Table of Contents

FORM 10-Q
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 201726, 2020
OR
¨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 001-35258
DUNKIN’ BRANDS GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware20-4145825
(State or other jurisdiction of

incorporation or organization)
(I.R.S. Employer

Identification No.)
130 Royall Street
Canton, Massachusetts 02021
(Address of principal executive offices) (zip code)
(781) 737-3000
(Registrants’ telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report.)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.001 par value per shareDNKNNasdaq Global Select Market
Indicate by check mark whether the registrant (1) has (1) 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  x    NO  ¨Yes      No  
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    YES  x    NO  ¨Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 filerxAccelerated filer¨
Non-accelerated filer¨Smaller reporting company¨
Emerging growth company¨
If an emerging growth company, indicatedindicate 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  xYes   No  
As of November 3, 2017, 90,322,903October 30, 2020, 82,417,076 shares of common stock of the registrant were outstanding.



Table of Contents

DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES


TABLE OF CONTENTS
 
Page    
Page    
Part I. – Financial Information
Item 1.
Item 2.
Item 3.
Item 4.
Part II. – Other Information
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.



2

Table of Contents
Part I.        Financial Information
Item 1.       Financial Statements and Supplementary Data
DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share data)
(Unaudited)
September 26,
2020
December 28,
2019
Assets
Current assets:
Cash and cash equivalents$613,641 621,152 
Restricted cash89,626 85,644 
Accounts receivable, net of allowances of $12,155 and $6,533 as of September 26, 2020 and December 28, 2019, respectively87,227 76,019 
Notes and other receivables, net of allowances of $870 and $778 as of September 26, 2020 and December 28, 2019, respectively55,617 57,174 
Prepaid income taxes8,799 16,701 
Prepaid expenses and other current assets57,622 50,611 
Total current assets912,532 907,301 
Property, equipment, and software, net of accumulated depreciation of $186,599 and $172,001 as of September 26, 2020 and December 28, 2019, respectively217,419 223,120 
Operating lease assets348,045 371,264 
Equity method investments163,443 154,812 
Goodwill888,274 888,286 
Other intangible assets, net of accumulated amortization of $266,590 and $253,641 as of September 26, 2020 and December 28, 2019, respectively1,288,952 1,302,721 
Other assets70,339 72,520 
Total assets$3,889,004 3,920,024 
Liabilities and Stockholders’ Deficit
Current liabilities:
Current portion of long-term debt$31,150 31,150 
Operating lease liabilities39,563 35,863 
Accounts payable76,017 89,413 
Deferred revenue38,144 39,950 
Other current liabilities379,504 386,050 
Total current liabilities564,378 582,426 
Long-term debt, net2,992,330 3,004,216 
Operating lease liabilities357,229 380,647 
Deferred revenue287,973 324,854 
Deferred income taxes, net197,669 197,673 
Other long-term liabilities22,770 18,218 
Total long-term liabilities3,857,971 3,925,608 
Commitments and contingencies (note 9)
Stockholders’ deficit:
Preferred stock, $0.001 par value; 25,000,000 shares authorized; 0 shares issued and outstanding
Common stock, $0.001 par value; 475,000,000 shares authorized; 82,407,709 shares issued and 82,406,709 shares outstanding as of September 26, 2020; 82,835,830 shares issued and 82,834,830 shares outstanding as of December 28, 201982 83 
Additional paid-in capital516,590 561,345 
Treasury stock, at cost; 1,000 shares as of September 26, 2020 and December 28, 2019(64)(64)
Accumulated deficit(1,028,546)(1,129,565)
Accumulated other comprehensive loss(21,407)(19,809)
Total stockholders’ deficit(533,345)(588,010)
Total liabilities and stockholders’ deficit$3,889,004 3,920,024 
 September 30,
2017
 December 31,
2016
Assets   
Current assets:   
Cash and cash equivalents$266,981
 361,425
Restricted cash76,141
 69,746
Accounts receivable, net of allowance for doubtful accounts of $4,616 and $4,778 as of September 30, 2017 and December 31, 2016, respectively47,136
 44,512
Notes and other receivables, net of allowance for doubtful accounts of $500 and $339 as of September 30, 2017 and December 31, 2016, respectively30,274
 40,672
Restricted assets of advertising funds57,873
 40,338
Prepaid income taxes9,843
 20,926
Prepaid expenses and other current assets33,605
 28,739
Total current assets521,853
 606,358
Property and equipment, net of accumulated depreciation of $135,284 and $124,675 as of September 30, 2017 and December 31, 2016, respectively170,269
 176,662
Equity method investments128,633
 114,738
Goodwill888,311
 888,272
Other intangible assets, net of accumulated amortization of $245,569 and $230,364 as of September 30, 2017 and December 31, 2016, respectively1,362,586
 1,378,720
Other assets67,674
 62,632
Total assets$3,139,326
 3,227,382
Liabilities and Stockholders’ Deficit 
Current liabilities:   
Current portion of long-term debt$25,000
 25,000
Capital lease obligations584
 589
Accounts payable12,416
 12,682
Liabilities of advertising funds57,935
 52,271
Deferred income37,595
 35,393
Other current liabilities230,487
 298,266
Total current liabilities364,017
 424,201
Long-term debt, net2,388,091
 2,401,998
Capital lease obligations7,209
 7,550
Unfavorable operating leases acquired10,164
 11,378
Deferred income10,729
 12,154
Deferred income taxes, net459,524
 461,810
Other long-term liabilities73,680
 71,549
Total long-term liabilities2,949,397
 2,966,439
Commitments and contingencies (note 9)
 
Stockholders’ equity (deficit):   
Preferred stock, $0.001 par value; 25,000,000 shares authorized; no shares issued and outstanding
 
Common stock, $0.001 par value; 475,000,000 shares authorized; 90,290,628 shares issued and 90,263,851 shares outstanding as of September 30, 2017; 91,464,229 shares issued and 91,437,452 shares outstanding as of December 31, 201690
 91
Additional paid-in capital746,052
 807,492
Treasury stock, at cost; 26,777 shares as of September 30, 2017 and December 31, 2016(1,060) (1,060)
Accumulated deficit(900,217) (945,797)
Accumulated other comprehensive loss(18,953) (23,984)
Total stockholders’ deficit(174,088) (163,258)
Total liabilities and stockholders’ deficit$3,139,326
 3,227,382


See accompanying notes to unaudited consolidated financial statements.

3

Table of Contents
DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)

Three months ended Nine months ended Three months endedNine months ended
September 30,
2017
 September 24,
2016
 September 30,
2017
 September 24,
2016
September 26,
2020
September 28,
2019
September 26,
2020
September 28,
2019
Revenues:       Revenues:
Franchise fees and royalty income$151,809
 138,639
 426,944
 399,617
Franchise fees and royalty income$160,065 157,224 415,506 454,810 
Advertising fees and related incomeAdvertising fees and related income132,280 128,675 358,881 375,132 
Rental income27,713
 26,880
 79,543
 75,874
Rental income30,639 31,984 85,588 92,691 
Sales of ice cream and other products27,551
 26,568
 85,710
 86,425
Sales of ice cream and other products24,514 24,409 71,164 72,400 
Sales at company-operated restaurants
 1,611
 
 11,924
Other revenues17,095
 13,401
 41,165
 39,344
Other revenues14,045 13,590 40,924 39,277 
Total revenues224,168
 207,099
 633,362
 613,184
Total revenues361,543 355,882 972,063 1,034,310 
Operating costs and expenses:       Operating costs and expenses:
Occupancy expenses—franchised restaurants15,333
 15,881
 43,758
 42,691
Occupancy expenses—franchised restaurants18,908 19,823 56,540 58,995 
Cost of ice cream and other products19,457
 18,384
 58,578
 58,445
Cost of ice cream and other products19,276 21,066 55,410 59,724 
Company-operated restaurant expenses
 1,682
 
 13,472
General and administrative expenses, net61,996
 59,374
 185,613
 184,028
Advertising expensesAdvertising expenses133,352 130,846 362,702 379,898 
General and administrative expensesGeneral and administrative expenses58,705 60,333 171,399 176,458 
Depreciation4,941
 5,050
 15,096
 15,361
Depreciation5,663 4,584 16,483 13,916 
Amortization of other intangible assets5,341
 5,397
 16,001
 16,726
Amortization of other intangible assets4,582 4,599 13,762 13,858 
Long-lived asset impairment charges536
 7
 643
 104
Long-lived asset impairment charges36 560 361 
Total operating costs and expenses107,604
 105,775
 319,689
 330,827
Total operating costs and expenses240,486 241,287 676,856 703,210 
Net income of equity method investments5,466
 5,467
 12,612
 12,148
Net income of equity method investments7,159 6,667 15,108 13,324 
Other operating income, net3
 2,569
 591
 6,329
Other operating income, net699 81 1,528 943 
Operating income122,033
 109,360
 326,876
 300,834
Operating income128,915 121,343 311,843 345,367 
Other income (expense), net:       Other income (expense), net:
Interest income624
 161
 1,370
 434
Interest income124 2,996 2,491 7,906 
Interest expense(24,436) (24,603) (74,192) (74,456)Interest expense(31,854)(31,787)(96,541)(96,758)
Other income (losses), net155
 (124) 370
 (596)
Loss on debt extinguishmentLoss on debt extinguishment(13,076)
Other income (loss), netOther income (loss), net154 (258)(302)(308)
Total other expense, net(23,657) (24,566) (72,452) (74,618)Total other expense, net(31,576)(29,049)(94,352)(102,236)
Income before income taxes98,376
 84,794
 254,424
 226,216
Income before income taxes97,339 92,294 217,491 243,131 
Provision for income taxes46,130
 32,082
 99,007
 86,760
Provision for income taxes23,371 19,929 54,960 58,821 
Net income$52,246
 52,712
 155,417
 139,456
Net income$73,968 72,365 162,531 184,310 
Earnings per share:       Earnings per share:
Common—basic$0.58
 0.58
 1.71
 1.52
Common—basic$0.90 0.87 1.97 2.23 
Common—diluted0.57
 0.57
 1.68
 1.51
Common—diluted0.89 0.86 1.96 2.20 
Cash dividends declared per common share0.32
 0.30
 0.97
 0.90
See accompanying notes to unaudited consolidated financial statements.

4

Table of Contents
DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(In thousands)
(Unaudited)

Three months ended Nine months ended Three months endedNine months ended
September 30,
2017
 September 24,
2016
 September 30,
2017
 September 24,
2016
September 26,
2020
September 28,
2019
September 26,
2020
September 28,
2019
Net income$52,246
 52,712
 155,417
 139,456
Net income$73,968 72,365 162,531 184,310 
Other comprehensive income (loss), net:       Other comprehensive income (loss), net:
Effect of foreign currency translation, net of deferred tax expense (benefit) of $6 and $(59) for the three months ended September 30, 2017 and September 24, 2016, respectively, and $579 and $(488) for the nine months ended September 30, 2017 and September 24, 2016, respectively(662) 6,161
 5,309
 8,730
Effect of interest rate swaps, net of deferred tax benefit of $216 for each of the three months ended September 30, 2017 and September 24, 2016 and $650 for each of the nine months ended September 30, 2017 and September 24, 2016(319) (319) (955) (955)
Effect of foreign currency translation, net of deferred tax expense (benefit) of $12 and $(47) for the three months ended September 26, 2020 and September 28, 2019, respectively, and $(53) and $(39) for the nine months ended September 26, 2020 and September 28, 2019, respectively.Effect of foreign currency translation, net of deferred tax expense (benefit) of $12 and $(47) for the three months ended September 26, 2020 and September 28, 2019, respectively, and $(53) and $(39) for the nine months ended September 26, 2020 and September 28, 2019, respectively.3,925 (5,457)(986)(9,470)
Other, net24
 (27) 677
 (230)Other, net(19)(34)(612)(165)
Total other comprehensive income (loss), net(957) 5,815
 5,031
 7,545
Total other comprehensive income (loss), net3,906 (5,491)(1,598)(9,635)
Comprehensive income$51,289
 58,527
 160,448
 147,001
Comprehensive income$77,874 66,874 160,933 174,675 
See accompanying notes to unaudited consolidated financial statements.

5

Table of Contents
DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Deficit
For the Three Months Ended September 26, 2020 and September 28, 2019
(In thousands)
(Unaudited)

Stockholders' Deficit
 Common stockAdditional
paid-in
capital
Treasury
stock, at cost
Accumulated
deficit
Accumulated
other
comprehensive
loss
Total
 SharesAmount
Balance at June 27, 202082,259 $82 539,847 (64)(1,102,284)(25,313)(587,732)
Net income— — — — 73,968 — 73,968 
Other comprehensive income, net— — — — — 3,906 3,906 
Exercise of stock options143 — 6,959 — — — 6,959 
Dividends paid on common stock ($0.4025 per share)— — (33,169)— — — (33,169)
Share-based compensation expense— 2,939 — — — 2,939 
Other— 14 — (230)— (216)
Balance at September 26, 202082,408 $82 516,590 (64)(1,028,546)(21,407)(533,345)
Balance at June 29, 201982,817 $83 603,868 (3,291)(1,238,190)(19,271)(656,801)
Net income— — — — 72,365 — 72,365 
Other comprehensive loss, net— — — — — (5,491)(5,491)
Exercise of stock options239 11,158 — — — 11,158 
Dividends paid on common stock ($0.3750 per share)— — (31,042)— — — (31,042)
Share-based compensation expense— 3,777 — — — 3,777 
Repurchases of common stock— — (14,673)— — (14,673)
Retirement of treasury stock(180)(1,246)14,673 (13,427)— 
Other— 98 (250)— (152)
Balance at September 28, 201982,883 $83 586,613 (3,291)(1,179,502)(24,762)(620,859)
See accompanying notes to unaudited consolidated financial statements.



6

Table of Contents
DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Deficit
For the Nine Months Ended September 26, 2020 and September 28, 2019
(In thousands)
(Unaudited)

Stockholders' Deficit
 Common stockAdditional
paid-in
capital
Treasury
stock, at cost
Accumulated
deficit
Accumulated
other
comprehensive
loss
Total
 SharesAmount
Balance at December 28, 201982,836 $83 561,345 (64)(1,129,565)(19,809)(588,010)
Net income— — — — 162,531 — 162,531 
Other comprehensive loss, net— — — — — (1,598)(1,598)
Exercise of stock options360 — 17,202 — — — 17,202 
Dividends paid on common stock ($0.8050 per share)— — (66,226)— — — (66,226)
Share-based compensation expense77 — 9,134 — — — 9,134 
Repurchases of common stock— — — (64,292)— — (64,292)
Retirement of treasury stock(881)(1)(5,615)64,292 (58,676)— — 
Other16 — 750 — (2,836)— (2,086)
Balance at September 26, 202082,408 $82 516,590 (64)(1,028,546)(21,407)(533,345)
Balance at December 29, 201882,437 $82 642,017 (1,060)(1,338,709)(15,127)(712,797)
Net income— — — — 184,310 — 184,310 
Other comprehensive loss, net— — — — — (9,635)(9,635)
Exercise of stock options596 27,902 — — — 27,903 
Dividends paid on common stock ($1.1250 per share)— — (93,027)— — — (93,027)
Share-based compensation expense154 — 11,073 — — — 11,073 
Repurchases of common stock— — — (24,802)— — (24,802)
Retirement of treasury stock(315)— (2,205)24,802 (22,597)— — 
Other11 — 853 (2,231)(2,506)— (3,884)
Balance at September 28, 201982,883 $83 586,613 (3,291)(1,179,502)(24,762)(620,859)
See accompanying notes to unaudited consolidated financial statements.

7

Table of Contents
DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

Nine months ended Nine months ended
September 30,
2017
 September 24,
2016
September 26,
2020
September 28,
2019
Cash flows from operating activities:   Cash flows from operating activities:
Net income$155,417
 139,456
Net income$162,531 184,310 
Adjustments to reconcile net income to net cash provided by operating activities:   Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization31,097
 32,087
Depreciation and amortization35,638 31,698 
Amortization of debt issuance costs4,843
 4,700
Amortization of debt issuance costs3,726 3,759 
Loss on debt extinguishmentLoss on debt extinguishment13,076 
Deferred income taxes(1,516) (5,595)Deferred income taxes105 (8,419)
Provision for bad debt599
 681
Provision for uncollectible accounts and notes receivableProvision for uncollectible accounts and notes receivable6,497 1,452 
Share-based compensation expense10,896
 12,548
Share-based compensation expense9,134 11,073 
Net income of equity method investments(12,612) (12,148)Net income of equity method investments(15,108)(13,324)
Dividends received from equity method investments4,711
 5,247
Dividends received from equity method investments5,090 4,367 
Gain on sale of real estate and company-operated restaurants(29) (6,322)
Other, net(2,299) (1,554)Other, net1,224 (702)
Change in operating assets and liabilities:   Change in operating assets and liabilities:
Accounts, notes, and other receivables, net7,712
 43,482
Accounts, notes, and other receivables, net(16,004)20,104 
Prepaid income taxes, net10,884
 6,569
Prepaid income taxes, net7,915 9,332 
Prepaid expenses and other current assets(4,600) (3,552)Prepaid expenses and other current assets(7,074)(532)
Accounts payable(1,501) (1,635)Accounts payable(11,757)(10,151)
Other current liabilities(68,274) (91,651)Other current liabilities(7,202)(75,858)
Liabilities of advertising funds, net(11,232) 896
Deferred income722
 3,800
Deferred revenueDeferred revenue(41,014)(7,984)
Other, net(3,289) 4,250
Other, net9,022 (4,422)
Net cash provided by operating activities121,529
 131,259
Net cash provided by operating activities142,723 157,779 
Cash flows from investing activities:   Cash flows from investing activities:
Additions to property and equipment(8,998) (10,358)
Proceeds from sale of real estate and company-operated restaurants
 15,479
Additions to property, equipment, and softwareAdditions to property, equipment, and software(15,797)(26,515)
Other, net(101) (1,014)Other, net345 1,118 
Net cash provided by (used in) investing activities(9,099) 4,107
Net cash used in investing activitiesNet cash used in investing activities(15,452)(25,397)
Cash flows from financing activities:   Cash flows from financing activities:
Proceeds from issuance of long-term debtProceeds from issuance of long-term debt1,700,000 
Repayment of long-term debt(18,750) (18,750)Repayment of long-term debt(15,612)(1,699,237)
Payment of debt issuance and other debt-related costs(312) 
Payment of debt issuance and other debt-related costs(17,937)
Dividends paid on common stock(87,911) (82,326)Dividends paid on common stock(66,226)(93,027)
Repurchases of common stock, including accelerated share repurchases(127,186)
(30,000)
Repurchases of common stockRepurchases of common stock(64,292)(24,802)
Exercise of stock options33,267
 4,937
Exercise of stock options17,202 27,903 
Other, net(214) (690)Other, net(2,566)(4,779)
Net cash used in financing activities(201,106) (126,829)Net cash used in financing activities(131,494)(111,879)
Effect of exchange rates on cash, cash equivalents, and restricted cash576
 20
Effect of exchange rates on cash, cash equivalents, and restricted cash(62)(208)
Increase (decrease) in cash, cash equivalents, and restricted cash(88,100) 8,557
Increase (decrease) in cash, cash equivalents, and restricted cash(4,285)20,295 
Cash, cash equivalents, and restricted cash, beginning of period431,832
 333,115
Cash, cash equivalents, and restricted cash, beginning of period707,977 598,321 
Cash, cash equivalents, and restricted cash, end of period$343,732
 341,672
Cash, cash equivalents, and restricted cash, end of period$703,692 618,616 
Supplemental cash flow information:   Supplemental cash flow information:
Cash paid for income taxes$89,882
 86,460
Cash paid for income taxes$47,470 58,179 
Cash paid for interest70,038
 70,749
Cash paid for interest93,184 93,384 
Noncash investing activities:   
Property and equipment included in accounts payable and other current liabilities1,919
 1,121
Purchase of leaseholds in exchange for capital lease obligations330
 389
Noncash activities:Noncash activities:
Leased assets obtained in exchange for operating lease liabilities, netLeased assets obtained in exchange for operating lease liabilities, net7,245 10,438 
Property, equipment, and software included in accounts payable and other current liabilitiesProperty, equipment, and software included in accounts payable and other current liabilities3,212 3,588 
Leased assets obtained in exchange for finance lease liabilities, netLeased assets obtained in exchange for finance lease liabilities, net1,073 
See accompanying notes to unaudited consolidated financial statements.

8


DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
(1) Description of business and organization
Dunkin’ Brands Group, Inc. (“DBGI”), together with its consolidated subsidiaries, is one of the world’s leading franchisors of restaurants serving coffee and baked goods, as well as ice cream, within the quick service restaurant segment of the restaurant industry. We franchise and license a system of both traditional and nontraditional quick service restaurants and, in limited circumstances, have owned and operated locations.restaurants. Through our Dunkin’ Donuts brand, we franchise restaurants featuring coffee, espresso, donuts, bagels, breakfast sandwiches, and related products. Additionally, we license Dunkin’ Donuts brand products sold in certain retail outlets such as retail packaged coffee, Dunkin’ K-Cup® pods, and ready-to-drink bottled iced coffee. Through our Baskin-Robbins brand, we franchise restaurants featuring ice cream, frozen beverages, and related products. Additionally, we distribute Baskin-Robbins ice cream products to Baskin-Robbins franchisees and licensees in certain international markets.markets for sale in Baskin-Robbins restaurants and certain retail outlets.
Throughout these unaudited consolidated financial statements, “Dunkin’ Brands,” “the Company,” “we,” “us,” “our,” and “management” refer to DBGI and its consolidated subsidiaries taken as a whole.
(2) Summary of significant accounting policies
(a) Unaudited consolidated financial statements
The consolidated balance sheet as of September 30, 2017,26, 2020, the consolidated statements of operations, and comprehensive income, and stockholders' deficit for each of the threethree- and nine monthsnine-month periods ended September 30, 201726, 2020 and September 24, 2016,28, 2019, and the consolidated statements of cash flows for each of the nine monthsnine-month periods ended September 30, 201726, 2020 and September 24, 201628, 2019 are unaudited.
The accompanying unaudited consolidated financial statements include the accounts of DBGI and its consolidated subsidiaries and have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for complete financial statements. All significant transactions and balances between subsidiaries and affiliates have been eliminated in consolidation. In the opinion of management, all adjustments necessary for a fair presentation of such financial statements in accordance with U.S. GAAP have been recorded. Such adjustments consisted only of normal recurring items. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended December 31, 2016,28, 2019, included in the Company’sCompany's Annual Report on Form 10-K.
(b) Fiscal year
The Company operates and reports financial information on a 52- or 53-week year on a 13-week quarter basis with the fiscal year ending on the last Saturday in December and fiscal quarters ending on the 13th Saturday of each quarter (or 14th Saturday when applicable with respect to the fourth fiscal quarter). The data periods contained within the three- and nine-month periods ended September 30, 201726, 2020 and September 24, 201628, 2019 reflect the results of operations for the 13-week and 39-week periods ended on those dates, respectively.dates. Operating results for the three- and nine-month periods ended September 30, 201726, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending December 30, 2017.26, 2020.
(c) Cash, cash equivalents, and restricted cash
In accordance with the Company’s securitized financing facility, certain cash accounts have been established in the name of Citibank, N.A. (the “Trustee”) for the benefit of the Trustee and the noteholders, and are restricted in their use. The Company holds restricted cash which primarily represents (i) cash collections held by the Trustee, (ii) interest, principal, and commitment fee reserves held by the Trustee related to the Company’s Notesnotes (see note 4), and (iii) real estate reserves used to pay real estate obligations.

9

Table of Contents
Pursuant to new accounting guidance for fiscal year 2017, restricted cash is combined with cash and cash equivalents when reconciling the beginning and end of period balances in the consolidated statements of cash flows (see note 2(f)). Cash, cash equivalents, and restricted cash within the consolidated balance sheets that are included in the consolidated statements of cash flows as of September 30, 201726, 2020 and December 31, 201628, 2019 were as follows (in thousands):
September 30,
2017
 December 31,
2016
September 26,
2020
December 28,
2019
Cash and cash equivalents$266,981
 361,425
Cash and cash equivalents$613,641 621,152 
Restricted cash76,141
 69,746
Restricted cash89,626 85,644 
Restricted cash, included in Other assets610
 661
Restricted cash, included in Other assets425 1,181 
Total cash, cash equivalents, and restricted cash$343,732
 431,832
Total cash, cash equivalents, and restricted cash$703,692 707,977 
(d) Fair value of financial instruments
Financial assets and liabilities are categorized, based on the inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to the quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable inputs. Observable market data, when available, is required to be used in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.
Financial assets and liabilities measured at fair value on a recurring basis as of September 30, 201726, 2020 and December 31, 201628, 2019 are summarized as follows (in thousands):
September 30, 2017 December 31, 2016September 26, 2020December 28, 2019
Significant other observable inputs (Level 2) Total Significant other observable inputs (Level 2) TotalSignificant other observable inputs (Level 2)TotalSignificant other observable inputs (Level 2)Total
Assets:       Assets:
Company-owned life insurance$10,389
 10,389
 9,271
 9,271
Company-owned life insurance$11,537 11,537 12,367 12,367 
Total assets$10,389
 10,389
 9,271
 9,271
Total assets$11,537 11,537 12,367 12,367 
Liabilities:       Liabilities:
Deferred compensation liabilities$12,851
 12,851
 11,126
 11,126
Deferred compensation liabilities$7,865 7,865 7,216 7,216 
Total liabilities$12,851
 12,851
 11,126
 11,126
Total liabilities$7,865 7,865 7,216 7,216 
The deferred compensation liabilities relate to the Dunkin’ Brands, Inc. non-qualified deferred compensation plans (“NQDC Plans”), which allow for pre-tax deferral of compensation for certain qualifying employees and directors. Changes in the fair value of the deferred compensation liabilities are derived using quoted prices in active markets of the asset selections made by the participants. The deferred compensation liabilities are classified within Level 2, as defined under U.S. GAAP, because their inputs are derived principally from observable market data by correlation to hypothetical investments. The Company holds company-owned life insurance policies to partially offset the Company’s liabilities under the NQDC Plans. The changes in the fair value of any company-owned life insurance policies are derived using determinable cash surrender value. As such, the company-owned life insurance policies are classified within Level 2, as defined under U.S. GAAP.
The carrying value and estimated fair value of total long-term debt as of September 30, 201726, 2020 and December 31, 201628, 2019 were as follows (in thousands):
 September 30, 2017 December 31, 2016
 Carrying value Estimated fair value Carrying value Estimated fair value
Financial liabilities       
Long-term debt$2,413,091
 2,474,291
 2,426,998
 2,460,544
September 26, 2020December 28, 2019
Carrying valueEstimated fair valueCarrying valueEstimated fair value
Total long-term debt$3,023,480 3,227,605 3,035,366 3,149,505 
The estimated fair value of our long-term debt is estimated primarily based on current market rates for debt with similar terms and remaining maturities or current bidmidpoint prices for our long-term debt. Judgment is required to develop these estimates. As such, ourthe estimated fair value of long-term debt is classified within Level 2, as defined under U.S. GAAP.

(e) Concentration of credit risk
The Company is subject to credit risk through its accounts receivable consisting primarily of amounts due from franchisees and licensees for franchise fees, royalty income, advertising fees, and sales of ice cream and other products. In addition, we have note and lease receivables from certain of our franchisees and licensees. The financial condition of these franchisees and
10

Table of Contents
licensees is largely dependent upon the underlying business trends of our brands and market conditions within the quick service restaurant industry. This concentration of credit risk is mitigated, in part, by the large number of franchisees and licensees of each brand and the short-term nature of the franchise and license fee and lease receivables. As of September 30, 201726, 2020 and December 31, 2016, one28, 2019, 1 master licensee, including its majority-owned subsidiaries, accounted for approximately 18%11% and 15%, respectively, of total accounts and notes receivable. NoNaN individual franchisee or master licensee accounted for more than 10% of total revenues for eachany of the threethree- and nine monthsnine-month periods ended September 30, 201726, 2020 and September 24, 2016.28, 2019.
Additionally, the Company engages various third parties to manufacture and/or distribute certain Dunkin’ DonutsDunkin' and Baskin-Robbins products under licensing arrangements. As of September 30, 2017,26, 2020, one of these third parties accounted for approximately 13%18% of total accounts and notes receivable. No individual third party accounted for more than 10% of total accounts and notes receivable as of December 31, 2016.28, 2019. No individual third party accounted for more than 10% of total revenues for any of the three- and nine-month periods ended September 26, 2020 and September 28, 2019.
(f) Recent accounting pronouncements
Recently adopted accounting pronouncements
In January 2017,June 2016, the Financial Accounting Standards Board (the “FASB”) issued new guidance for goodwill impairmentfinancial instruments which requires onlycompanies to measure credit losses utilizing a single-step quantitative test to identifymethodology that reflects expected credit losses and measure impairment and record an impairment charge based on the excessrequires consideration of a reporting unit’s carrying amount over its fair value. The optionbroader range of reasonable and supportable information to perform a qualitative assessment first for a reporting unit to determine if a quantitative impairment test is necessary does not change under the new guidance.inform credit loss estimates. The Company early adopted this new guidance in fiscal year 2017.2020 using the modified retrospective transition method. The adoption of this guidance had no impact on the Company’s consolidated financial statements, and did not impact our annual goodwill impairment test performed as of the first day of the third quarter of fiscal year 2017.
In November 2016, the FASB issued new guidance addressing diversity in practice that exists in the classification and presentation of changes in restricted cash in the statements of cash flows. The Company early adopted this guidance retrospectively in fiscal year 2017. Accordingly, changes in restricted cash that have historically been included within operating and financing activities have been eliminated, and restricted cash is combined with cash and cash equivalents when reconciling the beginning and end of period balances for all periods presented. The adoption of this guidance primarily resulted in a decrease of $1.1 million in net cash provided by operating activities for the nine months ended September 24, 2016 and had no impact on the consolidated statements of operations and balance sheets.
In March 2016, the FASB issued new guidance for employee share-based compensation which simplifies several aspects of accounting for share-based payment transactions, including excess tax benefits, forfeiture estimates, statutory tax withholding requirements, and classification in the statements of cash flows. The Company adopted this guidance in fiscal year 2017, which had the following impact on the consolidated financial statements:
On a prospective basis, as required, the Company recorded excess tax benefits of $524 thousand and $7.3 million to the provision for income taxes in the consolidated statements of operations for the three and nine months ended September 30, 2017, respectively, instead of additional paid-in capital in the consolidated balance sheets. As a result, net income increased $524 thousand and $7.3 million, for the three and nine months ended September 30, 2017, respectively, and basic and diluted earnings per share increased $0.01 and $0.08 for the three and nine months ended September 30, 2017, respectively.
Excess tax benefits are presented as operating cash inflows instead of financing cash inflows in the consolidated statements of cash flows, which the Company elected to apply on a retrospective basis. As a result, the Company classified $7.3 million and $2.0 million for the nine months ended September 30, 2017 and September 24, 2016, respectively, of excess tax benefits as operating cash inflows included within the change in prepaid income taxes, net in the consolidated statements of cash flows. The retrospective reclassification resulted in increases in cash provided by operating activities and cash used in financing activities of $2.0 million for the nine months ended September 24, 2016.
The Company prospectively excluded the excess tax benefits from the assumed proceeds available to repurchase shares in the computation of diluted earnings per share under the treasury stock method, which did not have a material impact on diluted earnings per share for the three and nine months ended September 30, 2017.Company's consolidated financial statements.

Recent accounting pronouncements not yet adopted
Leases
In February 2016, the FASB issued new guidance for lease accounting, which replaces existing lease accounting guidance. The new guidance aims to increase transparency and comparability among organizations by requiring lessees to recognize lease assets and lease liabilities on the balance sheet and requiring disclosure of key information about leasing arrangements. This guidance is effective for the Company in fiscal year 2019 with early adoption permitted, and modified retrospective application is required. The Company expects to adopt this new guidance in fiscal year 2019closely monitors the financial condition of our franchisees, licensees, and is currently evaluatingother third parties and estimates the impactallowance for credit losses based upon the adoption of this new guidance will havelifetime expected loss on the Company’s consolidated financial statementsreceivables. These estimates are based on historical collection experience with our franchisees, licensees, and related disclosures. The Company expects that substantially all of its operating lease commitments will be subject to the new guidance and will be recognizedother third parties as operating lease liabilities and right-of-use assets upon adoption, thereby having a material impact to its consolidated balance sheet.
Revenue from Contracts with Customers
In May 2014, the FASB issued new guidance for revenue recognitionwell as other factors, including those related to contracts with customers, except for contracts within the scope of other standards, which supersedes nearly all existing revenue recognition guidance. The new guidance provides a single framework in which revenue is required to be recognized to depict the transfer of goods or services to customers in amounts that reflect the consideration to which a company expects to be entitled in exchange for those goods or services.
The new guidance is effective for the Company in fiscal year 2018. The Company intends to adopt this new guidance in fiscal year 2018 using the full retrospective transition method, which will result in restating each prior reporting period presented, fiscal years 2016current market conditions and 2017,events. Included in the year of adoption. Additionally,allowance for credit losses is a cumulative effect adjustment will be recorded to the opening balance of accumulated deficit as of the first day of fiscal year 2016, the earliest period presented. Based on the expected impacts described below, the Company expects such cumulative effect adjustment to be material to the opening balance of accumulated deficit.
The Company expects the adoption of the new guidance to change the timing of recognition of initialprovision for uncollectible royalty, franchise fees, including master licensefee, advertising fee, ice cream, and territory fees for our international business, and renewal fees. Currently, these fees are generally recognized upfront upon either opening of the respective restaurant or when a renewal agreement becomes effective. The new guidance will generally require these fees to be recognized over the term of the related franchise license for the respective restaurant, which we expect will result in a material impact to revenue recognized for initial franchise fees and renewal fees. The Company does not expect this new guidance to materially impact the recognition of royalty income. Additionally, rental income is outside the scope of this new guidance, and therefore will not be impacted.licensing fee receivables (see note 13).
The Company also expects the adoptionmonitors its off-balance sheet exposures under its letters of this new guidance to change the reportingcredit and supply chain and other guarantees. None of advertising fund contributions from franchisees and the related advertising fund expenditures, which are not currently included in the consolidated statements of operations. The Company expects the new guidance to require these advertising fund contributions and expenditures to be reported on a gross basis in the consolidated statements of operations. For the fiscal year ended December 31, 2016, franchisee contributions to the U.S. advertising funds were $430.3 million, and therefore we expect this changearrangements has or is likely to have a material impact to our totaleffect on the Company’s results of operations, financial condition, revenues, and expenses. However, we expect such contributions and expenditures to be largely offsetting and therefore do not expect a significant impact on our reported net income.
Though the majority of the assessment phase is complete, the Company continues to evaluate the impact the adoption of this new guidance will have on these and other revenue transactions, in addition to the impact on accounting policies and related disclosures. Additionally, the Company is in the process of implementing new accounting systems, business processes, and internal controls related to revenue recognition to assist in the application of the new guidance.expenses or liquidity.
(g) Subsequent events
Subsequent events have been evaluated up through the date that these consolidated financial statements were filed.
11



Table of Contents
(3) FranchiseRevenue recognition
(a) Disaggregation of revenue
Revenues are disaggregated by timing of revenue recognition related to contracts with customers (“ASC 606”) and reconciled to reportable segment revenues as follows (in thousands):
Three months ended September 26, 2020
Dunkin' U.S.Baskin-Robbins U.S.Dunkin' InternationalBaskin-Robbins InternationalU.S. Advertising FundsTotal reportable segment revenues
Other(a)
Total revenues
Revenues recognized under ASC 606
Revenues recognized over time:        
Royalty income$130,866 9,016 4,744 2,278 146,904 5,733 152,637 
Franchise fees6,485 380 335 229 7,429 (1)7,428 
Advertising fees and related income123,025 123,025 1,223 124,248 
Other revenues627 2,985 104 3,724 9,775 13,499 
Total revenues recognized over time137,978 12,381 5,183 2,515 123,025 281,082 16,730 297,812 
       
Revenues recognized at a point in time:
Sales of ice cream and other products1,524 27,495 29,019 (4,505)24,514 
Other revenues153 132 (23)267 279 546 
Total revenues recognized at a point in time153 1,656 27,472 29,286 (4,226)25,060 
Total revenues recognized under ASC 606138,131 14,037 5,188 29,987 123,025 310,368 12,504 322,872 
Revenues not subject to ASC 606        
Advertising fees and related income8,032 8,032 
Rental income29,822 740 77 30,639 30,639 
Total revenues not subject to ASC 60629,822 740 77 30,639 8,032 38,671 
Total revenues$167,953 14,777 5,188 30,064 123,025 341,007 20,536 361,543 
(a)Revenues reported as “Other” include revenues earned through certain licensing arrangements, revenues generated from online training programs for franchisees, advertising fees and related income from international advertising funds, and breakage and other revenue related to the gift card program, all of which are not allocated to a specific segment. Additionally, the allocation of royalty income from sales of ice cream and other products, certain franchisee incentives, and certain corporate financial relief provided to franchisees are reported as “Other.”
Franchise
12

Table of Contents
Three months ended September 28, 2019
Dunkin' U.S.Baskin-Robbins U.S.Dunkin' InternationalBaskin-Robbins InternationalU.S. Advertising FundsTotal reportable segment revenues
Other(a)
Total revenues
Revenues recognized under ASC 606
Revenues recognized over time:        
Royalty income$130,993 8,973 5,769 2,197 147,932 5,288 153,220 
Franchise fees3,675 374 792 165 5,006 (1,002)4,004 
Advertising fees and related income122,819 122,819 1,412 124,231 
Other revenues624 2,962 120 3,715 9,196 12,911 
Total revenues recognized over time135,292 12,309 6,681 2,371 122,819 279,472 14,894 294,366 
       
Revenues recognized at a point in time:
Sales of ice cream and other products1,021 28,459 29,480 (5,071)24,409 
Other revenues288 52 68 (37)371 308 679 
Total revenues recognized at a point in time288 1,073 68 28,422 29,851 (4,763)25,088 
Total revenues recognized under ASC 606135,580 13,382 6,749 30,793 122,819 309,323 10,131 319,454 
Revenues not subject to ASC 606        
Advertising fees and related income4,444 4,444 
Rental income30,824 942 218 31,984 31,984 
Total revenues not subject to ASC 60630,824 942 218 31,984 4,444 36,428 
Total revenues$166,404 14,324 6,749 31,011 122,819 341,307 14,575 355,882 
(a)Revenues reported as “Other” include revenues earned through certain licensing arrangements, revenues generated from online training programs for franchisees, advertising fees and related income from international advertising funds, and breakage and other revenue related to the gift card program, all of which are not allocated to a specific segment. Additionally, the allocation of royalty income from sales of ice cream and other products and certain franchisee incentives are reported as “Other.”
13

Table of Contents
Nine months ended September 26, 2020
Dunkin' U.S.Baskin-Robbins U.S.Dunkin' InternationalBaskin-Robbins InternationalU.S. Advertising FundsTotal reportable segment revenues
Other(a)
Total revenues
Revenues recognized under ASC 606
Revenues recognized over time:        
Royalty income$351,740 23,423 12,086 5,662 392,911 3,584 396,495 
Franchise fees16,503 980 1,095 534 19,112 (101)19,011 
Advertising fees and related income331,139 331,139 3,309 334,448 
Other revenues2,002 7,481 192 9,683 29,593 39,276 
Total revenues recognized over time370,245 31,884 13,373 6,204 331,139 752,845 36,385 789,230 
       
Revenues recognized at a point in time:
Sales of ice cream and other products3,803 77,281 81,084 (9,920)71,164 
Other revenues684 195 91 (42)928 720 1,648 
Total revenues recognized at a point in time684 3,998 91 77,239 82,012 (9,200)72,812 
Total revenues recognized under ASC 606370,929 35,882 13,464 83,443 331,139 834,857 27,185 862,042 
Revenues not subject to ASC 606        
Advertising fees and related income24,433 24,433 
Rental income82,962 2,146 480 85,588 85,588 
Total revenues not subject to ASC 60682,962 2,146 480 85,588 24,433 110,021 
Total revenues$453,891 38,028 13,464 83,923 331,139 920,445 51,618 972,063 
(a)Revenues reported as “Other” include revenues earned through certain licensing arrangements, revenues generated from online training programs for franchisees, advertising fees and related income from international advertising funds, and breakage and other revenue related to the gift card program, all of which are not allocated to a specific segment. Additionally, the allocation of royalty income from sales of ice cream and other products, certain franchisee incentives, and certain corporate financial relief provided to franchisees are reported as “Other.”
14

Table of Contents
Nine months ended September 28, 2019
Dunkin' U.S.Baskin-Robbins U.S.Dunkin' InternationalBaskin-Robbins InternationalU.S. Advertising FundsTotal reportable segment revenues
Other(a)
Total revenues
Revenues recognized under ASC 606
Revenues recognized over time:        
Royalty income$379,772 23,904 17,078 6,055 426,809 12,524 439,333 
Franchise fees10,719 1,030 3,687 1,043 16,479 (1,002)15,477 
Advertising fees and related income355,049 355,049 3,984 359,033 
Other revenues1,918 8,125 124 10,176 26,813 36,989 
Total revenues recognized over time392,409 33,059 20,889 7,107 355,049 808,513 42,319 850,832 
       
Revenues recognized at a point in time:
Sales of ice cream and other products2,772 81,531 84,303 (11,903)72,400 
Other revenues1,154 183 181 (24)1,494 794 2,288 
Total revenues recognized at a point in time1,154 2,955 181 81,507 85,797 (11,109)74,688 
Total revenues recognized under ASC 606393,563 36,014 21,070 88,614 355,049 894,310 31,210 925,520 
Revenues not subject to ASC 606        
Advertising fees and related income16,099 16,099 
Rental income89,163 2,875 653 92,691 92,691 
Total revenues not subject to ASC 60689,163 2,875 653 92,691 16,099 108,790 
Total revenues$482,726 38,889 21,070 89,267 355,049 987,001 47,309 1,034,310 
(a)Revenues reported as “Other” include revenues earned through certain licensing arrangements, revenues generated from online training programs for franchisees, advertising fees and related income from international advertising funds, and breakage and other revenue related to the gift card program, all of which are not allocated to a specific segment. Additionally, the allocation of royalty income from sales of ice cream and other products and certain franchisee incentives are reported as “Other.”


15

Table of Contents
(b) Contract balances
Information about receivables, contract assets, and deferred revenue subject to ASC 606 is as follows (in thousands):
September 26,
2020
December 28,
2019
Balance Sheet Classification
Receivables$113,401 86,104 Accounts receivable, net, Notes and other receivables, net, and Other assets
Contract assets7,235 4,894 Other assets
Deferred revenue:
Current$26,138 27,213 Deferred revenue—current
Long-term284,023 320,457 Deferred revenue—long term
Total$310,161 347,670 
Receivables relate primarily to payments due for royalties, franchise fees, advertising fees, sales of ice cream and other products, and licensing fees. Contract assets relate primarily to consideration paid to customers, including franchisee incentives, that exceeds the fixed consideration received for certain contracts, net of any revenue recognized. Deferred revenue primarily represents the Company’s remaining performance obligations under its franchise and license agreements for which consideration has been received or is receivable, and is generally recognized on a straight-line basis over the remaining term of the related agreement.
The decrease in the deferred revenue balance as of September 26, 2020 was driven primarily by $27.1 million of revenues recognized that were included in the opening deferred revenue balance as of December 28, 2019, as well as franchisee incentives provided during fiscal year 2020, offset by cash payments received or due in advance of satisfying our performance obligations.
(c) Transaction price allocated to remaining performance obligations
Estimated revenue expected to be recognized in the future related to performance obligations that are either unsatisfied or partially satisfied at September 26, 2020 is as follows (in thousands):
Fiscal year:
2020(a)
$7,169 
202120,499 
202216,662 
202316,870 
202417,231 
Thereafter195,981 
Total$274,412 
(a) Represents the estimate for remainder of fiscal year 2020 which excludes the nine months ended September 26, 2020.
The estimated revenue in the table above does not contemplate future franchise renewals or new franchise agreements for restaurants for which a franchise agreement or store development agreement does not exist at September 26, 2020. Additionally, the table above excludes $46.1 million of consideration allocated to restaurants that were not yet open at September 26, 2020. The Company has applied the sales-based royalty exemption which permits exclusion of variable consideration in the form of sales-based royalties from the disclosure of remaining performance obligations in the table above.
16

Table of Contents
(4) Debt
Debt at September 26, 2020 and December 28, 2019 consisted of the following (in thousands):
September 26,
2020
December 28,
2019
2017 Class A-2-I Notes$585,000 588,000 
2017 Class A-2-II Notes780,000 784,000 
2019 Class A-2-I Notes594,000 597,000 
2019 Class A-2-II Notes396,000 398,000 
2019 Class A-2-III Notes693,000 696,500 
Other1,138 1,250 
Debt issuance costs, net of amortization(25,658)(29,384)
Total long-term debt, net3,023,480 3,035,366 
Less: current portion of long-term debt31,150 31,150 
Long-term debt, net$2,992,330 3,004,216 
 Three months ended Nine months ended
 September 30,
2017
 September 24,
2016
 September 30,
2017
 September 24,
2016
Royalty income$133,740
 127,986
 387,634
 368,190
Initial franchise fees and renewal income18,069
 10,653
 39,310
 31,427
Total franchise fees and royalty income$151,809
 138,639
 426,944
 399,617
The changes in franchised and company-operated pointsCompany's outstanding debt as of distribution were as follows:
 Three months ended Nine months ended
 September 30,
2017
 September 24,
2016
 September 30,
2017
 September 24,
2016
Systemwide points of distribution:       
Franchised points of distribution in operation—beginning of period20,242
 19,640
 20,080
 19,308
Franchised points of distribution—opened326
 310
 928
 988
Franchised points of distribution—closed(189) (195) (629) (563)
Net transfers from company-operated points of distribution
 23
 
 45
Franchised points of distribution in operation—end of period20,379
 19,778
 20,379
 19,778
Company-operated points of distribution—end of period
 6
 
 6
Total systemwide points of distribution—end of period20,379
 19,784
 20,379
 19,784
(4) Debt
Securitized Financing Facility
In January 2015, DB Master Finance LLC (the “Master Issuer”), a limited-purpose, bankruptcy-remote, wholly-owned indirect subsidiary of DBGI, issued Series 2015-1 3.262% Fixed Rate Senior Secured Notes, Class A-2-I (the “2015 Class A-2-I Notes”) with an initial principal amount of $750.0 million and Series 2015-1 3.980% Fixed Rate Senior Secured Notes, Class A-2-II (the “2015 Class A-2-II Notes” and, together with the 2015 Class A-2-I Notes, the “2015 Class A-2 Notes”) with an initial principal amount of $1.75 billion. In addition, the Master Issuer issued Series 2015-1 Variable Funding Senior Secured Notes, Class A-1 (the “2015 Variable Funding Notes” and, together with the 2015 Class A-2 Notes, the “2015 Notes”), which allowed the Master Issuer to borrow up to $100.0 million on a revolving basis. The 2015 Variable Funding Notes could also be used to issue letters of credit.
In October 2017, the Master Issuer issuedSeptember 26, 2020 included Series 2017-1 3.629% Fixed Rate Senior Secured Notes, Class A-2-I (the “2017 Class A-2-I Notes”) with an initial principal amount of $600.0 million and, Series 2017-1 4.030% Fixed Rate Senior Secured Notes, Class A-2-II (the “2017 Class A-2-II Notes” and, together with the 2017 Class A-2-I Notes, the “2017 Class A-2 Notes”), Series 2019-1 3.787% Fixed Rate Senior Secured Notes, Class A-2-I (the “2019 Class A-2-I Notes”), Series 2019-1 4.021% Fixed Rate Senior Secured Notes, Class A-2-II (the “2019 Class A-2-II Notes”), and Series 2019-1 4.352% Fixed Rate Senior Secured Notes, Class A-2-III (the “2019 Class A-2-III Notes” and, together with an initial principal amountthe 2019 Class A-2-I Notes and 2019 Class A-2-II Notes, the “2019 Class A-2 Notes”) issued by DB Master Finance LLC (the “Master Issuer”), a limited-purpose, bankruptcy-remote, wholly-owned indirect subsidiary of $800.0 million.DBGI. In addition, the Master Issuer issued Series 2017-12019-1 Variable Funding Senior Secured Notes, Class A-1 (the “2017“2019 Variable Funding Notes” and, together with the 20172019 Class A-2 Notes, the “2017“2019 Notes”), which allowsallow for the issuance of up to $150.0 million of 20172019 Variable Funding Notes and certain other credit instruments, including letters of credit. A portion of the proceeds of the 2017 Notes was used to repay the remaining $731.3 million of
No principal outstandingpayments are required on the 2015 Class A-2-I NotesCompany's outstanding debt if a specified leverage ratio, which is a measure of outstanding debt to earnings before interest, taxes, depreciation, and amortization, adjusted for certain items (as specified in the base indenture and related supplemental indentures, collectively, the “Indenture”), is less than or equal to pay related transaction fees. The additional net proceeds will be used for general corporate purposes, which may include5.0 to 1.0. As of March 28, 2020, the Company's leverage ratio was less than 5.0 to 1.0. As such, the Company did not make the scheduled principal payment of $7.8 million in May 2020. Based upon the Company's leverage ratio as of June 27, 2020 and September 26, 2020, the Company made the scheduled principal payment in August 2020 and intends to make the next scheduled principal payment in November 2020.
On March 11, 2020, the World Health Organization declared the outbreak of a return of capital tonovel coronavirus disease (“COVID-19”) as a pandemic. On March 16, 2020, the Company’s shareholders. In connection withCompany borrowed $116.0 million against the issuance of the 20172019 Variable Funding Notes as a precautionary measure given the Master Issuer terminatedmarket uncertainty arising from COVID-19 and to further strengthen financial flexibility. Borrowings under the commitments with respect to its existing 20152019 Variable Funding Notes.Notes bear interest at a rate equal to a LIBOR rate plus 1.50%. The Company repaid all borrowings under the 2019 Variable Funding Notes during the second fiscal quarter of 2020.
As of each of September 26, 2020 and December 28, 2019, $33.1 million of letters of credit were outstanding against the 2019 Variable Funding Notes, which related primarily to interest reserves required under the Indenture. There were no amounts drawn down on these letters of credit as of September 26, 2020 or December 28, 2019.
The 20152017 Class A-2 Notes and 20172019 Notes were each issued in a securitization transaction pursuant to which most of the Company’s domestic and certain of its foreign revenue-generating assets, consisting principally of franchise-related agreements, real estate assets, and intellectual property and license agreements for the use of intellectual property, are held by the Master Issuer and certain other limited-purpose, bankruptcy-remote, wholly-owned indirect subsidiaries of the Company that act as guarantors of the 20152017 Class A-2 Notes and 20172019 Notes and that have pledged substantially all of their assets to secure the 2015 Notes and 2017 Notes.
The 2015 Notes and 2017 Notes were issued pursuant to a base indenture and related supplemental indentures (collectively, the “Indenture”) under which the Master Issuer may issue multiple series of notes. The legal final maturity date of the 2015 Class A-2-II Notes and 2017 Class A-2 Notes is in February 2045 and November 2047, respectively, but it is anticipated that, unless

earlier prepaid to the extent permitted under the Indenture, the 2015 Class A-2-II Notes will be repaid by February 2022, the 2017 Class A-2-I Notes will be repaid by November 2024, and the 2017 Class A-2-II Notes will be repaid by November 2027 (the “Anticipated Repayment Dates”). If the 2015 Class A-2-II Notes or the 2017 Class A-2 Notes have not been repaid or refinanced by their respective Anticipated Repayment Dates, a rapid amortization event will occur in which residual net cash flows of the Master Issuer, after making certain required payments, will be applied to the outstanding principal of the 2015 Class A-2-II Notes and the 2017 Class A-2 Notes. Various other events, including failure to maintain a minimum ratio of net cash flows to debt service (“DSCR”), may also cause a rapid amortization event. Borrowings under the 2015 Class A-2-II Notes, 2017 Class A-2-I Notes, and 2017 Class A-2-II Notes bear interest at fixed rates equal to 3.980%, 3.629%, and 4.030%, respectively. If the 2015 Class A-2-II Notes or the 2017 Class A-2 Notes are not repaid or refinanced prior to their respective Anticipated Repayment Dates, incremental interest will accrue. Principal payments are required to be made on the 2015 Class A-2-II Notes, 2017 Class A-2-I Notes, and 2017 Class A-2-II Notes equal to $17.5 million, $6.0 million, and $8.0 million, respectively, per calendar year, payable in quarterly installments. No principal payments are required if a specified leverage ratio, which is a measure of outstanding debt to earnings before interest, taxes, depreciation, and amortization, adjusted for certain items (as specified in the Indenture), is less than or equal to 5.0 to 1.0. Other events and transactions, such as certain asset sales and receipt of various insurance or indemnification proceeds, may trigger additional mandatory prepayments.
It is anticipated that the principal and interest on the 2017 Variable Funding Notes will be repaid in full on or prior to November 2022, subject to two additional one-year extensions. Borrowings under the 2017 Variable Funding Notes bear interest at a rate equal to a LIBOR rate plus 1.50%, or the lenders’ commercial paper funding rate plus 1.50%. If the 2017 Variable Funding Notes are not repaid prior to November 2022 or prior to the end of an extension period, if applicable, incremental interest will accrue. In addition, the Company is required to pay a 1.50% fee for letters of credit amounts outstanding and a commitment fee on the unused portion of the 2017 Variable Funding Notes which ranges from 0.50% to 1.00% based on utilization.
As of September 30, 2017, approximately $731.3 million and $1.71 billion of principal were outstanding on the 2015 Class A-2-I Notes and 2015 Class A-2-II Notes, respectively. Total debt issuance costs incurred and capitalized in connection with the issuance of the 2015 Notes were $41.3 million. The effective interest rate, including the amortization of debt issuance costs, was 3.5% and 4.3% for the 2015 Class A-2-I Notes and 2015 Class A-2-II Notes, respectively, as of September 30, 2017. As noted above, subsequent to September 30, 2017, a portion of the net proceeds of the 2017 Notes was used to repay the remaining $731.3 million of principal outstanding on the 2015 Class A-2-I2019 Notes.
As
17

Table of each of September 30, 2017 and December 31, 2016, $25.9 million of letters of credit were outstanding against the 2015 Variable Funding Notes, which relate primarily to interest reserves required under the Indenture. There were no amounts drawn down on these letters of credit as of September 30, 2017 or December 31, 2016.Contents
The 2015 Class A-2-II Notes and 2017 Notes are subject to a series of covenants and restrictions customary for transactions of this type, including (i) that the Master Issuer maintains specified reserve accounts to be used to make required payments in respect of the 2015 Class A-2-II Notes and 2017 Notes, (ii) provisions relating to optional and mandatory prepayments, including mandatory prepayments in the event of a change of control as defined in the Indenture and the related payment of specified amounts, including specified make-whole payments in the case of the 2015 Class A-2-II Notes and 2017 Notes under certain circumstances, (iii) certain indemnification payments in the event, among other things, the assets pledged as collateral for the 2015 Class A-2-II Notes and 2017 Notes are in stated ways defective or ineffective, and (iv) covenants relating to recordkeeping, access to information, and similar matters. As noted above, the 2015 Class A-2-II Notes and 2017 Notes are also subject to customary rapid amortization events provided for in the Indenture, including events tied to failure to maintain stated DSCR, failure to maintain an aggregate level of Dunkin’ Donuts U.S. retail sales on certain measurement dates, certain manager termination events, an event of default, and the failure to repay or refinance the 2015 Class A-2-II Notes or the 2017 Notes on the applicable Anticipated Repayment Dates. The 2015 Class A-2-II Notes and 2017 Notes are also subject to certain customary events of default, including events relating to non-payment of required interest, principal, or other amounts due on or with respect to the 2015 Class A-2-II Notes and 2017 Notes, failure to comply with covenants within certain time frames, certain bankruptcy events, breaches of specified representations and warranties, failure of security interests to be effective, and certain judgments.


(5) Other current liabilities
Other current liabilities consisted of the following (in thousands):
September 26,
2020
December 28,
2019
Gift card/certificate liability$187,780 248,082 
Accrued payroll and benefits22,285 27,208 
Accrued interest12,687 13,086 
Other current liabilities—advertising funds106,206 48,089 
Franchisee profit-sharing liability8,012 14,184 
Other42,534 35,401 
Total other current liabilities$379,504 386,050 
 September 30,
2017
 December 31,
2016
Gift card/certificate liability$142,020
 207,628
Gift card breakage liability2,668
 13,301
Accrued payroll and benefits29,120
 25,071
Accrued legal liabilities (see note 9(c))
6,342
 5,555
Accrued interest10,621
 10,702
Accrued professional costs3,012
 2,170
Franchisee profit-sharing liability8,497
 11,083
Other28,207
 22,756
Total other current liabilities$230,487
 298,266
The decrease in the gift card/certificate liability was driven by the seasonality of our gift card program. The franchisee profit-sharing liability represents amounts owed to franchisees from the net profits primarily on the sale of Dunkin’ Donuts brand products such as Dunkin’ K-Cup® pods, retail packaged coffee, and ready-to-drink bottled iced coffee in certain retail outlets.
(6) Segment information
The Company is strategically aligned into two global brands, Dunkin’ Donuts and Baskin-Robbins, which are further segregated between U.S. operations and international operations. Additionally, the Company administers and directs the development of all advertising and promotional programs in the U.S. As such, the Company has determined that it has four operating segments, which are its5 reportable segments: Dunkin’ DonutsU.S., Baskin-Robbins U.S., Dunkin’ Donuts International, Baskin-Robbins U.S.,International, and Baskin-Robbins International.U.S. Advertising Funds. Dunkin’ Donuts U.S., Baskin-Robbins U.S., and Dunkin’ Donuts International primarily derive their revenues through royalty income and franchise fees. Baskin-Robbins U.S. also derives revenue through license fees from a third-party license agreement and rental income. Dunkin’ Donuts U.S. also derives revenue through rental income. Prior to the sale of all remaining company-operated restaurants in the fourth quarter of fiscal year 2016, Dunkin’ Donuts U.S. also derived revenue through retail sales at company-operated restaurants. Baskin-Robbins International primarily derives its revenues from sales of ice cream products, as well as royalty income and franchise fees. U.S. Advertising Funds primarily derive revenues through continuing advertising fees from Dunkin’ and license fees.Baskin-Robbins franchisees. The operating results of each segment are regularly reviewed and evaluated separately by the Company’s senior management, which includes, but is not limited to, the chief executive officer. Senior management primarily evaluates the performance of its segments and allocates resources to them based on operating income adjusted for amortization of intangible assets, long-lived asset impairment charges, impairment of our equity method investments, and othercertain non-recurring, infrequent or unusual charges, which does not reflect the allocation of any corporate charges. This profitability measure is referred to as segment profit. When senior management reviews a balance sheet, it is at a consolidated level. The accounting policies applicable to each segment are generally consistent with those used in the consolidated financial statements.
Revenues for all operating segments include only transactions with unaffiliated customers and include no intersegment revenues. Revenues reported as “Other” include revenues earned through certain licensing arrangements with third parties in which our brand names are used, including the licensing fees earned from the Dunkin’ K-Cup® pod licensing agreement and sales of Dunkin’ Donuts branded ready-to-drink bottled iced coffee and retail packaged coffee, revenues generated from online training programs for franchisees, advertising fees and revenuesrelated income from international advertising funds, and breakage and other revenue related to the sale of Dunkin’ Donuts products in certain international markets,gift card program, all of which are not allocated to a specific segment. Additionally, certain franchisee incentives and certain corporate financial relief provided to franchisees are reported as "Other." Revenues by segment were as follows (in thousands):
 Revenues
 Three months endedNine months ended
 September 26,
2020
September 28,
2019
September 26,
2020
September 28,
2019
Dunkin’ U.S.$167,953 166,404 453,891 482,726 
Baskin-Robbins U.S.14,777 14,324 38,028 38,889 
Dunkin’ International5,188 6,749 13,464 21,070 
Baskin-Robbins International30,064 31,011 83,923 89,267 
U.S. Advertising Funds123,025 122,819 331,139 355,049 
Total reportable segment revenues341,007 341,307 920,445 987,001 
Other20,536 14,575 51,618 47,309 
Total revenues$361,543 355,882 972,063 1,034,310 

18

 Revenues
 Three months ended Nine months ended
 September 30,
2017
 September 24,
2016
 September 30,
2017
 September 24,
2016
Dunkin’ Donuts U.S.$165,106
 152,425
 464,148
 444,898
Dunkin’ Donuts International5,157
 4,449
 14,947
 16,917
Baskin-Robbins U.S.13,751
 13,781
 38,645
 38,080
Baskin-Robbins International28,810
 27,904
 88,876
 89,578
Total reportable segment revenues212,824
 198,559
 606,616
 589,473
Other11,344
 8,540
 26,746
 23,711
Total revenues$224,168
 207,099
 633,362
 613,184
Table of Contents

Amounts included in “Corporate”“Corporate and other” in the segment profit table below include corporate overhead costs, such as payroll and related benefit costs and professional services, net of “Other” revenues reported above. Segment profit by segment was as follows (in thousands):
 Segment profit
 Three months endedNine months ended
 September 26,
2020
September 28,
2019
September 26,
2020
September 28,
2019
Dunkin’ U.S.$129,081 127,755 334,545 365,888 
Baskin-Robbins U.S.9,373 9,711 25,281 26,110 
Dunkin’ International3,544 4,898 8,880 15,213 
Baskin-Robbins International14,985 13,028 34,363 32,919 
U.S. Advertising Funds
Total reportable segments156,983 155,392 403,069 440,130 
Corporate and other(23,486)(29,414)(76,904)(80,544)
Interest expense, net(31,730)(28,791)(94,050)(88,852)
Amortization of other intangible assets(4,582)(4,599)(13,762)(13,858)
Long-lived asset impairment charges(36)(560)(361)
Loss on debt extinguishment(13,076)
Other income (loss), net154 (258)(302)(308)
Income before income taxes$97,339 92,294 217,491 243,131 
 Segment profit
 Three months ended Nine months ended
 September 30,
2017
 September 24,
2016
 September 30,
2017
 September 24,
2016
Dunkin’ Donuts U.S.$129,719
 119,434
 360,241
 335,963
Dunkin’ Donuts International1,439
 705
 4,782
 6,438
Baskin-Robbins U.S.10,466
 11,085
 28,773
 29,123
Baskin-Robbins International11,420
 11,154
 31,900
 30,617
Total reportable segments153,044
 142,378
 425,696
 402,141
Corporate(25,134) (27,614) (82,176) (84,477)
Interest expense, net(23,812) (24,442) (72,822) (74,022)
Amortization of other intangible assets(5,341) (5,397) (16,001) (16,726)
Long-lived asset impairment charges(536) (7) (643) (104)
Other income (losses), net155
 (124) 370
 (596)
Income before income taxes$98,376
 84,794
 254,424
 226,216
Net income of equity method investments is included in segment profit for the Dunkin’ Donuts International and Baskin-Robbins International reportable segments. Amounts reported as “Other” in the segment profit table below include the reduction in depreciation and amortization, net of tax, reported by our equity method investees as a result of previously recorded impairment charges. Net income of equity method investments by reportable segment was as follows (in thousands):
Net income of equity method investments
Net income (loss) of equity method investments Three months endedNine months ended
Three months ended Nine months ended September 26,
2020
September 28,
2019
September 26,
2020
September 28,
2019
September 30,
2017
 September 24,
2016
 September 30,
2017
 September 24,
2016
Dunkin’ Donuts International$9
 351
 (68) 829
Dunkin’ InternationalDunkin’ International$44 168 189 
Baskin-Robbins International4,492
 4,266
 9,468
 8,644
Baskin-Robbins International6,805 5,841 14,105 11,175 
Total reportable segments4,501
 4,617
 9,400
 9,473
Total reportable segments6,849 6,009 14,109 11,364 
Other965
 850
 3,212
 2,675
Other310 658 999 1,960 
Total net income of equity method investments$5,466
 5,467
 12,612
 12,148
Total net income of equity method investments$7,159 6,667 15,108 13,324 
(7) Stockholders’ deficit
The changes in total stockholders’ deficit were as follows (in thousands):
  Total stockholders’ deficit
Balance as of December 31, 2016 $(163,258)
Net income 155,417
Other comprehensive income 5,031
Dividends paid on common stock (87,911)
Exercise of stock options 33,267
Repurchases of common stock (127,186)
Share-based compensation expense 10,896
Other, net (344)
Balance as of September 30, 2017 $(174,088)

(a) Treasury stock
During the nine months ended September 30, 2017, the Company entered into and completed an accelerated share repurchase agreement (the “May 2017 ASR Agreement”) with a third-party financial institution. Pursuant to the terms of the May 2017 ASR Agreement, the Company paid the financial institution $100.0 million in cash and received 1,757,568 shares of the Company’s common stock during the nine months ended September 30, 2017 based on a weighted average cost per share of $56.90 over the term of the May 2017 ASR Agreement.
Additionally, during the nine months ended September 30, 2017,26, 2020, the Company repurchased a total of 513,880880,933 shares of common stock in the open market at a weighted average cost per sharefor total consideration of $52.90 from existing stockholders.$64.3 million.
The Company accounts for treasury stock under the cost method based on the cost of the shares on the dates of repurchase andplus any direct costs incurred. During the nine months ended September 30, 2017,26, 2020, the Company retired 2,271,448880,933 shares of treasury stock repurchased under the May 2017 ASR Agreement and in the open market. The repurchase and retirement of these shares of treasury stock resulted in a decrease in additional paid-in capital of $18.9$5.6 million and an increase in accumulated deficit of $108.3$58.7 million.
(b) Equity incentive plans
During the nine months ended September 30, 2017,26, 2020, the Company granted stock options to purchase 1,181,777681,862 shares of common stock and 90,34274,509 restricted stock units (“RSUs”) to certain employees and members of our board of directors. The stock options generally vest in equal annual amounts over a four-year period subsequent to the grant date, and have a maximum contractual term of seven years. The stock options were granted with a weighted averageweighted-average exercise price of $55.04$75.80 per share and havehad a weighted averageweighted-average grant-date fair value of $9.87$11.55 per share. The RSUs granted to certain employees and members of our board of
19

Table of Contents
directors generally vest in equal annual amounts over a three-year period and a one-year period, respectively, subsequent to the grant date and havehad a weighted averageweighted-average grant-date fair value of $52.41$69.00 per share.unit.
In addition, the Company granted 84,70545,964 performance stock units (“PSUs”) to certain employees during the nine months ended September 30, 2017.26, 2020. These PSUs are generally eligible to cliff-vest approximately three years from the grant date. Of the total PSUs granted, 37,02721,225 PSUs are subject to a service condition and a market vesting condition linked to the level of total shareholder return received by the Company’s shareholdersstockholders during the performance period measured against the companies in the S&P 500 Composite Index (“TSR PSUs”). The remaining 47,67824,739 PSUs granted are subject to a service condition and a performance vesting condition based on the level of adjusted operating income growth achieved over the performance period (“AOI PSUs”). The maximum vesting percentage that could be realized for each of the TSR PSUs and the AOI PSUs is 200% based on the level of performance achieved for the respective awards. All of the PSUs are also subject to a one-year post-vesting holding period. The TSR PSUs were valued based on a Monte Carlo simulation model to reflect the impact of the total shareholder return market condition, resulting in a weighted averageweighted-average grant-date fair value of $67.52$81.64 per share.unit. The probability of satisfying a market condition is considered in the estimation of the grant-date fair value for TSR PSUs and the compensation cost is not reversed if the market condition is not achieved, provided the requisite service has been provided. The AOI PSUs havehad a weighted averageweighted-average grant-date fair value of $52.44$72.95 per share.unit. Total compensation cost for the AOI PSUs is determined based on the most likely outcome of the performance condition and the number of awards expected to vest based on the outcome.
Total compensation expense related to all share-based awards was $3.6$2.9 million and $4.2$3.8 million for the three months ended September 30, 201726, 2020 and September 24, 2016,28, 2019, respectively, and $10.9$9.1 million and $12.5$11.1 million for the nine months ended September 30, 201726, 2020 and September 24, 2016,28, 2019, respectively, and iswas included in general and administrative expenses net in the consolidated statements of operations.
(c) Accumulated other comprehensive loss
The changes in the components of accumulated other comprehensive loss were as follows (in thousands):
 Effect of foreign currency translation Unrealized gains on interest rate swaps Other         Accumulated other comprehensive gain (loss)
Balance as of December 31, 2016$(23,019) 1,144
 (2,109) (23,984)
Other comprehensive income (loss), net5,309
 (955) 677
 5,031
Balance as of September 30, 2017$(17,710) 189
 (1,432) (18,953)

Effect of foreign currency translationOther        Accumulated other comprehensive loss
Balance as of December 28, 2019$(18,841)(968)(19,809)
Other comprehensive loss, net(986)(612)(1,598)
Balance as of September 26, 2020$(19,827)(1,580)(21,407)
(d) Dividends
The Company paid a quarterly dividend of $0.3225$0.4025 per share of common stock on March 22, 2017, June 14, 2017,18, 2020 and September 6, 20179, 2020 totaling approximately $29.6 million, $29.2$33.1 million and $29.1$33.2 million, respectively. On October 26, 2017, the Company announced that itsThe Company's board of directors approvedtemporarily suspended the next quarterlyregular dividend program during the second fiscal quarter in response to the uncertainty arising from the COVID-19 pandemic. The dividend program was reinstated during the third fiscal quarter. On October 30, 2020, the Company, Inspire Brands, Inc. (“Inspire”) and Inspire’s indirect wholly-owned subsidiary, Vale Merger Sub, Inc. (“Merger Sub”), entered into an Agreement and Plan of $0.3225 per shareMerger (the “Merger Agreement”) under which Inspire has agreed to acquire the Company on the terms, and subject to the conditions, set forth therein. The merger agreement contains limitations on actions that the Company may take between signing and closing without the consent of common stock payable December 6, 2017 to shareholdersInspire, including the declaration or payment of record as ofdividends. See note 15 for more information regarding the close of business on November 27, 2017.merger agreement.
(8) Earnings per share
The computation of basic and diluted earnings per share of common sharestock is as follows (in thousands, except for share and per share data):
20

Table of Contents
Three months ended Nine months ended Three months endedNine months ended
September 30,
2017
 September 24,
2016
 September 30,
2017
 September 24,
2016
September 26,
2020
September 28,
2019
September 26,
2020
September 28,
2019
Net income—basic and diluted$52,246
 52,712
 155,417
 139,456
Net income—basic and diluted$73,968 72,365 162,531 184,310 
Weighted average number of common shares:       
Weighted-average number of shares of common stock:Weighted-average number of shares of common stock:
Common—basic90,290,361
 91,621,553
 91,051,458
 91,603,653
Common—basic82,472,653 82,887,259 82,484,735 82,762,120 
Common—diluted91,433,076
 92,565,695
 92,386,611
 92,545,292
Common—diluted82,975,900 83,867,413 82,929,043 83,665,397 
Earnings per common share:       
Earnings per share of common stock:Earnings per share of common stock:
Common—basic$0.58
 0.58
 1.71
 1.52
Common—basic$0.90 0.87 1.97 2.23 
Common—diluted0.57
 0.57
 1.68
 1.51
Common—diluted0.89 0.86 1.96 2.20 
The weighted averageweighted-average number of shares of common sharesstock in the common diluted earnings per share calculation includes the dilutive effect of 1,142,715503,247 and 944,142980,154 equity awards for the three months ended September 30, 201726, 2020 and September 24, 2016,28, 2019, respectively, and includes the dilutive effect of 1,335,153444,308 and 941,639903,277 equity awards for the nine months ended September 30, 201726, 2020 and September 24, 2016,28, 2019, respectively, using the treasury stock method. The weighted averageweighted-average number of shares of common sharesstock in the common diluted earnings per share calculation for all periods excludes all contingently issuable equity awards outstanding for which the contingent vesting criteria were not yet met as of the fiscal period end. As of September 30, 201726, 2020 and September 24, 2016,28, 2019, there were 150,000 restricted70,598 and 35,804 shares, respectively, related to equity awards that were contingently issuable and for which the contingent vesting criteria were not yet met as of the fiscal period end. Additionally, the weighted averageweighted-average number of shares of common sharesstock in the common diluted earnings per share calculation excludes 1,315,2581,174,229 and 4,048,878628,783 equity awards for the three months ended September 30, 201726, 2020 and September 24, 2016,28, 2019, respectively, and 1,524,7391,516,149 and 4,257,237652,228 equity awards for the nine months ended September 30, 201726, 2020 and September 24, 2016,28, 2019, respectively, as they would be antidilutive.
(9) Commitments and contingencies
(a) Supply chain guarantees
The Company has entered into various supply chain agreements that provide for purchase commitments,with suppliers of franchisee products, the majority of which result incontain guarantees by the Company being contingently liable upon early terminationrelated to franchisees' purchases of certain volumes of products over specified periods. The Company's guarantees decrease as franchisees purchase products over their respective terms of the agreement.agreements. The guarantees have varying terms, many of which are one year or less, and the latest of which expires in 2022. As of September 30, 201726, 2020 and December 31, 2016,28, 2019, the Company was contingently liable under such supply chain agreements for approximately $118.0$67.3 million and $136.2$100.9 million, respectively. For certain supply chain commitments, as product is purchased by the Company’s franchisees over the term of the agreement, the amount of the guarantee is reduced. The Company assesses the risk of performing under each of these guarantees on a quarterly basis, and, based on various factors including internal forecasts, prior history, and ability to extend contract terms, wethe Company accrued an immaterialinconsequential amount of reserves related to supply chain commitmentsguarantees as of September 30, 201726, 2020 and December 31, 2016.28, 2019.
(b) Letters of credit
As of each of September 30, 201726, 2020 and December 31, 2016,28, 2019, the Company had standby letters of credit outstanding for a total of $25.9$33.1 million. There were no amounts drawn down on these letters of credit.credit as of each of September 26, 2020 and December 28, 2019.
(c) Legal matters
The Company is engaged in several matters of litigation arising in the ordinary course of its business as a franchisor. Such matters include disputes related to compliance with the terms of franchise and development agreements, including claims or threats of claims of breach of contract, negligence, and other alleged violations by the Company. As of each of September 30, 201726, 2020 and December 31, 2016, $6.3 million and $5.6 million, respectively,28, 2019, an inconsequential amount was included in other current liabilities in the consolidated balance sheetsaccrued related to reflect the Company’s estimate of the probable losses incurred in connection with all outstanding litigation.

(10) Related-party transactions
(a) Advertising funds
As of September 30, 2017 and December 31, 2016, the Company had a net payable of $62 thousand and $11.9 million, respectively, to the various advertising funds.
To cover administrative expenses of the advertising funds, the Company charges each advertising fund a management fee for items such as facilities, accounting services, information technology, data processing, product development, legal, administrative support services, and other operating expenses, as well as share-based compensation expense for employees that provide services directly to the advertising funds. Management fees totaled $2.8 million and $2.4 million for the three months ended September 30, 2017 and September 24, 2016, respectively, and $8.5 million and $7.3 million for the nine months ended September 30, 2017 and September 24, 2016, respectively. Such management fees are included in the consolidated statements of operations as a reduction in general and administrative expenses, net.
The Company made discretionary contributions to certain advertising funds for the purpose of supplementing national and regional advertising in certain markets of $33 thousand and $1.1 million during the three months ended September 30, 2017 and September 24, 2016, respectively, and $2.3 million and $1.1 million during the nine months ended September 30, 2017 and September 24, 2016, respectively. Additionally, the Company made contributions to the advertising funds based on retail sales at company-operated restaurants of $80 thousand and $594 thousand during the three and nine months ended September 24, 2016, respectively, which are included in company-operated restaurant expenses in the consolidated statements of operations. No such contributions were made during the three and nine months ended September 30, 2017, as the Company did not have any company-operated restaurants during these periods. The Company also funded advertising fund initiatives of $700 thousand and $762 thousand during the three months ended September 30, 2017 and September 24, 2016, respectively, and $1.9 million and $1.8 million during the nine months ended September 30, 2017 and September 24, 2016, respectively, which were contributed from the gift card breakage liability included within other current liabilities in the consolidated balance sheets (see note 5).
(b) Equity method investments
The Company recognized royalty incomerevenues from its equity method investees, consisting of royalty income and sales of ice cream and other products, as follows (in thousands):
21

Table of Contents
Three months ended Nine months ended Three months endedNine months ended
September 30,
2017
 September 24,
2016
 September 30,
2017
 September 24,
2016
September 26,
2020
September 28,
2019
September 26,
2020
September 28,
2019
B-R 31 Ice Cream Company., Ltd.$588
 686
 1,464
 1,577
B-R 31 Ice Cream Company., Ltd.$587 396 1,089 1,259 
BR-Korea Co., Ltd.1,122
 1,192
 3,174
 3,053
BR-Korea Co., Ltd.1,476 1,296 4,049 3,670 
Palm Oasis Ventures Pty. Ltd.Palm Oasis Ventures Pty. Ltd.706 1,370 2,292 2,883 
$1,710
 1,878
 4,638
 4,630
$2,769 3,062 7,430 7,812 
As of each of September 30, 201726, 2020 and December 31, 2016,28, 2019, the Company had $1.1$3.3 million and $3.7 million, respectively, of royalties receivablereceivables from its equity method investees, which were recorded in accounts receivable, net of allowance for doubtful accounts,allowances, in the consolidated balance sheets.
The Company made net payments to its equity method investees totaling approximately $958 thousand$1.7 million and $713 thousand$1.3 million during the three months ended September 30, 201726, 2020 and September 24, 2016,28, 2019, respectively, and $2.8$4.0 million and $2.3$3.1 million duringfor the nine months ended September 30, 201726, 2020 and September 24, 2016,28, 2019, respectively, primarily for the purchase of ice cream products.
22

Table of Contents
(11) Advertising funds
Assets and liabilities of the advertising funds, which are restricted in their use, included in the consolidated balance sheets were as follows (in thousands):
September 26,
2020
December 28,
2019
Accounts receivable, net of allowances$26,587 20,194 
Notes and other receivables, net of allowances1,481 1,133 
Prepaid income taxes168 79 
Prepaid expenses and other current assets11,342 10,255 
Total current assets39,578 31,661 
Property, equipment, and software, net19,440 17,125 
Operating lease assets2,632 4,262 
Other assets655 1,126 
Total assets$62,305 54,174 
Operating lease liabilities—current$402 1,932 
Accounts payable51,809 69,232 
Deferred revenue—current(a)
(722)(722)
Other current liabilities106,206 48,089 
Total current liabilities157,695 118,531 
Operating lease liabilities—long-term1,967 2,241 
Deferred revenue—long-term(a)
(5,511)(6,053)
Total liabilities$154,151 114,719 
(a)Amounts represent franchisee incentives that have been deferred and are being recognized over the terms of the respective franchise agreements.
(12) Leases
The Company is party as a lessor and/or lessee to various leases for restaurants and other properties, including land and buildings, as well as leases for office equipment and automobiles. In addition, the Company has leased and subleased land and buildings to others, primarily franchisees. Rental income consisted of the following (in thousands):
Three months endedNine months ended
September 26,
2020
September 28,
2019
September 26,
2020
September 28,
2019
Rental income—operating leases$18,485 18,807 55,552 56,248 
Variable rental income12,154 13,177 30,036 36,443 
Rental income$30,639 31,984 85,588 92,691 
As a result of the COVID-19 pandemic, the Company is waiving up to one month of rental payments and allowed franchisees to defer two months of rental payments on the approximately 900 properties leased by the Company to franchisees. Additionally, on properties the Company leases from third-party lessors, certain lessors provided waivers of rental payments, which the Company passed through to its franchisees, or permitted the short-term deferral of rental payments.
The FASB staff issued interpretive guidance on the application of lease accounting guidance related to lease concessions as a result of the COVID-19 pandemic. Under existing lease accounting guidance, certain rent waivers and deferrals provided to franchisees or received from lessors would be accounted for as lease modifications. The interpretive guidance provides companies the option to account for eligible lease concessions either as if the rent concessions were part of the enforceable rights and obligations under the original lease contracts, or as lease modifications under the existing guidance. The Company has elected to account for eligible lease concessions as if they were part of the enforceable rights and obligations under the original lease contracts. Accordingly, the Company has not remeasured the related lease assets or lease liabilities for eligible leases, and has recognized $702 thousandwaivers of rental payments as reductions of variable rental income and $790 thousand duringvariable occupancy expenses
23

Table of Contents
for leases where the Company is the lessor and lessee, respectively. The deferral of rental payments had no impact on the Company’s recognition of rental income or occupancy expenses for the three or nine months ended September 30, 2017 and September 24, 2016, respectively, and $2.726, 2020.
Variable rental income presented in the table above has been reduced by approximately $3 million and $2.5 million duringof rent waivers being provided to the Company's franchisees for the nine months ended September 30, 2017 and September 24, 2016, respectively,26, 2020. Occupancy expenses—franchised restaurants in the consolidated statements of operations has been reduced by approximately $1 million of rent waivers received from lessors for the sale of ice cream and other products to Palm Oasis Ventures Pty. Ltd. (“Australia JV”). As ofnine months ended September 30, 2017 and December 31, 2016, the Company had $2.4 million and $2.6 million, respectively, of net receivables from the Australia JV, consisting of26, 2020.
(13) Allowances for accounts and notes receivable net
The changes in the allowances for accounts and notes receivable were as follows (in thousands):
Allowance for expected credit losses, excluding lease receivables(a)
Allowance for lease receivables
Total(b)
Balance at June 27, 2020$10,869 3,252 14,121 
Provision for (recovery of) uncollectible accounts and notes receivable, net(369)894 525 
Write-offs and other88 88 
Balance at September 26, 2020$10,588 4,146 14,734 
Allowance for expected credit losses, excluding lease receivables(a)
Allowance for lease receivables
Total(b)
Balance at December 28, 2019$7,742 1,108 8,850 
Provision for uncollectible accounts and notes receivable, net3,448 3,049 6,497 
Write-offs and other(602)(11)(613)
Balance at September 26, 2020$10,588 4,146 14,734 
(a)Balance primarily consists of current liabilities.allowances recorded on receivables arising from contracts with customers under ASC 606.
(b)Balance is included in accounts receivable, net; notes and other receivables, net; and other assets in the consolidated balance sheets.
(11) Income taxes
In conjunction with(14) COVID-19 pandemic
On March 11, 2020, the anticipated closingWorld Health Organization declared the outbreak of COVID-19 as a pandemic. The pandemic had an unfavorable impact on the debt refinancing transactionCompany’s business, financial condition, and related issuanceresults of the 2017 Notes (see note 4), management assessed the realizability of its unused foreign tax credits by considering whether it is more likely than not that some portion or all of the unused foreign tax credits will not be realized. The ultimate realization of these unused foreign tax credits is dependent upon the generation of future taxable income available to apply such foreign tax credits prior to their

expiration in fiscal years 2021 through 2026. In making this assessment, management considered all relevant factors, including projected future taxable income and tax planning strategies. Based upon the level of historical and projected future taxable income over the periods prior to expiration, including the expected incremental interest expense from the 2017 Notes, management does not believe it is more likely than not that the Company will realize the benefit of the unused foreign tax credits. As such, a valuation allowance of $8.9 million was recorded to the provision for income taxesoperations for the three and nine months ended September 26, 2020, including temporary closures of restaurants and decreased traffic.
In response to the ongoing COVID-19 pandemic, the Company took a series of actions to preserve financial flexibility and support franchisees during this time of uncertainty. These actions included temporarily extending payment terms for royalties and advertising fees for franchisees in the U.S. and Canada from 12 to 45 days through mid-May, as well as providing payment plan options for these deferred fees, to provide franchisees with more financial flexibility to better support their employees and guests. Additionally, the Company provided extended payment terms and payment plan options to franchisees and licensees in certain international markets. The Company also provided approximately $7 million of corporate financial relief to franchisees in the U.S. that were most significantly impacted by the pandemic. In addition, the Company is waiving up to one month of rental payments and allowed franchisees to defer two months of rental payments on the approximately 900 properties leased by the Company to franchisees (see note 12).
While it is not possible at this time to estimate the full impact that the pandemic could have on our business due to numerous uncertainties, the continued spread of COVID-19 and the measures taken by local and national governments have disrupted and are expected to continue to disrupt our operations and may also impact the supply chain, resulting in an adverse impact on our business, financial condition, and results of operations.
(15) Subsequent event
On October 30, 2017.2020, the Company entered into the Merger Agreement with Inspire and Merger Sub.

Pursuant to the Merger Agreement, and upon the terms and subject to the conditions thereof, Merger Sub will commence a tender offer (the “Offer”) to purchase all of the issued and outstanding shares (the “Shares”) of the Company’s common stock at a price of $106.50 per Share, net to the holder of such share, in cash, without interest, but subject to any applicable withholding

24

Table of Contents
of taxes (the “Offer Price”). If certain conditions are satisfied and the Offer closes, Inspire has agreed to acquire any remaining shares that are not tendered in the Offer by a merger of Merger Sub with and into the Company (the “Merger”).
The Merger Agreement contemplates that the Merger will be effected as soon as practicable following consummation of the Offer pursuant to Section 251(h) of the General Corporation Law of the State of Delaware (the “DGCL”), which permits completion of the Merger without a shareholder vote. The obligation of Inspire and Merger Sub to consummate the Offer is subject to various conditions, including that there be validly tendered and not validly withdrawn that number of Shares representing, together with the number of Shares otherwise owned by Inspire and its affiliates, at least a majority of the Shares outstanding as of the scheduled expiration of the Offer (the “Minimum Tender Condition”). The Minimum Tender Condition may not be waived by Merger Sub without the prior written consent of the Company. Merger Sub will not be obligated to consummate the Offer on or prior to December 18, 2020. The obligation of Merger Sub to consummate the Offer is also subject to the expiration of the waiting period (and any extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and other customary conditions. Consummation of the Offer is not subject to a financing condition.
Following the consummation of the Offer and subject to the terms and conditions of the Merger Agreement, Merger Sub will merge with and into the Company pursuant to the provisions of Section 251(h) of the DGCL as provided in the Merger Agreement, with the Company being the surviving corporation.
The Merger Agreement includes customary representations, warranties and covenants of the Company, Inspire and Merger Sub. Subject to the terms of the Merger Agreement, the Company has agreed to operate its business in the ordinary course until the effective time of the Merger. The Company has also agreed, subject to certain conditions, not to solicit or engage in discussions with third parties regarding other acquisition proposals. Inspire and Merger Sub have agreed to use reasonable best efforts to take actions that may be required in order to obtain antitrust approval of the proposed transaction, subject to certain limitations.
The Merger Agreement also includes customary termination rights for both the Company and Inspire, subject, in certain circumstances, to the payment by the Company or Inspire of a termination fee of $268 million or $469 million, respectively.
The Offer will initially remain open for twenty business days, subject to possible extension on the terms set forth in the Merger Agreement. The parties currently expect the Offer and the Merger to be completed in the fourth quarter of 2020.
25

Table of Contents
Item 2.       Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Certain statements contained hereinin this Quarterly Report on Form 10-Q, including statements about our expected financial results, the impact of the COVID-19 pandemic, our ability to meet cash needs, our expected compliance with the covenants under the securitization documentation, and liquidity are not based on historical fact and are “forward-looking statements” within the meaning of the applicable securities laws and regulations. Generally, these statements can be identified by the use of words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “feel,” “forecast,” “intend,” “may,” “plan,” “potential,” “project,” “should,” or “would,” and similar expressions intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements include all matters that are not historical facts.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. These risks and uncertainties include, but are not limited to: the continuing and uncertain impact of the current COVID-19 global pandemic on our business; the ongoing level of profitability of franchisees and licensees; our franchiseesfranchisees’ and licenseeslicensees’ ability to sustain same store sales growth; successful westward expansion; changes in working relationships with our franchisees and licensees and the actions of our franchisees and licensees; our master franchisees’ relationships with sub-franchisees; the success of our investments in the Dunkin' U.S. Blueprint for Growth; the strength of our brand in the markets in which we compete; changes in competition within the quick service restaurant segment of the food industry; changes in consumer behavior resulting from changes in technologies or alternative methods of delivery; economic and political conditions in the countries where we operate; our substantial indebtedness; our ability to protect our intellectual property rights; consumer preferences, spending patterns and demographic trends; the impact of seasonal changes, including weather effects, on our business; the success of our growth strategy and international development; changes in commodity and food prices, particularly coffee, dairy products and sugar, and other operating costs; shortages of coffee; failure of our network and information technology systems; interruptions or shortages in the supply of products to our franchisees and licensees; the impact of food borne-illness or food safety issues or adverse public or media opinions regarding the health effects of consuming our products; our ability to collect royalty payments from our franchisees and licensees; uncertainties relating to litigation; the ability of our franchisees and licensees to open new restaurants and keep existing restaurants in operation; our ability to retain key personnel; any inabilityfailure to protect consumer creditpayment card data or other personally identifiable information; and catastrophic events.
Forward-looking statements reflect management’s analysis as of the date of this quarterly report. Important factors that could cause actual results to differ materially from our expectations are more fully described in our other filings with the Securities and Exchange Commission, including under the section headed “Risk Factors” in our most recent annual report on Form 10-K.10-K and within Item 1A of Part II of our Quarterly Report on Form 10-Q for the quarterly period ended March 28, 2020. Except as required by applicable law, we do not undertake to publicly update or revise any of these forward-looking statements, whether as a result of new information, future events or otherwise.
Introduction and overview
We are one of the world’s leading franchisors of quick service restaurants (“QSRs”) serving hot and cold coffee and baked goods, as well as hard serve ice cream. We franchise restaurants under our Dunkin’ Donuts and Baskin-Robbins brands. With more than 20,000 points of distribution in more than 60 countries worldwide, we believe that our portfolio has strong brand awareness in our key markets. QSR is a restaurant format characterized by counter or drive-thru ordering and limited or no table service. As of September 30, 2017,26, 2020, Dunkin’ Donuts had 12,43512,658 global points of distribution with restaurants in 4243 U.S. states, the District of Columbia, and 4539 foreign countries. Baskin-Robbins had 7,9447,895 global points of distribution as of the same date, with restaurants in 4344 U.S. states, the District of Columbia, Puerto Rico, and 51 foreign countries.
We are organized into fourfive reporting segments: Dunkin’ DonutsU.S., Baskin-Robbins U.S., Dunkin’ Donuts International, Baskin-Robbins U.S.,International, and Baskin-Robbins International.U.S. Advertising Funds. We generate revenue from fourfive primary sources: (i) royalty income and franchise fees associated with franchised restaurants, (ii) continuing advertising fees from Dunkin’ and Baskin-Robbins franchisees and breakage and other revenue related to the gift card program, (iii) rental income from restaurant properties that we lease or sublease to franchisees, (iii)(iv) sales of ice cream and other products to franchisees in certain international markets, and (iv)(v) other income including fees for the licensing of our brands for products sold in certain retail outlets, the licensing of the rights to manufacture Baskin-Robbins ice cream products sold to U.S. franchisees, refranchising gains, transfer fees from franchisees, and online training fees. Prior to completing the sale of all remaining company-operated restaurants in fiscal year 2016, we also generated revenue from retail store sales at our company-operated restaurants.
Franchisees fund the vast majority of the cost of new restaurant development. As a result, we are able to grow our system with lower capital requirements than many of our competitors. With no company-operated points of distribution during fiscal year 2017,as of September 26, 2020, we are less affected by store-level costs, profitability, and fluctuations in commodity costs than other QSR operators.
Our franchisees fund substantially all
26

Table of the advertising that supports both brands. Those advertising funds also fund the cost of our marketing, research and development, and innovation personnel. Royalty payments and advertising fund contributions typically are made on a weekly basis for restaurants in the U.S., which limit our working capital needs. For the nine months ended September 30, 2017, franchisee contributions to the U.S. advertising funds were $330.1 million.Contents

We operate and report financial information on a 52- or 53-week year on a 13-week quarter basis with the fiscal year ending on the last Saturday in December and fiscal quarters ending on the 13th Saturday of each quarter (or 14th Saturday when applicable with respect to the fourth fiscal quarter). The data periods contained within the three- and nine-monthnine-month periods ended September 30, 201726, 2020 and September 24, 201628, 2019 reflect the results of operations for the 13-week and 39-week periods ended on those dates. Operating results for the three- and nine-monthnine-month periods ended September 30, 201726, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending December 26, 2020.
On March 11, 2020, the World Health Organization declared the outbreak of novel coronavirus disease (“COVID-19”) as a pandemic. While it is not possible at this time to estimate the full impact that the pandemic could have on our business due to numerous uncertainties, the continued spread of COVID-19 and the measures taken by local and national governments have disrupted and are expected to continue to disrupt our operations and may also impact the supply chain, resulting in an adverse impact on our business, financial condition, and results of operations.
Pending Merger with Inspire Brands
On October 30, 20172020, we entered into an Agreement and Plan of Merger (the "Merger Agreement") with Inspire Brands, Inc. (“Inspire”) and Inspire’s indirect wholly-owned subsidiary, Vale Merger Sub, Inc. (“Merger Sub”). Pursuant to the Merger Agreement, and upon the terms and subject to the conditions thereof, Merger Sub will commence a tender offer (the “Offer”) to purchase all of the issued and outstanding shares (the “Shares”) of the Company’s common stock at a price of $106.50 per Share, net to the holder of such share, in cash, without interest, but subject to any applicable withholding of taxes (the “Offer Price”). If certain conditions are satisfied and the Offer closes, Inspire has agreed to acquire any remaining shares that are not tendered in the Offer by a merger of Merger Sub with and into the Company (the “Merger”). The parties currently expect the Offer and the Merger to be completed in the fourth quarter of 2020.
For additional information related to the Merger Agreement, please refer to our Current Report on Form 8-K filed with the SEC on November 2, 2020 and note 15 to the accompanying unaudited consolidated financial statements.
Selected operating and financial highlights
 Amounts and percentages may not recalculate due to rounding
Three months endedNine months ended
 September 26,
2020
September 28,
2019
September 26,
2020
September 28,
2019
Financial data (in thousands):
Total revenues$361,543 355,882 972,063 1,034,310 
Operating income128,915 121,343 311,843 345,367 
Adjusted operating income133,497 125,978 326,165 359,586 
Net income73,968 72,365 162,531 184,310 
Adjusted net income77,267 75,702 172,843 203,962 
Systemwide sales (in millions):
Dunkin’ U.S.$2,373.8 2,365.9 6,387.0 6,874.8 
Baskin-Robbins U.S.187.4 186.3 488.8 499.6 
Dunkin’ International179.4 210.9 470.3 609.4 
Baskin-Robbins International430.8 449.7 1,079.4 1,141.9 
Total systemwide sales$3,171.5 3,212.9 8,425.4 9,125.7 
Systemwide sales growth (decline)(1.3)%4.7 %(7.7)%4.2 %
Comparable store sales growth (decline):
Dunkin’ U.S.0.9 %1.5 %(6.8)%1.9 %
Baskin-Robbins U.S.6.5 %3.6 %0.7 %0.0 %
Dunkin’ International(15.9)%7.3 %(19.0)%5.2 %
Baskin-Robbins International(0.5)%3.0 %(1.0)%1.6 %
 Amounts and percentages may not recalculate due to rounding
Three months ended Nine months ended
 September 30,
2017
 September 24,
2016
 September 30,
2017
 September 24,
2016
Financial data (in thousands):       
Total revenues$224,168
 207,099
 633,362
 613,184
Operating income122,033
 109,360
 326,876
 300,834
Adjusted operating income127,910
 114,764
 343,520
 317,300
Net income52,246
 52,712
 155,417
 139,456
Adjusted net income55,772
 55,955
 165,403
 149,336
Systemwide sales (in millions):       
Dunkin’ Donuts U.S.$2,166.3
 2,075.3
 6,298.4
 5,997.5
Dunkin’ Donuts International189.3
 177.5
 533.6
 519.9
Baskin-Robbins U.S.177.0
 178.2
 493.6
 491.1
Baskin-Robbins International382.2
 390.0
 1,021.8
 1,006.0
Total systemwide sales$2,914.8
 2,821.0
 8,347.4
 8,014.5
Systemwide sales growth3.3 % 6.3 % 4.2 % 4.8 %
Comparable store sales growth (decline):       
Dunkin’ Donuts U.S.0.6 % 2.0 % 0.5 % 1.4 %
Dunkin’ Donuts International1.3 % (1.4)% (0.1)% (2.2)%
Baskin-Robbins U.S.(0.4)% (0.9)% (1.1)% 1.1 %
Baskin-Robbins International(4.3)% (2.9)% (1.0)% (5.5)%

Our financial results are largely driven by changes in systemwide sales, which include sales by all points of distribution, whether owned by Dunkin’ Brands or by our franchisees and licensees, includingor joint ventures. While we do not record sales by franchisees licensees, or joint ventures as revenue, and such sales are not included in our consolidated financial statements, we believe that this operating measure is important in obtaining an understanding of our financial performance. We believe systemwide sales information aids in understanding how we derive royalty revenue and in evaluating our performance relative to competitors.
27

Table of Contents
Comparable store sales growth (decline) for Dunkin’ Donuts U.S. and Baskin-Robbins U.S. is calculated by including only sales from franchisee- and company-operatedfranchisee-operated restaurants that have been open at least 78 weeks and that have reported sales in the current and comparable prior year week. Comparable store sales growth (decline) for Dunkin’ Donuts International and Baskin-Robbins International generally represents the growth (decline) in local currency average monthly sales for franchisee-operated restaurants, including joint ventures, that have been open at least 13 months and that have reported sales in the current and comparable prior year month.
Overall growthThe COVID-19 pandemic had an unfavorable impact on systemwide sales for each of our segments for the three and nine months ended September 26, 2020. Global declines in systemwide sales of 3.3%1.3% and 4.2%7.7% for the three-three and nine-month periodsnine months ended September 30, 201726, 2020, respectively, over the same periods in the prior fiscal year resulted from the following:
Dunkin’ Donuts U.S. systemwide sales growth of 4.4% and 5.0%0.3% for the three months ended September 26, 2020 was primarily a result of comparable store sales growth of 0.9%, offset by 423 net restaurant closures since September 28, 2019. The comparable store sales growth was driven by an increase in average ticket, offset by a decline in traffic due to the COVID-19 pandemic. Dunkin’ U.S. systemwide sales decline of 7.1% for the nine months ended September 26, 2020 was primarily a result of a comparable store sales decline of 6.8%, as well as the 423 net restaurant closures since September 28, 2019. Comparable store sales declined for the nine months ended September 26, 2020 as a decline in traffic driven by the COVID-19 pandemic was offset by an increase in average ticket. The increase in average ticket for the three and nine months ended September 30, 2017, respectively,26, 2020 was driven primarily a resultby favorable mix shift to family-size bulk orders and snacking attachment, as well as premium priced cold beverages, espresso, and other specialty beverages, and partially offset by increased discounting driven by both national and local value platforms. Comparable store sales improved sequentially in each month of 386 net new restaurants opened since September 24, 2016 and comparable storethe third quarter.
Baskin-Robbins U.S. systemwide sales growth of 0.6% and 0.5%, respectively. The increases in comparable store sales were driven by increased average ticket, offset by a decline in traffic. Growth was primarily driven by sales of breakfast sandwiches. Beverage sales increased slightly for the three months ended September 30, 2017, led by hot coffee and espresso,26, 2020 was primarily a result of comparable store sales growth of 6.5%, offset by a42 net restaurant closures since September 28, 2019. Baskin-Robbins U.S. systemwide sales decline in frozen beverages, while beverage sales decreased slightlyof 2.2% for the nine months ended September 30, 2017 due26, 2020 was primarily to a decline in hot coffee,result of the 42 net restaurant closures since September 28, 2019, offset by an increase in iced coffee, driven by Cold Brew sales.
Dunkin’ Donuts International systemwidecomparable store sales growth of 6.7% and 2.6%0.7%. The comparable store sales growth for the three and nine months ended September 30, 2017, respectively,26, 2020 was primarily due to sales growthdriven by an increase in Southeast Asia, the Middle East, South

America, and China,average ticket, offset by a decline in South Korea. Systemwide sales for the three-month period was alsotraffic driven by the COVID-19 pandemic. The increase in average ticket was driven by ice cream cakes and take home products, specifically quarts. Comparable store sales growthimproved sequentially in Europe. Systemwide sales growth foreach month of the nine-month period was also offset by athird quarter.
Dunkin’ International systemwide sales decline in India. Forof 14.9% for the three months ended September 30, 2017,26, 2020 was driven by sales declines in Latin America, Asia, and South Korea, offset by sales growth in the Middle East. Foreign exchange rates did not have a significant impact on systemwide sales as the negative impact of unfavorable foreign exchange rates on sales in Latin America was offset by the favorable impact of foreign exchange rates on sales in all other regions. Dunkin’ International comparable store sales decline of 15.9% for the three months ended September 26, 2020 was due primarily to declines in Asia, Latin America, South Korea, and Europe, offset by an increase in the Middle East.
Dunkin’ International systemwide sales decline of 22.8% for the nine months ended September 26, 2020 was driven by sales declines in Asia, Latin America, South Korea, Europe, and the Middle East. Sales in Asia were positively impacted by favorable foreign exchange rates, while sales in Southeast Asiaacross all other regions were negatively impacted by unfavorable foreign exchange rates. Forrates for the nine months ended September 30, 2017, sales in South Korea and South America were positively impacted by foreign exchange rates, while sales in Southeast Asia were negatively impacted by foreign exchange rates.26, 2020. On a constant currency basis, systemwide sales increaseddecreased by approximately 7% and 2%21% for the three and nine months ended September 30, 2017, respectively.26, 2020. Dunkin’ Donuts International comparable store sales grew 1.3%decline of 19.0% for the nine months ended September 26, 2020 was due primarily to declines in Asia, Latin America, Europe, the Middle East, and South Korea.
Baskin-Robbins International systemwide sales decline of 4.2% for the three months ended September 30, 2017, due primarily to growth26, 2020 was driven by sales declines in Southeast Asia, South America, andJapan, the Middle East, Asia, Europe, and Australia, offset by declinessales growth in South Korea. Foreign exchange rates did not have a significant impact on systemwide sales as the positive impact of favorable foreign exchange rates on sales in Japan, Australia, and South Korea and Europe. Dunkin’ Donutswas offset by the unfavorable impact of foreign exchange rates on sales in all other regions. Baskin-Robbins International comparable store sales declined 0.1% for the nine months ended September 30, 2017,decline of 0.5% was due primarily to declines in Japan, Asia, Europe, and Latin America, offset by increases in South Korea and Europe, offset by gains in Southeast Asia and South America.
Baskin-Robbins U.S. systemwide sales decline of 0.7% for the three months ended September 30, 2017 was primarily a result of comparable store sales declines of 0.4% for the three months ended September 30, 2017 driven by decreases in sales of sundaes, desserts, and beverages, offset by an increase in take-home products. Systemwide sales growth of 0.5% for the nine months ended September 30, 2017 was driven by the addition of 29 net new restaurants opened since September 24, 2016, offset by comparable sales decline of 1.1%. For the nine months ended September 30, 2017, sales of cups and cones, desserts, and beverages decreased, offset by increased sales in take-home products. For the three and nine months ended September 30, 2017, traffic declined and average ticket increased.Middle East.
Baskin-Robbins International systemwide sales decline of 2.0%5.5% for the threenine months ended September 30, 201726, 2020 was driven by sales declines in South Korea and Japan, offset by growth in the Middle East, Japan, Asia, Europe, Australia, and Southeast Asia. SystemwideLatin America, offset by sales growth of 1.6%in South Korea. Sales in Japan were positively impacted by favorable foreign exchange rates, while sales across all other regions were negatively impacted by unfavorable foreign exchange rates for the nine months ended September 30, 2017 was driven by growth in South Korea, Southeast Asia, India, and Canada, offset by declines in Japan, China, Europe, and the Middle East. Sales in Japan were negatively impacted by foreign exchange rates for both the three- and nine-month periods, while sales in South Korea were positively impacted by foreign exchange rates for the nine-month period.26, 2020. On a constant currency basis, systemwide sales increaseddecreased by approximately 1% and 2%4% for the three and nine months ended September 30, 2017, respectively.26, 2020. Baskin-Robbins International comparable store sales declinesdecline of 4.3% and 1.0% for the three and nine months ended
28

Table of Contents
September 30, 201726, 2020 was driven primarily by declines in the Middle East. Also contributing to the decline in comparable store sales for the three months ended September 30, 2017 was a declineEast, Japan, Asia, Europe, and Latin America, offset by growth in South Korea.Korea and Australia.
Changes in systemwide sales are impacted, in part, by changes in the number of points of distribution. Points of distribution and net openings (closings) as of and for the three and nine months ended September 30, 201726, 2020 and September 24, 201628, 2019 were as follows:
September 26,
2020
September 28,
2019
Points of distribution, at period end(a):
Dunkin’ U.S.9,131 9,554 
Baskin-Robbins U.S.2,500 2,542 
Dunkin’ International3,527 3,481 
Baskin-Robbins International5,395 5,574 
Consolidated global points of distribution20,553 21,151 
 September 30,
2017
 September 24,
2016
Points of distribution, at period end:   
Dunkin’ Donuts U.S.9,015
 8,629
Dunkin’ Donuts International3,420
 3,379
Baskin-Robbins U.S.2,562
 2,533
Baskin-Robbins International5,382
 5,243
Consolidated global points of distribution20,379
 19,784
Three months endedNine months ended
September 26,
2020
September 28,
2019
September 26,
2020
September 28,
2019
Net openings (closings) during the period:
Dunkin’ U.S.(466)55 (499)135 
Baskin-Robbins U.S.(11)(14)(24)(8)
Dunkin’ International(1)23 20 29 
Baskin-Robbins International(75)58 (241)83 
Consolidated global net openings (closings)(553)122 (744)239 
(a)     Temporary restaurant closures due to COVID-19 are not treated as restaurant closures and affected restaurants are included in points of distribution.
 Three months ended Nine months ended
 September 30,
2017
 September 24,
2016
 September 30,
2017
 September 24,
2016
Net openings (closings) during the period:       
Dunkin’ Donuts U.S.67
 56
 187
 198
Dunkin’ Donuts International18
 11
 (10) 60
Baskin-Robbins U.S.11
 3
 24
 4
Baskin-Robbins International41
 45
 98
 165
Consolidated global net openings137
 115
 299
 427
As of the week ended October 24, 2020, quarter-to-date comparable store sales growth for Dunkin’ U.S. and Baskin-Robbins U.S. was in the low-single digits and high-single digits, respectively, for open stores. However, there can be no assurance that further declines in systemwide sales or comparable store sales will not occur for the remainder of the fourth quarter or beyond as a result of the continuing impact of the COVID-19 pandemic or otherwise.
As of October 24, 2020, approximately 98% of Dunkin’ U.S. locations were open. The majority of the Dunkin’ U.S. locations that remain temporarily closed are in transportation hubs, on college campuses, in sports venues, and other alternative points of distribution. As of October 24, 2020, approximately 99% of Baskin-Robbins U.S. locations were open. As of October 24, 2020, approximately 93% of each of Dunkin’ and Baskin-Robbins International locations were open. We have worked with our franchisees to permit them to temporarily close restaurants where market conditions warrant. Our restaurants have been deemed an essential business in many jurisdictions allowing them to remain open in some capacity throughout the course of the pandemic. Dunkin' U.S. has a flexible operating model where it can often continue to offer drive-thru, delivery, and curbside service where in-restaurant dining is not permitted. The Company is unable to predict the reopening schedule for restaurants that are temporarily closed due to the pandemic, or whether and when additional closures may occur.
Summary of operating results
Total revenues for the three months ended September 30, 201726, 2020 increased $17.1$5.7 million, or 8.2%1.6%, compared to the prior year period due primarily to an increase in franchise fees and royalty income driven byas a result of additional renewal incomedeferred revenue recognized in connection with the closure of restaurants, including Speedway locations, and Dunkin’ Donuts U.S. systemwide sales growth.

Also contributing to the increase in revenues was an increase in other revenues drivenadvertising fees and related income. These increases were offset by license fees relateda decrease in rental income due to Dunkin’ Donuts K-Cup® pods and ready-to-drink bottled iced coffee,a reduction in variable rental income as well as increased transfer fee income.a result of a decline in sales at leased locations.
Total revenues for the nine months ended September 30, 2017 increased $20.226, 2020 decreased $62.2 million, or 3.3%6.0%, compared to the prior year period due primarily to an increasedecreases in franchise fees and royalty income and advertising fees driven by Dunkin’ Donuts U.S.a decline in systemwide sales, growthprimarily for the Dunkin' U.S. and additional renewalDunkin' International segments. Royalty income as well as an increasealso reflects a reduction of revenue of approximately $7 million related to corporate financial relief provided to franchisees most significantly impacted by the COVID-19 pandemic. Also contributing to the decrease in revenues was a decrease in rental income due to an increasea reduction in the numbervariable rental income as a result of leases for franchised locations. Also contributing to the increase in revenues was an increase in other revenues driven by license fees related to Dunkin’ Donuts K-Cup® pods, offset by timing of refranchising gains. These increases in revenues were offset by a decreasedecline in sales at company-operated restaurants as there were no company-operated pointsleased locations and rent waivers being provided to our franchisees of distribution during 2017.approximately $3 million.
29

Table of Contents
Operating income and adjusted operating income for the three months ended September 30, 201726, 2020 increased $12.7$7.6 million or 11.6%, and $13.1$7.5 million, or 11.5%, respectively, fromcompared to the prior year periodperiod. These increases were primarily as a result of the increase in revenues. Thefranchise fees, as well as an increase in revenues was offsetice cream margin driven by an increasea decrease in commodity costs and favorable product mix, and a decrease in general and administrative expenses as well as gains recognized in connection with the sale of company-operated restaurantsdue primarily to reduced non-essential spending in the priorcurrent year period.period to preserve financial flexibility as a result of the COVID-19 pandemic and a decrease in benefits and personnel costs.
Operating income and adjusted operating income for the nine months ended September 30, 2017 increased $26.026, 2020 decreased $33.5 million or 8.7%, and $26.2$33.4 million, or 8.3%, respectively, fromcompared to the prior year period. The increasesThese decreases were primarily a result of the increasesdecreases in franchise fees and royalty income and rental margin, and other revenues. Additionally, the prior year periods were unfavorably impacted by the operating resultswhich includes approximately $2 million of company-operated restaurants. The increasesunfavorable impact from rent waivers being provided to our franchisees, net of waivers received from landlords. These decreases in operating income and adjusted operating income were negatively impactedoffset by gains recognized in connection with the sale of company-operated restaurants in the prior year period, as well an increasea decrease in general and administrative expenses.expenses primarily as a result of decreases in personnel and benefits costs and reduced non-essential spending in the current year period to preserve financial flexibility as a result of the COVID-19 pandemic, offset by increases in reserves for uncollectible receivables and costs incurred to support brand-building activities.
Net income and adjusted net income each increased $1.6 million for the three months ended September 30, 2017 decreased $0.5 million, or 0.9%, and $0.2 million, or 0.3%, respectively, primarily a result of an increase in income tax expense. Net income and adjusted net income for26, 2020 compared to the nine months ended September 30, 2017 increased $16.0 million, or 11.4%, and $16.1 million, or 10.8%, respectively,prior year period primarily as a result of the increases in operating income and adjusted operating income, respectively, offset by an increase in tax expense. Incomeincome tax expense for the three and nine months ended September 30, 2017 included a valuation allowance recordeddecrease in interest income earned on foreign tax credit carryforwardsour cash balances as a result of $8.9 million primarily resulting from expected incrementallower interest expense from the debt refinancing transaction that closed in October 2017, negatively impacting the realizability of such carryforwards (see note 11 to the unaudited consolidated financial statements included herein). Thisrates. The increase in income tax expense was offsetdriven primarily by the increasesincrease in income in the current year period, as well as a decrease in excess tax benefits from share-based compensation.
Net income and adjusted net income for the nine months ended September 26, 2020 decreased $21.8 million and $31.1 million, respectively, compared to the prior year period. These decreases were primarily a result of the decreases in operating income and adjusted operating income. Additionally,income, respectively, as well as a decrease in interest income earned on our cash balances as a result of lower interest rates, offset by a decrease in income tax expense. The decrease in income tax expense forwas driven primarily by the nine months ended September 30, 2017 included $7.3 million ofdecrease in income in the current year period, offset by a decrease in excess tax benefits from share-based compensation, which are now includedcompensation. Also offsetting the decrease in operating income was a $13.1 million loss on debt extinguishment recorded during the provision for income taxes as a result of the required adoption of a new accounting standard in the firstsecond quarter of 2017 (see note 2(f)fiscal year 2019 due to the unaudited consolidated financial statements included herein).write-off of debt issuance costs in conjunction with a refinancing transaction completed during the second quarter of fiscal year 2019.
Adjusted operating income and adjusted net income are non-GAAP measures reflecting operating income and net income adjusted for amortization of intangible assets, long-lived asset impairments, impairment of our equity method investments, and other non-recurring, infrequent, or unusual charges, net of the tax impact of such adjustments in the case of adjusted net income. We use adjusted operating income and adjusted net income as key performance measures for the purpose of evaluating performance internally. We also believe adjusted operating income and adjusted net income provide our investors with useful information regarding our historical operating results. These non-GAAP measurements are not intended to replace the presentation of our financial results in accordance with GAAP. Use of the terms adjusted operating income and adjusted net income may differ from similar measures reported by other companies.

30

Table of Contents
Adjusted operating income and adjusted net income are reconciled from operating income and net income, respectively, determined under GAAP as follows:
 Three months endedNine months ended
 September 26,
2020
September 28,
2019
September 26,
2020
September 28,
2019
 (In thousands)
Operating income$128,915 121,343 311,843 345,367 
Adjustments:
Amortization of other intangible assets4,582 4,599 13,762 13,858 
Long-lived asset impairment charges— 36 560 361 
Adjusted operating income$133,497 125,978 326,165 359,586 
Net income$73,968 72,365 162,531 184,310 
Adjustments:
Amortization of other intangible assets4,582 4,599 13,762 13,858 
Long-lived asset impairment charges— 36 560 361 
Loss on debt extinguishment— — — 13,076 
Tax impact of adjustments(a)
(1,283)(1,298)(4,010)(7,643)
Adjusted net income$77,267 75,702 172,843 203,962 
 Three months ended Nine months ended
 September 30,
2017
 September 24,
2016
 September 30,
2017
 September 24,
2016
 (In thousands)
Operating income$122,033
 109,360
 326,876
 300,834
Adjustments:       
Amortization of other intangible assets5,341
 5,397
 16,001
 16,726
Long-lived asset impairment charges536
 7
 643
 104
Transaction-related costs(a)

 
 
 64
Bertico and related litigation
 
 
 (428)
Adjusted operating income$127,910
 114,764
 343,520

317,300
Net income$52,246
 52,712
 155,417
 139,456
Adjustments:       
Amortization of other intangible assets5,341
 5,397
 16,001
 16,726
Long-lived asset impairment charges536
 7
 643
 104
Transaction-related costs(a)

 
 
 64
Bertico and related litigation
 
 
 (428)
Tax impact of adjustments(b)
(2,351) (2,161) (6,658) (6,586)
Adjusted net income$55,772
 55,955
 165,403
 149,336
(a)Tax impact of adjustments calculated at effective tax rate of 28%.
(a)Represents non-capitalizable costs incurred as a result of the securitized financing facility.
(b)Tax impact of adjustments calculated at a 40% effective tax rate.


Earnings per share
Earnings per share of common stock and diluted adjusted earnings per share of common stock were as follows:
Three months endedNine months ended
Three months ended Nine months ended September 26,
2020
September 28,
2019
September 26,
2020
September 28,
2019
September 30,
2017
 September 24,
2016
 September 30,
2017
 September 24,
2016
Earnings per share:       
Earnings per share of common stock:Earnings per share of common stock:
Common—basic$0.58
 0.58
 1.71
 1.52
Common—basic$0.90 0.87 1.97 2.23 
Common—diluted0.57
 0.57
 1.68
 1.51
Common—diluted0.89 0.86 1.96 2.20 
Diluted adjusted earnings per share0.61
 0.60
 1.79
 1.61
Diluted adjusted earnings per share of common stockDiluted adjusted earnings per share of common stock0.93 0.90 2.08 2.44 
Diluted adjusted earnings per share of common stock is calculated using adjusted net income, as defined above, and diluted weighted averageweighted-average shares outstanding. Diluted adjusted earnings per share of common stock is not a presentation made in accordance with GAAP, and our use of the term diluted adjusted earnings per share of common stock may vary from similar measures reported by others in our industry due to the potential differences in the method of calculation. Diluted adjusted earnings per share of common stock should not be considered as an alternative to earnings per share of common stock derived in accordance with GAAP. Diluted adjusted earnings per share of common stock has important limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Because of these limitations, we rely primarily on our GAAP results. However, we believe that presenting diluted adjusted earnings per share of common stock is appropriate to provide investors with useful information regarding our historical operating results.
The following table sets forth the computation of diluted adjusted earnings per share:share of common stock:
 Three months endedNine months ended
 September 26,
2020
September 28,
2019
September 26,
2020
September 28,
2019
 (In thousands, except share and per share data)
Adjusted net income$77,267 75,702 172,843 203,962 
Weighted-average number of shares of common stock—diluted82,975,900 83,867,413 82,929,043 83,665,397 
Diluted adjusted earnings per share of common stock$0.93 0.90 2.08 2.44 

31

 Three months ended Nine months ended
 September 30,
2017
 September 24,
2016
 September 30,
2017
 September 24,
2016
 (In thousands, except share and per share data)
Adjusted net income$55,772
 55,955
 165,403
 149,336
Weighted average number of common shares—diluted91,433,076
 92,565,695
 92,386,611
 92,545,292
Diluted adjusted earnings per share$0.61
 0.60
 1.79
 1.61
Table of Contents


Results of operations
Consolidated results of operations
Three months ended Nine months ended Three months endedNine months ended
September 30,
2017
 September 24,
2016
 Increase (Decrease) September 30,
2017
 September 24,
2016
 Increase (Decrease) September 26,
2020
September 28,
2019
Increase (Decrease)September 26,
2020
September 28,
2019
Increase (Decrease)
$ % $ %$%$%
(In thousands, except percentages) (In thousands, except percentages)
Franchise fees and royalty income$151,809
 138,639
 13,170
 9.5 % $426,944
 399,617
 27,327
 6.8 %Franchise fees and royalty income$160,065 157,224 2,841 1.8 %$415,506 454,810 (39,304)(8.6)%
Advertising fees and related incomeAdvertising fees and related income132,280 128,675 3,605 2.8 %358,881 375,132 (16,251)(4.3)%
Rental income27,713
 26,880
 833
 3.1 % 79,543
 75,874
 3,669
 4.8 %Rental income30,639 31,984 (1,345)(4.2)%85,588 92,691 (7,103)(7.7)%
Sales of ice cream and other products27,551
 26,568
 983
 3.7 % 85,710
 86,425
 (715) (0.8)%Sales of ice cream and other products24,514 24,409 105 0.4 %71,164 72,400 (1,236)(1.7)%
Sales at company-operated restaurants
 1,611
 (1,611) (100.0)% 
 11,924
 (11,924) (100.0)%
Other revenues17,095
 13,401
 3,694
 27.6 % 41,165
 39,344
 1,821
 4.6 %Other revenues14,045 13,590 455 3.3 %40,924 39,277 1,647 4.2 %
Total revenues$224,168
 207,099
 17,069
 8.2 % $633,362
 613,184
 20,178
 3.3 %Total revenues$361,543 355,882 5,661 1.6 %$972,063 1,034,310 (62,247)(6.0)%
Total revenues for the three months ended September 30, 201726, 2020 increased $17.1$5.7 million, or 8.2%1.6%, due primarily to an increase in franchise fees and royalty income driven byas a result of additional renewal income and Dunkin’ Donuts U.S. systemwide sales growth. Also contributing todeferred revenue recognized in connection with the closure of restaurants, including Speedway locations, an increase in revenues wasadvertising fees and related income due to an increase in gift card breakage, and an increase in other revenues driven primarily by license fees related to Dunkin’ Donuts K-Cup® pods and ready-to-drink bottled iced coffee,pods. These increases were offset by a decrease in rental income due to a reduction in variable rental income as a result of a decline in sales at leased locations, as well as increased transfer fee income.a decrease in royalty income driven by a decline in systemwide sales, primarily for the Dunkin' International segment.
Total revenues for the nine months ended September 30, 2017 increased $20.226, 2020 decreased $62.2 million, or 3.3%6.0%, due primarily to a decrease in royalty income driven by a decline in systemwide sales, primarily for the Dunkin' U.S. and Dunkin' International segments, and a decrease in advertising fees and related income due primarily to the decline in Dunkin' U.S. systemwide sales offset by an increase in gift card breakage. Royalty income also reflects a reduction of revenue of approximately $7 million related to corporate financial relief provided to franchisees most significantly impacted by the COVID-19 pandemic. Also contributing to the decrease in revenues was a decrease in rental income due to a reduction in variable rental income as a result of a decline in sales at leased locations and rent waivers being provided to our franchisees of approximately $3 million, as well as a decrease in sales of ice cream and other products. Offsetting these decreases in revenues was an increase in franchise fees and royalty income driven by Dunkin’ Donuts U.S. systemwide sales growth andas a result of additional renewal income,deferred revenue recognized in connection with the closure of restaurants, including Speedway locations, as well as an increase in rental income due to an increase in the number of leases for franchised locations. Also contributing to the increase in revenues was an increase in other revenues driven primarily by license fees related to Dunkin’ Donuts K-Cup® pods, offset by timing of refranchising gains. These increases in revenues were offset by a decrease in sales at company-operated restaurants as there were no company-operated points of distribution during 2017.

pods.
32

Table of Contents
Three months ended Nine months ended Three months endedNine months ended
September 30,
2017
 September 24,
2016
 Increase (Decrease) September 30,
2017
 September 24,
2016
 Increase (Decrease) September 26,
2020
September 28,
2019
Increase (Decrease)September 26,
2020
September 28,
2019
Increase (Decrease)
$ % $ %$%$%
(In thousands, except percentages) (In thousands, except percentages)
Occupancy expenses—franchised restaurants$15,333
 15,881
 (548) (3.5)% $43,758
 42,691
 1,067
 2.5 %Occupancy expenses—franchised restaurants$18,908 19,823 (915)(4.6)%$56,540 58,995 (2,455)(4.2)%
Cost of ice cream and other products19,457
 18,384
 1,073
 5.8 % 58,578
 58,445
 133
 0.2 %
Cost of ice
cream and other products
19,276 21,066 (1,790)(8.5)%55,410 59,724 (4,314)(7.2)%
Company-operated restaurant expenses
 1,682
 (1,682) (100.0)% 
 13,472
 (13,472) (100.0)%
General and administrative expenses, net61,996
 59,374
 2,622
 4.4 % 185,613
 184,028
 1,585
 0.9 %
Advertising expensesAdvertising expenses133,352 130,846 2,506 1.9 %362,702 379,898 (17,196)(4.5)%
General and administrative expensesGeneral and administrative expenses58,705 60,333 (1,628)(2.7)%171,399 176,458 (5,059)(2.9)%
Depreciation and amortization10,282
 10,447
 (165) (1.6)% 31,097
 32,087
 (990) (3.1)%Depreciation and amortization10,245 9,183 1,062 11.6 %30,245 27,774 2,471 8.9 %
Long-lived asset impairment charges536
 7
 529
 7,557.1 % 643
 104
 539
 518.3 %Long-lived asset impairment charges— 36 (36)(100.0)%560 361 199 55.1 %
Total operating costs and expenses$107,604
 105,775
 1,829
 1.7 % $319,689
 330,827
 (11,138) (3.4)%Total operating costs and expenses$240,486 241,287 (801)(0.3)%676,856 703,210 (26,354)(3.7)%
Net income of equity method investments5,466
 5,467
 (1) (0.0 )% 12,612
 12,148
 464
 3.8 %Net income of equity method investments7,159 6,667 492 7.4 %15,108 13,324 1,784 13.4 %
Other operating income, net3
 2,569
 (2,566) (99.9)% 591
 6,329
 (5,738) (90.7)%Other operating income, net699 81 618 763.0 %1,528 943 585 62.0 %
Operating income$122,033
 109,360
 12,673
 11.6 % $326,876
 300,834
 26,042
 8.7 %Operating income$128,915 121,343 7,572 6.2 %$311,843 345,367 (33,524)(9.7)%
Occupancy expenses for franchised restaurants for the three and nine months ended September 30, 201726, 2020 decreased $0.5$0.9 million and $2.5 million, respectively, due primarily to expenses incurreddeclines in the prior year period to record lease-related liabilitiesvariable rental expense as a result of lease terminations. Occupancy expenses for franchised restaurants for the nine months ended September 30, 2017 increased $1.1 million due primarily to to an increasedeclines in the number of leases for franchisedsales at leased locations offset by the expenses incurred in the prior year period to record lease-related liabilities as a result of lease terminations.and rent waivers received from our landlords.
Net margin on ice cream and other products for the three and nine months ended September 30, 2017 decreased $0.126, 2020 increased $1.9 million, or 1.1%56.7%, and $0.8$3.1 million, or 3.0%24.3%, respectively, due primarily to an increasedecreases in commodity costs. Additionally, the decrease in net margin on ice creamcosts and other products for the three-month period was offset by an increase in sales volume.favorable product mix.
Company-operated restaurantAdvertising expenses for the three and nine months ended September 30, 2017 decreased $1.726, 2020 increased $2.5 million and $13.5decreased $17.2 million, respectively, as all remaining company-operated points of distributionrespectively. The fluctuations in advertising expenses were solddriven primarily by the end of fiscal 2016.fluctuations in advertising fees and related income.
General and administrative expenses for the three months ended September 30, 2017 increased $2.6 million driven by increased incentive compensation expense. General and administrative expenses for the nine months ended September 30, 2017 increased26, 2020 decreased $1.6 million and $5.1 million, respectively, due primarily to increased incentive compensation expensedecreases in personnel and other personnelbenefit costs and reduced non-essential spending in the current year period to preserve financial flexibility as well asa result of the COVID-19 pandemic, offset by increases in costs incurred to support brand-building activities offset byin the current year period and a recovery of legal fees in the prior year period. Also offsetting the decreases in professional feesgeneral and other general expenses.administrative expenses for the nine-month period were increases in reserves for uncollectible receivables and expenses incurred to support health and safety measures at our restaurants as a result of the COVID-19 pandemic.
Depreciation and amortization for the three and nine months ended September 30, 2017 decreased $0.226, 2020 increased $1.1 million and $1.0$2.5 million, respectively, due primarily to certain intangibleincreases in depreciable assets, becoming fully amortizedprimarily comprised of technology infrastructure to support the Dunkin' mobile ordering and favorable lease intangible assets being written-off upon termination of the related leases.payment platform.
Long-lived asset impairment charges increased $0.2 million for each of the three and nine months ended September 30, 2017 increased $0.5 million from the prior year periods. Such26, 2020. Long-lived asset impairment charges generally fluctuate based on the timing of lease terminations and the related write-off of favorable lease intangible assets and leasehold improvements.

33

Table of Contents
Net income of equity method investments for the three months ended September 30, 2017 remained consistent with the prior year period. Net income of equity method investments for theand nine months ended September 30, 201726, 2020 increased $0.5 million and $1.8 million, respectively, primarily as a result of increases in net income from our South Korea joint venture. Also contributing to the increase for the three-month period was an increase in net income from our Japan joint venture.
Other operating income, net, which includes net gains and losses recognized in connection with the sale or disposal of real estate, fluctuates based onproperty, equipment, and software as well as other miscellaneous income, increased $0.6 million for each of the timingthree and nine months ended September 26, 2020 due primarily to income from administrative services performed that are not part of such transactions. Other operating income, net,our core operations.
 Three months endedNine months ended
 September 26,
2020
September 28,
2019
Increase (Decrease)September 26,
2020
September 28,
2019
Increase (Decrease)
 $%$%
 (In thousands, except percentages)
Interest expense, net$31,730 28,791 2,939 10.2 %$94,050 88,852 5,198 5.9 %
Loss on debt extinguishment— — — n/m— 13,076 (13,076)(100.0)%
Other loss (income), net(154)258 (412)(159.7)%302 308 (6)(1.9)%
Total other expense$31,576 29,049 2,527 8.7 %$94,352 102,236 (7,884)(7.7)%
Net interest expense for the three and nine months ended September 24, 2016 includes gains of $2.526, 2020 increased $2.9 million and $4.6$5.2 million, respectively, recognized in connection with the sale of company-operated restaurants.
 Three months ended Nine months ended
 September 30,
2017
 September 24,
2016
 Increase (Decrease) September 30,
2017
 September 24,
2016
 Increase (Decrease)
 $ % $ %
 (In thousands, except percentages)
Interest expense, net$23,812
 24,442
 (630) (2.6)% $72,822
 74,022
 (1,200) (1.6)%
Other losses (income), net(155) 124
 (279) (225.0)% (370) 596
 (966) (162.1)%
Total other expense$23,657
 24,566
 (909) (3.7)% $72,452
 74,618
 (2,166) (2.9)%
Net interest expense decreased $0.6 million and $1.2 million for the three and nine months ended September 30, 2017, respectively, driven primarily by an increasedecreases in interest income earned on our cash balances as well as a decrease in interest expense due to a lower principal balance as a result of principal payments madelower interest rates.
The loss on our long-term debt sinceextinguishment of $13.1 million for the priornine months ended September 28, 2019 was due to the write-off of debt issuance costs in conjunction with the securitization refinancing transaction completed during the second quarter of fiscal year periods.2019.
The fluctuation in other lossesloss (income), net, for the three and nine months ended September 30, 201726, 2020 resulted primarily from net foreign exchange gains and losses driven primarily by fluctuations in the U.S. dollar against foreign currencies.
 Three months endedNine months ended
 September 26,
2020
September 28,
2019
September 26,
2020
September 28,
2019
 (In thousands, except percentages)
Income before income taxes$97,339 92,294 217,491 243,131 
Provision for income taxes23,371 19,929 54,960 58,821 
Effective tax rate24.0 %21.6 %25.3 %24.2 %
 Three months ended Nine months ended
 September 30,
2017
 September 24,
2016
 September 30,
2017
 September 24,
2016
 (In thousands, except percentages)
Income before income taxes$98,376
 84,794
 254,424
 226,216
Provision for income taxes46,130
 32,082
 99,007
 86,760
Effective tax rate46.9% 37.8% 38.9% 38.4%
The increaseincreases in the effective tax raterates for the three and nine months ended September 30, 2017 was primarily driven by a valuation allowance recorded on foreign tax credit carryforwards of $8.9 million primarily resulting from expected incremental interest expense from the debt refinancing transaction that closed in October 2017, negatively impacting the realizability of such carryforwards (see note 1126, 2020 compared to the unaudited consolidated financial statements included herein). This increase in the effective tax rate was offsetprior year periods were driven primarily by excess tax benefits from share-based compensation of $0.5 million and $7.3$1.8 million for the three months ended September 26, 2020 and September 28, 2019, respectively, and $1.6 million and $4.4 million for the nine months ended September 30, 2017, respectively, which are now included26, 2020 and September 28, 2019, respectively.
Also contributing to the increase in the provisioneffective tax rate for income taxes as a result of the required adoptionthree- and nine-month periods was the release of a new accounting standard (see note 2(f)valuation allowance recorded on foreign tax credit carryforwards of $2.0 million in the prior year period, offset by a benefit of $1.3 million in the current year period related to the unaudited consolidated financial statements included herein).foreign income and foreign tax credits upon finalizing and filing our 2019 tax return.
Operating segments
We operate fourfive reportable operating segments: Dunkin’ DonutsU.S., Baskin-Robbins U.S., Dunkin’ Donuts International, Baskin-Robbins U.S.,International, and Baskin-Robbins International.U.S. Advertising Funds. We evaluate the performance of our segments and allocate resources to them based on operating income adjusted for amortization of intangible assets, long-lived asset impairment charges, and othercertain non-recurring, infrequent or unusual charges, which does not reflect the allocation of any corporate charges. This profitability measure is referred to as segment profit. Segment profit for the Dunkin’ Donuts International and Baskin-Robbins International segments includes net income of equity method investments, except for the other-than-temporary impairment charges and the related reduction in depreciation, and amortization, net of tax, on the underlying long-lived assets.
34

Table of Contents
For reconciliations to total revenues and income before income taxes, see note 6 to the unaudited consolidated financial statements included herein.statements. Revenues for all segments include only transactions with unaffiliated customers and include no intersegment revenues. Revenues not included in segment revenues include revenue earned through certain licensing arrangements with third parties in which our brand names are used, revenue generated from online training programs for franchisees, advertising fees and revenuesrelated income from international advertising funds, and breakage and other revenue related to the sale of Dunkin’ Donuts products in certain international markets,gift card program, all of which are not allocated to a specific segment.

Additionally, allocation of the consideration from sales of ice cream and other products to royalty income as consideration for the use of the franchise license, certain franchisee incentives, and certain corporate financial relief provided to franchisees are not reflected within segment revenues, but have no impact to total revenues for any segment.
Dunkin’ Donuts U.S.
 Three months endedNine months ended
 September 26,
2020
September 28,
2019
Increase (Decrease)September 26,
2020
September 28,
2019
Increase (Decrease)
 $%$%
 (In thousands, except percentages)
Royalty income$130,866 130,993 (127)(0.1)%$351,740 379,772 (28,032)(7.4)%
Franchise fees6,485 3,675 2,810 76.5 %16,503 10,719 5,784 54.0 %
Rental income29,822 30,824 (1,002)(3.3)%82,962 89,163 (6,201)(7.0)%
Other revenues780 912 (132)(14.5)%2,686 3,072 (386)(12.6)%
Total revenues$167,953 166,404 1,549 0.9 %$453,891 482,726 (28,835)(6.0)%
Segment profit$129,081 127,755 1,326 1.0 %$334,545 365,888 (31,343)(8.6)%
 Three months ended Nine months ended
 September 30,
2017
 September 24,
2016
 Increase (Decrease) September 30,
2017
 September 24,
2016
 Increase (Decrease)
 $ % $ %
 (In thousands, except percentages)
Royalty income$118,831
 113,281
 5,550
 4.9 % $345,103
 326,835
 18,268
 5.6 %
Franchise fees16,635
 9,852
 6,783
 68.8 % 35,943
 26,257
 9,686
 36.9 %
Rental income26,786
 25,972
 814
 3.1 % 76,842
 73,285
 3,557
 4.9 %
Sales at company-operated restaurants
 1,611
 (1,611) (100.0)% 
 11,924
 (11,924) (100.0)%
Other revenues2,854
 1,709
 1,145
 67.0 % 6,260
 6,597
 (337) (5.1)%
Total revenues$165,106
 152,425
 12,681
 8.3 % $464,148
 444,898
 19,250
 4.3 %
Segment profit$129,719
 119,434
 10,285
 8.6 % $360,241
 335,963
 24,278
 7.2 %
Dunkin’ Donuts U.S. revenues increased $12.7 million and $19.3 million for the three and nine months ended September 30, 2017, respectively, due primarily to increased franchise fees driven by additional renewal income and increased royalty income driven by systemwide sales growth. Also contributing to the increase in revenues for the three months ended September 30, 2017 was26, 2020 increased $1.5 million due primarily to an increase in other revenues drivenfranchise fees as a result of additional deferred revenue recognized in connection with the closure of restaurants, including Speedway locations, offset by transfer fee income. Additionally, the increasea decrease in rental income due to a reduction in variable rental income as a result of a decline in sales at leased locations.
Dunkin’ U.S. revenues for the nine months ended September 30, 2017 was26, 2020 decreased $28.8 million due primarily to an increasea decrease in royalty income driven by a decline in systemwide sales, as well as a decrease in rental income driven by an increasedue to a reduction in the numbervariable rental income as a result of leases for franchised locations. These increases in revenues were offset by a decline in sales at company-operatedleased locations and rent waivers being provided to our franchisees. Offsetting these decreases in revenues was an increase in franchise fees as a result of additional deferred revenue recognized in connection with the closure of restaurants, as there were no company-operated points of distribution during 2017.including Speedway locations.
Dunkin’ Donuts U.S. segment profit increased $10.3 million for the three months ended September 30, 201726, 2020 increased $1.3 million driven primarily by the increasesincrease in franchise fees. Offsetting the increase in franchise fees royalty income, and other revenues, as well as lease-related liabilities recorded in the prior year period as a result of lease terminations. The increases in segment profit were negatively impacted bywas an increase in general and administrative expenses due primarily to an increase in costs incurred to support brand-building activities offset by reduced non-essential spending, as well as gains recognizeda decrease in connection with the sale of company-operated restaurants in the prior year period.rental margin.
Dunkin’ Donuts U.S. segment profit increased $24.3 million for the nine months ended September 30, 2017 driven26, 2020 decreased $31.3 million due primarily by the increasesto decreases in royalty income franchise fees, and rental margin. Additionally, the prior year period was unfavorably impacted by the operating results of company-operated restaurants. The increases in segment profit were negatively impacted by gains recognized in connection with the sale of company-operated restaurants in the prior year period,margin, as well as an increase in general and administrative expenses.
Dunkin’ Donuts International
 Three months ended Nine months ended
 September 30,
2017
 September 24,
2016
 Increase (Decrease) September 30,
2017
 September 24,
2016
 Increase (Decrease)
 $ %  $ %
 (In thousands, except percentages)
Royalty income$4,442
 4,125
 317
 7.7% $13,011
 12,583
 428
 3.4 %
Franchise fees704
 323
 381
 118.0% 1,958
 3,856
 (1,898) (49.2)%
Other revenues11
 1
 10
 1,000.0% (22) 478
 (500) (104.6)%
Total revenues$5,157
 4,449
 708
 15.9% $14,947
 16,917
 (1,970) (11.6)%
Segment profit$1,439
 705
 734
 104.1% $4,782
 6,438
 (1,656) (25.7)%
Dunkin’ Donuts International revenues for the three months ended September 30, 2017 increased by $0.7 million dueexpenses driven primarily to increased franchise fees and royalty income.
Dunkin’ Donuts International revenues for the nine months ended September 30, 2017 decreased by $2.0 million primarily as a result of a decline in franchise fees, as well as a decrease in other revenues due to a decrease in transfer fees, offset by an increase in royalty income. The declinereserves for uncollectible receivables and an increase in franchise fees for the nine-month period was due primarilycosts incurred to a significant market development fee recognized upon entry into a new marketsupport brand-building activities offset by decreases in the prior year period.

Segmentpersonnel and benefit costs and reduced non-essential spending. These decreases in segment profit for Dunkin’ Donuts International for the three months ended September 30, 2017 increased $0.7 million primarily as a result ofwere offset by the increase in revenues and a decrease in general and administrative expenses, offset by a decrease in net income from our South Korea joint venture.
Segment profit for Dunkin’ Donuts International for the nine months ended September 30, 2017 decreased $1.7 million primarily as a result of the decrease in revenues and a decrease in net income from our South Korea joint venture, offset by a decrease in general and administrative expenses.franchise fees.
Baskin-Robbins U.S.
 Three months endedNine months ended
 September 26,
2020
September 28,
2019
Increase (Decrease)September 26,
2020
September 28,
2019
Increase (Decrease)
 $%$%
 (In thousands, except percentages)
Royalty income$9,016 8,973 43 0.5 %$23,423 23,904 (481)(2.0)%
Franchise fees380 374 1.6 %980 1,030 (50)(4.9)%
Rental income740 942 (202)(21.4)%2,146 2,875 (729)(25.4)%
Sales of ice cream and other products1,524 1,021 503 49.3 %3,803 2,772 1,031 37.2 %
Other revenues3,117 3,014 103 3.4 %7,676 8,308 (632)(7.6)%
Total revenues$14,777 14,324 453 3.2 %$38,028 38,889 (861)(2.2)%
Segment profit$9,373 9,711 (338)(3.5)%$25,281 26,110 (829)(3.2)%
35

 Three months ended Nine months ended
 September 30,
2017
 September 24,
2016
 Increase (Decrease) September 30,
2017
 September 24,
2016
 Increase (Decrease)
 $ %  $ %
 (In thousands, except percentages)
Royalty income$8,501
 8,499
 2
 0.0 % $24,265
 23,546
 719
 3.1 %
Franchise fees557
 273
 284
 104.0 % 885
 790
 95
 12.0 %
Rental income798
 787
 11
 1.4 % 2,346
 2,221
 125
 5.6 %
Sales of ice cream and other products771
 805
 (34) (4.2)% 2,179
 2,037
 142
 7.0 %
Other revenues3,124
 3,417
 (293) (8.6)% 8,970
 9,486
 (516) (5.4)%
Total revenues$13,751
 13,781
 (30) (0.2)% $38,645
 38,080
 565
 1.5 %
Segment profit$10,466
 11,085
 (619) (5.6)% $28,773
 29,123
 (350) (1.2)%
Table of Contents
Baskin-Robbins U.S. revenues for the three months ended September 30, 2017 decreased slightly26, 2020 increased $0.5 million due primarily to increases in sales of ice cream and other products and other revenues, offset by a decrease in rental income due primarily to a decrease in other revenues driven by a decrease in licensing income, offset by an increase in franchise fees driven by additional renewal income.the number of leased locations.
Baskin-Robbins U.S. revenues for the nine months ended September 30, 2017 increased $0.626, 2020 decreased $0.9 million due primarily to an increasedecreases in royalty income, sales of ice cream and other products, and rental income offset byas a result of rent waivers being provided to our franchisees and a decrease in the number of leased locations, other revenues driven by a decrease in licensing income.income, and royalty income due to a decline in systemwide sales. These decreases in revenues were offset by an increase in sales of ice cream and other products.
Baskin-Robbins U.S. segment profit for the three months ended September 30, 201726, 2020 decreased $0.6$0.3 million due primarily toas a result of an increase in general and administrative expenses.expenses driven by an increase in costs incurred to support brand-building activities offset by reduced non-essential spending. Offsetting these factors was an increase in ice cream margin.
Baskin-Robbins U.S. segment profit for the nine months ended September 30, 201726, 2020 decreased $0.4$0.8 million due primarily to increasesthe decreases in other revenues and royalty income, offset by an increase in ice cream margin.
Dunkin’ International
 Three months endedNine months ended
 September 26,
2020
September 28,
2019
Increase (Decrease)September 26,
2020
September 28,
2019
Increase (Decrease)
 $%$%
 (In thousands, except percentages)
Royalty income$4,744 5,769 (1,025)(17.8)%$12,086 17,078 (4,992)(29.2)%
Franchise fees335 792 (457)(57.7)%1,095 3,687 (2,592)(70.3)%
Other revenues109 188 (79)(42.0)%283 305 (22)(7.2)%
Total revenues$5,188 6,749 (1,561)(23.1)%$13,464 21,070 (7,606)(36.1)%
Segment profit$3,544 4,898 (1,354)(27.6)%$8,880 15,213 (6,333)(41.6)%
Dunkin’ International revenues for the three and nine months ended September 26, 2020 decreased $1.6 million and $7.6 million, respectively, primarily as a result of decreases in royalty income driven by declines in systemwide sales and franchise fees due primarily to additional deferred revenue recognized in the prior year periods upon closure of certain international markets.
Segment profit for Dunkin’ International for the three and nine months ended September 26, 2020 decreased $1.4 million and $6.3 million, respectively, primarily as a result of the decreases in revenues, offset by decreases in general and administrative expenses and a decrease in other revenues driven by a decrease in licensing income, offset by the increase in royalty income.due to reduced non-essential spending.
Baskin-Robbins International
Three months ended Nine months ended Three months endedNine months ended
September 30,
2017
 September 24,
2016
 Increase (Decrease) September 30,
2017
 September 24,
2016
 Increase (Decrease) September 26,
2020
September 28,
2019
Increase (Decrease)September 26,
2020
September 28,
2019
Increase (Decrease)
$ % $ % $%$%
(In thousands, except percentages) (In thousands, except percentages)
Royalty income$1,966
 2,081
 (115) (5.5)% $5,255
 5,226
 29
 0.6 %Royalty income$2,278 2,197 81 3.7 %$5,662 6,055 (393)(6.5)%
Franchise fees173
 205
 (32) (15.6)% 524
 524
 
  %Franchise fees229 165 64 38.8 %534 1,043 (509)(48.8)%
Rental income129
 121
 8
 6.6 % 355
 340
 15
 4.4 %Rental income77 218 (141)(64.7)%480 653 (173)(26.5)%
Sales of ice cream and other products26,512
 25,340
 1,172
 4.6 % 82,602
 83,119
 (517) (0.6)%Sales of ice cream and other products27,495 28,459 (964)(3.4)%77,281 81,531 (4,250)(5.2)%
Other revenues30
 157
 (127) (80.9)% 140
 369
 (229) (62.1)%Other revenues(15)(28)13 (46.4)%(34)(15)(19)126.7 %
Total revenues$28,810
 27,904
 906
 3.2 % $88,876
 89,578
 (702) (0.8)%Total revenues$30,064 31,011 (947)(3.1)%$83,923 89,267 (5,344)(6.0)%
Segment profit$11,420
 11,154
 266
 2.4 % $31,900
 30,617
 1,283
 4.2 %Segment profit$14,985 13,028 1,957 15.0 %$34,363 32,919 1,444 4.4 %
Baskin-Robbins International revenues for the three months ended September 30, 2017 increased26, 2020 decreased $0.9 million due primarily to an increasedecreases in sales of ice cream and other products and rental income due to rent waivers received from landlords and passed through to our licensees in the Middle East,franchisees, offset by decreasesan increase in royalty income and other revenues.

income.
Baskin-Robbins International revenues for the nine months ended September 30, 201726, 2020 decreased $0.7$5.3 million due primarily to a decreasedecreases in sales of ice cream and other products, franchise fees, and royalty income. The decrease in franchise fees was due primarily to our licenseesadditional deferred revenue recognized in the Middle East, as well as a decrease in other revenues.prior year period upon closure of certain international markets.
36

Table of Contents
Baskin-Robbins International segment profit for the three and nine months ended September 30, 201726, 2020 increased $0.3$2.0 million and $1.4 million, respectively, primarily as a result of an increaseincreases in net income from our South Korea and Japan joint venture, as well as an increaseventures and decreases in net margin ongeneral and administrative expenses due to reduced non-essential spending offset by increases in reserves for uncollectible receivables. Offsetting these factors for the nine-month period was a decrease in ice cream drivenmargin due primarily by an increaseto a decrease in sales volume offset by favorable product mix, as well as the decreases in franchise fees and royalty income and other revenues.income.
Baskin-Robbins International segment profitU.S. Advertising Funds
 Three months endedNine months ended
 September 26,
2020
September 28,
2019
Increase (Decrease)September 26,
2020
September 28,
2019
Increase (Decrease)
 $%$%
 (In thousands, except percentages)
Advertising fees and related income$123,025 122,819 206 0.2 %$331,139 355,049 (23,910)(6.7)%
Total revenues$123,025 122,819 206 0.2 %$331,139 355,049 (23,910)(6.7)%
Segment profit$— — — — %$— — — — %
U.S. Advertising Funds revenues for the three months ended September 26, 2020 increased $0.2 million, or 0.2%, driven primarily by the increase in Dunkin' U.S. systemwide sales. 
U.S. Advertising Funds revenues for the nine months ended September 30, 2017 increased $1.326, 2020 decreased $23.9 million, as a result of an increase in net income from our Japan joint venture, as well as a decrease in general and administrative expensesor 6.7%, driven primarily due to expenses incurred in the prior year period related to brand-building activities, offset by the decrease in other revenues.Dunkin' U.S. systemwide sales. 
Expenses for the U.S. Advertising Funds were equivalent to revenues in each period, resulting in no segment profit.
Liquidity and capital resources
As of September 30, 2017,26, 2020, we held $267.0$613.6 million of cash and cash equivalents and $76.1$89.6 million of short-term restricted cash that was restricted under our securitized financing facility. Included in cash and cash equivalents is $106.8$239.3 million of cash held for advertising funds and reserved for gift card/certificate programs. Cash reserved for gift card/certificate programs also includes cash that will be used to fund initiatives from the gift card breakage liabilities (see note 5 to the unaudited consolidated financial statements included herein). In addition, as of September 30, 2017, we had a borrowing capacity of $74.1 million under our $100.0 million 2015 Variable Funding Notes (as defined below).
As a result of the adoption of new accounting standards during fiscal year 2017 that impacted the consolidated statements of cash flows (see note 2(f) to the unaudited consolidated financial statements included herein), the “Operating, investing, and financing cash flows” and “Adjusted operating and investing cash flow” sections below have been revised to reflect these changes for all periods presented.
Operating, investing, and financing cash flows
Net cash provided by operating activities was $121.5$142.7 million for the nine months ended September 30, 2017,26, 2020, as compared to $131.3$157.8 million in the prior year period. The $9.7$15.1 million decrease in operating cash flowsinflows was driven primarily by unfavorablea decrease in pre-tax net income related to operating activities, excluding non-cash items, timing of receipts related to the sale of Dunkin’ K-Cup® pods, and an increase in incentive compensation payments, offset by favorable cash flows related to our gift card program due primarily to the timing of holidays and our prior year fiscal year end, the timing of receipts and payments, related to the sale of Dunkin’ K-Cup® pods and the related franchisee profit-sharing program, and a decrease in cash paid for income taxes. Additionally,taxes, and favorable cash flows due to working capital fluctuations of our advertising funds, as well as various other changes in working capital contributed to the decrease in operating cash flows. Offsetting these decreases were an increase in pre-tax net income related to operating activities, excluding non-cash items, and payments made in connection with the settlement of the Bertico litigation in the prior year period.capital.
Net cash used in investing activities was $9.1$15.5 million for the nine months ended September 30, 2017,26, 2020, as compared to net cash provided by investing activities of $4.1$25.4 million in the prior year period. The $13.2$9.9 million decrease in investing cash flowsoutflows was driven primarily by a decrease in proceeds received from the sale of real estate and company-operated restaurants of $15.5 million, offset primarily by a reduction in capital expenditures of $1.4$10.7 million.
Net cash used in financing activities was $201.1$131.5 million for the nine months ended September 30, 2017,26, 2020, as compared to $126.8$111.9 million in the prior year period. The $74.3$19.6 million increase in financing cash outflows was driven primarily by incremental cash used in the current year period for repurchases of common stock of $97.2$39.5 million as well as additional cash used to pay the increased quarterly dividend of $5.6 million, offset by incrementaland a decrease in cash generated from the exercise of stock options in the current year period of $28.3$10.7 million, offset by a decrease in quarterly dividends paid on common stock of $26.8 million.
On October 30, 2020, we entered into the Merger Agreement with Inspire and Merger Sub. The Merger Agreement contains limitations on actions that the Company may take between signing and closing without the consent of Inspire, including the declaration or payment of dividends and the repurchase of shares in the open market. See note 15 to the unaudited consolidated financial statements for more information regarding the merger agreement.
Adjusted operating and investing cash flow
Net cash flows from operating and investing activities for the nine months ended September 30, 201726, 2020 and September 24, 2016 include decreases28, 2019 included net cash outflows of $69.2$2.8 million and $37.5$28.0 million, respectively, in cash held forrelated to advertising funds and reserved for gift card/certificate programs, which were primarily driven by the seasonality of our gift card program.programs. Excluding cash held for advertising funds and reserved for gift card/certificate programs, we generated $181.7$130.1 million and $172.9$160.4 million of adjusted operating and investing cash flow during the nine months ended September 30, 201726, 2020 and September 24, 2016,28, 2019, respectively.
The increasedecrease in adjusted operating and investing cash flow was duedriven primarily to an increase the decrease
37

Table of Contents
in pre-tax net income related to operating activities, excluding non-cash items, payments made in connection with the settlement of the Bertico litigation in the prior year period, and a reduction in capital expenditures. Offsetting these increases were a decrease in proceeds from the sale of real estate and company-operated restaurants, the timing of receipts and payments related to the sale of Dunkin’ K-Cup® pods, and the related franchisee profit-sharing program, other changesincrease in working capital, and a decreaseincentive compensation payments, offset by the decreases in cash paid for income taxes.

taxes and capital expenditures, as well as various other changes in working capital.
Adjusted operating and investing cash flow is a non-GAAP measure reflecting net cash provided by operating and investing activities, excluding the cash flows related to advertising funds and gift card/certificate programs. We use adjusted operating and investing cash flow as a key liquidity measure for the purpose of evaluating our ability to generate cash. We also believe adjusted operating and investing cash flow provides our investors with useful information regarding our historical cash flow results. This non-GAAP measurement is not intended to replace the presentation of our financial results in accordance with GAAP, and adjusted operating and investing cash flow does not represent residual cash flows available for discretionary expenditures. Use of the term adjusted operating and investing cash flow may differ from similar measures reported by other companies.
Adjusted operating and investing cash flow is reconciled from net cash provided by operating activities determined under GAAP as follows (in thousands):
Nine months endedNine months ended
September 30,
2017
 September 24,
2016
September 26,
2020
September 28,
2019
Net cash provided by operating activities$121,529
 131,259
Net cash provided by operating activities$142,723 157,779 
Plus: Decrease in cash held for advertising funds and gift card/certificate programs69,224
 37,511
Plus: Decrease in cash held for advertising funds and gift card/certificate programs2,828 27,985 
Plus (less): Net cash provided by (used in) investing activities(9,099) 4,107
Less: Net cash used in investing activitiesLess: Net cash used in investing activities(15,452)(25,397)
Adjusted operating and investing cash flow$181,654
 172,877
Adjusted operating and investing cash flow$130,099 160,367 
Borrowing capacity
Our securitized financing facility included original aggregate borrowingsAs of September 26, 2020, there was approximately $2.60$3.05 billion consisting of $2.50 billion 2015total principal outstanding on the 2017 Class A-2 Notes (as defined below) and $100.02019 Class A-2 Notes (as defined below). In March 2020, the Company borrowed $116.0 million of 2015under our $150.0 million 2019 Variable Funding Notes (as defined below) which were undrawn at closing.as a precautionary measure given the market uncertainty arising from COVID-19 and to further strengthen financial flexibility. The Company repaid all borrowings under the 2019 Variable Funding Notes during the second fiscal quarter of 2020. As of September 30, 2017,26, 2020, there was approximately $2.44 billion of total principal outstanding on the 2015 Class A-2 Notes, while there was $74.1$116.9 million in available commitments under the 20152019 Variable Funding Notes as $25.9$33.1 million of letters of credit were outstanding. The Merger Agreement contains restrictions, however, limiting the Company’s ability to borrow additional amounts under the 2019 Variable Funding Notes in excess of $3.0 million.
In January 2015,April 2019, DB Master Finance LLC (the “Master Issuer”"Master Issuer"), a limited-purpose, bankruptcy-remote, wholly-owned indirect subsidiary of Dunkin’ Brands Group, Inc. (“DBGI”), issued Series 2015-1 3.262%2019-1 3.787% Fixed Rate Senior Secured Notes, Class A-2-I (the “2015 Class A-2-I Notes”) with an initial principal amount of $750.0 million and Series 2015-1 3.980% Fixed Rate Senior Secured Notes, Class A-2-II (the “2015 Class A-2-II Notes” and, together with the 2015 Class A-2-I Notes, the “2015 Class A-2 Notes”) with an initial principal amount of $1.75 billion. In addition, the Master Issuer issued Series 2015-1 Variable Funding Senior Secured Notes, Class A-1 (the “2015 Variable Funding Notes” and, together with the 2015 Class A-2 Notes, the “2015 Notes”), which allowed the Master Issuer to borrow up to $100.0 million on a revolving basis. The 2015 Variable Funding Notes could also be used to issue letters of credit.
In October 2017, the Master Issuer issued Series 2017-1 3.629% Fixed Rate Senior Secured Notes, Class A-2-I (the “2017“2019 Class A-2-I Notes”) with an initial principal amount of $600.0 million, and Series 2017-1 4.030%2019-1 4.021% Fixed Rate Senior Secured Notes, Class A-2-II (the “2017“2019 Class A-2-II Notes”) with an initial principal amount of $400.0 million, and Series 2019-1 4.352% Fixed Rate Senior Secured Notes, Class A-2-III (the “2019 Class A-2-III Notes”, and together with the 20172019 Class A-2-I Notes and 2019 Class A-2-II Notes, the “2017“2019 Class A-2 Notes”) with an initial principal amount of $800.0$700.0 million. In addition, the Master Issuer issued Series 2017-12019-1 Variable Funding Senior Secured Notes, Class A-1 (the “2017“2019 Variable Funding Notes” and, together with the 20172019 Class A-2 Notes, the “2017“2019 Notes”), which allowsallow for the issuance of up to $150.0 million of 20172019 Variable Funding Notes and certain other credit instruments, including letters of credit.
A portion of the proceeds of theThe 2017 Notes was used to repay the remaining $731.3 million of principal outstanding on the 2015 Class A-2-IA-2 Notes and to pay related transaction fees. The additional net proceeds will be used for general corporate purposes, which may include a return of capital to the Company’s shareholders. In connection with the issuance of the 2017 Variable Funding Notes, the Master Issuer terminated the commitments with respect to its existing 2015 Variable Funding Notes.
The 2015 Notes and 20172019 Notes were each issued in a securitization transaction pursuant to which most of the Company’s domestic and certain of its foreign revenue-generating assets, consisting principally of franchise-related agreements, real estate assets, and intellectual property and license agreements for the use of intellectual property, are held by the Master Issuer and certain other limited-purpose, bankruptcy-remote, wholly-owned indirect subsidiaries of the Company that act as guarantors of the 20152017 Class A-2 Notes and 20172019 Notes and that have pledged substantially all of their assets to secure the 20152017 Class A-2 Notes and 20172019 Notes.
The 20152017 Class A-2 Notes and 20172019 Notes were issued pursuant to a base indenture and related supplemental indentures (collectively, the “Indenture”) under which the Master Issuer may issue multiple series of notes. The legal final maturity date of the 20152017 Class

A-2-II A-2 Notes and 20172019 Class A-2 Notes is in February 2045November 2047 and November 2047,May 2049, respectively, but it is anticipated that, unless earlier prepaid to the extent permitted under the Indenture, the 2015Series 2017-1 3.629% Fixed Rate Senior Secured Notes, Class A-2-I (the “2017 Class A-2-I Notes”) will be repaid by November 2024, the Series 2017-1 4.030% Fixed Rate Senior Secured Notes, Class A-2-II (the “2017 Class A-2-II Notes” and, together with the 2017 Class A-2-I Notes, the “2017 Class A-2 Notes”) will be repaid by November 2027, the 2019 Class A-2-I Notes will be repaid by February 2024, the 2019 Class A-2-II Notes will be repaid by February 2022,May 2026, and the 20172019 Class A-2-1A-2-III Notes will be repaid by November 2024, and the 2017 Class A-2-II Notes will be repaid by November 2027May 2029 (the “Anticipated Repayment Dates”). Principal amortization payments equal to $31 million per calendar year, payable quarterly, are collectively
38

Table of Contents
required to be made on the 2015 Class A-2-II, 2017 Class A-2-I Notes,A-2 and 20172019 Class A-2-II Notes equal to $17.5 million, $6.0 million, and $8.0 million, respectively, per calendar yearA-2 through the respective Anticipated Repayment Dates. No principal payments are required if a specified leverage ratio, which is a measure of outstanding debt to earnings before interest, taxes, depreciation, and amortization, adjusted for certain items (as specified in the Indenture), is less than or equal to 5.0 to 1.0. If the 20152017 Class A-2-IIA-2 Notes or the 20172019 Class A-2 Notes have not been repaid or refinanced by their respective Anticipated Repayment Dates, a rapid amortization event will occur in which residual net cash flows of the Master Issuer, after making certain required payments, will be applied to the outstanding principal of the 20152017 Class A-2-IIA-2 Notes and the 20172019 Class A-2 Notes. Various other events, including failure to maintain a minimum ratio of net cash flows to debt service ("DSCR") of 1.20 to 1.0, measured for the four immediately preceding fiscal quarters, may also cause a rapid amortization event. Failure to maintain a minimum DSCR of 1.75 to 1.0 would also cause certain excess cash flows to be segregated in a separate restricted cash account. As of September 26, 2020, we had a DSCR of 3.61 to 1.0.
It is anticipated that the principal and interest on the 20172019 Variable Funding Notes will be repaid in full on or prior to November 2022,August 2024, subject to two additional one-year extensions. Borrowings under the 2019 Variable Funding Notes bear interest at a rate equal to a LIBOR rate plus 1.50%, or the lenders' commercial paper funding rate plus 1.50%. If the 2019 Variable Funding Notes are not repaid prior to August 2024 or prior to the end of the extension period, if applicable, incremental interest will accrue. In addition, the Company is required to pay a 1.50% fee for letters of credit amounts outstanding and a commitment fee on the unused portion of the 2019 Variable Funding Notes which ranges from 0.50% to 1.00% based on utilization. Other events and transactions, such as certain asset sales and receipt of various insurance or indemnification proceeds, may trigger additional mandatory prepayments.
In order to assess our current debt levels, including servicing our long-term debt, and our ability to take on additional borrowings, we monitor a leverage ratio of our long-term debt, net of cash (“Net Debt”), to adjusted earnings before interest, taxes, depreciation, and amortization (“Adjusted EBITDA”). This leverage ratio differs from the leverage ratios specified in the Indenture. This leverage ratio, and the related Net Debt and Adjusted EBITDA measures used to compute it, are non-GAAP measures, and our use of the terms Net Debt and Adjusted EBITDA may vary from other companies, including those in our industry, due to the potential inconsistencies in the method of calculation and differences due to items subject to interpretation. Net Debt reflects the gross principal amount outstanding under our securitized financing facility, notes payable, and capitalfinance lease obligations, less short-term cash, cash equivalents, and restricted cash, excluding cash reserved for gift card/certificate programs. Adjusted EBITDA is defined in our securitized financing facility as net income before interest, taxes, depreciation and amortization, and impairment charges, as adjusted for certain items that are summarized in the table below. Net Debt should not be considered as an alternative to debt, total liabilities, or any other obligations derived in accordance with GAAP. Adjusted EBITDA should not be considered as an alternative to net income, operating income, or any other performance measures derived in accordance with GAAP, as a measure of operating performance, or as an alternative to cash flows as a measure of liquidity. Net Debt, Adjusted EBITDA, and the related leverage ratio have important limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. However, we believe that presenting Net Debt, Adjusted EBITDA, and the related leverage ratio are appropriate to provide additional information to investors to demonstrate our current debt levels and ability to take on additional borrowings.
As of September 30, 2017,26, 2020, we had a Net Debt to Adjusted EBITDA ratio of 4.45.1 to 1.0. The following is a reconciliation of our Net Debt and Adjusted EBITDA to the corresponding GAAP measures as of and for the twelve months ended September 30, 2017,26, 2020, respectively (in thousands):
September 26, 2020
Principal outstanding under 2017 Class A-2 Notes$1,365,000 
Principal outstanding under 2019 Class A-2 Notes1,683,000 
Other notes payable1,138 
Total finance lease obligations8,412 
Less: cash and cash equivalents(613,641)
Less: restricted cash, current(89,626)
Plus: cash held for gift card/certificate programs154,780 
Net Debt$2,509,063 
39

Table of Contents
 September 30, 2017
Principal outstanding under Class A-2 Notes$2,437,500
Total capital lease obligations7,793
Less: cash and cash equivalents(266,981)
Less: restricted cash, current(76,141)
Plus: cash held for gift card/certificate programs106,768
Net Debt$2,208,939

 Twelve months ended
 September 30, 2017
Net income$211,537
Interest expense100,588
Income tax expense129,920
Depreciation and amortization41,547
Impairment charges688
EBITDA484,280
Adjustments: 
Share-based compensation expense15,529
Other(a) 
2,266
Total adjustments17,795
Adjusted EBITDA$502,075
Twelve months ended
September 26, 2020
Net income$220,245 
Interest expense128,194 
Income tax expense73,377 
Depreciation and amortization(a)
39,354 
Impairment charges750 
(a)EBITDARepresents costs and fees associated with various franchisee-related investments, bank fees, legal reserves, the allocation of share-based461,920 
Adjustments:
Share-based compensation expense(a)
11,314 
Decrease in deferred revenue related to the advertising funds,franchise and other non-cash gains and losses.licensing agreements(b)
(19,911)
COVID-19 related adjustments(c)
11,090 
Other(d)
31,173 
Total adjustments33,666 
Adjusted EBITDA$495,586 
(a)Amounts exclude depreciation and share-based compensation of $7.0 million and $0.8 million, respectively, related to U.S. Advertising Funds.
(b)Amount excludes incentives paid to franchisees, primarily related to the Dunkin' U.S. Blueprint for Growth.
(c)Amount includes approximately $7 million of corporate financial relief and $2 million of rent waivers being provided to the Company's franchisees, net of waivers received from landlords, as well as additional general and administrative expenses incurred as a result of the COVID-19 pandemic.
(d)Represents costs and fees associated with various franchisee-related investments, including investments in the Dunkin' U.S. Blueprint for Growth, bank fees, legal reserves, and other non-cash gains and losses.
In response to the ongoing COVID-19 pandemic, the Company has taken a series of actions to preserve financial flexibility and support franchisees during this time of uncertainty. These actions include temporarily extending payment terms for royalties and advertising fees for franchisees in the U.S. and Canada from 12 to 45 days through mid-May, as well as providing payment plan options for these deferred fees, to provide franchisees with more financial flexibility to better support their employees and guests. Additionally, the Company provided extended payment terms and payment plan options to franchisees and licensees in certain international markets. The Company also provided approximately $7 million of corporate financial relief primarily to franchisees in the U.S. that were most significantly impacted by the pandemic. In addition, the Company is waiving up to one month of rental payments and allowed franchisees to defer two months of rental payments on the approximately 900 properties leased by the Company to franchisees. While we do not expect these actions to adversely affect our ability to meet our cash needs, we have also implemented plans to preserve our strong balance sheet by reducing operating expenses and preserving cash, including suspension of our share repurchase program. We expect to remain in compliance with all of our debt covenants under the securitization facility.
Based upon our current level of operations and anticipated growth, we believe that our cash on hand and the cash generated from our operations and amounts available under our 2017 Variable Funding Notes will be adequate to meet our anticipated debt service requirements, capital expenditures, and working capital needs for at least the next twelve months. We believe that we will be able to meet these obligations even if we experience no growth in sales or profits.profits from current levels. There can be no assurance, however, that our business will generate sufficient cash flows from operations or that future borrowings will be available under our 2017 Variable Funding Notes or otherwise to enable us to service our indebtedness, including our securitized financing facility, or to make anticipated capital expenditures. Our future operating performance and our ability to service, extend, or refinance the securitized financing facility will be subject to future economic conditions and to financial, business, and other factors, many of which are beyond our control.
40

Recently Issued Accounting Standards
See note 2(f) and note 13 to the unaudited consolidated financial statements included in Item 1 of Part I of this Form 10-Q, for a detailed description of recent accounting pronouncements.
Item 3.       Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in the foreign exchange or interest rate risks discussed in Part II, Item 7A “Quantitative and Qualitative Disclosures about Market Risk” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.28, 2019.
Item 4.       Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2017.26, 2020. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
There were no changes in our internal control over financial reporting that occurred during the quarter ended September 26, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on the evaluation of our disclosure controls and procedures as of September 30, 2017,26, 2020, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective.
During the quarterly period ended September 30, 2017, there were no changes in the Company’s internal controls over financial reporting that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.
41


Part II.        Other Information
Item 1.       Legal Proceedings
We are engaged in several matters of litigation arising in the ordinary course of our business as a franchisor. Such matters include disputes related to compliance with the terms of franchise and development agreements, including claims or threats of claims of breach of contract, negligence, and other alleged violations by us. As of September 30, 2017, $6.3 million is recorded within other current liabilities in the consolidated balance sheet in connection with all outstanding litigation.
Item 1A.       Risk Factors.
There have been no material changes from the risk factors disclosed in Part I, Item 1A “Risk Factors”"Risk Factors" included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.28, 2019 other than those disclosed in Part II, Item 1A "Risk Factors" included in our Quarterly Report on Form 10-Q for the quarterly period ended March 28, 2020 and the following:
The announcement and pendency of the transactions contemplated by the Merger Agreement may adversely affect our business, financial condition and results of operations.
Uncertainty about the effect of the transactions contemplated by the Merger Agreement on our employees, franchisees, customers, and other parties may have an adverse effect on our business, financial condition and results of operation regardless of whether the proposed transaction is completed. These risks to our business include the following, all of which could be exacerbated by a delay in the completion of the proposed transaction:
the impairment of our ability to attract, retain, and motivate our employees, including key personnel;
the diversion of significant management time and resources towards the completion of the proposed transaction;
difficulties maintaining relationships with customers, franchisees, suppliers, and other business partners;
delays or deferments of certain business decisions by our customers, franchisees, suppliers, and other business partners;
the inability to pursue alternative business opportunities or make appropriate changes to our business because the transaction agreement requires us to conduct our business in the ordinary course of business consistent with past practice and not engage in certain kinds of transactions prior to the completion of the proposed transaction;
litigation relating to the proposed transaction and the costs related thereto; and
the incurrence of significant costs, expenses, and fees for professional services and other transaction costs in connection with the proposed transaction.
Failure to consummate the proposed transaction within the expected timeframe or at all could have a material adverse impact on our business, financial condition and results of operations.
There can be no assurance that the proposed Merger will be consummated. The consummation of the proposed Merger is subject to the satisfaction or waiver of specified closing conditions, including the prior consummation of the Offer, which is conditioned upon (i) there be validly tendered and not validly withdrawn that number of shares representing, together with the number of shares otherwise owned by Inspire or its affiliates, at least a majority of the shares outstanding as of the scheduled expiration of the tender offer, (ii) any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”) having expired or been terminated, and (iii) other customary closing conditions. There can be no assurance that these and other conditions to closing will be satisfied in a timely manner or at all.

The Merger Agreement also provides that the Merger Agreement may be terminated by us or Inspire under certain circumstances, and in certain specified circumstances upon termination of the Merger Agreement we will be required to pay Inspire a termination fee of $268 million. If we are required to make this payment, doing so would materially adversely affect our business, financial condition and results of operations.

A failed transaction may result in negative publicity and a negative impression of us among our customers, franchisees or in the investment community or business community generally. Further, any disruptions to our business resulting from the announcement and pendency of the proposed Merger, including any adverse changes in our relationships with our customers, partners, suppliers and employees, could continue or accelerate in the event of a failed transaction. In addition, if the proposed Merger is not completed, and there are no other parties willing and able to acquire the Company at a price of $106.50 per share or higher, on terms acceptable to us, the share price of our common stock will likely decline to the extent that the current market price of our common stock reflects an assumption that the proposed Merger will be completed. Also, we have incurred, and will continue to incur, significant costs, expenses and fees for professional services and other transaction costs in connection with the proposed Merger, for which we will have received little or no benefit if the proposed Merger is not completed. Many of these fees and costs will be payable by us even if the proposed Merger is not completed and may relate to activities that we would not have undertaken other than to complete the proposed Merger.
42

Item 2.       Unregistered Sales of Equity Securities and Use of Proceeds
The following table contains information regarding purchases of our common stock made during the quarter ended September 30, 2017 by or on behalf of Dunkin’ Brands Group, Inc. or any “affiliated purchaser,” as defined by Rule 10b-18(a)(3) of the Securities Exchange Act of 1934:None.
  Issuer Purchases of Equity Securities
Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs 
Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs(1)
07/02/17 - 07/29/17 260,444
 $52.87
 260,444
 $136,231,545
07/30/17 - 09/02/17 253,436
 52.93
 253,436
 122,817,161
09/03/17 - 09/30/17 
 
 
 122,817,161
Total 513,880
 $52.90
 513,880
  

(1)On October 25, 2017, our board of directors approved a share repurchase program of up to $650.0 million of outstanding shares of our common stock. Under the program, purchases may be made in the open market or in privately negotiated transactions from time to time subject to market conditions. The authorization is valid for a period of two years and replaces our $250.0 million share repurchase program that was approved by our board of directors on May 10, 2017 and which was set to expire two years after such approval.
Item 3.       Defaults Upon Senior Securities
None.
Item 4.       Mine Safety Disclosures
Not Applicable.
Item 5.       Other Information
On November 8, 2017, the BoardNone.
43

Under the terms of the Plan, if the individual participating in the Plan is terminated by the Company or an affiliate for any reason other than, death, Disability or Cause or resigns for Good Reason (each as defined in the Plan) during the 18-month period following a change in control (the “Change in Control Protection Period”), such individual is entitled to receive (i) a

lump sum payment equal to the greater of (a) an amount equal to two weeks of base salary per year of service (capped at one year) or (b) a multiple of the individual’s annual base salary (200% for the CEO and the President of Dunkin’ Donuts U.S. and Canada, and 150% for Senior Vice Presidents, including the CFO and other NEOs), (ii) a lump sum payment equal to 100% of the individual’s target annual cash bonus in the most recent calendar year (or, if greater, the year in which the change in control occurs), and (iii) Company-subsidized continuation of medical and dental benefits for the period specified in the Plan (24 months for the CEO and the President of Dunkin’ Donuts U.S. and Canada, and 18 months for the CFO and other NEOs). The severance benefits provided under the Plan in connection with a qualifying termination are in lieu of any other severance plans, policies or practices of the Company, including employment or severance-benefit agreements.
Change in control is defined in the Plan and includes the acquisition of shares of the Company representing more than 40% of the Company’s capital stock; a merger, consolidation or reorganization where pre-transaction shareholders do not continue to hold at least 60% of the Company’s voting power; a change in the majority of the Board within a two-year period; and a complete liquidation of the Company or a sale or disposition by the Company or all or substantially all of its assets.
The Plan also provides for that, if any payments to be made to an individual under the Plan or otherwise would be subject to the “golden parachute” excise tax rules of the Internal Revenue Code, then the individual will receive either (i) the full amount of the payments or (ii) an amount that is reduced by the minimum necessary to allow the individual to avoid golden parachute excise taxes, whichever results in a greater after-tax amount to the individual. All severance payments under the Plan are conditioned on the individual’s execution and non-revocation of a release of claims in favor of the Company and on the individual agreeing to certain non-competition, non-solicitation and confidentiality obligations in favor of the Company.
No other material changes were made to the severance arrangements of the CEO, CFO and other NEOs, including with respect to equity incentive awards (i.e., the treatment of stock options, restricted stock units and performance restricted stock units in connection with a change in control or the payment of severance under circumstances other than those covered by the Plan).
This summary of the Plan does not purport to be complete and is subject to and qualified in its entirety by reference to the text of the  Plan, which has been filed as Exhibit 10.1 to this Quarterly Report on Form 10-Q.


Item 6.       Exhibits
(a) Exhibits:
Ex. 101.INS*101.INS XBRL Instance Document - the instant document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
Ex. 101.SCH*101.SCH Inline XBRL Taxonomy Extension Schema Document
Ex. 101.CAL*101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
Ex. 101.LAB*101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
Ex. 101.PRE*101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
Ex. 101.DEF*101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
Ex. 104.Cover Page Interactive Data File (embedded within the Inline XBRL document)
 



44

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DUNKIN’ BRANDS GROUP, INC.
 
Date:November 4, 2020By:/s/ Katherine Jaspon
Date:November 8, 2017By:/s/ Nigel Travis
Nigel Travis,
ChairmanKatherine Jaspon
Chief Financial Officer
Principal Financial
and Chief ExecutiveAccounting Officer

3645