STOCK-BASED COMPENSATION

12 Months Ended

Dec. 31, 2025

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

12. STOCK-BASED COMPENSATION

Pursuant to the 2018 Omnibus Equity Incentive Plan the Company grants stock options (“options”), restricted stock units, performance-based stock units and restricted stock. On May 29, 2025, the Company’s stockholders approved an amendment to the Incentive Plan, under which the new aggregate share limit was increased by 1,250,000 shares for a total of 4,500,000 shares. As of December 31, 2025, 525,898 shares were available for grant.

During the years ended December 31, 2025, December 25, 2024 and December 27, 2023, the Company recognized stock-based compensation expense of $5.4 million, $3.9 million and $3.0 million, respectively. These expenses were included in general and administrative expenses consistent with the salary expense for the related grantees in the accompanying consolidated statements of income.

Stock Options

At December 31, 2025, options to purchase 1,233,984 shares of common stock of the Company were outstanding, including 444,364 vested and 789,620 unvested. Unvested options vest over time, or upon the Company’s achievement of annual financial goals. However, the compensation committee of the board of directors, as administrator of the Company’s Equity Incentive Plan, has the power to accelerate the vesting schedule of stock-based compensation, and, generally, in the event of an employee termination in connection with a change in control of the Company, any unvested portion of an award under the plan shall become fully vested. At December 31, 2025, there were no premium options that were granted above the stock price at date of grant. In fiscal 2025, the Company granted 525,493 options, with an exercise price equal to the fair market value of the common stock on the date of grant. The options granted in fiscal 2025 had a three year vesting period. Stock options generally expire ten years from the date of grant. In fiscal 2024, the Company granted 578,473 options, with an exercise price equal to the fair market value of the common stock on the date of grant. The options granted in fiscal 2024 had a four year vesting period. Stock options generally expire 10 years from the date of grant. Changes in options for the years ended December 31, 2025 and December 25, 2024, are as follows:

				Weighted-Average		Aggregate
		Weighted-Average		Contractual Life		Intrinsic Value
	Shares	Exercise Price		Life (Years)		(in thousands)
Outstanding - December 27, 2023	843,320	$	10.13
Grants	578,473		10.53
Exercised	(163,696)		9.50
Forfeited, cancelled or expired	(159,777)		10.66
Outstanding – December 25, 2024	1,098,320	$	10.36
Grants	525,493		10.43
Exercised	(113,307)		9.75
Forfeited, cancelled or expired	(276,522)		10.28
Outstanding – December 31, 2025	1,233,984	$	10.46		7.17	$	435
Vested and expected to vest at December 31, 2025	1,223,897	$	10.46		7.15	$	433
Exercisable at December 31, 2025	444,364	$	10.70		4.32	$	268

The intrinsic value of options exercised, calculated as the difference between the market value on the date of exercise and the exercise price, was $0.2 million, $0.3 million and $0.9 million for fiscal years 2025, 2024 and 2023, respectively.

The Company measures and recognizes compensation expense for the estimated fair value of stock options for employees based on the grant-date fair value of the award. For options that are based on a service requirement, the cost is recognized on a straight-line basis over the requisite service period, usually the vesting period. In order to calculate the Company’s stock options’ fair values and the associated compensation costs for share-based awards, the Company utilizes the Black–Scholes option pricing model and has developed estimates of various inputs including forfeiture rate, expected term, expected volatility, and risk-free interest rate. The forfeiture rate is based on historical rates and reduces the compensation expense recognized. The expected term for options granted is derived using the “simplified” method, in accordance with SEC guidance. The Company calculates the risk-free interest rate using the implied yield for a U.S. Treasury security with constant maturity and a remaining term equal to the expected term of the Company’s employee stock options. The Company does not anticipate paying any cash dividends for the foreseeable future and therefore uses an expected dividend yield of zero for option valuation purposes. Expected volatility is based on the Company’s historical data. Volatility is calculated by taking the historical daily closing equity prices of the Company, prior to the grant date, over a period equal to the expected term.

The weighted-average estimated fair value of employee stock options granted in fiscal 2025 and 2024 was $4.94 and $5.28 per share, respectively, using the Black–Scholes model with the following weighted-average assumptions used to value the option grants:

	December 31, 2025		December 25, 2024
Expected volatility	42.8	%	44.1	%
Risk-free interest rate	4.1	%	4.6	%
Expected term (years)	6.00		6.25
Expected dividends	—		—

As of December 31, 2025, the Company had total unrecognized compensation expense of $3 million related to unvested stock options, which the Company expects to recognize over a weighted average period of 2.3 years.

The above assumptions generally require judgment. If in the future the Company determines that another method is more reasonable, or if another method for calculating these input assumptions is prescribed by authoritative guidance, and, therefore, should be used to estimate volatility or expected term, the fair value calculated for the Company’s stock options could change significantly. Higher volatility and longer expected lives result in an increase to stock-based compensation expense determined at the date of grant.

The Company estimates its forfeiture rate based on an analysis of its actual forfeitures and will continue to evaluate the appropriateness of the forfeiture rate based on actual forfeiture experience, analysis of employee turnover behavior, and other factors. Changes in the estimated forfeiture rate can have a significant effect on reported stock-based compensation expense, as the cumulative effect of adjusting the rate for all expense amortization is recognized in the period the forfeiture estimate is changed. If a revised forfeiture rate is higher than the previously-estimated forfeiture rate, an adjustment is made that will result in a decrease to the stock-based compensation expense recognized in the financial statements. If a revised forfeiture rate is lower than the previously-estimated forfeiture rate, an adjustment is made that will result in an increase to the stock-based compensation expense recognized in the financial statements. The effect of forfeiture adjustments was insignificant in fiscal 2025, 2024 and 2023. The Company will continue to use judgment in evaluating the expected term, volatility, and forfeiture rate related to its stock-based compensation.

Restricted Shares

In fiscal 2025 and 2024, 408,348 and 472,186 restricted share awards were granted, respectively, at the fair market value on the date of grant. The grants in fiscal 2025 vest based on continued service over one year for directors and three years for employees and the grants in fiscal 2024 vest based on continued service over one year for directors and four years for employees.

Changes in restricted shares for the years ended December 31, 2025 and December 25, 2024, are as follows:

		Weighted-Average
	Shares	Fair Value
Unvested shares at December 27, 2023	537,461	$	9.94
Granted	472,186	$	10.42
Released	(258,506)	$	9.86
Forfeited, cancelled, or expired	(84,301)	$	10.91
Unvested shares at December 25, 2024	666,840	$	10.19
Granted	408,348	$	10.42
Released	(286,914)	$	10.38
Forfeited and cancelled	(171,237)	$	10.31
Unvested shares at December 31, 2025	617,037	$	10.22

As of December 31, 2025, there was total unrecognized compensation expense of $4.3 million related to unvested restricted share awards, which the Company expects to recognize over a weighted-average period of 2.13 years.

During fiscal 2025, the Company granted 161,229 restricted stock units subject to performance-based vesting conditions based on Adjusted EBITDA and restaurant contribution margin to certain officers. Each performance-based restricted stock unit ("PSU") has a grant date fair value of $10.42 and a vesting period from the grant date through the date the audit of the Company's fiscal 2027 financial results is expected to be completed. The fair value of each PSU is expensed based on management's current estimate of the level that the performance goal will be achieved. As of December 31, 2025, based on the target level of performance, the total unrecognized compensation expense related to unvested performance stock units was $1.1 million, which is expected to be recognized over a weighted-average period of 2.05 years. Changes in performance-based shares for the years ended December 31, 2025 and December 25 2024, are as follows:

		Weighted-Average
	Shares	Fair Value
Unvested shares at December 27, 2023	—	$	—
Granted	41,537	$	9.63
Released	—	$	—
Forfeited, cancelled, or expired	—	$	—
Unvested shares at December 25, 2024	41,537	$	9.63
Granted	161,229	$	10.42
Released	(28,973)	$	9.63
Forfeited and cancelled	(35,988)	$	10.42
Unvested shares at December 31, 2025	137,805	$	10.34