term 9.9 years 10.3 years
Weighted average discount rate 7.01 % 7.12 %
Other information related to finance leases as follows:
Weighted average remaining lease term 11.0 years 11.9 years
Weighted average discount rate 4.56 % 4.93 %


	Forty Weeks Ended
	October 2, 2022			October 3, 2021
Cash flows from operating activities
Cash paid related to lease liabilities
Operating leases	$	65,943		$	68,036
Finance leases	408			406
Cash flows from financing activities
Cash paid related to lease liabilities
Finance leases	1,048			1,447
Cash paid for amounts included in the measurement of lease liabilities:	$	67,399		$	69,889

Right of use assets obtained in exchange for operating lease obligations	$	11,604		$	27,483
Right of use assets obtained in exchange for finance lease obligations	$	541		$	988

Other information related to operating leases as follows:
Weighted average remaining lease term (years)	9.21			9.86
Weighted average discount rate	7.24		%	7.01		%

Other information related to finance leases as follows:
Weighted average remaining lease term (years)	10.49			11.04
Weighted average discount rate	4.89		%	4.56		%

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~~each of the twelve ~~week~~ and forty ~~week periods~~weeks ended October 2, 2022 and October 3, 2021, ~~and October 4, 2020,~~ all potentially dilutive common shares are considered anti-dilutive.

Table of Contents

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		Forty Weeks Ended
		October 3, 2021	October 4, 2020	October 3, 2021	October 4, 2020		October 2, 2022	October 3, 2021	October 2, 2022	October 3, 2021
Basic weighted average shares outstanding	Basic weighted average shares outstanding	15,709	15,540	15,647	13,945	Basic weighted average shares outstanding	15,892	15,709	15,816	15,647
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	15,892	15,709	15,816	15,647

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	869	545	1,010	390

~~Table of Contents~~

5. Other Charges (Gains), net

Other charges ~~consist~~(gains), 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				Forty Weeks Ended
	October 2, 2022		October 3, 2021		October 2, 2022		October 3, 2021
Asset impairment	$	2,187	$	—	$	13,048	$	1,357
Gain on sale of restaurant property	(9,204)		—		(9,204)		—
Executive transition	1,825		—		1,954		—
Other financing costs	1,022		—		1,392		—
COVID-19 related charges	123		299		423		1,112
Restaurant closure costs (gains)	(1,570)		1,102		309		5,301
Closed corporate office, net of sublease income	267		—		267		—
Litigation contingencies	133		160		47		1,330



Board and stockholder matter costs	—		—		—		128
Other charges (gains), net	$	(5,217)	$	1,561	$	8,236	$	9,228

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

~~During the forty weeks ended October 3, 2021, Asset~~The Company recognized non-cash impairment charges primarily related to ~~the impairment of long-lived~~restaurant assets at 1one and ten 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. Duringrestaurants during the twelve and forty weeks ended October ~~4, 2020~~2, 2022, respectively, and one Company-owned restaurant for the forty weeks ended October 3, 2021.

During the second quarter of 2022 the Company closed on an agreement to sell a restaurant property that the Company owned and leased back on a short-term basis. The Company collected initial net proceeds from the purchaser-lessor of $3.9 million, which represented a portion of the total consideration 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. During third quarter of 2022, the Company received the remaining proceeds, upon which the lease terminated and the sale transaction was completed, and recognized ~~non-cash impairment charges~~a $9.2 million gain on the sale of the restaurant property . The initial net proceeds of $3.9 million are included within cash flows from financing activities and the final proceeds received of $8.5 million are included within cash flows from investing activities on the Condensed Consolidated Statements of Cash Flows for the forty weeks ended October 2, 2022.

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

Other financing costs include fees related to ~~restaurant assets at 2 and NaN Company-owned restaurants, respectively, resulting from quantitative impairment analyses.~~

~~Litigation contingencies include legal settlement costs accrued within~~ the ~~period presented related to class action employment cases and other employment matters.~~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 Credit Facility. See Note 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 related to the COVID-19 pandemic.

Restaurant closure costs (gains) include the ongoing restaurant operating costs of the Company-owned restaurants incurred for permanently closed restaurants and closed restaurant lease termination gains or losses.

Closed corporate office, net of sublease income includes expense and sublease income related to a corporate office facility that was vacated and subleased.

Litigation contingencies during the ~~pandemic.~~twelve and forty weeks ended October 2, 2022 include the impact of cash proceeds received by the Company related to certain legal claims. Litigation contingencies during the twelve and forty weeks ended October 2, 2022 and October 3, 2021 include legal settlement costs accrued related to pending or threatened litigation.

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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 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.

~~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.~~2021.

6. Borrowings

Borrowings as of October ~~3, 2021~~2, 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


	October 2, 2022		Weighted Average Interest Rate		December 26, 2021		Weighted Average Interest Rate
Revolving line of credit	$	—			$	57,000
Term loan	199,000		8.70	%	119,080		7.10	%
Notes payable, non-current	875				875
Total borrowings	199,875				176,955
Less: unamortized debt issuance costs and discounts(1)	8,555				—
Less: current portion of long-term debt	2,000				9,692
Long-term debt	$	189,320			$	167,263

Revolving line of credit unamortized deferred financing charges(1):	$	1,042			$	2,015

(1)

~~Table of Contents~~

Loan origination costs associated with the Company's ~~Amended and Restated Credit Agreement (the "Credit Facility")~~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. ~~Unamortized debt issuance costs were $2.0~~

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 ~~$3.3~~a $200.0 million term loan (collectively, the "Credit Facility"). 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 Facility. The term loans require quarterly principal payments in an aggregate annual amount equal to 1.0% of the original principal amount of the term loan. The Credit Agreement's interest rate references the Secured Overnight Financing Rate ("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 0.5% per annum, or (c) one-month term SOFR plus 1.0% per annum. The variable interest rate on the term loan was 10.31% as of October ~~3, 2021 and December 27, 2020.~~2, 2022.

~~Third Amendment to Credit Agreement~~

~~In response to~~Red Robin International, Inc. is 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 (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 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, with the definition 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 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 of the Company ending on or about October 2, 2022, 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) such "Expansion Capital Expenditures" do not exceed certain agreed amounts in each fiscal quarter (with carryforward 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~~borrower 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~~Agreement, and certain of ~~the fiscal quarter of~~its subsidiaries and 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~~are guarantors of ~~0.75% per annum of the daily outstanding principal amount of term loans, revolving loans, swingline loans and letter of credit~~borrower’s obligations under the Credit ~~Facility shall be owing solely in respect~~Agreement. Borrowings under the Credit Agreement are secured by substantially all 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~~assets of the ~~fiscal quarter~~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, ~~ending on or about April 17, 2022;~~the borrower and its subsidiaries, including permitted acquisitions and capital expenditures, but excluding restricted payments.

•~~amend~~On March 4, 2022, Red Robin International, Inc., the ~~anti-cash hoarding provision to require revolver repayments (but with no associated permanent reduction in~~Company, and the ~~revolving commitment)~~guarantors also entered into a Pledge and Security Agreement (the “Security Agreement”) granting to the ~~extent that~~Administrative Agent a first priority security interest in substantially all of the ~~Company’s consolidated cash on hand exceeds $30,000,000 at any time;~~

•~~revise~~assets of the ~~requirement that~~borrower and the ~~annual audited financial statements be delivered without a "going concern qualification"~~guarantors to ~~permit such a qualification solely relating to (i) any impending debt maturity (whether~~secure the obligations under the Credit ~~Facility or otherwise) or (ii) any actual or prospective inability~~Agreement. This new Security Agreement replaced 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 ~~satisfy a financial maintenance covenant; and~~

•~~make certain amendments~~pay customary fees to the agents, lenders and issuing banks under the Credit ~~Facility~~Agreement with respect to ~~address LIBOR transition matters.~~

providing, maintaining, or administering, as applicable, the credit facilities.

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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.

The ~~description above is a~~ summary descriptions of the ~~Third Amendment~~Credit Agreement and isthe Security Agreement do not purport to be complete and are qualified in ~~its~~their entirety by reference to the ~~complete~~full text of the ~~agreement,~~Credit Agreement and the Security Agreement, respectively, which ~~is incorporated herein by reference. In conjunction~~were filed as exhibits to the Company’s Current Report on Form 8-K filed with the ~~Third Amendment,~~Securities and Exchange Commission on March 10, 2022.

During the first quarter of 2022, the Company ~~paid certain customary amendment fees~~expensed approximately $1.7 million of deferred financing charges related 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~~extinguishment of the Prior Credit ~~Facility.~~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 forty weeks ended October 2, 2022. In association with the execution of the new Credit Agreement, the Company recognized $4.8 million of deferred financing charges, and $6.1 million of 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~~2, 2022 and December ~~27, 2020~~26, 2021 (in thousands):


		October 3, 2021		Level 1		Level 2		Level 3			October 2, 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	$	4,020	$	4,020	$	—	$	—
Total assets measured at fair value	Total assets measured at fair value	$	5,999	$	5,999	$	—	$	—	Total assets measured at fair value	$	4,020	$	4,020	$	—	$	—

		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 5~~Note 5. Other Charges (Gains), 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 $5.8 million and $27.3 million, recognizing an impairment expense of $2.2 million and $13.0 million during the twelve and forty weeks ended October 2, 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 $3.6 million and $14.3 million in the twelve and forty weeks ended October 2, 2022, respectively. The impairment was recorded as a result of quantitative impairment analyses.

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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,~~2, 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 $194.8 million and ~~$172.6~~the principal amount carrying value was $199.0 million. The credit facility term loan is reported net of $8.6 million in unamortized discount and debt issuance costs in the Condensed Consolidated Balance Sheet as of October 2, 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.

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 condensed 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 October 2, 2022, we had a balance of $4.5 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 October 2, 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 $128.4 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 weeks ended October ~~3, 2021~~2, 2022 and October ~~4, 2020,~~3, 2021, 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~~525 locations in North America. As of October ~~3, 2021,~~2, 2022, the Company owned ~~430~~424 restaurants located in 38 states. The Company also had 101 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.~~

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Financial and Operational Highlights

The following summarizes the operational and financial highlights during the twelve weeks ended October ~~3, 2021:~~2, 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~~3, 2021

~~197.0~~270.2

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

~~67.0~~14.1

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

~~6.2~~ (1.9)

Total ~~increase~~increase/(decrease)

~~73.2~~12.2

Restaurant Revenue for the twelve weeks ended October ~~3, 2021~~2, 2022

~~270.2~~282.4

The following summarizes the operational and financial highlights during the forty weeks ended October ~~3, 2021:~~2, 2022:

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

(millions)

Restaurant Revenue for the forty weeks ended October ~~4, 2020~~3, 2021

~~658.6~~861.0

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

~~200.6~~93.6

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

~~1.8~~ (2.9)

Total ~~increase~~increase/(decrease)

~~202.4~~90.7

Restaurant Revenue for the forty weeks ended October ~~3, 2021~~2, 2022

~~861.0~~951.7

(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
	October 2, 2022			October 3, 2021			Increase/(Decrease)
Restaurant revenue (millions)	$	282.4		$	270.2		4.5	%
Restaurant operating costs:	(Percentage of Restaurant Revenue)						(Basis Points)
Cost of sales	25.0		%	23.2		%	180
Labor	35.6			36.9			(130)
Other operating	18.7			19.0			(30)
Occupancy	8.1			8.3			(20)
Total	87.4		%	87.5		%	(10)

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	Forty Weeks Ended
	October 2, 2022			October 3, 2021			Increase/(Decrease)
Restaurant revenue (millions)	$	951.7		$	861.0		10.5	%
Restaurant operating costs:	(Percentage of Restaurant Revenue)						(Basis Points)
Cost of sales	24.6		%	22.5		%	210
Labor	35.8			36.0			(20)
Other operating	18.1			18.1			—
Occupancy	8.0			8.6			(60)
Total	86.5		%	85.3		%	120

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 weeks ended and October 2, 2022 and October 3, ~~2021~~2021:


	Twelve Weeks Ended				Forty Weeks Ended
	October 2, 2022		October 3, 2021		October 2, 2022		October 3, 2021
Net loss as reported	$	(12,567)	$	(14,980)	$	(33,605)	$	(28,689)


























Loss per share - diluted:
Net loss as reported	$	(0.79)	$	(0.95)	$	(2.12)	$	(1.83)
Asset impairment	0.14		—		0.82		0.09
Gain on sale of restaurant property	(0.58)		—		(0.58)		—
Change in accounting estimate, gift card breakage revenue, net of commissions(1)	—		—		(0.33)		—
Executive transition	0.11		—		0.12		—
Write-off of unamortized debt issuance costs(2)	—		—		0.11		—
Other financing costs(3)	0.06		—		0.09		—
Income tax expense	0.09		(0.03)		(0.08)		(0.16)
COVID-19 related charges	0.01		0.02		0.03		0.07
Restaurant closure costs (gains)	(0.10)		0.07		0.02		0.34
Closed corporate office, net of sublease income	0.02		—		0.02		—
Litigation contingencies	0.01		0.01		—		0.08
Board and stockholder matter costs	—		—		—		0.01



Adjusted loss per share - diluted	$	(1.03)	$	(0.88)	$	(1.90)	$	(1.40)

Weighted average shares outstanding:
Basic	15,892		15,709		15,816		15,647
Diluted	15,892		15,709		15,816		15,647

(1) During the forty weeks ended October 2, 2022, the Company re-evaluated the estimated redemption pattern related to gift cards. See Note 1. Basis of Presentation and ~~October 4, 2020;~~Recent Accounting Pronouncements included in Part I. Financial Information in this Quarterly Report on form 10-Q.
Twelve Weeks Ended Forty Weeks Ended
October 3, 2021 October 4, 2020 October 3, 2021 October 4, 2020
Net loss as reported $ (14,980) $ (6,179) $ (28,689) $ (236,738)
Loss per share - diluted:
Net loss as reported $ (0.95) $ (0.40) $ (1.83) $ (16.98)
Restaurant closure costs 0.07 0.26 0.34 0.93
Asset impairment — — 0.09 1.49
Litigation contingencies 0.01 — 0.08 0.32
COVID-19 related costs 0.02 0.03 0.07 0.09
Board and stockholder matter costs — — 0.01 0.18
Severance and executive transition — — — 0.06
Goodwill impairment — — — 6.84
Income tax effect (0.03) (0.08) (0.16) (2.57)
Adjusted loss per share - diluted $ (0.88) $ (0.19) $ (1.40) $ (9.64)
Weighted average shares outstanding
Basic 15,709 15,540 15,647 13,945
Diluted 15,709 15,540 15,647 13,945

(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 and office 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
October 3, 2021 October 4, 2020 October 3, 2021 October 4, 2020
Company-owned:
Beginning of period 430 450 443 454
Closed during the period — (6) (13) (10)
End of period 430 444 430 444
Franchised:
Beginning of period 101 102 103 102
Opened during the period — 1 — 1
Closed during the period — — (2) —
End of period 101 103 101 103
Total number of restaurants 531 547 531 547


	Twelve Weeks Ended		Forty Weeks Ended
	October 2, 2022	October 3, 2021	October 2, 2022	October 3, 2021
Company-owned:
Beginning of period	426	430	430	443


Closed during the period	(2)	—	(6)	(13)
End of period	424	430	424	430
Franchised:
Beginning of period	102	101	101	103
Opened during the period	—	—	1	—
Closed during the period	(1)	—	(1)	(2)
End of period	101	101	101	101
Total number of restaurants	525	531	525	531

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The following table presents total Company-owned and franchised restaurants by state or province as of October ~~3, 2021:~~2, 2022:


		Company-Owned Restaurants	Franchised Restaurants		Company-Owned Restaurants	Franchised Restaurants

State:	State:			State:
Arkansas	Arkansas	2	2	Arkansas	2	2
Alaska	Alaska	—	3	Alaska		3
Alabama	Alabama	4	—	Alabama	4
Arizona	Arizona	18	1	Arizona	17	1
California	California	59	—	California	57
Colorado	Colorado	22	—	Colorado	22
Connecticut	Connecticut	—	3	Connecticut		3
Delaware	Delaware	—	5	Delaware		5
Florida	Florida	19	—	Florida	18
Georgia	Georgia	6	—	Georgia	6
Iowa	Iowa	5	—	Iowa	5
Idaho	Idaho	8	—	Idaho	8
Illinois	Illinois	22	—	Illinois	22
Indiana	Indiana	13	—	Indiana	13
Kansas	Kansas	—	4	Kansas		5
Kentucky	Kentucky	4	—	Kentucky	4
Louisiana	Louisiana	2	—	Louisiana	2
Massachusetts	Massachusetts	4	2	Massachusetts	4	2
Maryland	Maryland	13	—	Maryland	12
Maine	Maine	2	—	Maine	2
Michigan	Michigan	—	20	Michigan		20
Minnesota	Minnesota	4	—	Minnesota	4
Missouri	Missouri	8	3	Missouri	8	3
Montana	Montana	—	2	Montana		2
North Carolina	North Carolina	17	—	North Carolina	17
Nebraska	Nebraska	4	—	Nebraska	4
New Hampshire	New Hampshire	3	—	New Hampshire	3
New Jersey	New Jersey	12	1	New Jersey	12	1
New Mexico	New Mexico	3	—	New Mexico	3
Nevada	Nevada	6	—	Nevada	6
New York	New York	14	—	New York	14
Ohio	Ohio	18	2	Ohio	18	2
Oklahoma	Oklahoma	5	—	Oklahoma	5
Oregon	Oregon	15	5	Oregon	15	5
Pennsylvania	Pennsylvania	11	21	Pennsylvania	11	21
Rhode Island	Rhode Island	1	—	Rhode Island	1
South Carolina	South Carolina	4	—	South Carolina	4
South Dakota	South Dakota	1	—	South Dakota	1
Tennessee	Tennessee	11	—	Tennessee	11
Texas	Texas	20	9	Texas	20	9
Utah	Utah	1	6	Utah	1	5
Virginia	Virginia	20	—	Virginia	20
Washington	Washington	38	—	Washington	37
Wisconsin	Wisconsin	11	—	Wisconsin	11

Province:	Province:			Province:
British Columbia	British Columbia	—	12	British Columbia		12
Total	Total	430	101	Total	424	101

~~———————————————————~~

Results of Operations

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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) % — %

~~(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.~~


	Twelve Weeks Ended				Forty Weeks Ended
	October 2, 2022		October 3, 2021			October 2, 2022		October 3, 2021
Revenues:
Restaurant revenue	98.5	%	98.1	%		97.5	%	98.0	%
Franchise and other revenues	1.5		1.9			2.5		2.0
Total revenues	100.0		100.0			100.0		100.0

Costs and expenses:
Restaurant operating costs (excluding depreciation and amortization shown separately below):
Cost of sales	25.0		23.2			24.6		22.5
Labor	35.6		36.9			35.8		36.0
Other operating	18.7		19.0			18.1		18.1
Occupancy	8.1		8.3			8.0		8.6
Total restaurant operating costs	87.4		87.5			86.5		85.3
Depreciation and amortization	6.1		6.9			6.0		7.3
Selling, general, and administrative expenses	12.4		11.0			10.5		10.2
Pre-opening costs	0.1		0.2			0.1		0.1
Other charges (gains), net	(1.8)		0.6			0.8		1.1
Loss from operations	(2.8)		(4.4)			(1.7)		(2.2)

Interest expense, net and other	1.6		1.0			1.7		1.1
Loss before income taxes	(4.4)		(5.4)			(3.4)		(3.3)
Income tax provision (benefit)	—		—			—		—
Net loss	(4.4)	%	(5.4)	%		(3.4)	%	(3.3)	%

Revenues


	Twelve Weeks Ended						Forty Weeks Ended
(Revenues in thousands)	October 2, 2022		October 3, 2021		Percent Change		October 2, 2022		October 3, 2021		Percent Change
Restaurant revenue	$	282,449	$	270,202	4.5	%	$	951,718	$	861,036	10.5	%
Franchise and other revenues	4,439		5,242		(15.3)	%	24,810		17,658		40.5	%
Total revenues	$	286,888	$	275,444	4.2	%	$	976,528	$	878,694	11.1	%
Average weekly net sales volumes in Company-owned restaurants	$	55,469	$	52,599	5.5	%	$	55,927	$	50,324	11.1	%
Total operating weeks	5,092		5,137		(0.9)	%	17,017		17,110		(0.5)	%
Net sales per square foot	106		101		5.3	%	358		322		11.1	%

1718

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,~~2, 2022, which comprises primarily food and beverage sales, increased ~~$73.2~~$12.2 million, or ~~37.2%~~4.5%, as compared to the ~~twelve weeks ended October 4, 2020.~~third quarter of 2021. The increase was due to a ~~$67.0~~$14.1 million, or ~~34.3%~~5.3%, increase in comparable restaurant revenue, and a ~~$6.2~~$1.9 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%~~9.0% increase in average Guest ~~check.~~check, and a 3.7% decrease in Guest count. The increase in average Guest check resulted from a ~~3.5%~~2.5% increase in menu mix, a 7.7% increase in pricing, and ~~a 8.4% increase in menu mix,~~was partially offset by a ~~0.1%~~1.2% decrease from higher ~~discounting.~~discounts. The increase in menu mix was primarily driven by ~~higher sales of beverages and~~ our limited time menu ~~offerings. Off-premises~~offerings and higher dine-in sales volumes. Dine-in sales comprised ~~30.8%~~72.3% of total food and beverage sales during the third quarter ~~2021,~~of 2022, as compared to ~~40.7%~~69.2% in the same period in ~~2020.~~2021.

Restaurant revenue for the forty weeks ended October ~~3, 2021,~~2, 2022, increased ~~$202.4~~$90.7 million, or ~~30.7%~~10.5%, as compared to the forty weeks ended October ~~4, 2020.~~3, 2021. The increase was due to a ~~$200.6~~$93.6 million, or ~~31.5%~~11.2%, increase in comparable restaurant revenue, and a ~~$1.8~~$2.9 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%~~10.6% increase in average Guest ~~check.~~check, and a 0.6% increase in Guest count. The increase in average Guest check resulted from a ~~3.5%~~4.2% increase in menu mix, a 6.3% increase in pricing, and a ~~6.6% increase~~0.1% 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. Dine-in sales comprised 70.9% of total food and beverage sales during the forty weeks ended October 2, 2022, as compared to 64.5% in 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 weeks ended October ~~3, 2021~~2, 2022 or October ~~4, 2020.~~3, 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 ~~new~~reopened and ~~acquired~~new 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~~decreased $0.8 million, or 15.3% for the twelve weeks ended October ~~3, 2021~~2, 2022 compared to the twelve weeks ended October ~~4, 2020, due~~3, 2021. Our franchisees reported flat comparable restaurant revenue for the twelve weeks ended October 2, 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~~$7.2 million for the forty weeks ended October ~~3, 2021~~2, 2022 compared to the forty weeks ended October ~~4, 2020,~~3, 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 $5.9 million adjustment to gift card ~~breakage.~~

~~Table~~breakage from aligning our estimate to the updated estimated redemption pattern. Our franchisees reported a comparable restaurant revenue increase of ~~Contents~~

8.0% for the forty weeks ended October 2, 2022 compared to the same period in 2021.

Cost of Sales


		Twelve Weeks Ended						Forty Weeks Ended							Twelve Weeks Ended								Forty 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)	October 2, 2022			October 3, 2021			Percent Change		October 2, 2022			October 3, 2021			Percent Change
Cost of sales	Cost of sales	$	62,671	$	46,037	36.1 %		$	193,754	$	155,243	24.8 %		Cost of sales	$	70,640		$	62,671		12.7	%	$	234,283		$	193,754		20.9	%
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	25.0		%	23.2		%	1.8	%	24.6		%	22.5		%	2.1	%

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 180 basis points for the twelve weeks ended October ~~3, 2021~~2, 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 favorable mix shifts.

Cost of sales as a percentage of restaurant revenue ~~decreased 110~~increased 210 basis points for the forty weeks ended October ~~3, 2021~~2, 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 and ~~rebates.~~pricing.

Table of Contents

Labor


		Twelve Weeks Ended						Forty Weeks Ended							Twelve Weeks Ended								Forty 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)	October 2, 2022			October 3, 2021			Percent Change		October 2, 2022			October 3, 2021			Percent Change
Labor	Labor	$	99,725	$	74,344	34.1 %		$	310,333	$	255,652	21.4 %		Labor	$	100,522		$	99,725		0.8	%	$	340,273		$	310,333		9.6	%
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	35.6		%	36.9		%	(1.3)	%	35.8		%	36.0		%	(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,~~2, 2022, labor as a percentage of restaurant revenue decreased 80130 basis points compared to the same period in ~~2020.~~2021. The decrease was primarily driven by ~~industry staffing shortages~~sales leverage, lower hiring costs, and ~~sales leverage,~~lower 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 weeks ended October ~~3, 2021,~~2, 2022, labor as a percentage of restaurant revenue decreased ~~280~~20 basis points compared to the same period in ~~2020.~~2021. The decrease was primarily driven by ~~staffing shortages,~~sales leverage, lower group insurance, and ~~sales leverage,~~lower management incentive compensation costs, partially offset by higher wage ~~rates, staffing costs and increased restaurant management compensation costs in 2021.~~rate inflation.

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								Forty Weeks Ended
(In thousands, except percentages)	October 2, 2022			October 3, 2021			Percent Change		October 2, 2022			October 3, 2021			Percent Change
Other operating	$	52,858		$	51,462		2.7	%	$	172,725		$	156,102		10.6	%
As a percent of restaurant revenue	18.7		%	19.0		%	(0.3)	%	18.1		%	18.1		%	—	%

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,~~2, 2022, other operating costs as a percentage of restaurant revenue decreased 1030 basis points as compared to the same period in ~~2020.~~2021. The decrease was primarily driven by ~~sales leverage and~~ lower ~~utilities, and lower supplies due to~~hiring advertisement costs, lower off-premises supplies, and sales ~~mix,~~leverage, partially offset by ~~increased hiring advertisement costs~~an increase in utilities and ~~janitorial and maintenance expenses.~~credit card fees.

For the forty weeks ended October ~~3, 2021,~~2, 2022, other operating costs as a percentage of restaurant revenue ~~decreased 80 basis points as~~was flat compared to the same period in ~~2020. The decrease was primarily driven by sales leverage and lower utilities and supplies due to lower off-premises sales mix, partially offset by increased hiring costs.~~

~~Table of Contents~~

2021.

Occupancy


		Twelve Weeks Ended						Forty Weeks Ended							Twelve Weeks Ended								Forty 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)	October 2, 2022			October 3, 2021			Percent Change		October 2, 2022			October 3, 2021			Percent Change
Occupancy	Occupancy	$	22,519	$	22,099	1.9 %		$	74,233	$	76,514	(3.0)	%	Occupancy	$	22,828		$	22,519		1.4	%	$	76,406		$	74,233		2.9	%
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	8.1		%	8.3		%	(0.2)	%	8.0		%	8.6		%	(0.6)	%

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, 2021,~~2, 2022, occupancy costs as a percentage of restaurant revenue decreased ~~290~~20 basis points compared to the same period in ~~2020~~2021 primarily driven by sales ~~leverage and restructured leases.~~leverage.

For the forty weeks ended October ~~3, 2021,~~2, 2022, occupancy costs as a percentage of restaurant revenue decreased ~~300~~60 basis points compared to the same period in ~~2020~~2021 primarily driven by sales leverage, ~~savings from permanently closed restaurants and restructured leases.~~partially offset by higher insurance costs.

Our fixed rents for the twelve weeks ended October 2, 2022 and October 3, 2021 ~~and October 4, 2020~~ were ~~$15.8~~$16.1 million and ~~$14.7~~$15.8 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.

$0.3 million. Our fixed rents for the forty weeks ended October 2, 2022 and October 3, 2021 ~~and October 4, 2020~~ were ~~$52.8~~$53.5 million and ~~$51.0~~$52.8 million, an increase of ~~$1.8 million due to recognizing ongoing fixed rents~~$0.6 million.

Table 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								Forty 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)	October 2, 2022			October 3, 2021			Percent Change		October 2, 2022			October 3, 2021			Percent Change
Depreciation and amortization	Depreciation and amortization	$	18,881	$	19,173	(1.5)	%	$	63,984	$	68,053	(6.0)	%	Depreciation and amortization	$	17,368		$	18,881		(8.0)	%	$	58,924		$	63,984		(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	6.1		%	6.9		%	(0.8)	%	6.0		%	7.3		%	(1.3)	%

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,~~2, 2022, depreciation and amortization expense as a percentage of revenue decreased ~~270~~80 basis points over the same period in ~~2020.~~ 2021 primarily due to net closed Company-owned restaurants, and sales leverage.

For the forty weeks ended October ~~3, 2021,~~2, 2022, depreciation and amortization expense as a percentage of revenue decreased ~~290~~130 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								Forty Weeks Ended
(In thousands, except percentages)	October 2, 2022			October 3, 2021			Percent Change		October 2, 2022			October 3, 2021			Percent Change
Selling, general, and administrative	$	35,692		$	30,343		17.6	%	$	102,168		$	89,299		14.4	%
As a percent of total revenues	12.4		%	11.0		%	1.4	%	10.5		%	10.2		%	0.3	%

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~~2, 2022 increased ~~$2.5~~$3.8 million, or ~~16.5 %,~~21.5%, as compared to the same period in ~~2020.~~2021. The increase ~~in general and administrative expenses in 2021~~ was primarily driven by a timing shift of our annual leadership conference, increased stock based compensation expense, and merit increases, ~~and lapping temporary salary reductions in 2020, increased travel costs, and higher professional services spend.~~

~~Table of Contents~~

partially offset by lower corporate office costs.

General, and administrative ~~expenses~~costs in the forty weeks ended October ~~3, 2021~~2, 2022 increased ~~$1.6~~$7.0 million, or ~~2.9 %,~~12.1%, 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,~~the 2022 leadership conference, increased stock based compensation expense, merit increases, and ~~lapping temporary salary reductions in 2020,~~increased manager-in-training costs, partially offset by ~~decreased travel costs and other~~lower corporate office 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~~2, 2022 increased ~~$6.6~~$1.5 million, or 12.2%, 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 weeks ended October ~~3, 2021~~2, 2022 increased ~~$5.2~~$5.9 million, or ~~19.7 %,~~18.5%, 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								Forty Weeks Ended
(In thousands, except percentages)	October 2, 2022			October 3, 2021			Percent Change		October 2, 2022			October 3, 2021			Percent Change
Pre-opening costs	$	217		$	418		(48.1)	%	$	514		$	792		(35.1)	%
As a percent of total revenues	0.1		%	0.2		%	(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 weeks ended October ~~3, 2021 and October 4, 2020~~2, 2022 related to the rollout of Donatos®. ~~The~~As of October 2, 2022, the Company had completed ~~the~~its rollout of 38Donatos® at approximately 50 restaurants ~~during the twelve weeks ended October 3, 2021, and expects to continue its roll out~~for 2022.

Table of ~~Donatos® to approximately 40 restaurants in the fourth quarter of fiscal year 2021.~~Contents

Interest Expense, Net and Other

Interest expense, net and other was ~~$2.9~~$4.6 million for the twelve weeks ended October ~~3, 2021,~~2, 2022, an increase of ~~$0.6~~$1.7 million, or ~~26.1%~~59.9%, compared to the same period in ~~2020.~~2021. The increase was primarily related to higher average outstanding debt, which increased $50.5 million compared to the same period in 2021, 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%~~9.7% for the twelve weeks ended October ~~3, 2021~~2, 2022 as compared to ~~5.0%~~6.8% for the same period in ~~2020.~~2021.

Interest expense, net and other was ~~$10.0~~$16.2 million for the forty weeks ended October ~~3, 2021,~~2, 2022, an increase of ~~$2.4~~$6.2 million, or ~~31.6%~~61.7%, ~~from~~compared to the same period in ~~2020.~~2021. The increase was primarily related to higher average outstanding debt, which increased $37.2 million compared to the same period in 2021, 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%~~8.7% for the forty weeks ended October ~~3, 2021~~2, 2022 as compared to ~~4.5%~~6.6% 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~~2, 2022 was a ~~0.2%~~0.3% benefit, compared to a ~~77.0%~~0.2% benefit for the twelve weeks ended October ~~4, 2020.~~ 3, 2021.

The effective tax rate for the forty weeks ended October 2, 2022 was a 1.4% expense, compared to a 1.1% benefit for the forty weeks ended October 3, ~~2021 was 1.1%, compared to a 1.8% benefit for~~2021.

During the forty weeks ended October ~~4, 2020. The decrease in tax benefit for~~2, 2022, the ~~twelve and forty weeks ended October 3, 2021 is primarily due to the change in full valuation allowance recognition.~~

~~The~~ Company ~~has filed~~received $14.8 million of federal and state ~~cash tax~~ refund claims, ~~totaling approximately $16 million during 2021 from net operating loss carrybacks. While we expect~~respectively, and expects to receive ~~a portion of~~an additional $0.7 million over the ~~refunds in 2021,~~next 12-15 months due to ~~government~~processing delays ~~in processing these claims we do not expect to receive~~at the ~~majority until 2022.~~IRS and state authorities.

Liquidity and Capital Resources

Cash and cash equivalents, and restricted cash increased ~~$1.6~~$35.4 million to ~~$17.8~~$58.1 million as of October ~~3, 2021,~~2, 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,~~2, 2022, the Company had approximately ~~$75.2~~$75.0 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)


	Forty Weeks Ended
	October 2, 2022		October 3, 2021
Net cash provided by operating activities	$	38,800	$	37,617
Net cash used in investing activities	(18,297)		(19,967)
Net cash provided by (used in) financing activities	14,921		(16,037)
Effect of exchange rate changes on cash	(44)		28
Net change in cash and cash equivalents, and restricted cash	$	35,380	$	1,641

Operating Cash Flows

Net cash flows provided by ~~(used in)~~ operating activities increased ~~$61.0~~$1.2 million to ~~$37.6~~$38.8 million for the forty weeks ended October ~~3, 2021.~~2, 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 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, as well as other changes in working capital, including the tax refunds received in 2022, partially offset by decreased cash from earnings after non-cash items, as presented in the Condensed Consolidated Statements of Cash Flows.

Investing Cash Flows

Net cash flows used in investing activities ~~increased $5.8~~decreased $1.7 million to ~~$20.0~~$18.3 million for the forty weeks ended October ~~3, 2021,~~2, 2022, as compared to ~~$14.1~~$20.0 million for the same period in ~~2020.~~2021. The ~~increase~~decrease is primarily due to proceeds received in connection with the sale of a restaurant property, partially offset by 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 weeks ended October ~~3, 2021~~2, 2022 and October ~~4, 2020~~3, 2021 (in thousands):


		Forty Weeks Ended					Forty Weeks Ended
		October 3, 2021		October 4, 2020			October 2, 2022		October 3, 2021
Donatos® expansion		$	7,687	$	—
Restaurant improvement capital and other	Restaurant improvement capital and other	6,467		8,433		Restaurant improvement capital and other	$	12,376	$	6,467
Investment in technology infrastructure and other		5,355		6,437
Investment in technology, infrastructure, and other						Investment in technology, infrastructure, and other	8,274		5,355
Donatos® expansion						Donatos® expansion	4,396		7,687
New restaurants and restaurant refreshes	New restaurants and restaurant refreshes	478		—		New restaurants and restaurant refreshes	1,989		478

Total capital expenditures	Total capital expenditures	$	19,987	$	14,870	Total capital expenditures	$	27,036	$	19,987

Financing Cash Flows

Net cash flows ~~used in~~provided by financing activities increased ~~$51.0~~$31.0 million to ~~$16.0~~$14.9 million for the forty weeks ended October ~~3, 2021,~~2, 2022, as compared to net cash flows ~~provided by~~used in financing activities of ~~$34.0~~$16.0 million in the same period in ~~2020.~~2021. The ~~decrease~~increase is primarily due to ~~a $28.9~~$15.9 million ~~decrease in proceeds from the issuance of common stock, net of issuance costs, and a $24.7 million increase~~ in net ~~repayments made~~borrowings in 2022 compared to a net paydown of debt of $15.7 million in 2021 as a result of the Company's refinancing of debt on ~~long-term debt,~~March 4, 2022 and $3.9 million in initial deposit proceeds received related to the sale of a restaurant property in the second quarter of 2022, partially offset by ~~a decrease~~an increase in cash used for debt issuance ~~costs,~~costs.

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 five-year $225.0 million Credit Agreement provides for a $25.0 million revolving line of credit and a ~~decrease in cash used to~~$200.0 million term loan (collectively, the “Credit Facility”). The new Credit Agreement references the Secured Overnight Financing Rate ("SOFR"), a 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 0.5% per annum, or (c) one-month term SOFR plus 1.0% per annum.

As of October ~~3, 2021,~~2, 2022, the Company had outstanding borrowings under the Credit ~~Facility~~Agreement of ~~$156.3~~$190.4 million net of $8.6 million 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,~~2, 2022, the Company had ~~$57.4~~$25.0 million of available borrowing capacity under its Credit ~~Facility, including~~Agreement.

As of October 2, 2022, the ~~impact~~Company had $7.8 million of ~~a $30~~letters of credit issued against cash collateral, compared to $8.6 million ~~capacity reduction~~as of the prior comparable period. The Company's cash collateral is recorded in Restricted cash on our ~~revolving line~~Condensed Consolidated Balance Sheets as of ~~credit pursuant to~~ the ~~Second Amendment. Net payments during the forty weeks~~quarter ended October ~~3, 2021 totaled $14.3 million, and net draws during the same period in 2020 totaled $9.2 million. We have made net repayments 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 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 in2, 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.~~

ratio covenant. As of October ~~3, 2021, the Company is~~2, 2022, we were 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.debt covenants.

Debt Outstanding

Total debt outstanding ~~decreased $13.4~~increased $22.9 million to ~~$157.2~~$199.9 million at October ~~3, 2021~~,2, 2022, from ~~$170.6~~$177.0 million at December ~~27, 2020,~~26, 2021, primarily ~~due to~~driven by net ~~payments~~proceeds from the execution of ~~$14.3 million on~~ the ~~Credit Facility, offset by accruing utilization fees on the~~new Credit Facility during the forty weeks ended October ~~3, 2021~~.

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2, 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,~~2, 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,~~2, 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 forty weeks ended October 2, 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 October 2, 2022 are as follows (in thousands):


	Payments Due by Period
	Total		2022		2023-2024		2025-2026		2027 and Thereafter
Long-term debt obligations(1)	$	291,775	$	5,707	$	45,187	$	44,351	$	196,530
Purchase obligations(2)	$	171,974	$	18,335	$	68,287	$	38,848	$	46,504

(1) Long-term debt obligations primarily represent minimum required principal payments under our Credit Facility including estimated interest of $91.9 million based on a 10.31% 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 3,3. 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 Securities Exchange ~~Act.~~Act of 1934, as amended (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 impacts of interest rate increases;

•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

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•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~~As of October ~~3, 2021,~~2, 2022, we had ~~an average of $154.7~~$199.0 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, 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,~~2, 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 (as each term is defined in the Credit Agreement).

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ITEM 6. Exhibits


Exhibit Number						Description

(10.1)						~~Third Amendment to Credit Agreement, dated as of November 9, 2021,~~Offer Letter by and ~~among Red Robin International, Inc.,~~between Red Robin Gourmet Burgers, Inc.~~, the Guarantors, the Lenders party thereto~~ and ~~Wells Fargo Bank, National Association, as administration agent.~~G.J. Hart, dated July 13, 2022. Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on ~~November 10, 2021.~~July 14, 2022.

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~~2, 2022 formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at October ~~3, 2021~~2, 2022 and December ~~27, 2020;~~26, 2021; (ii) Condensed Consolidated Statements of Operations and Comprehensive Loss for the twelve and forty weeks ended October ~~3, 2021~~2, 2022 and October ~~4, 2020;~~3, 2021; (iii) Condensed Consolidated Statements of Stockholders' Equity at October ~~3, 2021~~2, 2022 and October ~~4, 2020;~~3, 2021; (iv) Condensed Consolidated Statements of Cash Flows for the forty weeks ended October ~~3, 2021~~2, 2022 and October ~~4, 2020;~~3, 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 ~~10, 2021~~2, 2022

By:

/s/ Lynn S. Schweinfurth

(Date)

Lynn S. Schweinfurth

(Chief Financial Officer)

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		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	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	1314
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2627
Item 4.	Controls and Procedures	2627
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	2728
Item 1A.	Risk Factors	2728
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2728
Item 6.	Exhibits	2829
	Signature	2930


	Common Stock			Treasury Stock					Accumulated Other Comprehensive (Loss) Income, 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

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)


Non-cash stock compensation	—	—		—	—		2,048		—		—		2,048
Net loss	—	—		—	—		—		—		(14,980)		(14,980)
Other comprehensive loss	—	—		—	—		—		(6)		—		(6)
Balance, October 3, 2021	20,449	$	20	4,727	$	(192,819)	$	240,445	$	10	$	48,509	$	96,165


	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


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