(Address, including zip code, and telephone number including area code, of registrant’s principal executive offices)

(name, address, including zip code, and telephone number, including area code, of agent for service)

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement and the satisfaction or waiver of all other conditions to the closing of the mergers described herein. ☐

If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. ☐

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

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:

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) ☐
Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) ☐

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the registration statement shall become effective or such date as the Commission, acting pursuant to such Section 8(a), may determine.

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT OFFER THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

We are issuing shares of our common stock, par value $0.01 per share, to the existing holders of common stock of our current parent company, Carrols Restaurant Group, Inc. (“Carrols”), in connection with the transactions described in this prospectus. Prior to this offering, there has been no public market for our common stock. Holders of common stock of Carrols will receive, at no cost, one share of our common stock in exchange for each share of common stock of Carrols held by such stockholders. On April 8, 2019, 37,007,107 shares of common stock of Carrols were outstanding. Upon completion of the transactions described in this prospectus, all shares of common stock of Carrols will be cancelled. We intend to apply to list our common stock, as successor to Carrols, on The NASDAQ Global Market and, upon the completion of the mergers described in this prospectus, our common stock will trade under the symbol under which common stock of Carrols currently trades, “TAST”.

Investing in our common stock involves risks. See “Risk Factors” on page 23.

Neither the Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Throughout this prospectus, unless the context requires otherwise, “we,” “us”, “our” and “NewCRG” refer to Carrols Holdco Inc., a Delaware corporation and the issuer of the shares offered hereby, and its future wholly owned subsidiary, Carrols, as well as Carrols’ direct and indirect subsidiaries. “Carrols” refers to Carrols Restaurant Group, Inc., a Delaware corporation and our current public parent company, individually or collectively with its consolidated subsidiaries not formed for purposes of the acquisitions described herein, as the context may require. Any reference to “Carrols Corp” refers to Carrols’ wholly owned subsidiary, Carrols Corporation, a Delaware corporation, and its consolidated subsidiary, unless otherwise indicated or the context otherwise requires. Any reference to “Carrols LLC” refers to the wholly owned subsidiary of Carrols Corp, Carrols LLC, a Delaware limited liability company, unless otherwise indicated or the context otherwise requires. Any reference to “Republic Foods, Inc.” refers to Carrols LLC’s wholly owned subsidiary, Republic Foods, Inc., a Maryland corporation unless otherwise indicated or the context otherwise requires. In addition, unless the context requires otherwise, references to “our Board” and “our common stock” refer to the board of directors and the common stock of our public parent company at the relevant time. Any reference to “Cambridge” refers to Cambridge Franchise Holdings, LLC, individually or together with its consolidated subsidiaries not formed for purposes of the acquisitions described herein unless otherwise indicated or the context otherwise requires. Any reference to “New CFH” refers to Cambridge’s wholly owned subsidiary, New CFH, LLC, a Delaware limited liability, and its consolidated subsidiaries, unless otherwise indicated or the context otherwise requires. When we use the terms “we,” “us” or “our” with respect to Cambridge or its business, or express “beliefs” with respect thereto, we have based those statements or beliefs on our general knowledge of the industries involved, the results of our due diligence investigations of Cambridge and other information provided to us by the management of Cambridge.

Carrols uses a 52- or 53- week fiscal year ending on the Sunday closest to December 31. Carrols fiscal years ended December 28, 2014, January 1, 2017, December 31, 2017 and December 30, 2018 each contained 52 weeks. Carrols fiscal year ended January 3, 2016 contained 53 weeks.

Throughout this prospectus, any reference to “BKC” refers to Burger King Corporation and its parent company, Restaurant Brands International Inc. (“RBI”). Any reference to “PLK” refers to Popeyes Louisiana Kitchen, Inc. and its parent company, RBI.

BURGER KING® is a registered trademark and service mark and WHOPPER® is a registered trademark of BKC. Popeyes® is a registered trademark and service mark of PLK. Neither BKC or PLK nor any of their respective subsidiaries, affiliates, officers, directors, agents, employees, accountants or attorneys are in any way participating in, approving or endorsing this offering, any representations made in connection with this offering or any of the underwriting (if any) or accounting procedures used in this offering. The grant by BKC or PLK of any franchise or other rights to Carrols or Cambridge is not intended as, and should not be interpreted as, an express or implied approval, endorsement or adoption of any statement regarding actual or projected financial or other performance which may be contained in the prospectus. All financial information and other projections in this prospectus are our sole responsibility.

Any review by BKC or PLK of this prospectus or the information included herein has been conducted solely for the benefit of BKC or PLK to determine conformance with BKC or PLK internal policies, and not to benefit or protect any other person. No investor should interpret such review by BKC or PLK as an internal approval, endorsement, acceptance or adoption of any representation, warranty, covenant or projection contained in this prospectus.

The enforcement or waiver of any obligation of Carrols or Cambridge under any agreement between Carrols and BKC or BKC affiliates or between Cambridge and BKC or PLK and their respective affiliates is a matter of BKC, PLK or their respective affiliates’ sole discretion. No investor should rely on any representation, assumption or belief that BKC, PLK or their respective affiliates will enforce or waive particular obligations of ours under those agreements.

In this prospectus, we refer to information, forecasts and statistics regarding the restaurant industry and to information, forecasts and statistics from Nation’s Restaurant News, the U.S. Census Bureau and the U.S. Department of Agriculture. Unless otherwise indicated, information regarding BKC in this prospectus has been made publicly available by BKC and information regarding PLK in this prospectus has been made publicly available by PLK. The information, forecasts and statistics we have used may reflect rounding adjustments.

PROSPECTUS SUMMARY

This summary highlights selected information contained elsewhere in this prospectus and does not contain all of the information that may be important to you. You should carefully read the entire prospectus, including the information in the sections entitled “Risk Factors” and “Financial Statements,” before making an investment decision.

The Companies

Carrols Restaurant Group, Inc.
968 James Street
Syracuse, New York 13203
(315) 424-0513

Carrols is one of the largest restaurant companies in the United States and has been operating restaurants for more than 55 years. Carrols is the largest Burger King franchisee in the United States, based on number of restaurants, and has operated Burger King restaurants since 1976. As of December 30, 2018, we owned and operated 849 Burger King restaurants located in 18 Northeastern, Midwestern and Southeastern states. Burger King restaurants feature the popular flame-broiled Whopper sandwich, as well as a variety of hamburgers, chicken and other specialty sandwiches, french fries, salads, breakfast items, snacks, smoothies, frappes and other offerings. Carrols’ believes that its size, seasoned management team, extensive operating infrastructure, experience and proven operating disciplines differentiate it from many of its competitors as well as many other Burger King operators. For the fiscal year ended December 30, 2018, Carrols’ restaurants generated total revenues of $1,179.3 million, our comparable restaurant sales increased 3.8% and our average annual restaurant sales for all restaurants were approximately $1.45 million per restaurant.

During 2018, Carrols acquired a total of 44 restaurants from other franchisees in four separate transactions. During 2017, Carrols acquired a total of 64 restaurants from other franchisees in three separate transactions. In 2016, Carrols acquired 56 restaurants in seven separate transactions.

In connection with the consummation of the transactions described in this prospectus, Carrols will merge with and into a wholly owned subsidiary of NewCRG and be renamed “Carrols Holdco Inc.”

Carrols Holdco Inc.
968 James Street
Syracuse, New York 13203
(315) 424-0513

NewCRG is a direct, wholly owned subsidiary of Carrols formed solely to effect the transactions described in this prospectus and has not conducted any business to date. Pursuant to the Agreement and Plan of Merger, dated as of February 19, 2019 (the “Merger Agreement”), by and among Carrols, NewCRG, GRC MergerSub Inc., GRC MergerSub LLC, Cambridge Franchise Partners, LLC (“CFP”), Cambridge and New CFH described in this prospectus, NewCRG will, by operation of law, become the parent company of Carrols and New CFH, each of which will survive as a wholly owned subsidiary of NewCRG. Thereafter, NewCRG will be renamed “Carrols Restaurant Group, Inc.”

GRC MergerSub Inc.
968 James Street
Syracuse, New York 13203
(315) 424-0513

GRC MergerSub Inc. (“Carrols Merger Sub”) is a direct, wholly owned subsidiary of NewCRG formed solely to effect the transactions described in this prospectus and has not conducted and will not conduct any business during any period of its existence. Pursuant to the Merger Agreement, Carrols Merger Sub will merge with and into Carrols, with Carrols continuing as the surviving corporation and a wholly owned subsidiary of NewCRG. Thereafter, Carrols will be renamed “Carrols Holdco Inc.”

GRC MergerSub LLC
968 James Street
Syracuse, New York 13203
(315) 424-0513

GRC MergerSub LLC (“Carrols Acquisition Sub”) is a direct, wholly owned subsidiary of NewCRG formed solely to effect the transactions described in this prospectus and has not conducted and will not conduct any business during any period of its existence. Pursuant to the Merger Agreement, Carrols Acquisition Sub will merge with and into New CFH, with New CFH as the surviving entity and a wholly owned subsidiary of NewCRG.

Cambridge Franchise Holdings, LLC

8010 Stage Hills Blvd.

Bartlett, Tennessee 38133

(901) 930-0700

Cambridge is a fast-growing, privately held restaurant franchisee company based in Memphis, Tennessee. Cambridge acquired its first Burger King restaurants in 2014 and added the Popeyes brand to its portfolio of restaurants in 2018.

Cambridge grows its business through strategic investments in new restaurant development and restaurant acquisitions. During the past two years, Cambridge has built 33 new restaurants and acquired 74 restaurants throughout the Southeast. As of December 31, 2018, Cambridge owned and operated 166 Burger King restaurants and 55 Popeyes restaurants located throughout Alabama, Arkansas, Indiana, Kentucky, Louisiana, Mississippi, Missouri, North Carolina, Tennessee and Virginia, as well as six gas stations and convenience stores.

Cambridge owns and operates its franchised restaurants and its convenience stores through its subsidiaries, the collective business of all of which (other than New CFH) is referenced in this prospectus as the “Cambridge Business.” Carrols will acquire the Cambridge Business in the Cambridge Merger. Immediately prior to the closing of the Cambridge Merger, Cambridge will contribute the Cambridge Business to New CFH for the purpose of effecting the Cambridge Merger.

Pursuant to the Merger Agreement, Cambridge will, by operation of law, become a stockholder of NewCRG.

New CFH, LLC
8010 Stage Hills Blvd.

Bartlett, Tennessee 38133
(901) 930-0700

New CFH is a direct, wholly owned subsidiary of Cambridge formed solely to effect the transactions described in this prospectus and has not conducted any business to date. Pursuant to the Merger Agreement, Carrols Acquisition Sub will merge with and into New CFH, with New CFH continuing as the surviving entity and a wholly owned subsidiary of NewCRG.

The Transactions

In connection with a reorganization of its holding company structure and to complete the acquisition of New CFH, Carrols has formed NewCRG, and NewCRG has formed Carrols Merger Sub and Carrols Acquisition Sub, which will merge with and into Carrols and New CFH, respectively.

Pursuant to a contribution agreement to be entered into by and among Cambridge, New CFH, Matthew Perelman, Neil Shah and Alex Sloane and effective immediately prior to the closing of the Cambridge Merger (as defined below), (i) Cambridge will transfer to New CFH all of the limited liability company units of its subsidiaries (the “Contributed Equity”) and all of its assets, properties and rights other than (a) the Contributed Equity and (b) any asset, property or right that is not used primarily in or does not relate primarily to the business of owning, acquiring, leasing, divesting, developing, operating and managing restaurants and convenience stores and activities and operations incidental thereto (the “Retained Assets”), (ii) each of Messrs. Perelman, Shah and Sloane will assign to New CFH his interest in all guarantees given by such individual in support of any obligation of Cambridge or of any subsidiary of Cambridge (the “Personal Guarantor Guarantees”) and (iii) New CFH will acquire and assume all of the obligations of CFH and of each of Messrs. Perelman, Shah and Sloane under the Personal Guarantor Guarantees other than liabilities that primarily relate to or arise out of the Retained Assets and any Personal Guarantor Guarantees in support of any obligation of Cambridge or any of its subsidiaries that is not primarily related to the business of owning, acquiring, leasing, divesting, developing, operating and managing restaurants and convenience stores and activities and operations incidental thereto (such transactions, the “Cambridge Reorganization”).

Upon satisfaction or waiver of the conditions to the transactions specified in the Merger Agreement, Carrols Merger Sub will merge with and into Carrols with Carrols as the surviving entity (the “Carrols Merger”). As a result of the Carrols Merger, Carrols will, by operation of law, become a wholly owned subsidiary of NewCRG. Following the consummation of the Carrols Merger, NewCRG will be renamed “Carrols Restaurant Group, Inc.” The officers and directors of NewCRG immediately after consummation of the Carrols Merger will be the same as the officers and directors of Carrols immediately prior to the consummation of the Carrols Merger. In addition, upon consummation of the Carrols Merger, the certificate of incorporation (except for certain technical matters) and by-laws of NewCRG will be the same as the certificate of incorporation and by-laws of Carrols immediately prior to the consummation of the Carrols Merger and Carrols’ certificate of incorporation and bylaws will be amended to remove the classified board of directors and for certain technical matters. Each share of (i) common stock, par value $0.01 per share, of Carrols (“Carrols Common Stock”) outstanding immediately prior to the consummation of the Carrols Merger will be converted into one share of common stock, par value $0.01 per share, of NewCRG (“NewCRG Common Stock”) and (ii) each share of Series B Convertible Preferred Stock, par value $0.01 per share, of Carrols (the “Carrols Series B Preferred Stock”) outstanding immediately prior to the consummation of the Carrols Merger will be converted into one share of Series B Convertible Preferred Stock, par value $0.01 per share, of NewCRG (the “NewCRG Series B Preferred Stock”). NewCRG Common Stock will be listed on the NASDAQ Global Market and will trade under Carrols’ current ticker symbol “TAST”. Holders of Carrols Series B Preferred Stock immediately prior to the consummation of the Carrols Merger will not be required to exchange their certificates representing shares of Carrols Series B Preferred Stock for certificates representing shares of NewCRG Series B Preferred Stock; certificates representing shares of Carrols Series B Preferred Stock will continue to represent an equal number of shares of NewCRG Series B Preferred Stock. Holders of Carrols Common Stock immediately prior to the consummation of the Carrols Merger will not be required to exchange their certificates representing shares of Carrols Common Stock for certificates representing shares of NewCRG Common Stock. The certificates representing shares of Carrols Common Stock will continue to represent an equal number of shares of NewCRG Common Stock. Each person entered as the owner in a book entry that, immediately prior to the Carrols Merger, represented any outstanding shares of Carrols Common Stock shall be deemed to have received an equivalent number of shares of NewCRG Common Stock.

Carrols Acquisition Sub will merge with and into New CFH, with New CFH as the surviving entity (the “Cambridge Merger”). As a result of the Cambridge Merger, New CFH will, by operation of law, become a wholly owned subsidiary of NewCRG.

The Carrols Merger and the Cambridge Merger are sometimes collectively referred to as the “Mergers.”

Merger Consideration

The consideration to be paid to Cambridge by NewCRG to acquire all of the equity of New CFH in the Cambridge Merger (the “Cambridge Merger Consideration”) will consist of (i) a number of shares of NewCRG Common Stock equal to 19.9% of the number of shares of NewCRG Common Stock outstanding immediately prior to the issuance of such shares of NewCRG Common Stock to Cambridge (such newly issued shares, the “NewCRG Investor Shares”) and (ii) 10,000 shares of Series C Convertible Preferred Stock, par value $0.01 per share, of NewCRG (the “NewCRG Series C Preferred Stock”). At the effective time of the Cambridge Merger, Cambridge’s equity interest in New CFH will automatically be converted into the right to receive the Cambridge Merger Consideration.

NewCRG Series C Convertible Preferred Stock

In connection with the closing of the Cambridge Merger, NewCRG will issue to Cambridge 10,000 shares of NewCRG Series C Preferred Stock pursuant to a Certificate of Designations (the “NewCRG Series C Certificate of Designations”) which will be filed with the Delaware Secretary of State immediately prior to the completion of the Mergers. The NewCRG Series C Preferred Stock shall (i) accrue a dividend (the “NewCRG Series C Dividend”) of 9% per annum (accrued on a daily basis) that will be payable by increasing the Stated Value (as defined in the NewCRG Series C Certificate of Designations) per share of NewCRG Series C Preferred Stock every six months from the date of issuance (a “NewCRG Series C Dividend Payment Date”) provided that if the NewCRG Series C Preferred Stock is converted into NewCRG Common Stock prior to a NewCRG Series C Dividend Payment Date, any accrued and unpaid dividend since the date of the prior NewCRG Series C Dividend Payment Date shall be forfeited upon conversion, (ii) be subject to certain restrictions prohibiting the conversion of NewCRG Series C Preferred Stock and the issuance of shares of NewCRG Common Stock upon conversion (the “Issuance Restriction”), unless and until the stockholders of NewCRG approve such issuance and conversion (the “Stockholder Approval”), as further described below, (iii) be initially (at the Effective Time, as defined in the Merger Agreement) convertible into a number of shares of NewCRG Common Stock equal to the quotient of (1) the difference of (A) the Equity Consideration Amount and (B) the product of (x) the number of NewCRG Investor Shares and (y) 13.5 and (2) 13.5, subject to adjustment pursuant to certain anti-dilution provisions set forth in the NewCRG Series C Certificate of Designations and (iii) be automatically convertible into shares of NewCRG Common Stock upon Stockholder Approval (as defined below), subject to compliance with any applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”). The “Equity Consideration Amount” means the difference of (a) $200,000,000 and (b) the amount, if any, by which Net Debt (as defined in the Merger Agreement) exceeds $115,000,000. Pursuant to the Merger Agreement, NewCRG must seek the Stockholder Approval at its next annual meeting of stockholders to be held after the closing of the Mergers or at subsequent meetings of stockholders, if necessary, until the Stockholder Approval is obtained. The NewCRG Series C Preferred Stock will rank senior to the NewCRG Common Stock and NewCRG Series B Preferred Stock with respect to (i) any voluntary or involuntary liquidation, dissolution or winding-up of NewCRG, (ii) the consummation of a merger or consolidation in which the stockholders of NewCRG prior to such transaction own less than a majority of the voting securities of (a) the entity surviving or resulting from such transaction or (b) if the surviving or resulting entity is a wholly owned subsidiary of another corporation or entity immediately following such transaction, the parent corporation or entity of such surviving or resulting entity, or (iii) the sale, distribution or other disposition of all or substantially all of NewCRG’s assets (on a consolidated basis). In addition, the NewCRG Series C Preferred Stock will receive dividends on an as converted basis without regard to the Issuance Restriction.

The prior consent of holders of at least a majority of the shares of NewCRG Series C Preferred Stock then outstanding is required to, among other things, (i) (A) authorize, create, designate, establish or issue an increased number of shares of NewCRG Series C Preferred Stock or any other class or series of capital stock ranking senior to or on parity with the NewCRG Series C Preferred Stock as to dividends or upon liquidation or (B) reclassifying any shares of NewCRG Common Stock into shares of capital stock having preference or priority as to dividends or upon liquidation senior to or on parity with such preference or priority of the NewCRG Series C Preferred Stock, (ii) amend the NewCRG Series C Certificate of Designations or (iii) amend NewCRG’s organizational documents in a manner adverse to the rights, powers or preferences of the NewCRG Series C Preferred Stock or holders of NewCRG Series C Preferred Stock in their capacity as such.

Registration Rights and Stockholders’ Agreement

Simultaneously with the closing of the Mergers, NewCRG and Cambridge will enter into a Registration Rights and Stockholders’ Agreement (the “Registration Rights and Stockholders’ Agreement”) pursuant to which NewCRG will agree to file one shelf registration statement on Form S-3 covering the resale of at least 30% of the NewCRG Investor Shares, the shares of NewCRG Common Stock issuable upon conversion of the NewCRG Series C Preferred Stock (the “Conversion Common Stock”) and any shares of NewCRG Common Stock issued or issuable to Cambridge with respect to the NewCRG Common Stock and the Conversion Common Stock by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger consolidation or other reorganization (collectively, the “Registrable Shares”) upon written request of Cambridge at any time after the 24-month anniversary of the closing of the Mergers. The Registration Rights and Stockholders’ Agreement also provides that Cambridge may make up to three demands to register, in connection with an underwritten public offering of the Registrable Shares, for the resale of at least 33.3% of the Registrable Shares held by Cambridge on the date of the closing of the Mergers upon the written request by Cambridge at any time following the 24th month anniversary of the closing of the Mergers. The Registration Rights and Stockholders’ Agreement also provides that whenever NewCRG registers shares of NewCRG Common Stock under the Securities Act of 1933, as amended (the “Securities Act”) (other than on a Form S-4 or Form S-8), then Cambridge will have the right as specified therein to register its shares of NewCRG Common Stock as part of that registration. The registration rights under the Registration Rights and Stockholders’ Agreement are subject to the rights of the managing underwriters, if any, to reduce or exclude certain shares owned by Cambridge from an underwritten registration under certain circumstances and, with respect to “piggyback” registrations, the rights granted to certain current and former executive officers of Carrols pursuant to a registration rights agreement entered into by Carrols and such executive officers on March 27, 1997. Except as otherwise provided, the Registration Rights and Stockholders’ Agreement requires NewCRG to pay for all costs and expenses incurred in connection with the registration of the Registrable Securities, other than underwriting discounts, selling commissions, stock transfer taxes and the fees and expenses of Cambridge’s legal counsel, provided that NewCRG will pay the reasonable fees and expenses of one counsel for Cambridge up to $50,000 in the aggregate for any registration thereunder, subject to the limitations set forth therein. NewCRG will also agree to indemnify Cambridge against certain liabilities, including liabilities under the Securities Act.

For the period that is two years after the date of the Registration Rights and Stockholders’ Agreement, Cambridge may not, without the approval of a majority of the directors of NewCRG other than the Cambridge Directors (as defined below), directly or indirectly transfer any shares of NewCRG Series C Preferred Stock (or any securities convertible into or exercisable or exchangeable for any such shares), NewCRG Investor Shares (or any securities convertible into or exercisable or exchangeable for any such shares), or Conversion Common Stock (or any securities convertible into or exercisable or exchangeable for any shares) held by Cambridge provided that such transfer restriction will not apply to (i) any transfer of NewCRG Investor Shares or Conversion Common Stock yielding up to $6.0 million in gross aggregate proceeds, and (ii) transfers to certain identified affiliates of Cambridge (such affiliates, “Permitted Affiliates”).

Until the date that Cambridge and the Permitted Affiliates collectively hold shares of NewCRG Common Stock and Conversion Common Stock constituting less than 14.5% of the total number of outstanding shares of NewCRG Common Stock (the “Cambridge Director Step-Down Date”), Cambridge has the right to nominate two individuals as director nominees of NewCRG, which shall initially be Matthew Perelman and Alex Sloane, and the NewCRG Board of Directors (the “NewCRG Board”) will take all necessary action to support the election and appointment of such director nominees as directors of the NewCRG Board (each such director, a “Cambridge Director”). From the Cambridge Director Step-Down Date to the date that Cambridge and the Permitted Affiliates collectively hold shares of NewCRG Common Stock and Conversion Common Stock constituting less than 10% of the total number of outstanding shares of NewCRG Common Stock (the “Cambridge Director Cessation Date”), Cambridge has the right to nominate one individual as a director nominee of NewCRG and NewCRG and the NewCRG Board will take all necessary action to support the election and appointment of such director nominee as a director of the NewCRG Board. Until the Cambridge Director Cessation Date, NewCRG and the NewCRG Board will act to ensure that the number of Cambridge Directors serving on each committee of the NewCRG Board is, to the extent possible proportional to the number of Cambridge Directors serving on the NewCRG Board and that at least one Cambridge Director serves on each of the Compensation Committee, the Finance Committee and the Nominating and Corporate Governance Committee of the NewCRG Board at all times, provided that such Cambridge Directors meet the requirements to serve on such committee under the rules and regulations of NASDAQ, the Securities Act and the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Until the Cambridge Director Cessation Date, at each annual or special meeting of the NewCRG stockholders at which any person is subject to election or re-election as a member of the NewCRG Board, Cambridge has agreed to cause to be present for quorum purposes all shares of NewCRG Investor Common Stock and Conversion Common Stock that Cambridge and its Permitted Affiliates have the right to vote as of the record date for such meeting of the NewCRG stockholders, and vote or cause to be voted all such shares of NewCRG Investor Common Stock and Conversion Common Stock in favor of the election of all of the director nominees recommended for election by the NewCRG Board, and against the removal of any such director (unless proposed by NewCRG).

Area Development and Remodeling Agreement

Carrols LLC, Carrols, Carrols Corp and BKC have entered into an Area Development and Remodeling Agreement (the “Area Development Agreement”) which will be subject to the closing of the transactions contemplated by the Merger Agreement, and effective and have a term commencing on the date of the closing of the transactions contemplated by the Merger Agreement and ending on September 30, 2024. Pursuant to the Area Development Agreement, BKC will assign to Carrols LLC its right of first refusal under its franchise agreements with its franchisees to purchase all of the assets of a Burger King restaurant or all or substantially all of the voting stock of the franchisee, whether direct or indirect, on the same terms proposed between such franchisee and a third party purchaser (the “ADA ROFR”), in 16 states, which include Arkansas, Indiana, Kentucky, Louisiana, Maine, Maryland, Michigan, Mississippi, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont and Virginia (subject to certain exceptions for certain limited geographic areas within certain states) and a limited number of counties in four additional states (collectively, the “ADA DMAs”) until the date that Carrols LLC has acquired more than an aggregate of 500 Burger King restaurants. The continued assignment of the ADA ROFR is subject to suspension or termination in the event of non-compliance by Carrols LLC with certain terms as set forth in the Area Development Agreement. In addition, pursuant to the Area Development Agreement, BKC will grant Carrols LLC franchise pre-approval (the “Franchise Pre-Approval”) to build new Burger King restaurants or acquire Burger King restaurants from Burger King franchisees in the ADA DMAs until the date that Carrols LLC acquires, in the aggregate, more than 500 Burger King restaurants inside or outside of the ADA DMAs. The grant by BKC to Carrols LLC of Franchise Pre-Approval to develop new Burger King restaurants in the ADA DMA’s is a non-exclusive right, subject to customary BKC franchise, site and construction approval as specified in the Area Development Agreement. Carrols LLC will pay BKC $3.0 million for the ADA ROFR payable in four equal installment payments over the course of one year. In the event that Carrols LLC fails to meet the Remodel and Upgrade Obligations (as defined below), BKC has the right, in its sole discretion, to suspend the Franchise Pre-Approval and the right to receive an assignment of the ADA ROFR for the calendar year immediately following the remodel year with respect to which such occurred until such default is cured.

Pursuant to the Area Development Agreement, Carrols LLC will agree to open, build and operate 200 new Burger King restaurants including seven Burger King restaurants by September 30, 2019, 32 additional Burger King restaurants by September 30, 2020, 41 additional Burger King restaurants by September 30, 2021, 41 additional Burger King restaurants by September 30, 2022, 40 additional Burger King restaurants by September 30, 2023 and 39 additional Burger King restaurants by September 30, 2024, subject to and in accordance with the terms of the Area Development Agreement (such obligation the “Development Obligations”). In addition, Carrols LLC will agree to remodel or upgrade 748 Burger King restaurants to BKC’s Burger King of Tomorrow restaurant image, including 90 Burger King restaurants by September 30, 2019, 130 additional Burger King restaurants by September 30, 2020, 118 additional Burger King restaurants by September 30, 2021, 131 additional Burger King restaurants by September 30, 2022, 138 additional Burger King restaurants by September 30, 2023 and 141 additional Burger King restaurants by September 30, 2024, subject to and in accordance with the terms of the Area Development Agreement (such obligation the “Remodel and Upgrade Obligations”) and BKC will agree to contribute $10 million to $12 million for remodels of approximately 50 to 60 Burger King restaurants in 2019 and 2020, most of which have already been remodeled to the 20/20 image and where BKC is the landlord on the lease for such Burger King restaurants owned and operated by Carrols LLC or an affiliate.

On October 1 of each year following the commencement date of the Area Development Agreement, Carrols LLC will pay BKC pre-paid franchise fees in the following amounts, which will be applied to new Burger King restaurants opened and operated by Carrols LLC: (a) $350,000 on the commencement date of the Area Development Agreement, (b) $1,600,000 on October 1, 2019, (c) $2,050,000 on October 1, 2020, (d) $2,050,000 on October 1, 2021, (e) $2,000,000 on October 1, 2022 and (f) $1,950,000 on October 1, 2023. In the event that Carrols LLC fails to comply with the Development Obligations, BKC has the right, in its sole discretion, to receive and retain, without obligation for any refund to Carrols LLC, all unapplied installments of prepaid franchise fees paid or due on or before the date of the such default and Carrols LLC will be required to pay additional franchise fees upon the opening of any new restaurant opened after the expiration of the applicable cure period, until such default is cured.

The base franchise fee payable by Carrols LLC to BKC pursuant to the Area Development Agreement for each franchise agreement is the greater in each category of (a) the then-current amount charged by BKC in the U.S. for monthly royalty, monthly advertising contribution, and franchise fees, and (b) (i) royalty percentage in an amount equal to 4.5% of monthly gross sales; (ii) advertising contribution percentage in the amount of 4.0% of monthly gross sales; and (iii) franchise fees in an amount equal to $50,000 for free standing, in-line, and food court restaurant formats for a 20-year term. For each franchise agreement entered into by BKC and Carrols LLC on or after January 1, 2019 pursuant to the Area Development Agreement (each such agreement, a “New Franchise Agreement”), the royalty percentage will be reduced by 1% and the advertising contribution percentage will be reduced by 3% for the first four years of such New Franchise Agreement, provided that such discounts will not apply at any time that Carrols LLC is in default of the Development Obligations and has not cured such default.

Carrols LLC, in its sole discretion, may elect to enter into a successor franchise agreement in connection with all the restaurants it remodels or upgrades pursuant to the Remodel and Upgrade Obligations, for all such restaurants which (i) have more than three (3) years remaining on the term of the franchise agreement and (ii) the remodel or upgrade is completed by the applicable deadline and cure period (each such agreement, a “Successor Franchise Agreement”) in accordance with the Area Development Agreement. Under Successor Franchise Agreements which relate to restaurants which have been remodeled (but not those which relate to restaurants which have been upgraded), the royalty percentage will be reduced by 0.75% of monthly gross sales and the advertising contribution percentage will be reduced by 0.75% of monthly gross sales for the first five years of such Successor Franchise Agreement.

The Area Development Agreement when effective, will supersede the Operating Agreement dated as of May 30, 2012, as amended, between Carrols LLC and BKC.

Commitment Letter

In connection with Carrols’ entry into the Merger Agreement, Carrols entered into an amended and restated commitment letter (the “Commitment Letter”) with Wells Fargo Bank, National Association (“Wells Fargo Bank”), Wells Fargo Securities, LLC (“Wells Fargo Securities”), Coöperatieve Rabobank U.A., New York Branch (“Rabobank”), Manufacturers and Traders Trust Company (“M&T Bank”), SunTrust Bank (“SunTrust Bank” and together with Wells Fargo Bank, Rabobank and M&T Bank, the “Lenders”) and SunTrust Robinson Humphrey, Inc. (“STRH”), pursuant to which the Lenders committed to provide $500.0 million in debt financing (the “Financing”) to NewCRG. Wells Fargo Bank will act as the sole administrative agent. Wells Fargo Securities, Rabobank, M&T Bank and STRH will act as joint bookrunners and joint lead arrangers (the “Joint Lead Arrangers”).

Pursuant to which and subject to the satisfaction or waiver of the conditions set forth in the Commitment Letter, the Lenders have committed to provide to NewCRG, substantially contemporaneously with the consummation of the Mergers, senior secured credit facilities in an aggregate principal amount of $500.0 million, consisting of (i) a term loan B facility in an aggregate principal amount of $400.0 million (the “Term Loan B Facility”) and (ii) a revolving credit facility (including a sub-facility for standby letters of credit) in an aggregate principal amount of $100.0 million (the “New Revolving Credit Facility” and, together with the Term Loan B Facility, the “New Senior Credit Facilities”), all on the terms set forth in the Commitment Letter.

The Joint Lead Arrangers have secured commitments for the New Senior Credit Facilities from a syndicate of banks, financial institutions and other entities identified by Wells Fargo Securities in consultation with NewCRG. Notwithstanding the foregoing, the successful syndication of the New Senior Credit Facilities does not constitute a condition precedent to the funding thereof.

In connection with the syndication of the New Senior Credit Facilities, NewCRG expects the New Senior Credit Facilities to be in an aggregate principal amount of $550.0 million consisting of (i) a Term Loan B Facility in an aggregate principal amount of $425.0 million and (ii) a New Revolving Credit Facility in the aggregate principal amount of $125.0 million although there can be no assurance in this regard. Borrowings under the New Senior Credit Facilities are expected to bear interest, at NewCRG’s election, at a rate per annum equal to (i) the Base Rate (as defined in the Commitment Letter) plus 2.25% or (b) LIBOR (as defined in the Commitment Letter) plus 3.25% although there can be no assurance in this regard. The Financing also will be subject to certain fees, including arrangement fees, upfront fees (including an expected original issue discount of 0.50%), agent fees, unused commitment fees and mandatory prepayment premiums.

The proceeds of the Term Loan B Facility will be used to refinance the existing indebtedness of (i) Carrols and (ii) New CFH and its subsidiaries, in each case, to the extent provided in the Commitment Letter (collectively, the “Refinancing”) and the payment of fees and expenses in connection with the transactions contemplated by the Merger Agreement and the Commitment Letter. The proceeds of the Revolving Credit Facility will be used to finance (i) the Refinancing, (ii) the payment of fees and expenses incurred in connection with the transactions contemplated by the Merger Agreement and the Commitment Letter and (iii) ongoing working capital and for other general corporate purposes of NewCRG and its subsidiaries, including permitted acquisitions and required expenditures under development agreements.

All borrowings under the Term Loan B Facility will be made in a single drawing on the date of the closing of the Mergers. Repayments and prepayments of the Term Loan B Facility may not be re-borrowed. Regularly scheduled principal payments will be required on the Term Loan B Facility, as set forth in the Commitment Letter. The Term Loan B Facility will amortize in equal quarterly installments in an aggregate annual amount equal to 1% of the original principal amount of the Term Loan B Facility with the remainder due on the Term Loan B Facility maturity date. The Term Loan B Facility will mature seven years after the date of the closing of the Mergers and the New Senior Credit Facilities, while the New Revolving Credit Facility will mature five years after the date of the closing of the Mergers and the New Senior Credit Facilities.

As contemplated by the Commitment Letter, loans under the New Senior Credit Facilities may be prepaid and unused commitments under the New Revolving Credit Facility may be reduced at any time, in whole or in part, at the option of the NewCRG, upon notice and in minimum principal amounts and in multiples to be agreed upon, without premium or penalty (except as set forth in the Commitment Letter). Any optional prepayment of the Term Loan B Facility or any incremental term loan facility will be applied as directed by NewCRG.

The Commitment Letter provides that subject to certain customary exceptions, exclusions, limitations and thresholds to be set forth in the definitive documentation related to the New Senior Credit Facilities, (a) the New Senior Credit Facilities will be guaranteed by each existing and subsequently acquired or formed direct and indirect material domestic restricted subsidiary of NewCRG (each a “Guarantor” and together with NewCRG, the “Credit Parties”), and (b) the obligations of the Credit Parties under the New Senior Credit Facilities will be secured by first priority security interests in and liens on substantially all of the assets of the Credit Parties.

Once funded, the New Senior Credit Facilities documentation will contain affirmative and negative covenants customarily applicable to senior secured credit facilities, including the requirement that the NewCRG and its subsidiaries maintain a maximum Total Net Leverage Ratio (as defined in the Commitment Letter) (such requirement, the “Financial Covenant”). The Commitment Letter provides that the Financial Covenant shall be solely for the benefit of the lenders under the New Revolving Credit Facility such that a breach of the Financial Covenant will not constitute an event of default for purposes of the Term Loan B Facility (or any other facility, other than the New Revolving Credit Facility), and the lenders under the Term Loan B Facility or any other facility (other than the New Revolving Credit Facility) will not be permitted to exercise any remedies with respect to an uncured breach of the Financial Covenant until the date, if any, on which the commitments under the New Revolving Credit Facility have been terminated or the loans thereunder have been accelerated as a result of such breach.

The obligation of the Lenders to provide the Financing is subject to a number of conditions, including, among others, (i) the consummation of the Mergers substantially contemporaneously with the initial funding of the New Senior Credit Facilities, (ii) the accuracy of certain representations and warranties in the Merger Agreement, as well as certain other specified representations of NewCRG that are customary for a loan facility of this type, (iii) execution and delivery of definitive documentation consistent with the Commitment Letter with respect to the New Senior Credit Facilities, (iv) delivery of certain customary closing documents (including, among others, a customary solvency certificate), specified items of collateral and certain financial statements, all as more fully described in the Commitment Letter, (v) payment of applicable fees and expenses, (vi) receipt of one or more customary confidential information memoranda to be used for syndication of the New Senior Credit Facilities and the expiration of a 15 business day period following delivery of such Confidential information memorandum, and (vii) that there has been no Material Adverse Effect (as defined in the Merger Agreement) since the date of the Merger Agreement.

Voting Agreements

On February 19, 2019, Cambridge entered into a Voting Agreement with each of Daniel T. Accordino, the Chief Executive Officer, President and a director of Carrols and NewCRG (the “Accordino Voting Agreement”), Paul R. Flanders, the Vice President, Chief Financial Officer and Treasurer of Carrols and NewCRG (the “Flanders Voting Agreement”), Richard G. Cross, the Vice President, Real Estate of Carrols and NewCRG (the “Cross Voting Agreement”) and William E. Myers, the Vice President, General Counsel and Secretary of Carrols and NewCRG (the “Myers Voting Agreement” and together with the Accordino Voting Agreement, Flanders Voting Agreement and the Cross Voting Agreement, the “Voting Agreements”), pursuant to which the Messrs. Accordino, Flanders, Cross and Myers will agree to vote their respective shares of NewCRG Common Stock that they will hold after giving effect to the Carrols Merger, in favor of a proposal at the next annual meeting of NewCRG stockholders to be held following the closing of the transaction and any subsequent meeting of NewCRG stockholders, if necessary, to remove the Issuance Restriction. The Voting Agreements will terminate upon the earliest to occur of (a) the date on which the removal of the Issuance Restriction is approved by the NewCRG stockholders, (b) the date on which the Merger Agreement is terminated in accordance with its terms and (c) the date of any amendment to the Merger Agreement or any change to or modification of the NewCRG Series C Certificate of Designations, in each case which change is materially adverse to Carrols, Mr. Accordino, Mr. Flanders, Mr. Cross or Mr. Myers, as applicable.

Ownership of NewCRG after the Mergers

Based on the 37,007,107 shares of Carrols Common Stock outstanding on April 8, 2019, approximately 7.4 million shares of NewCRG Common Stock and 10,000 shares of NewCRG Series C Preferred Stock will be issued to Cambridge, the owner of New CFH, upon consummation of the Cambridge Merger. The 10,000 shares of NewCRG Series C Preferred Stock will initially be convertible into approximately 7.3 million shares of NewCRG Common Stock, assuming pro forma Net Debt (as defined in the Merger Agreement) of Cambridge of $117.2 million and subject to the Issuance Restriction until the Stockholder Approval is obtained. Based on the 37,007,107 shares of Carrols Common Stock outstanding on April 8, 2019, (i) a total of 44,371,521 shares of NewCRG Common Stock, 100 shares of NewCRG Series B Preferred Stock (convertible into 9,414,580 shares of NewCRG Common Stock) and 10,000 shares of NewCRG Series C Preferred Stock would be outstanding after the Cambridge Merger, (ii) Cambridge would hold, in the aggregate, approximately 16.6% of the outstanding shares of NewCRG Common Stock immediately after the closing of the Cambridge Merger without giving effect to the conversion of the NewCRG Series B Preferred Stock and the NewCRG Series C Preferred Stock and (iii) Cambridge would hold, in the aggregate approximately 24.0% of the outstanding shares of NewCRG Common Stock immediately after the closing of the Cambridge Merger assuming removal of the Issuance Restriction and after giving effect to the conversion of the NewCRG Series B Preferred Stock and the NewCRG Series C Preferred Stock.

Stockholder Approval Not Required

The Mergers do not require the approval of Carrols’ stockholders. Pursuant to the Merger Agreement, NewCRG must seek the Stockholder Approval with respect to the removal of the Issuance Restriction at NewCRG’s next annual meeting of stockholders to be held after the closing of the Cambridge Merger or at subsequent meetings of stockholders, if necessary, until Stockholder Approval is obtained.

Conditions to Completion of the Mergers

The completion of the Mergers depends upon the satisfaction or, to the extent legally permissible, waiver of a number of conditions which are described in more detail later in this prospectus, including, among other things:

●

the absence of any legal prohibition on completion of the transaction;

●

the expiration or termination of the relevant waiting period under the HSR Act;

●

subject to materiality standards set forth in the Merger Agreement, the accuracy, as of the closing, of the respective representations and warranties made by the parties in the Merger Agreement;

●

material compliance by the parties with their respective obligations under the Merger Agreement;

●

the effectiveness of the registration statement of which this prospectus is a part;

●

the approval for listing on the NASDAQ Global Market, subject to official notice of issuance, of the NewCRG Investor Shares and the Conversion Common Stock;

●

receipt of certain third-party consents, including, without limitation, consent of BKC and another affiliate of RBI as holders of Carrols Series B Preferred Stock; and

●

the absence of any change since the date of the Merger Agreement that would reasonably be expected to have a Material Adverse Effect (as defined in the Merger Agreement) upon Cambridge.

Appraisal Rights (see page 46)

Under Delaware law, neither the stockholders of Carrols nor the equity holders of New CFH have appraisal rights in connection with the Mergers.

Material U.S. Federal Income Tax Consequences of the Mergers (see page 59)

Subject to the limitations and qualifications described in “Material U.S. Federal Income Tax Consequences of the Mergers” below, the exchange by U.S. holders of shares of Carrols Common Stock for shares of NewCRG Common Stock and shares of Carrols Series B Preferred Stock for shares of NewCRG Series B Preferred Stock pursuant to the Carrols Merger, when taken together with the Cambridge Merger, is intended to qualify as a transaction described in Section 351 of the Internal Revenue Code of 1986, as amended (the “Code”), and separately is intended to qualify as a reorganization within the meaning of Section 368(a) of the Code. As a result, it is intended that no gain or loss be recognized by Carrols, NewCRG, or the stockholders of Carrols as a result of the exchange of shares of Carrols Common Stock for shares of NewCRG Common Stock and shares of Carrols Series B Preferred Stock for shares of NewCRG Series B Preferred Stock pursuant to the Carrols Merger. In addition, it is intended that no gain or loss be recognized by Carrols or NewCRG as a result of the issuance of shares of NewCRG Common Stock and shares of NewCRG Series C Preferred Stock in exchange for the equity in New CFH pursuant to the Cambridge Merger. Your tax consequences will depend on your own situation. You should consult your tax advisor to fully understand the tax consequences of the Mergers to you.

SELECTED HISTORICAL FINANCIAL DATA OF CARROLS

Fiscal years ended December 28, 2014, January 1, 2017, December 31, 2017 and December 30, 2018 of Carrols presented below each include 52 weeks. The fiscal year ended January 3, 2016 presented below includes 53 weeks.

The information in the following table should be read together with Carrols’ audited consolidated financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Carrols” included elsewhere in this prospectus.

In 2014, Carrols acquired 123 restaurants from other franchisees in five separate transactions and in 2015, Carrols acquired 55 restaurants from other franchisees in eight separate transactions. During 2016, Carrols acquired 56 restaurants from other franchisees in seven separate transactions and in 2017 Carrols acquired 64 restaurants from other franchisees in three separate transactions. During 2018, Carrols acquired 44 restaurants in four separate transactions. Carrols’ consolidated financial information may not be indicative of Carrols’ future performance.

	Year Ended
	December 28, 2014			January 3, 2016			January 1, 2017			December 31, 2017			December 30, 2018
	(In thousands, except share and per share data)
Statements of operations data:
Restaurant sales	$	692,755		$	859,004		$	943,583		$	1,088,532		$	1,179,307
Costs and expenses:
Cost of sales		209,664			240,322			250,112			304,593			326,308
Restaurant wages and related expenses		219,718			267,950			297,766			350,054			382,829
Restaurant rent expense		48,865			58,096			64,814			75,948			81,409
Other restaurant operating expenses		113,586			135,874			148,946			166,786			178,750
Advertising expense		27,961			32,242			41,299			44,677			48,340
General and administrative (1)(2)		40,001			50,515			54,956			60,348			66,587
Depreciation and amortization		36,923			39,845			47,295			54,159			58,468
Impairment and other lease charges		3,541			3,078			2,355			2,827			3,685
Other expense (income) (3)		47			(126	)		338			(333	)		(424	)
Total operating expenses		700,306			827,796			907,881			1,059,059			1,145,952
Income (loss) from operations		(7,551	)		31,208			35,702			29,473			33,355
Interest expense		18,801			18,569			18,315			21,710			23,638
Loss on extinguishment of debt		—			12,635			—			—			—
Gain on bargain purchase		—			—			—			—			(230	)
Income (loss) before income taxes		(26,352	)		4			17,387			7,763			9,947
Provision (benefit) for income taxes		11,765			—			(28,085	)		604			(157	)
Net income (loss)	$	(38,117	)	$	4		$	45,472		$	7,159		$	10,104
Per share data:
Basic and diluted net income (loss) per share:	$	(1.23	)	$	0.00		$	1.01		$	0.16		$	0.22

Weighted average shares used in computing net income (loss) per share:
Basic		30,885,275			34,958,847			35,178,329			35,416,531			35,715,372
Diluted		30,885,275			44,623,251			44,851,345			44,976,514			45,319,971

	Year Ended
	December 28, 2014			January 3, 2016			January 1, 2017			December 31, 2017			December 30, 2018
	(In thousands, except restaurant weekly sales data)
Other financial data:
Net cash provided by operating activities	$	14,707		$	70,702		$	62,288		$	72,783		$	80,769
Total capital expenditures		52,010			56,848			94,099			73,516			75,735
Net cash used for investing activities		68,003			103,429			96,221			108,105			106,894
Net cash provided by financing activities		66,215			33,780			13,661			62,732			727
Operating Data:
Restaurants (at end of period)		674			705			753			807			849
Average number of restaurants		581.9			662.1			719.5			784.3			813.9
Average annual sales per restaurant (4)		1,190,505			1,274,372			1,311,516			1,387,850			1,449,047
Adjusted EBITDA (5)		36,008			76,737			89,505			91,408			102,341
Adjusted net income (loss) (5)		(10,408	)		13,429			17,860			9,037			13,587
Restaurant-Level EBITDA (5)		72,961			124,520			140,646			146,474			161,671
Change in comparable restaurant sales (6)		0.6	%		7.4	%		2.3	%		5.2	%		3.8	%
Balance sheet data (at end of period):
Total assets	$	364,573		$	427,256		$	490,155		$	581,514		$	600,251
Working capital		(13,554	)		(26,259	)		(39,231	)		(19,514	)		(47,461	)
Debt:
Senior and senior subordinated debt		150,000			200,000			213,500			275,000			275,000
Capital leases		8,694			8,006			7,039			5,681			3,941
Lease financing obligations		1,202			1,203			3,020			1,203			1,201
Total debt	$	159,896		$	209,209		$	223,559		$	281,884		$	280,142
Stockholders’ equity	$	106,535		$	107,999		$	154,656		$	169,060		$	185,540

	Year Ended
	December 28, 2014			January 3, 2016			January 1, 2017			December 31, 2017			December 30, 2018
	(In thousands, except per share data)
Reconciliation of EBITDA and Adjusted EBITDA (5):
Net income (loss)	$	(38,117	)	$	4		$	45,472		$	7,159		$	10,104
Provision (benefit) for income taxes		11,765			—			(28,085	)		604			(157	)
Interest expense		18,801			18,569			18,315			21,710			23,638
Depreciation and amortization		36,923			39,845			47,295			54,159			58,468
EBITDA		29,372			58,418			82,997			83,632			92,053
Impairment and other lease charges		3,541			3,078			2,355			2,827			3,685
Acquisition costs (7)		1,915			1,168			1,853			1,793			1,445
Gain on partial condemnation and fires (3)		—			—			(1,603	)		(362	)		(424	)
Litigation settlement (3)		—			—			1,850			—			—
Stock compensation expense		1,180			1,438			2,053			3,518			5,812
Gain on bargain purchase		—			—			—			—			(230	)
Loss on extinguishment of debt		—			12,635			—			—			—
Adjusted EBITDA	$	36,008		$	76,737		$	89,505		$	91,408		$	102,341

Reconciliation of Restaurant-Level EBITDA (5):
Income (loss) from operations	$	(7,551	)	$	31,208		$	35,702		$	29,473		$	33,355
Add:
General and administrative expenses		40,001			50,515			54,956			60,348			66,587
Depreciation and amortization		36,923			39,845			47,295			54,159			58,468
Impairment and other lease charges		3,541			3,078			2,355			2,827			3,685
Other expense (income), net (3)		47			(126	)		338			(333	)		(424	)
Restaurant-Level EBITDA	$	72,961		$	124,520		$	140,646		$	146,474		$	161,671

	Year Ended
	December 28, 2014			January 3, 2016			January 1, 2017			December 31, 2017			December 30, 2018
Reconciliation of Adjusted net income (loss) (5):
Net income (loss)	$	(38,117	)	$	4		$	45,472		$	7,159		$	10,104
Add:
Loss on extinguishment of debt		—			12,635			—			—			—
Impairment and other lease charges		3,541			3,078			2,355			2,827			3,685
Acquisition costs (7)		1,915			1,168			1,853			1,793			1,445
Gain on bargain purchase		—			—			—			—			(230	)
Gain on partial condemnation and fires (3)		—			—			(1,603	)		(362	)		(424	)
Litigation settlement (3)		—			—			1,850			—			—
Income tax effect of above adjustments (8)		(2,073	)		(6,415	)		(1,693	)		(1,618	)		(993	)
Adjustments to income tax benefit (9)		24,326			2,959			(30,374	)		(762	)		—
Adjusted net income (loss)	$	(10,408	)	$	13,429		$	17,860		$	9,037		$	13,587
Adjusted diluted net income (loss) per share (10)	$	(0.34	)	$	0.30		$	0.40		$	0.20		$	0.30

(1)

Acquisition expenses of $1.9 million $1.2 million, $1.9 million, $1.8 million and $1.4 million were included in general and administrative expense for the years ended December 28, 2014, January 3, 2016, January 1, 2017, December 31, 2017 and December 30, 2018, respectively.

(2)

General and administrative expenses include stock-based compensation expense for the years ended December 28, 2014, January 3, 2016, January 1, 2017, December 31, 2017 and December 30, 2018 of $1.2 million, $1.4 million, $2.1 million, $3.5 million and $5.8 million, respectively.

(3)

In fiscal 2018 and 2017, Carrols recorded net gains of $0.4 million and $0.3 million, respectively, primarily related to insurance recoveries from fires at two restaurants. In fiscal 2016, Carrols recorded gains of $1.2 million related to property insurance recoveries from fires at two restaurants, a gain of $0.5 million related to a settlement for a partial condemnation on one of its operating restaurant properties and expense of $1.85 million related to a settlement of litigation.

(4)

Average annual sales per restaurant are derived by dividing restaurant sales by the average number of restaurants operating during the period.

(5)

EBITDA, Adjusted EBITDA, Restaurant-Level EBITDA and Adjusted net income (loss) are non-GAAP financial measures. EBITDA represents net income or loss before income taxes, interest expense and depreciation and amortization. Adjusted EBITDA represents EBITDA as adjusted to exclude impairment and other lease charges, acquisition costs, EEOC litigation and settlement costs, stock compensation expense, loss on extinguishment of debt and other income or expense. Restaurant-Level EBITDA represents income or loss from operations adjusted to exclude general and administrative expenses, depreciation and amortization, impairment and other lease charges, and other expense (income). Adjusted net income (loss) represents net income or loss as adjusted to exclude loss on extinguishment of debt, impairment and other lease charges, acquisition costs, gain on bargain purchase, the related income tax effect of these adjustments and the establishment or reversal of a valuation allowance on Carrols’ net deferred income tax assets.

Carrols is presenting Adjusted EBITDA, Restaurant-Level EBITDA and Adjusted net income (loss) because it believes that they provide a more meaningful comparison than EBITDA and net income or loss of Carrols’ core business operating results, as well as with those of other similar companies. Additionally, Carrols presents Restaurant-Level EBITDA because it excludes the impact of general and administrative expenses and other income or expense, which are not directly related to restaurant-level operations. Management believes that Adjusted EBITDA and Restaurant-Level EBITDA, when viewed with Carrols’ results of operations in accordance with GAAP and the accompanying reconciliations, provide useful information about operating performance and period-over-period growth, and provide additional information that is useful for evaluating the operating performance of Carrols’ core business without regard to potential distortions. Additionally, management believes that Adjusted EBITDA and Restaurant-Level EBITDA permit investors to gain an understanding of the factors and trends affecting Carrols’ ongoing cash earnings, from which capital investments are made and debt is serviced.

However, EBITDA, Adjusted EBITDA, Restaurant-Level EBITDA and Adjusted net income (loss) are not measures of financial performance or liquidity under GAAP and, accordingly, should not be considered as alternatives to net income or loss, income or loss from operations or cash flow from operating activities as indicators of operating performance or liquidity. Also, these measures may not be comparable to similarly titled captions of other companies.

EBITDA, Adjusted EBITDA, Restaurant-Level EBITDA and Adjusted net income (loss) have important limitations as analytical tools. These limitations include the following:

●

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

●

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

●

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

●

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

(6)

Restaurants are included in comparable restaurant sales after they have been open or owned for 12 months. Comparable restaurant sales are on a 53-week basis for the year ended January 3, 2016.

(7)

Acquisition costs for the periods presented include primarily legal and professional fees incurred in connection with acquisitions.

(8)

The income tax effect related to all adjustments, other than the deferred income tax valuation allowance provision (benefit), was calculated using an effective income tax rate of 22.2% in fiscal 2018 and 38% in all other years presented.

(9)

The benefit for income taxes in fiscal 2018 contains net discrete tax adjustments of $0.1 million of income tax expense. The provision for income taxes in fiscal 2017 contains a $0.8 million discrete tax benefit recorded in the fourth quarter to re-measure Carrols’ net deferred taxes due to the lowering of the Federal income tax rate to 21% under the Tax Cuts and Jobs Act signed into law in the fourth quarter of 2017. The benefit for income taxes in 2016 reflects a $30.4 million income tax benefit recorded in the fourth quarter of 2016 to reverse the previously recorded valuation allowance on net deferred income tax assets as well as the full year deferred income tax provision of $2.3 million which was recorded in the fourth quarter of 2016. For comparability, when presenting 2016 Adjusted net income, the provision (benefit) for income taxes for each respective period is adjusted as if such valuation allowance had been reversed prior to 2016. The adjustment for the year ended December 28, 2014 of $24.3 million reflects the removal of the income tax provision recorded for the establishment of the valuation allowance on all Carrols’ net deferred income tax assets.

(10)

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

SELECTED HISTORICAL FINANCIAL DATA OF CAMBRIDGE

The information in the following table should be read together with the Cambridge Business’ audited combined financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Cambridge Business” included elsewhere in this prospectus.

	Year Ended
	December 31, 2017			December 31, 2018
	(In thousands)
Statements of operations data:
Restaurant sales	$	178,952		$	235,154
Costs and expenses
Cost of sales		62,318			80,551
Restaurant wages and related expenses		48,957			64,570
Restaurant rent expense		11,217			16,494
Other restaurant operating expenses		24,923			34,854
Advertising		6,525			8,221
General and administrative		12,893			17,005
Depreciation and amortization		8,328			11,610
Loss (gain) on sale of property and equipment		(498	)		578
Total operating expenses		174,663			233,883
Income from operations		4,289			1,271
Interest expense		5,640			8,824
Loss before income taxes		(1,351	)		(7,553	)
Benefit for income taxes		(69	)		(1,022	)
Net loss	$	(1,282	)	$	(6,531	)

	Year Ended
	December 31, 2017			December 31, 2018
	(dollar amounts in thousands)
Other financial data:
Net cash provided by operating activities	$	6,604		$	16,319
Total capital expenditures		45,037			25,900
Net cash used for investing activities		30,657			81,027
Net cash provided by financing activities		27,484			64,044
Operating data:
Restaurants (at end of period)
Burger King		128			166
Popeyes		-			55
Adjusted EBITDA (2)		12,119			14,621
Restaurant-Level EBITDA (2)		25,012			30,464
Change in Burger King comparable restaurant sales (3)		1.6	%		(3.3	)%
Balance sheet data (at end of period):
Total assets	$	151,430		$	222,565
Working capital		(4,266	)		(14,442	)
Debt:
Senior and senior subordinated debt		87,615			126,701
Lease financing obligations		52,152			50,839
Total debt	$	139,767		$	177,540
Reconciliation of EBITDA and Adjusted EBITDA (2):
Net loss	$	(1,282	)	$	(6,531	)
Benefit for income taxes		(69	)		(1,022	)
Interest expense		5,640			8,824
Depreciation and amortization		8,328			11,610
EBITDA		12,617			12,881
Acquisition costs (1)		-			926
Loss (gain) on sale of property and equipment		(498)			578
Stock compensation expense		-			236
Adjusted EBITDA	$	12,119		$	14,621
Reconciliation of Restaurant-Level EBITDA (2):
Income from operations	$	4,289		$	1,271
Add:
General and administrative expenses		12,893			17,005
Depreciation and amortization		8,328			11,610
Loss (gain) on sale of property and equipment		(498	)		578
Restaurant-Level EBITDA	$	25,012		$	30,464

(1)

Acquisition expenses of $0.9 million were included in general and administrative expense for the year ended December 31, 2018 and primarily include legal and professional fees incurred in connection with restaurant acquisitions.

(2)

EBITDA, Adjusted EBITDA and Restaurant-Level EBITDA are non-GAAP financial measures. EBITDA represents net income or loss before income taxes, interest expense and depreciation and amortization. Adjusted EBITDA represents EBITDA as adjusted to exclude acquisition costs, stock compensation expense and loss (gain) on sale of property and equipment. Restaurant-Level EBITDA represents income or loss from operations adjusted to exclude general and administrative expenses, depreciation and amortization and loss (gain) on sale of property and equipment.

Cambridge is presenting Adjusted EBITDA and Restaurant-Level EBITDA because it believes that they provide a more meaningful comparison than EBITDA and net income or loss of Cambridge’s core business operating results, as well as with those of other similar companies. Additionally, Cambridge presents Restaurant-Level EBITDA because it excludes the impact of general and administrative expenses including certain corporate overhead expenses allocated from Cambridge, and loss (gain) on sale of property and equipment, which are not directly related to restaurant-level operations. Cambridge management believes that Adjusted EBITDA and Restaurant-Level EBITDA, when viewed with its results of operations in accordance with GAAP and the accompanying reconciliations, provide useful information about operating performance and period-over-period growth, and provide additional information that is useful for evaluating the operating performance of Cambridge’s core business without regard to potential distortions. Additionally, Cambridge management believes that Adjusted EBITDA and Restaurant-Level EBITDA permit investors to gain an understanding of the factors and trends affecting its ongoing cash earnings, from which capital investments are made and debt is serviced.

However, EBITDA, Adjusted EBITDA and Restaurant-Level EBITDA are not measures of financial performance or liquidity under GAAP and, accordingly, should not be considered as alternatives to net income or loss, income or loss from operations or cash flow from operating activities as indicators of operating performance or liquidity. Also, these measures may not be comparable to similarly titled captions of other companies.

EBITDA, Adjusted EBITDA and Restaurant-Level EBITDA have important limitations as analytical tools. These limitations include the following:

●

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

●

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

●

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

●

EBITDA, Adjusted EBITDA and Restaurant-Level EBITDA do not reflect the effect of earnings or charges resulting from matters that Cambridge management does not consider to be indicative of Cambridge’s ongoing operations. However, some of these charges (such as acquisition costs) have recurred and may reoccur.

(3)

Comparable restaurant sales includes newly constructed restaurants that have been open for at least 15 months and other restaurants that have been open for at least 12 months, other than stores closed for remodeling or other non-recurring closures.

CARROLS HOLDCO INC. UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following unaudited condensed combined pro forma financial information has been derived by applying pro forma adjustments to Carrols’ historical consolidated financial statements. The unaudited condensed combined pro forma statement of operations for the year ended December 30, 2018 gives effect to the recent transactions (as defined below) as if such events occurred on January 1, 2018. The unaudited condensed combined pro forma balance sheet as of December 30, 2018 gives effect to the recent transaction as if such events occurred on December 30, 2018. As used herein, the term “recent transactions” means (i) the Mergers, including the assumed conversion of the NewCRG Series C Preferred Stock, (ii) the Refinancing and our entering into the New Senior Credit Facilities which consists of the $425.0 million Term Loan B Facility and the $125.0 million New Revolving Credit Facility, (iii) the fees and expenses related to the foregoing, and (iv) entering into the Area Development Agreement with BKC. The unaudited condensed combined pro forma financial information does not include the pro forma impact on the results of operations for 44 restaurants acquired by Carrols during 2018 or 72 restaurants acquired by Cambridge during 2018.

The unaudited condensed combined pro forma financial information should be read in conjunction with (a) Carrols historical audited consolidated financial statements and the notes thereto that are included in this prospectus and (b) Cambridge’s historical audited combined financial statements and the notes thereto included elsewhere in this prospectus. In addition, the Cambridge Combined Financial Statements were calculated based on a calendar year, rather than a 52/53 week fiscal year, which may affect comparability.

The unaudited condensed combined pro forma financial information does not include all disclosures required by GAAP. The unaudited condensed combined pro forma financial information does not give effect to any anticipated synergies, operating efficiencies or cost savings that may be associated with the Cambridge Merger. This information also does not include any integration costs we may incur related to the Cambridge Merger.

Pro forma adjustments to the historical financial information include adjustments that we deem reasonable, appropriate, are factually supported based on currently available information and are directly related to the transaction and with respect to the statement of operations, expected to have a continuing impact. The pro forma adjustments also include estimates of the allocation of the purchase price for the Cambridge Merger which requires extensive use of accounting estimates and judgments to allocate the purchase price to tangible and intangible assets acquired and liabilities assumed based on their respective fair values. As the values of certain asset and liabilities are preliminary in nature, the fair values for assets acquired and liabilities assumed are subject to adjustment as additional information is obtained. For purposes of a preliminary allocation of the assets acquired and liabilities assumed, the excess of the purchase price over the estimated fair value of net tangible and intangible assets has been assigned to franchise rights. The preliminary fair value of property and equipment, franchise agreements, and favorable and unfavorable leases was based on the assets carrying value due to recent valuations completed by Cambridge on the acquisition of 132 restaurants and construction of 33 new restaurants over the last three years. The amounts allocated to the assets acquired and liabilities assumed in the unaudited pro forma combined financial statements are based on management’s preliminary estimates of their respective fair values. Definitive allocations will be performed and finalized, including the completion of valuations of assets acquired and liabilities assumed with the assistance of third party valuation specialists. This unaudited condensed combined pro forma financial information is included for informational purposes only, and may not be indicative of what actual results would have been had the recent transactions occurred on the dates indicated. The unaudited condensed combined pro forma financial information does not purport to present our separate financial results of operations or financial condition for future periods.

CARROLS HOLDCO INC.

UNAUDITED CONDENSED COMBINED PRO FORMA BALANCE SHEET

YEAR ENDED DECEMBER 30, 2018

(In thousands)

	Carrols Holdco Inc. (1)		Historical Carrols Restaurant Group, Inc.			Historical Cambridge Franchise Holdings Businesses		Financing Pro Forma Adjustments (2)			Purchase Accounting Pro Forma Adjustments (3)			Combined Pro forma Carrols Holdco Inc.
ASSETS
Current assets:
Cash and cash equivalents	$	-	$	4,014		$	9,470	$	2,713		$	-		$	16,197
Trade and other receivables		-		11,693			866		-			-			12,559
Inventories		-		10,396			2,705		-			-			13,101
Prepaid rent		-		1,880			-		-			-			1,880
Prepaid expenses and other current assets		-		6,695			2,418		-			-			9,113
Refundable income taxes		-		-			131		-			-			131
Total current assets		-		34,678			15,590		2,713			-			52,981

Property and equipment, net		-		289,817			114,008		-			-			403,825
Franchise rights, net		-		175,897			57,370		-			149,778			383,045
Goodwill		-		38,469			29,199		-			(29,199	)		38,469
Franchise agreements, net		-		24,414			4,175		-			-			28,589
Favorable leases, net		-		5,892			-		-			-			5,892
Deferred income taxes, net		-		28,291			725		-			-			29,016
Other assets		-		2,793			1,498		5,342	(4)		-			9,633
Total assets	$	-	$	600,251		$	222,565	$	8,055		$	120,579		$	951,450

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	-	$	1,948		$	9,932	$	(5,932	)	$	-		$	5,948
Current portion of lease financing obligations		-		-			1,409		-			-			1,409
Accounts payable		-		29,143			3,557		-			-			32,700
Accrued interest		-		3,818			-		(3,818	)		-			-
Accrued payroll, related taxes and benefits		-		28,719			3,989		-			-			32,708
Accrued real estate taxes		-		5,910			-		-			-			5,910
Other current liabilities		-		12,601			11,146		3,000	(4)		(2,359	)(5)		24,388
Total current liabilities		-		82,139			30,033		(6,750	)		(2,359	)		103,063

Long-term debt, net of current portion and deferred financing costs		-		276,823			114,947		22,516			-			414,286
Lease financing obligations		-		1,196			49,430		-			-			50,626
Deferred income—sale-leaseback of real estate		-		10,073			7,820		-			-			17,893
Accrued postretirement benefits		-		4,320			-		-			-			4,320
Unfavorable leases, net		-		12,348			-		-			-			12,348
Other liabilities		-		27,812			3,643		-			(3,643	)(5)		27,812
Total liabilities		-		414,711			205,873		15,766			(6,002	)		630,348

Commitments and contingencies
Stockholders’ equity:
Preferred stock		-		-			-		-			-			-
Voting common stock		-		357			-		-			146			503
Additional paid-in capital		-		150,459			-		(141	)		143,126			293,444
Retained earnings		-		35,511			16,692		(7,711	)		(16,692	)		27,800
Accumulated other comprehensive loss		-		(646	)		-		-			-			(646	)
Treasury stock, at cost		-		(141	)		-		141			-			-
Total stockholders’ equity		-		185,540			16,692		(7,711	)		126,581			321,102
Total liabilities and stockholders’ equity	$	-	$	600,251		$	222,565	$	8,055		$	120,579		$	951,450

CARROLS HOLDCO INC.

NOTES TO UNAUDITED CONDENSED COMBINED PRO FORMA BALANCE SHEET

(1)

Carrols Holdco Inc. was incorporated as a Delaware corporation on February 15, 2019. Pursuant to a reorganization, NewCRG will become a holding corporation whose assets are expected to include all of the outstanding equity interest of Carrols. NewCRG will, through Carrols, continue to conduct the business now conducted by Carrols. NewCRG is authorized to issue 1,000 shares of common stock, par value $0.01 per share. Under NewCRG’s certificate of incorporation in effect as of February 15, 2019, all shares of NewCRG Common Stock are identical. NewCRG has issued all 1,000 shares of NewCRG Common Stock in exchange for $10.00, all of which were held by Carrols Restaurant Group, Inc. at April 8, 2019.

(2)

Reflects the Refinancing of the Carrols $275.0 million 8% Senior Secured Second Lien Notes due 2022 (the “8% Notes”) and the repayment of the outstanding indebtedness of Cambridge assumed in the Cambridge Merger. In connection with the Cambridge Merger, Carrols will also retire its treasury stock of $0.1 million as a reduction of additional paid-in capital. The combined pro forma Carrols Holdco Inc. cash position at December 30, 2018 does not include an $8.5 million capital contribution made by CFP to Cambridge subsequent to December 30, 2018. The following summarizes the components of the financing pro forma adjustment for the year ended December 30, 2018 (in thousands):

Cash
Proceeds from Term Loan B Facility	$	425,000
Repayment of Carrols 8% Notes		(275,000	)
Call premium of 102% on Carrols 8% Notes		(5,500	)
Repayment of accrued interest on Carrols 8% Notes		(3,818	)
Repayment of Cambridge existing debt		(126,701	)
Payment of financing fees on New Senior Credit Facilities		(11,268	)
Total adjustments to cash	$	2,713

Other assets
New deferred financing costs on New Revolving Credit Facility	$	2,561
Write-off of unamortized deferred financing costs on existing Carrols Revolving Credit Facility		(219	)
Other asset for ADA ROFR		3,000	(4)
Total adjustments to other assets	$	5,342

Long-term debt
Proceeds from Term Loan B Facility	$	425,000
Repayment of Carrols 8% Notes		(275,000	)
Repayment of Cambridge existing debt		(126,701	)
New deferred financing costs on Term Loan B Facility		(8,707	)
Write-off of unamortized deferred financing costs on existing Carrols 8% Notes		3,673
Write-off of unamortized bond premium on existing Carrols 8% Notes		(3,503	)
Write-off of unamortized financing cost on Cambridge existing debt		1,822
Current portion of long-term debt adjustments		5,932
Total adjustments to long-term debt	$	22,516

Accrued interest
Repayment of accrued interest	$	(3,818	)

Retained earnings
Call premium at 102% on Carrols 8% Notes	$	(5,500	)
Write-off of unamortized deferred financing costs on existing Carrols 8% Notes		(3,673	)
Write-off of unamortized bond premium on existing Carrols 8% Notes		3,503
Write-off of unamortized deferred financing costs on existing Carrols Revolving Credit Facility		(219	)
Write-off of unamortized deferred financing costs on Cambridge existing debt		(1,822	)
	$	(7,711	)

(3)

Under the purchase method of accounting, the aggregate purchase price is allocated to the net tangible and intangible assets based on their estimated fair values on the acquisition date. For purposes of estimating the total purchase price in connection with the Cambridge Merger, we estimated the value of the NewCRG Common Stock to be issued at closing to be $72.0 million representing 19.9% of the outstanding shares of NewCRG Common Stock based upon the issuance of approximately 7.4 million shares at the $9.78 closing stock price of Carrols Common Stock on April 8, 2019 and $71.2 million for the value of 10,000 shares of NewCRG Series C Preferred Stock that is estimated to be convertible into approximately 7.3 million shares of NewCRG Common Stock as set forth in the NewCRG Series C Certificate of Designations and the Merger Agreement after taking into account the equity consideration amount and subject to the removal of the Issuance Restriction upon Stockholder Approval. We have assumed the conversion of the NewCRG Series C Preferred Stock into NewCRG Common Stock in our computation of the purchase price as we believe this is the most likely scenario. The excess of the purchase price over the value assigned to the net tangible and identifiable intangible assets acquired has initially been allocated to franchise rights. The preliminary fair value of property and equipment, franchise agreements, and favorable and unfavorable leases was based on the assets carrying value due to recent valuations completed by Cambridge on the acquisition of 132 restaurants and construction of 33 new restaurants in the last three years. Goodwill for Cambridge has been eliminated. When the independent valuation is finalized, changes to the preliminary valuation of assets acquired or liabilities assumed may result in material adjustments to the estimated fair value of identifiable assets acquired, including franchise rights, and goodwill initially recorded. The following table illustrates the purchase price calculation as described above and the purchase price allocation (in thousands, except for stock price amounts):

NewCRG Series C Convertible Preferred Stock Share Calculation

Equity consideration factor	$	200,000
Existing Cambridge Net Debt (as defined in Merger Agreement) that exceeds $115.0 million		2,231
Total equity consideration amount	$	197,769

Equity consideration less shares of NewCRG Common Stock times 13.5		98,349
Denominator per agreement above		13.50
Number of shares of NewCRG Common Stock that shares of NewCRG Series C Preferred Stock is convertible into		7,285

Purchase Price Calculation

	Common Shares		Stock Price		Purchase Price
NewCRG Series C Convertible Preferred Stock conversion		7,285	$	9.78	$	71,249
NewCRG Common Stock		7,364	$	9.78		72,024
Purchase price calculation					$	143,273

Preliminary estimated purchase price allocation

Net assets acquired	$	193,366
Net liabilities assumed		(199,871	)
Preliminary purchase price allocation to franchise rights		149,778
Preliminary estimated acquisition consideration	$	143,273

The following table illustrates the effect of a change in the stock price of Carrols Common Stock from its price of $9.78 on April 8, 2019 and the resulting impact on the estimated total purchase price and estimated franchise rights (in thousands, except for stock price amounts):

Change in stock price	Stock price purchase price		Estimated consideration		Estimated franchise rights
Increase of 10%	$	10.76	$	157,600	$	164,105
Decrease of 10%		8.80		128,945		135,450
Increase of 20%		11.74		171,927		178,432
Decrease of 20%		7.82		114,618		121,123
Increase of 30%		12.71		186,255		192,760
Decrease of 30%		6.85		100,291		106,796

(4)

Upon closing of the Mergers, the Area Development Agreement with BKC will become effective and provides for an assignment of BKC’s ROFR with respect to certain territories (see discussion of ADA ROFR). Includes a current liability of a $3.0 million ROFR assignment fee payable to BKC in four equal installments over one year and the corresponding other asset.

(5)

Reflects the reversal of a $2.4 million liability on Cambridge’s balance sheet due to related parties, as well as the reversal of a $3.6 million liability on Cambridge’s balance sheet related to deferred step rent, which will not be assigned any value in purchase accounting.

CARROLS HOLDCO INC.

UNAUDITED CONDENSED COMBINED PRO FORMA STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 30, 2018

(In thousands, except share and per share amounts)

	Carrols Holdco Inc.		Historical Carrols Restaurant Group, Inc.			Historical Cambridge Franchise Holdings Businesses			Financing Pro Forma Adjustments			Purchase Accounting Pro Forma Adjustments			Combined Pro Forma Carrols Holdco Inc.
Revenues:
Restaurant sales	$	-	$	1,179,307		$	235,154	(1)	$	-		$	-		$	1,414,461

Costs and expenses:
Cost of sales		-		326,308			80,551			-			-			406,859
Restaurant wages and related expenses		-		382,829			64,570			-			-			447,399
Restaurant rent expense		-		81,409			16,494			-			-			97,903
Other restaurant operating expenses		-		178,750			34,854			-			-			213,604
Advertising expense		-		48,340			8,222			-			-			56,562
General and administrative		-		66,587			17,004			-			-			83,591
Depreciation and amortization		-		58,468			11,610			-			4,879	(2)		74,957
Impairment and other lease charges		-		3,685			-			-			-			3,685
Other expense (income)		-		(424	)		578			-			-			154
Total operating expenses		-		1,145,952			233,883			-			4,879			1,384,714
Income (loss) from operations		-		33,355			1,271			-			(4,879	)		29,747
Interest expense		-		23,638			8,824			(2,420	)(3)		-			30,042
Loss on extinguishment of debt		-		-			-			7,536	(4)		-			7,536
Gain on bargain purchase		-		(230	)		-			-			-			(230	)
Income (loss) before income taxes		-		9,947			(7,553	)		(5,116	)		(4,879	)		(7,601	)
Benefit for income taxes		-		(157	)		(1,022	)		(1,279	)(5)		(1,220	)(5)		(3,678	)
Net income (loss)	$	-	$	10,104		$	(6,531	)	$	(3,837	)	$	(3,660	)	$	(3,924	)

Basic and diluted net income (loss) per share			$	0.22											$	(0.07	)

Weighted average common shares outstanding:
Basic				35,715,372									7,364,414			43,079,786
Diluted				45,319,971									14,649,561			59,969,532

CARROLS HOLDCO INC.

NOTES TO UNAUDITED CONDENSED COMBINED PRO FORMA STATEMENT OF OPERATIONS

(1)

Historical restaurant sales of Cambridge include approximately $15.7 million of sales related to six gas stations and convenience stores owned and operated by Cambridge during 2018.

(2)

Includes pro forma amortization of the preliminary valuation of franchise rights to be recorded for the Cambridge Merger over an estimated 35 year life of $4.3 million and $0.6 million of amortization expense related to the ADA ROFR over the five year term of the Area Development Agreement.

(3)

The reduction to interest expense for the year ended December 30, 2018 includes (a) interest on the New Senior Credit Facilities totaling $25.4 million, (b) amortization of deferred financing costs associated with the New Senior Credit Facilities and other interest totaling $3.1 million, (c) reversal of previously recorded interest expense on the 8% Notes and existing senior credit facility totaling $23.1 million and (d) the reversal of interest expense on debt assumed in the Mergers and repaid in connection with and as part of the Refinancing totaling $7.7 million. We have not assumed an original issue discount on the New Senior Credit Facilities. Borrowings under the Term Loan B Facility at an original issue discount of 0.5% to 1.5% would increase interest expense by $0.4 million to $1.2 million for the year ended December 30, 2018. In addition, a 0.125% change in the interest rate would result in an increase or decrease to interest expense of approximately $0.5 million for the year ended December 30, 2018.

(4)

Reflects the call premium at 102% on the principal amount of $275.0 million of 8% Notes of $5.5 million, the write-off deferred financing costs associated with prior outstanding debt of $5.0 million, the write-off of Cambridge deferred financing fees on outstanding debt of $1.4 million, and the write-off of the unamortized bond premium of $4.4 million on the 8% Notes in connection with the Refinancing.

(5)

The income tax expense (benefit) related to the combined pretax pro forma adjustments are based on a blended tax rate of 25%.

You should carefully consider the following risks associated with the common stock covered hereby. Additional risks and uncertainties not presently known to us or which are not currently believed to be important also may adversely affect the transactions and NewCRG following the Mergers.

We may not be able to obtain the regulatory approvals required to consummate the Mergers.

Completion of the Mergers is subject to customary closing conditions. These closing conditions include, among others, the effectiveness of this registration statement and expiration or termination of the waiting period under the HSR Act. We intend to pursue all of these consents and authorizations as required by and in accordance with the terms of the Merger Agreement. Complying with requests from such governmental agencies, including requests for additional information and documents, could delay consummation of either or both of the Mergers.

In connection with granting these consents and authorizations, governmental authorities may impose conditions on NewCRG’s operations after completion of the Mergers. Such conditions may jeopardize or delay completion of the Mergers or may reduce the anticipated benefits of the Mergers. Under the terms of the Merger Agreement, Carrols and Cambridge are required to use its commercially reasonable efforts to obtain all necessary governmental approvals and each of Carrols and Cambridge will each make each make or cause to be made all filings and submissions required under the HSR Act as promptly as practicable, after the date of the Merger Agreement, and thereafter respond, as promptly as practicable, to any inquiries or information requests received from any governmental authority and make, as promptly as practicable, any other required submissions with respect to the transactions contemplated by the Merger Agreement under the HSR Act and otherwise use its reasonable best efforts to cause the expiration or termination of the applicable waiting period under the HSR Act as soon as practicable.

If we do not integrate our businesses successfully, we may lose customers and fail to achieve our financial objectives.

Achieving the benefits of the Mergers will depend in part on the successful integration of Cambridge’s business into our operations in a timely and efficient manner. In order for us to provide our customers with the same level of service the after the Mergers, we will need to integrate our product lines and development organizations with those of Cambridge. This may be difficult, unpredictable, and subject to delay because our businesses have been developed independently and were designed without regard to such integration. If we cannot successfully integrate our businesses and products and continue to provide customers with products and new product features in the future on a timely basis, we may lose customers and our business and results of operations may be harmed.

We may experience difficulties in integrating restaurants acquired by us into our existing business.

The acquisition of a significant number of restaurants from Cambridge will involve the integration of those acquired restaurants with our existing business. The difficulties of integration include:

The process of integrating operations could cause an interruption of, or loss of momentum in, the activities of our business and the loss of key personnel. The diversion of management’s attention and any delays or difficulties encountered in connection with the acquisition of restaurants and integration of acquired restaurants’ operations could have an adverse effect on our business, results of operations and financial condition.

Achieving the anticipated benefits of the acquisition of additional restaurants will depend in part upon whether we can integrate the acquired restaurants from Cambridge in an efficient and effective manner. We may not accomplish this integration process smoothly or successfully. If management is unable to successfully integrate the acquired restaurants from Cambridge, the anticipated benefits of the acquisition may not be realized.

In our evaluation of our acquired restaurants from Cambridge, assumptions are made as to our ability to increase sales as well as improve restaurant-level profitability particularly in the areas of food, labor and cash controls as well as other operating expenses. If we are not able to make such improvements in these operational areas as planned, the acquired restaurants’ targeted profitability levels will be affected which could cause an adverse effect on our overall financial results and financial condition.

The combined companies may not realize the anticipated benefits from the Mergers.

The Mergers involve the integration of two companies that have previously operated independently. We expect the combined companies to result in financial and operational benefits, including increased cost savings and other financial and operating benefits from the Mergers. There can be no assurance, however, regarding when or the extent to which the combined companies will be able to realize these increased cost savings or benefits. The companies must integrate or, in some cases, replace numerous systems, including those involving management information, purchasing, accounting and finance, sales, billing, employee benefits, payroll and regulatory compliance, many of which are dissimilar. Difficulties associated with integrating New CFH could have a material adverse effect on the combined companies and the market price of NewCRG Common Stock.

The market price of NewCRG Common Stock may be volatile, and the market price of NewCRG Common Stock may decline in value following the Mergers.

The market price of NewCRG’s Common Stock could be subject to significant fluctuations following the Mergers. Market prices for securities of companies that have undergone significant acquisitions may be volatile. Some of the factors that may cause the market price of NewCRG’s Common Stock to fluctuate include, without limitation: general stock market and general economic conditions in the United States and abroad, not directly related to the combined companies or their business; the entry into, or termination of, material agreements; changes in local, regional or national economic conditions; changes in demographic trends; changes in consumer tastes; changes in traffic patterns; increases in fuel prices and utility costs; consumer concerns about health, diet and nutrition; increases in the number of, and particular locations of, competing restaurants; changes in discretionary consumer spending; inflation; increases in the cost of food, such as beef, chicken, produce and packaging; increased labor costs, including healthcare, unemployment insurance and minimum wage requirements; the availability of experienced management and hourly-paid employees; regional weather conditions; issues in operating the combined companies; changes in estimates or recommendations by securities analysts, if any, who cover NewCRG Common Stock; future sales of NewCRG securities; fluctuations in the combined companies’ financial results, including its cash, cash equivalents and short-term investment balance, operating expenses, cash burn rate or revenues; and other potentially negative financial announcements, including delisting of NewCRG Common Stock from the NASDAQ Global Market, changes in accounting treatment or restatement of previously reported financial results, delays in the combined companies’ filings with the SEC or the combined companies’ failure to maintain effective internal control over financial reporting.

We will incur significant transaction and merger-related costs in connection with the Mergers and will remain liable for significant transaction costs whether or not we successfully close the Mergers, including legal, accounting and other costs.

We have incurred and expect to continue to incur a number of non-recurring costs associated with combining the operations of the two companies which cannot be estimated accurately at this time. Although we expect that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, may offset incremental transaction and transaction-related costs over time, this net benefit may not be achieved in the near term, or at all. Also, speculation regarding the likelihood of the closing of the Mergers could increase the volatility of Carrols’ and NewCRG share price in the interim.

While the Mergers are pending, we and Cambridge are restricted from taking certain actions in the conduct of our respective businesses.

Under the Merger Agreement, we and Cambridge have agreed to operate our respective businesses in the usual, regular and ordinary course. In addition, we and Cambridge have agreed not to, and not to permit our affiliates to, perform certain actions including, without limitation, to the extent provided in the Merger Agreement, declaring dividends, issuing securities, encumbering our respective capital stock, making material acquisitions or disposing of material assets. Cambridge has agreed to additional restrictions on its business conduct, including with respect to material contracts, employment and compensation matters, indebtedness, capital expenditures and certain strategic and other transactions. Our agreement not to, and not to permit our affiliates to, take these actions could adversely affect our ability to take actions beneficial to Carrols or its stockholders. Similarly, the restrictions applicable to Cambridge may limit Cambridge’s ability to pursue attractive business opportunities and making other changes to its business, which could adversely affect its results of operations.

Our indebtedness following the Mergers will be higher than our existing indebtedness, which could limit our operations and opportunities, make it more difficult for us to pay or refinance our debts and may cause us to issue additional equity in the future, which would increase the dilution of our stockholders or reduce earnings.

In connection and concurrently with the execution of the Merger Agreement, Carrols entered into the Commitment Letter, with Wells Fargo Bank, Wells Fargo Securities, Rabobank, M&T Bank, SunTrust Bank and STRH, pursuant to which, and subject to the satisfaction or waiver of the conditions set forth in the Commitment Letter, the Lenders have committed to provide to NewCRG, substantially contemporaneously with the consummation of the Mergers, senior secured credit facilities in an aggregate principal amount of $500.0 million, consisting of (i) the Term Loan B Facility in an aggregate principal amount of $400.0 million and (ii) the New Revolving Credit Facility (including a sub-facility for standby letters of credit) in an aggregate principal amount of $100.0 million, all on the terms set forth in the Commitment Letter. NewCRG expects the New Senior Credit Facilities to be in an aggregate principal amount of $550.0 million consisting of (i) a Term Loan B Facility in an aggregate principal amount of $425.0 million and (ii) a New Revolving Credit Facility in the aggregate principal amount of $125.0 million although there can be no assurance in this regard.

On a pro forma basis, after giving effect to the Mergers, the Financing and the Refinancing, as of December 30, 2018, we would have had approximately $480.9 million of total indebtedness outstanding consisting of $425.0 million outstanding under our Term Loan B Facility, $52.0 million of lease financing obligations and $3.9 million of capital leases and other debt on a pro forma basis. After giving effect to the Mergers, at December 30, 2018, we would have had $113.4 million of borrowing availability under our New Revolving Credit Facility (after reserving $11.6 million for letters of credit issued under our New Revolving Credit Facility, which included amounts for anticipated claims from our renewals of workers’ compensation and other insurance policies).

Our debt service obligations with respect to increased indebtedness under the New Senior Credit Facilities could have an adverse impact on our earnings and cash flows (which after the Mergers would include the earnings and cash flows of New CFH) for as long as the indebtedness is outstanding. See “Summary—Commitment Letter” for a discussion of the Commitment Letter and the New Senior Credit Facilities.

Our substantial indebtedness could have important consequences to you. For example, it could:

We expect to use cash flow from operations and revolving credit borrowings and the New Senior Credit Facilities to meet our current and future financial obligations, including funding our operations, debt service and capital expenditures. Our ability to make these payments depends on our future performance, which will be affected by financial, business, economic and other factors, many of which we cannot control. Our business may not generate sufficient cash flow from operations in the future, which could result in our being unable to repay indebtedness, or to fund other liquidity needs. If we do not have enough money, we may be forced to reduce or delay our business activities and capital expenditures, sell assets, obtain additional debt or equity capital or restructure or refinance all or a portion of our debt on or before maturity. We cannot make any assurances that we will be able to accomplish any of these alternatives on terms acceptable to us, or at all. In addition, the terms of existing or future indebtedness may limit our ability to pursue any of these alternatives.

The unaudited pro forma financial information included elsewhere in this prospectus may not be representative of the combined results of our Burger King restaurant business and the restaurants acquired from Cambridge after the consummation of the Mergers, and accordingly, you have limited financial information on which to evaluate our business following the consummation of the Mergers.

We and Cambridge currently operate as part of separate companies. We have had no prior history as an integrated entity and our operations have not previously been managed on an integrated basis. The unaudited pro forma financial information is presented for informational purposes only and is not necessarily indicative of the financial position or results of operations that would have actually occurred had the Mergers been completed at or as of the dates indicated, nor is it indicative of our future operating results or financial position. The unaudited pro forma financial information does not reflect future events that may occur after the Mergers, including the potential realization of operating cost savings or costs related to the planned integration of the acquired restaurants from Cambridge, and does not consider potential impacts of current market conditions on revenues or expenses. The unaudited pro forma financial acquisition presented in this prospectus is based in part on certain assumptions regarding the acquisition that we believe are reasonable under the circumstances. We cannot assure you that our assumptions will prove to be accurate over time.

Failure to complete the Mergers may result in certain costs that could negatively affect the financial condition and results of operations of Carrols.

Carrols will incur significant transaction and merger-related costs whether or not Carrols receives the benefits associated with successfully closing the Mergers. Moreover, the market price of Carrols Common Stock may decline as a result of Carrols’ failure to close the Mergers.

The Mergers could cause Carrols and New CFH to lose key personnel, which could materially affect the respective companies’ businesses and require the companies to incur substantial costs to recruit replacements for lost personnel.

As a result of the Mergers, current and prospective Carrols and New CFH employees could experience uncertainty about their future roles within the combined company. This uncertainty may adversely affect our ability to attract and retain key management and operational personnel. Any failure to attract and retain key personnel could have a material adverse effect on the business of Carrols now and NewCRG after completion of the Mergers.

After the Mergers, the concentrated ownership of our capital stock by insiders will likely limit your ability to influence corporate matters.

After the Mergers, based on 37,007,107 shares of Carrols Common Stock outstanding on April 8, 2019, our executive officers, directors, affiliates of RBI and Cambridge will together beneficially own approximately 21.9% of NewCRG Common Stock outstanding without giving effect to the conversion of NewCRG Series B Preferred Stock and NewCRG Series C Preferred Stock and 43.3% of the NewCRG Common Stock outstanding assuming the removal of the Issuance Restriction and after giving effect to the conversion of the NewCRG Series B Preferred Stock and the NewCRG Series C Preferred Stock. Based on 37,007,107 shares of Carrols Common Stock outstanding on April 8, 2019, affiliates of RBI and Cambridge will beneficially own approximately 15.4% and 24.0%, respectively, and 39.4% collectively, of NewCRG Common Stock outstanding assuming the removal of the Issuance Restriction and after giving effect to the conversion of the NewCRG Series B Preferred Stock and the NewCRG Series C Preferred Stock. In addition, based on 37,007,107 shares of Carrols Common Stock outstanding on April 8, 2019, our executive officers and directors (excluding directors affiliated with affiliates of RBI and Cambridge) together will beneficially own approximately 6.4% of NewCRG Common Stock outstanding without giving effect to the conversion of NewCRG Series B Preferred Stock and NewCRG Series C Preferred Stock, and 3.9% NewCRG Common Stock outstanding assuming the removal of the Issuance Restriction and after giving effect to the conversion of the NewCRG Series B Preferred Stock and the NewCRG Series C Preferred Stock. As a result, our executive officers, directors, affiliates of RBI and Cambridge, if they act as a group, will be able to significantly influence matters that require approval by our stockholders, including the election of directors and approval of significant corporate transactions such as mergers and acquisitions. The directors will have the authority to make decisions affecting our capital structure, including the issuance of additional debt and the declaration of dividends. Each of RBI and Cambridge may also have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests. Corporate action might be taken even if other stockholders oppose them. This concentration of ownership might also have the effect of delaying or preventing a change of control of our company that other stockholders may view as beneficial, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company and might ultimately depress the market price of NewCRG Common Stock.

We are required to make substantial capital expenditures pursuant to the terms of the Area Development Agreement.

The remodeling and upgrading of existing Burger King restaurants and the Burger King restaurants to be acquired under the Merger Agreement pursuant to the Remodel and Upgrade Obligations may be substantially costlier than we currently anticipate. In addition, we may incur substantial capital expenditures as a result of exercising the ADA ROFR in the ADA DMAs. If we are required to make greater than anticipated capital expenditures in connection with either or both of these activities, our business, financial condition and cash flows could be adversely affected.

Intense competition in the restaurant industry could make it more difficult to profitably expand our business and could also have a negative impact on our operating results if customers favor our competitors or we are forced to change our pricing and other marketing strategies.

The restaurant industry is highly competitive. In each of our markets, our restaurants compete with a large number of national and regional restaurant chains, as well as locally owned restaurants, offering low and medium-priced fare. We also compete with convenience stores, delicatessens and prepared food counters in grocery stores, supermarkets, cafeterias and other purveyors of moderately priced and quickly prepared food. We believe our largest competitors are McDonald’s and Wendy’s restaurants.

Due to competitive conditions, we, as well as certain of the other major quick-service restaurant chains, have offered select food items and combination meals at discounted prices. These pricing and marketing strategies have had, and in the future may have, a negative impact on our sales and earnings.

Factors applicable to the quick-service restaurant segment may adversely affect our results of operations, which may cause a decrease in earnings and revenues.

The quick-service restaurant segment is highly competitive and can be materially adversely affected by many factors, including:

We are highly dependent on the Burger King system and our ability to renew our franchise agreements with BKC. The failure to renew our franchise agreements or Burger King’s failure to compete effectively would materially adversely affect our results of operations.

Due to the nature of franchising and our agreements with BKC, our success is, to a large extent, directly related to the success of the Burger King system including its financial condition, advertising programs, new products, overall quality of operations and the successful and consistent operation of Burger King restaurants owned by other franchisees. We cannot assure you that Burger King restaurants will be able to compete effectively with other restaurants. As a result, any failure of the Burger King system to compete effectively would likely have a material adverse effect on our operating results.

Under each of our franchise agreements with BKC, we are required to comply with operational programs established by BKC. For example, our franchise agreements with BKC require that our restaurants comply with specified design criteria. In addition, BKC generally has the right to require us during the tenth year of a franchise agreement to remodel our restaurants to conform to the then-current image of Burger King restaurants, which may require the expenditure of considerable funds. In addition we may not be able to avoid adopting menu price discount promotions or permanent menu price decreases instituted by BKC that may be unprofitable.

Our franchise agreements typically have a 20-year term after which BKC’s consent is required to receive a successor franchise agreement. Our franchise agreements with BKC that are set to expire over the next three years are as follows: 33 in 2019, 55 in 2020 and 12 in 2021.

We cannot assure you that BKC will grant each of our future requests for successor franchise agreements, and any failure of BKC to renew our franchise agreements could adversely affect our operating results. In addition, as a condition of approval of a successor franchise agreement, BKC may require us to make capital improvements to particular restaurants to bring them up to Burger King current image standards, which may require us to incur substantial costs.

In addition, our franchise agreements with BKC do not give us exclusive rights to operate Burger King restaurants in any defined territory. Although we believe that BKC generally seeks to ensure that newly granted franchises do not materially adversely affect the operations of existing restaurants, we cannot assure you that franchises granted by BKC to third parties will not adversely affect any restaurants that we operate.

Additionally, as a franchisee, we have no control over the Burger King brand. If BKC does not adequately protect the Burger King brand and other intellectual property, our competitive position and operating results could be harmed.

Our strategy includes pursuing acquisitions of additional Burger King restaurants and we may not find Burger King restaurants that are suitable acquisition candidates or successfully operate or integrate any Burger King restaurants we may acquire.

As part of our strategy, we intend to pursue the acquisition of additional Burger King restaurants. Pursuant to the operating agreement between BKC and Carrols LLC, dated as of May 30, 2012, as amended on January 26, 2015 and December 17, 2015, BKC assigned to us its ROFR under its franchise agreements with its franchisees to purchase all of the assets of a restaurant or all or substantially all of the voting stock of the franchisee, whether direct or indirect, on the same terms proposed between such franchisee and a third party purchaser in 20 states as follows: Connecticut (except Hartford county), Delaware, Indiana, Kentucky, Maine, Maryland, Massachusetts (except for Middlesex, Norfolk and Suffolk counties), Michigan, New Hampshire, New Jersey, New York (except for Bronx, Kings, Nassau, New York, Queens, Richmond, Suffolk and Westchester counties), North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Vermont, Virginia, Washington DC, and West Virginia. In addition, pursuant to the operating agreement, BKC granted us, on a non-exclusive basis, franchise pre-approval to, among other things, acquire restaurants from Burger King franchisees in the 20 states above until we operate 1,000 Burger King restaurants. As part of the franchise pre-approval, BKC granted us pre-approval for acquisitions of restaurants from franchisees in the 20 states above subject to and in accordance with the terms of the operating agreement. Under the new Area Development Agreement which is subject to and effective upon the closing of the Mergers, BKC will assign to Carrols LLC the ADA ROFR in the ADA DMAs until the date that Carrols LLC has acquired more than an aggregate of 500 Burger King restaurants. In addition, pursuant to the Area Development Agreement, BKC will grant Carrols LLC franchise pre-approval to build new Burger King restaurants or acquire Burger King restaurants from Burger King franchisees in the ADA DMAs until the date that Carrols LLC acquires, in the aggregate, more than 500 Burger King restaurants inside or outside of the ADA DMAs. Although we believe that opportunities for future acquisitions may be available from time to time, competition for acquisition candidates may exist or increase in the future. Consequently, there may be fewer acquisition opportunities available to us at an attractive acquisition price. There can be no assurance that we will be able to identify, acquire, manage or successfully integrate additional restaurants without substantial costs, delays or operational or financial problems. In the event we are able to acquire additional restaurants, the integration and operation of the acquired restaurants may place significant demands on our management, which could adversely affect our ability to manage our existing restaurants. We may be required to obtain additional financing to fund future acquisitions. There can be no assurance that we will be able to obtain additional financing, if necessary, on acceptable terms or at all. Both our senior credit facility and the indenture governing the $275.0 million of 8% Senior Secured Second Lien Notes due 2022 (the “Carrols 8% Notes”) contain restrictive covenants that may prevent us from incurring additional debt to acquire additional Burger King restaurants.

We may experience difficulties in integrating restaurants acquired by us into our existing business.

The acquisition of a significant number of restaurants will involve the integration of those acquired restaurants with our existing business. The difficulties of integration include:

Achieving the anticipated benefits of the acquisition of additional restaurants will depend in part upon whether we can integrate any acquired restaurants in an efficient and effective manner. We may not accomplish this integration process smoothly or successfully. If management is unable to successfully integrate acquired restaurants, the anticipated benefits of the acquisition may not be realized.

In our evaluation of our recent and potential acquisitions, assumptions are made as to our ability to increase sales as well as improve restaurant-level profitability particularly in the areas of food, labor and cash controls as well as other operating expenses. If we are not able to make such improvements in these operational areas as planned, the acquired restaurants’ targeted profitability levels will be affected which could cause an adverse effect on our overall financial results and financial condition.

We could be adversely affected by food-borne illnesses, as well as widespread negative publicity regarding food quality, illness, injury or other health concerns.

Negative publicity about food quality, illness, injury or other health concerns (including health implications of obesity) or similar issues stemming from one restaurant or a number of restaurants could materially adversely affect us, regardless of whether they pertain to our own restaurants, other Burger King restaurants, or to restaurants owned or operated by other companies. For example, health concerns about the consumption of beef, chicken or eggs or by specific events such as the outbreak of “mad cow” disease could lead to changes in consumer preferences, reduce consumption of our products and adversely affect our financial performance. These events could also reduce available supply or significantly raise the price of beef, chicken or eggs.

In addition, we cannot guarantee that our operational controls and employee training will be effective in preventing food-borne illnesses, food tampering and other food safety issues that may affect our restaurants. Food-borne illness or food tampering incidents could be caused by customers, employees or food suppliers and transporters and, therefore, could be outside of our control. Any publicity relating to health concerns or the perceived or specific outbreaks of food-borne illnesses, food tampering or other food safety issues attributed to one or more of our restaurants, could result in a significant decrease in guest traffic in all of our restaurants and could have a material adverse effect on our results of operations. In addition, similar publicity or occurrences with respect to other restaurants or restaurant chains could also decrease our guest traffic and have a similar material adverse effect on our business.

We may incur significant liability or reputational harm if claims are brought against us or the Burger King brand.

We may be subject to complaints, regulatory proceedings or litigation from guests or other persons alleging food-related illness, injuries suffered in our premises or other food quality, health or operational concerns, including environmental claims. In addition, in recent years a number of restaurant companies have been subject to lawsuits, including class action lawsuits, alleging, among other things, violations of federal and state law regarding workplace and employment matters, discrimination, harassment, wrongful termination and wage, rest break, meal break and overtime compensation issues and, in the case of quick-service restaurants, alleging that they have failed to disclose the health risks associated with high fat or high sodium foods and that their marketing practices have encouraged obesity. We may also be subject to litigation or other actions initiated by governmental authorities or our employees, among others, based upon these and other matters. Adverse publicity resulting from such allegations or occurrences or alleged discrimination or other operating issues stemming from one or a number of our locations could adversely affect our business, regardless of whether the allegations are true, or whether we are ultimately held liable. Any cases filed against us could materially adversely affect us if we lose such cases and have to pay substantial damages or if we settle such cases. In addition, any such cases may materially and adversely affect our operations by increasing our litigation costs and diverting our attention and resources to address such actions. In addition, if a claim is successful, our insurance coverage may not cover or be adequate to cover all liabilities or losses and we may not be able to continue to maintain such insurance, or to obtain comparable insurance at a reasonable cost, if at all. If we suffer losses, liabilities or loss of income in excess of our insurance coverage or if our insurance does not cover such loss, liability or loss of income, there could be a material adverse effect on our results of operations.

We obtain a significant portion of our revenues from the sale of hamburgers and various types of sandwiches. If consumer preferences for these types of foods change, it could have a material adverse effect on our operating results. The quick-service restaurant segment is characterized by the frequent introduction of new products, often supported by substantial promotional campaigns, and is subject to changing consumer preferences, tastes, and eating and purchasing habits. Our success depends on BKC’s ability to anticipate and respond to changing consumer preferences, tastes and dining and purchasing habits, as well as other factors affecting the restaurant industry, including new market entrants and demographic changes. BKC may be forced to make changes to our menu items in order to respond to changes in consumer tastes or dining patterns, and we may lose customers who do not prefer the new menu items. In recent years, numerous companies in the quick-service restaurant segments have introduced products positioned to capitalize on the growing consumer preference for food products that are, or are perceived to be, promoting good health, nutritious, low in calories and low in fat content. If BKC does not continually develop and successfully introduce new menu offerings that appeal to changing consumer preferences or if the Burger King system does not timely capitalize on new products, our operating results could suffer. In addition, any significant event that adversely affects consumption of our products, such as cost, changing tastes or health concerns, could adversely affect our financial performance.

If a significant disruption in service or supply by any of our suppliers or distributors were to occur, it could create disruptions in the operations of our restaurants, which could have a material adverse effect on our business.

Our financial performance depends on our continuing ability to offer fresh, quality food at competitive prices. If a significant disruption in service or supply by our suppliers or distributors were to occur, it could create disruptions in the operations of our restaurants, which could have a material adverse effect on us.

We are a member of a national purchasing cooperative, Restaurant Services, Inc., which serves as the purchasing agent for approved distributors to the Burger King system. We are required to purchase all of our food products, paper goods and packaging materials from BKC-approved suppliers. We currently utilize mostly three distributors for our restaurants, Maines Paper & Food Service, Inc., McLane Company Inc., and Reinhart Food Service L.L.C., to supply our restaurants in various geographical areas. As of December 30, 2018, such distributors supplied 40%, 32%, and 28%, respectively of our restaurants. Although we believe that we have alternative sources of supply, in the event any distributors or suppliers are unable to service us, this could lead to a disruption of service or supply until a new distributor or supplier is engaged, which could have an adverse effect on our business.

If labor costs increase, we may not be able to make a corresponding increase in our prices and our operating results may be adversely affected.

Wage rates for a number of our employees are either at or slightly above the federal and or state minimum wage rates. As federal and/or state minimum wage rates increase, we may need to increase not only the wage rates of our minimum wage employees but also the wages paid to the employees at wage rates which are above the minimum wage, which will increase our costs. The extent to which we are not able to raise our prices to compensate for increases in wage rates, including increases in state unemployment insurance costs or other costs including mandated health insurance, could have a material adverse effect on our operating results. In addition, even if minimum wage rates do not increase, we may still be required to raise wage rates in order to compete for an adequate supply of labor for our restaurants.

Higher labor costs due to statutory and regulatory changes could have a material adverse effect on our business and financial results.

We are subject to the federal labor laws, including the Fair Labor Standards Act, as well as various state and local laws governing such matters as minimum wages, labor relations, workplace safety, citizenship requirements and other working conditions for employees. Federal, state and local laws may also require us to provide paid and unpaid leave, healthcare, or other benefits to our employees. Changes in the law, or penalties associated with any failure on our part to comply with legal requirements, could increase our labor costs or result in additional expense.

During 2018, certain workers were able to take up to eight weeks (increasing in New York and other areas to twelve weeks in 2021) of employer-provided paid leave for childbirth, care for a seriously ill family member or needs related to a family member’s military deployment. These additional expenses may cause us to raise our prices. In certain geographic areas which cannot absorb such increases, this could have a material adverse effect on our business, financial condition; results of operations and/or cash flows. We provide unpaid leave for employees for covered family and medical reasons, including childbirth, to the extent required by the Family and Medical Leave Act of 1933, as amended, and applicable state laws. To the extent we need to hire additional employees or pay overtime for such employees on leave, this would be an added expense which could adversely affect our results of operations.

Increases in income tax rates or changes in income tax laws could adversely affect our business, financial condition or results of operations.

Increases in income tax rates in the United States or other changes in income tax laws in any particular jurisdiction could reduce our after-tax income arising in such jurisdiction and could adversely affect our business, financial condition or results of operations. The United States recently made changes to existing tax laws in the Tax Cuts and Jobs Act (the “Tax Act”) which was signed into law on December 22, 2017. Among its many provisions, the Tax Act reduced the U.S. Federal corporate income tax rate from 35% to 21% and imposed limitations on the deductibility of interest and certain other corporate deductions. Additional changes in the U.S. tax regime, including changes in how existing tax laws are interpreted or enforced, could adversely affect our business, financial condition or results of operations.

The efficiency and quality of our competitors’ advertising and promotional programs and the extent and cost of our advertising could have a material adverse effect on our results of operations and financial condition.

The success of our restaurants depends in part upon the effectiveness of the advertising campaigns and promotions by BKC. If our competitors increase spending on advertising and promotion, or the cost of television or radio advertising increases, or BKC’s or our advertising and promotions are less effective than our competitors’, there could be a material adverse effect on our results of operations and financial condition.

Our business is regional and we therefore face risks related to reliance on certain markets as well as risks for other unforeseen events.

At December 30, 2018, 18% of our restaurants were located in North Carolina, 15% were located in New York, and 31% were located in Indiana, Ohio and Michigan. Therefore, the economic conditions, state and local government regulations, weather conditions or other conditions affecting New York, Indiana, Ohio, Michigan, and North Carolina and other unforeseen events, including terrorism and other national conflicts may have a material impact on the success of our restaurants in those locations.

Many of our restaurants are located in regions that may be susceptible to severe weather conditions such as harsh winter weather and hurricanes. As a result, adverse weather conditions in any of these areas could damage these restaurants, result in fewer guest visits to these restaurants and otherwise have a material adverse impact on our business.

We cannot assure you that the current locations of our restaurants will continue to be economically viable or that additional locations will be acquired at reasonable costs.

The location of our restaurants has significant influence on their success. We cannot assure you that current locations will continue to be economically viable or that additional locations can be acquired at reasonable costs. In addition, the economic environment where restaurants are located could decline in the future, which could result in reduced sales for those locations. We cannot assure you that new sites will be profitable or as profitable as existing sites.

The U.S. economy has in the past experienced significant slowdown and volatility due to uncertainties related to availability of credit, difficulties in the banking and financial services sectors, softness in the housing market, diminished market liquidity, falling consumer confidence and high unemployment rates. Our business is dependent to a significant extent on national, regional and local economic conditions, particularly those that affect our guests that frequently patronize our restaurants. In particular, where our customers’ disposable income is reduced (such as by job losses, credit constraints and higher housing, tax, energy, interest or other costs) or where the perceived wealth of customers has decreased (because of circumstances such as lower residential real estate values, increased foreclosure rates, increased tax rates or other economic disruptions), our restaurants have in the past experienced, and may in the future experience, lower sales and customer traffic as customers choose lower-cost alternatives or other alternatives to dining out. The resulting decrease in our customer traffic or average sales per transaction has had an adverse effect in the past, and could in the future have a material adverse effect, on our business.

The loss of the services of our senior management could have a material adverse effect on our business, financial condition or results of operations.

Our success depends to a large extent upon the continued services of our senior management who have substantial experience in the restaurant industry. We believe that it could be difficult to replace our senior management with individuals having comparable experience. Consequently, the loss of the services of members of our senior management could have a material adverse effect on our business, financial condition or results of operations.

Government regulation could adversely affect our financial condition and results of operations.

We are subject to extensive laws and regulations relating to the development and operation of restaurants, including regulations relating to the following:

In the event that legislation having a negative impact on our business is adopted, it could have a material adverse impact on us. For example, substantial increases in the minimum wage or state or Federal unemployment taxes could adversely affect our financial condition and results of operations. Local zoning or building codes or regulations can cause substantial delays in our ability to build and open new restaurants. Any failure to obtain and maintain required licenses, permits and approvals could also adversely affect our operating results.

Federal, state and local environmental regulations relating to the use, storage, discharge, emission and disposal of hazardous materials could expose us to liabilities, which could adversely affect our results of operations.

We are subject to a variety of federal, state and local environmental regulations relating to the use, storage, discharge, emission and disposal of hazardous substances or other regulated materials, release of pollutants into the air, soil and water, and the remediation of contaminated sites.

Failure to comply with environmental laws could result in the imposition of fines or penalties, restrictions on operations by governmental agencies or courts of law, as well as investigatory or remedial liabilities and claims for alleged personal injury or damages to property or natural resources. Some environmental laws impose strict, and under some circumstances joint and several, liability for costs of investigation and remediation of contaminated sites on current and prior owners or operators of the sites, as well as those entities that send regulated materials to the sites. We cannot assure you that we have been or will be at all times in complete compliance with such laws, regulations and permits. Therefore, our costs of complying with current and future environmental, health and safety laws could adversely affect our results of operations.

We are subject to all of the risks associated with leasing property subject to long-term non-cancelable leases.

The leases for our restaurant locations (except for certain acquired restaurants which have an underlying lease term of less than 20 years) generally have initial terms of 20 years, and typically provide for renewal options in five year increments as well as for rent escalations. Generally, our leases are “net” leases, which require us to pay all of the costs of insurance, taxes, maintenance and utilities. Additional sites that we lease are likely to be subject to similar long-term non-cancelable leases. We generally cannot cancel our leases. If an existing or future restaurant is not profitable, and we decide to close it, we may nonetheless be obligated to perform our monetary obligations under the applicable lease including, among other things, paying all amounts due for the balance of the lease term. In addition, as each of our leases expire, we may fail to negotiate renewals, either on commercially acceptable terms or any terms at all, which could cause us to close restaurants in desirable locations.

Our profitability and operating margins are dependent in part on our ability to anticipate and react to changes in food costs. Changes in the price or availability of certain food products could affect our ability to offer broad menu and price offerings to guests and could materially adversely affect our profitability and reputation. The type, variety, quality and price of beef, chicken, produce and cheese can be subject to change and to factors beyond our control, including weather, governmental regulation, availability and seasonality, each of which may affect our food costs or cause a disruption in our supply. Our food distributors or suppliers may also be affected by higher costs to produce and transport commodities used in our restaurants, higher minimum wage and benefit costs and other expenses that they pass through to their customers, which could result in higher costs for goods and services supplied to us. Although RSI is able to contract for certain food commodities for periods up to one year, the pricing and availability of some commodities used in our operations are not locked in for periods of longer than one week or at all. We do not currently use financial instruments to hedge our risk to market fluctuations in the price of beef, produce and other food products. We may not be able to anticipate and react to changing food costs through menu price adjustments in the future, which could negatively impact our results of operations.

Security breaches of confidential guest information in connection with our electronic processing of credit and debit card transactions may adversely affect our business.

A significant amount of our restaurant sales are by credit or debit cards. Other restaurants and retailers have experienced security breaches in which credit and debit card information of their customers was compromised. We may in the future become subject to lawsuits or other proceedings for purportedly fraudulent transactions arising out of the actual or alleged theft of our guests’ credit or debit card information. Any such claim or proceeding, or any adverse publicity resulting from these allegations, may have a material adverse effect on us and our restaurants.

We depend on information technology and any material failure of that technology could impair our ability to efficiently operate our business.

We rely on information systems across our operations, including, for example, point-of-sale processing in our restaurants, procurement and payment to significant suppliers, collection of cash, and payment of other financial obligations and various other processes and procedures. Our ability to efficiently manage our business depends significantly on the reliability and capacity of these systems. The failure of these systems to operate effectively, problems with maintenance, upgrading or transitioning to replacement systems or a breach in security of these systems could cause delays in customer service and reduce efficiency in our operations. Significant capital investments might be required to remediate any problems.

Carrols is currently a guarantor under 27 Fiesta Restaurant Group, Inc. (“Fiesta”) restaurant property leases and the primary lessee on five Fiesta restaurant property leases, and any default under such property leases by Fiesta may result in substantial liabilities to us.

Fiesta, a former wholly owned subsidiary of the Company, was spun-off in 2012 to the Company’s stockholders. Carrols currently is a guarantor under 27 Fiesta restaurant property leases, of which all except for one are still operating as of December 30, 2018. The Separation and Distribution Agreement, which we refer to as the “separation agreement”, dated as of April 24, 2012 and entered into in connection with the spin-off among Carrols, Fiesta and us provides that the parties will cooperate and use their commercially reasonable efforts to obtain the release of such guarantees. Unless and until any such guarantees are released, Fiesta agrees to indemnify Carrols for any losses or liabilities or expenses that it may incur arising from or in connection with any such lease guarantees.

Carrols is currently a primary lessee of five Fiesta restaurants which it subleases to Fiesta. The separation agreement provides that the parties will cooperate and use their commercially reasonable efforts to cause Fiesta or a subsidiary of Fiesta to enter into a new master lease or individual leases with the lessor with respect to the Fiesta restaurants where Carrols is currently a lessee. The separation agreement provides that until such new master lease or such individual leases are entered into, (i) Carrols will perform its obligations under the master lease for the five Fiesta restaurants where it is a lessee and (ii) the parties will cooperate and use their commercially reasonable efforts to enter into a non-disturbance agreement or similar agreement with the lessor which shall provide that Fiesta or one of its subsidiaries shall become the lessee under such master lease with respect to such Fiesta restaurants and perform Carrols’ obligations under such master lease in the event of a breach or default by Carrols.

Such guarantees may never be released and a new master lease with respect to the five Fiesta properties where Carrols is the primary lessee may never be entered into by Fiesta. Any losses or liabilities that may arise in connection such guarantees or the master lease where Carrols is not able to receive indemnification from Fiesta may result in substantial liabilities to us and could have a material adverse effect on our business.

The market price of our common stock may be highly volatile or may decline regardless of our operating performance.

The trading price of our common stock may fluctuate substantially. The price of our common stock that will prevail in the market may be higher or lower than the price you pay, depending on many factors, some of which are beyond our control. Broad market and industry factors may adversely affect the market price of our common stock, regardless of our actual operating performance. The fluctuations could cause a loss of all or part of an investment in our common stock. Factors that could cause fluctuation in the trading price of our common stock may include, but are not limited to the following:

In addition, if the market for restaurant company stocks or the stock market in general experiences loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, results of operations or financial condition. The trading price of our common stock might also decline in reaction to events that affect other companies in our industry or related industries even if these events do not directly affect us.

In the past, following periods of volatility in the market price of a company’s securities, class action securities litigation has often been brought against that company. Due to the potential volatility of our stock price, we may therefore be the target of securities litigation in the future. Securities litigation could result in substantial costs and divert management’s attention and resources from our business, and could also require us to make substantial payments to satisfy judgments or to settle litigation.

The concentrated ownership of our capital stock by insiders will likely limit our stockholders’ ability to influence corporate matters.

Our executive officers, directors and BKC together beneficially own approximately 25.4% of our outstanding common stock as of April 8, 2019 (assuming conversion of the Series B Preferred Stock held by BKC and another affiliate of RBI). As a result, our executive officers, directors, BKC and another affiliate of RBI, if they act as a group, will be able to significantly influence matters that require approval by our stockholders, including the election of directors and approval of significant corporate transactions such as mergers and acquisitions. The directors will have the authority to make decisions affecting our capital structure, including the issuance of additional debt and the declaration of dividends. BKC and another affiliate of RBI may also have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests. Corporate action might be taken even if other stockholders oppose them. This concentration of ownership might also have the effect of delaying or preventing a change of control of us that other stockholders may view as beneficial, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company and might ultimately depress the market price of our common stock.

We do not expect to pay any cash dividends for the foreseeable future, and the indenture governing the Carrols 8% Notes and the senior credit facility limit our ability to pay dividends to our stockholders.

We do not anticipate that we will pay any cash dividends to holders of our common stock in the foreseeable future. The absence of a dividend on our common stock may increase the volatility of the market price of our common stock or make it more likely that the market price of our common stock will decrease in the event of adverse economic conditions or adverse developments affecting our company. Additionally, the indenture governing the Carrols 8% Notes and our senior credit facility limit, and our New Senior Credit Facilities if entered into in connection with the Mergers will limit, and the debt instruments that we may enter into in the future may limit our ability to pay dividends to our stockholders.

If securities analysts do not publish research or reports about our business or if they downgrade our stock, the price of our stock could decline.

The trading market for our common stock will rely in part on the research and reports that industry or financial analysts publish about us or our business. We cannot assure you that these analysts will publish research or reports about us or that any analysts that do so will not discontinue publishing research or reports about us in the future. If one or more analysts who cover us downgrade our stock, our stock price could decline rapidly. If analysts do not publish reports about us or if one or more analysts cease coverage of our stock, we could lose visibility in the market, which in turn could cause our stock price to decline.

Provisions in our restated certificate of incorporation and amended and restated bylaws, as amended, or Delaware law might discourage, delay or prevent a change of control of our company or changes in our management and, therefore, depress the trading price of our common stock.

Delaware corporate law and our restated certificate of incorporation and amended and restated bylaws, as amended, contain provisions that could discourage, delay or prevent a change in control of our company or changes in our management that the stockholders of our company may deem advantageous. These provisions:

As of December 30, 2018, we had approximately $280.1 million of total indebtedness outstanding consisting of $275.0 million of Notes, $1.2 million of lease financing obligations and $3.9 million of capital leases and other debt. At December 30, 2018, we had $61.4 million of borrowing availability under our senior credit facility (after reserving $11.6 million for letters of credit issued under our senior credit facility, which included amounts for anticipated claims from our renewals of workers’ compensation and other insurance policies), which would effectively rank senior to the Carrols 8% Notes.

As a result of our substantial indebtedness, a significant portion of our operating cash flow will be required to make payments of interest and principal on our outstanding indebtedness, and we may not generate sufficient cash flow from operations, or have future borrowings available under our senior credit facility, to enable us to repay our indebtedness, including the Carrols 8% Notes, or to fund other liquidity needs.

Our substantial indebtedness could have important consequences to our stockholders. For example, it could:

We expect to use cash flow from operations, our cash balances and revolving credit borrowings under our senior credit facility to meet our current and future financial obligations, including funding our operations, debt service, possible future acquisitions and capital expenditures (including restaurant remodeling and new restaurant development). Our ability to make these payments depends on our future performance, which will be affected by financial, business, economic and other factors, many of which we cannot control. Our business may not generate sufficient cash flow from operations in the future, which could result in our being unable to repay indebtedness, or to fund other liquidity needs. If we do not have sufficient liquidity, we may be forced to reduce or delay capital expenditures and restaurant acquisitions, sell assets, obtain additional debt or equity capital or restructure or refinance all or a portion of our debt, including our senior credit facility and the Carrols 8% Notes, on or before maturity. We cannot make any assurances that we will be able to accomplish any of these alternatives on terms acceptable to us, or at all. In addition, the terms of existing or future indebtedness, including the agreements for our senior credit facility, may limit our ability to pursue any of these alternatives.

Despite current indebtedness levels and restrictive covenants, we may still be able to incur more debt or make certain restricted payments, which could further exacerbate the risks described above.

We and our subsidiaries may be able to incur additional debt in the future, including debt that may be secured on a first lien basis or pari passu with the Carrols 8% Notes. Although our senior credit facility and the indenture governing the Carrols 8% Notes contain restrictions on our ability to incur indebtedness, those restrictions are subject to a number of exceptions. In addition, if we are able to designate some of our restricted subsidiaries under the indenture governing the Carrols 8% Notes as unrestricted subsidiaries, those unrestricted subsidiaries would be permitted to borrow beyond the limitations specified in the indenture governing the Carrols 8% Notes and engage in other activities in which restricted subsidiaries may not engage. We could also consider investments in joint ventures or acquisitions, which may increase our indebtedness. Moreover, although our senior credit facility and the indenture governing the Carrols 8% Notes contain restrictions on our ability to make restricted payments, including the declaration and payment of dividends, we are able to make such restricted payments under certain circumstances. Adding new debt to current debt levels or making restricted payments could intensify the related risks that we and our subsidiaries now face.

The agreements governing our debt agreements restrict our ability to engage in some business and financial transactions and contain certain other restrictive terms.

Our debt agreements, such as the indenture governing the Carrols 8% Notes and our senior credit facility, restrict our ability in certain circumstances to, among other things:

These covenants limit our operational flexibility and could prevent us from taking advantage of business opportunities as they arise, growing our business or competing effectively. In addition, our senior credit facility required us to maintain specified financial ratios and satisfy other financial tests. At December 30, 2018, we were in compliance with such covenants under our senior credit facility. Our ability to meet these financial ratios and tests can be affected by events beyond our control, and we cannot assure you that we will meet these tests.

A breach of any of these covenants or other provisions in our debt agreements could result in an event of default, which if not cured or waived, could result in such debt becoming immediately due and payable. This, in turn, could cause our other debt to become due and payable as a result of cross-acceleration provisions contained in the agreements governing such other debt. In the event that some or all of our debt is accelerated and becomes immediately due and payable, we may not have the funds to repay, or the ability to refinance, such debt. In addition, in the event that the Carrols 8% Notes become immediately due and payable, the holders of the Carrols 8% Notes would not be entitled to receive any payment in respect of the Carrols 8% Notes until all of our senior debt has been paid in full.

We may not have the funds necessary to satisfy all of our obligations under our senior credit facility, the Carrols 8% Notes or other indebtedness in connection with certain change of control events.

Upon the occurrence of specific kinds of change of control events, the indenture governing the Carrols 8% Notes requires us to make an offer to repurchase all outstanding Notes at 101% of the principal amount thereof, plus accrued and unpaid interest (and additional interest, if any) to the date of repurchase. However, it is possible that we will not have sufficient funds, or the ability to raise sufficient funds, at the time of the change of control to make the required repurchase of the Carrols 8% Notes. In addition, restrictions under our senior credit facility may not allow us to repurchase the Carrols 8% Notes upon a change of control. If we could not refinance such debt or otherwise obtain a waiver from the holders of such debt, we would be prohibited from repurchasing the Carrols 8% Notes, which would constitute an event of default under the indenture. Certain important corporate events, such as leveraged recapitalizations that would increase the level of our indebtedness, would not constitute a “Change of Control” under the indenture.

In addition, our senior credit facility provides that certain change of control events constitute an event of default under such senior credit facility. Such an event of default entitles the lenders thereunder to, among other things, cause all outstanding debt obligations under the senior credit facility to become due and payable and to proceed against the collateral securing such senior credit facility. Any event of default or acceleration of the senior credit facility will likely also cause a default under the terms of our other indebtedness.

Intense competition in the restaurant industry could make it more difficult to profitably expand the Cambridge Business and could also have a negative impact on Cambridge’s operating results if customers favor Cambridge’s competitors or Cambridge is forced to change is pricing and other marketing strategies.

The restaurant industry is highly competitive. In each of the markets in which Cambridge operates its restaurants, its restaurants compete with a large number of national and regional restaurant chains and locally owned restaurants offering low- and medium-priced fare. Cambridge also competes with other convenience stores, delicatessens and prepared food counters in grocery stores, supermarkets, cafeterias and with other purveyors of moderately priced and quickly prepared food. Cambridge believes its largest competitors for its Burger King restaurants are McDonald’s and Wendy’s restaurants and its largest competitor for its Popeyes restaurants is KFC.

Due to competitive conditions, Cambridge, as well as certain of the other major quick-service restaurant chains, has offered select food items and combination meals at discounted prices. These pricing and marketing strategies have had, and in the future may have, a negative impact on its sales and earnings.

Factors applicable to the quick-service restaurant segment may adversely affect Cambridge’s results of operations, which may cause a decrease in earnings and revenues.

The quick-service restaurant segment is highly competitive and can be materially adversely affected by many factors, including:

Cambridge is highly dependent on each of the Burger King system and the Popeyes system and on its ability to renew its franchise agreements with BKC and PLK. The failure to renew its franchise agreements or the failure of the Burger King or Popeyes systems to compete effectively would materially adversely affect Cambridge’s results of operations.

Due to the nature of franchising and Cambridge’s agreements with BKC and PLK, Cambridge’s success is, to a large extent, directly related to the success of the Burger King system and the Popeyes system, including their respective financial conditions, advertising programs, new products and overall quality of operations and the successful and consistent operation of Burger King restaurants and Popeyes restaurants owned by other franchisees. As a result, any failure of the Burger King system or Popeyes system to compete effectively would likely have a material adverse effect on Cambridge’s operating results.

BKC or PLK may not grant Cambridge’s future requests for successor franchise agreements, or may grant successor franchise agreements on terms that are less advantageous than the terms of existing franchise agreements, which could adversely affect Cambridge’s operating results. In addition, as a condition of approval of a successor franchise agreement, BKC or PLK may require Cambridge to make capital improvements to particular restaurants to bring them up to current image standards established by Burger King or Popeyes, as applicable, which may require Cambridge to incur substantial costs.

Additionally, as a franchisee, Cambridge has no control over the Burger King brand or the Popeyes brand. If BKC does not adequately protect the Burger King brand and other intellectual property, or if PLK does not adequately protect the Popeyes brand and other intellectual property, Cambridge’s competitive position and operating results could be harmed.

Cambridge’s strategy includes pursuing acquisitions of additional Burger King and Popeyes restaurants and it may not find Burger King restaurants or Popeyes restaurants that are suitable acquisition candidates or successfully operate or integrate any Burger King restaurants or Popeyes restaurants that it may acquire.

As part of Cambridge’s strategy, it intends to pursue the acquisition of additional Burger King restaurants and Popeyes restaurants. Although Cambridge believes that opportunities for future acquisitions may be available from time to time, competition for acquisition candidates may exist or increase in the future. Consequently, there may be fewer acquisition opportunities available to Cambridge at an attractive acquisition price. There can be no assurance that Cambridge will be able to identify, acquire, manage or successfully integrate additional restaurants without substantial costs, delays or operational or financial problems. In the event Cambridge is able to acquire additional restaurants, the integration and operation of the acquired restaurants may place significant demands on its management, which could adversely affect its ability to manage its existing restaurants. Cambridge may be required to obtain additional financing to fund future acquisitions. There can be no assurance that Cambridge will be able to obtain additional financing, if necessary, on acceptable terms or at all.

Cambridge could be adversely affected by food-borne illnesses, as well as widespread negative publicity regarding food quality, illness, injury or other health concerns.

Negative publicity about food quality, illness, injury or other health concerns (including health implications of obesity) or similar issues stemming from one restaurant or a number of restaurants could materially adversely affect Cambridge, regardless of whether they pertain to Cambridge’s own restaurants, other Burger King restaurants, other Popeyes restaurants or to restaurants owned or operated by other companies. For example, health concerns about the consumption of beef, chicken or eggs or by specific events such as the outbreak of “mad cow” disease or “avian flu” could lead to changes in consumer preferences, reduce consumption of Cambridge’s products and adversely affect Cambridge’s financial performance. These events could also reduce available supply or significantly raise the price of beef, chicken or eggs.

In addition, Cambridge cannot guarantee that its operational controls and employee training will be effective in preventing food-borne illnesses, food tampering and other food safety issues that may affect its restaurants. Food-borne illness or food tampering incidents could be caused by customers, employees or food suppliers and transporters and, therefore, could be outside of Cambridge’s control. Any publicity relating to health concerns or the perceived or specific outbreaks of food-borne illnesses, food tampering or other food safety issues attributed to one or more of Cambridge’s restaurants, could result in a significant decrease in guest traffic in all of its restaurants and could have a material adverse effect its results of operations. In addition, similar publicity or occurrences with respect to other restaurants or restaurant chains could also decrease Cambridge’s guest traffic and have a similar material adverse effect on its business.

Cambridge may incur significant liability or reputational harm if claims are brought against it, the Burger King brand or the Popeyes brand.

Cambridge may be subject to complaints, regulatory proceedings or litigation from guests or other persons alleging food-related illness, injuries suffered in its premises or other food quality, health or operational concerns, including environmental claims. In addition, in recent years a number of restaurant companies have been subject to lawsuits, including class action lawsuits, alleging, among other things, violations of federal and state law regarding workplace and employment matters, discrimination, harassment, wrongful termination and wage, rest break, meal break and overtime compensation issues and, in the case of quick-service restaurants, alleging that they have failed to disclose the health risks associated with high fat or high sodium foods and that their marketing practices have encouraged obesity. Cambridge may also be subject to litigation or other actions initiated by governmental authorities or its employees, among others, based upon these and other matters. Adverse publicity resulting from such allegations or occurrences or alleged discrimination or other operating issues stemming from one or a number of Cambridge’s locations could adversely affect Cambridge’s business, regardless of whether the allegations are true, or whether Cambridge is ultimately held liable. Any cases filed against Cambridge could materially adversely affect it if it loses such cases and has to pay substantial damages or if it settles such cases. In addition, any such cases may materially and adversely affect Cambridge’s operations by increasing its litigation costs and diverting its attention and resources to address such actions. In addition, if a claim is successful, Cambridge’s insurance coverage may not cover or be adequate to cover all liabilities or losses and Cambridge may not be able to continue to maintain such insurance, or to obtain comparable insurance at a reasonable cost, if at all. If Cambridge suffers losses, liabilities or loss of income in excess of its insurance coverage or if its insurance does not cover such loss, liability or loss of income, there could be a material adverse effect on Cambridge’s results of operations.

Cambridge obtains a significant portion of its revenues from the sale of hamburgers, fried chicken and various types of sandwiches. If consumer preferences for these types of foods change, it could have a material adverse effect on Cambridge’s operating results. The quick-service restaurant segment is characterized by the frequent introduction of new products, often supported by substantial promotional campaigns, and is subject to changing consumer preferences, tastes, and eating and purchasing habits. Cambridge’s success depends on each of BKC’s and PLK’s ability to anticipate and respond to changing consumer preferences, tastes and dining and purchasing habits, as well as other factors affecting the restaurant industry, including new market entrants and demographic changes. BKC or PLK may be forced to make changes to Cambridge’s menu items in order to respond to changes in consumer tastes or dining patterns, and Cambridge may lose customers who do not prefer the new menu items. In recent years, numerous companies in the quick-service restaurant segments have introduced products positioned to capitalize on the growing consumer preference for food products that are, or are perceived to be, promoting good health, nutritious, low in calories and low in fat content. If BKC or PLK does not continually develop and successfully introduce new menu offerings that appeal to changing consumer preferences or if the Burger King system or the Popeyes system does not timely capitalize on new products, Cambridge’s operating results could suffer. In addition, any significant event that adversely affects consumption of Cambridge’s products, such as cost, changing tastes or health concerns, could adversely affect its financial performance.

If labor costs increase, Cambridge may not be able to make a corresponding increase in its prices and its operating results may be adversely affected.

Wage rates for a number of Cambridge’s employees are either at or slightly above the federal and or state minimum wage rates. As federal and/or state minimum wage rates increase, Cambridge may need to increase not only the wage rates of its minimum wage employees but also the wages paid to the employees at wage rates which are above the minimum wage, which will increase its costs. The extent to which Cambridge is not able to raise its prices to compensate for increases in wage rates, including increases in state unemployment insurance costs or other costs including mandated health insurance, could have a material adverse effect on its operating results. In addition, even if minimum wage rates do not increase, Cambridge may still be required to raise wage rates in order to compete for an adequate supply of labor for its restaurants.

Higher labor costs due to statutory and regulatory changes could have a material adverse effect on Cambridge’s business and financial results.

Cambridge is subject to the federal labor laws, including the Fair Labor Standards Act, as well as various state and local laws governing such matters as minimum wages, labor relations, workplace safety, citizenship requirements and other working conditions for employees. Federal, state and local laws may also require Cambridge to provide paid and unpaid leave, healthcare, or other benefits to its employees. Changes in the law, or penalties associated with any failure on Cambridge’s part to comply with legal requirements, could increase Cambridge’s labor costs or result in additional expense.

During 2018, certain workers were able to take up to eight weeks of employer-provided paid leave for childbirth, care for a seriously ill family member or needs related to a family member’s military deployment. These additional expenses may cause Cambridge to raise its prices. In certain geographic areas that cannot absorb such increases, this could have a material adverse effect on Cambridge’s business, financial condition; results of operations and/or cash flows. Cambridge provides unpaid leave for employees for covered family and medical reasons, including childbirth, to the extent required by the Family and Medical Leave Act of 1933, as amended, and applicable state laws. To the extent Cambridge needs to hire additional employees or pay overtime for such employees on leave, this would be an added expense which could adversely affect its results of operations.

Increases in income tax rates or changes in income tax laws could adversely affect Cambridge’s business, financial condition or results of operations.

Increases in income tax rates in the United States or other changes in income tax laws in any particular jurisdiction could reduce Cambridge’s after-tax income from such jurisdiction and could adversely affect Cambridge’s business, financial condition or results of operations. The United States recently made changes to existing tax laws in the Tax Act, which was signed into law on December 22, 2017. Among its many provisions, the Tax Act reduced the U.S. federal corporate income tax rate from 35% to 21% and imposed limitations on the deductibility of interest and certain other corporate deductions. Additional changes in the U.S. tax regime, including changes in how existing tax laws are interpreted or enforced, could adversely affect Cambridge’s business, financial condition or results of operations.

The efficiency and quality of Cambridge’s competitors’ advertising and promotional programs and the extent and cost of Cambridge’s advertising and promotional programs could have a material adverse effect on Cambridge’s results of operations and financial condition.

The success of Cambridge’s restaurants depends in part upon the effectiveness of the advertising campaigns and promotions by BKC and PLK. If Cambridge’s competitors increase spending on advertising and promotion, or the cost of television or radio advertising increases, or BKC’s, PLK’s or Cambridge’s advertising and promotions are less effective than those of their competitors’, there could be a material adverse effect on Cambridge’s results of operations and financial condition.

Cambridge cannot assure you that the current locations of its restaurants will continue to be economically viable or that additional locations will be acquired at reasonable costs.

The location of Cambridge’s restaurants has significant influence on their success. Cambridge cannot assure you that current locations will continue to be economically viable or that additional locations can be acquired at reasonable costs. In addition, the economic environment where restaurants are located could decline in the future, which could result in reduced sales for those locations. New sites may not be profitable or as profitable as existing sites.

The U.S. economy has in the past experienced significant slowdown and volatility due to uncertainties related to availability of credit, difficulties in the banking and financial services sectors, softness in the housing market, diminished market liquidity, falling consumer confidence and high unemployment rates. Cambridge’s business is dependent to a significant extent on national, regional and local economic conditions, particularly those that affect its guests that frequently patronize its restaurants. In particular, where Cambridge’s customers’ disposable income is reduced (such as by job losses, credit constraints and higher housing, tax, energy, interest or other costs) or where the perceived wealth of customers has decreased (because of circumstances such as lower residential real estate values, increased foreclosure rates, increased tax rates or other economic disruptions), Cambridge’s restaurants have in the past experienced, and may in the future experience, lower sales and customer traffic as customers choose lower-cost alternatives or other alternatives to dining out. The resulting decrease in Cambridge’s customer traffic or average sales per transaction has had an adverse effect in the past, and could in the future have a material adverse effect, on its business.

The loss of the services of Cambridge’s senior management could have a material adverse effect on its business, financial condition or results of operations.

Cambridge’s success depends to a large extent upon the continued services of its senior management who have substantial experience in the restaurant industry. Cambridge believes that it could be difficult to replace its senior management with individuals having comparable experience. Consequently, the loss of the services of members of Cambridge’s senior management could have a material adverse effect on its business, financial condition or results of operations.

Government regulation could adversely affect Cambridge’s financial condition and results of operations.

Cambridge is subject to extensive laws and regulations relating to the development and operation of restaurants, including regulations relating to the following:

In the event that legislation having a negative impact on Cambridge’s business is adopted, it could have a material adverse impact on Cambridge. For example, substantial increases in the minimum wage or state or Federal unemployment taxes could adversely affect Cambridge’s financial condition and results of operations. Local zoning or building codes or regulations can cause substantial delays in Cambridge’s ability to build and open new restaurants. Any failure to obtain and maintain required licenses, permits and approvals could also adversely affect Cambridge’s operating results.

Federal, state and local environmental regulations relating to the use, storage, discharge, emission and disposal of hazardous materials could expose Cambridge to liabilities, which could adversely affect its results of operations.

Cambridge is subject to a variety of federal, state and local environmental regulations relating to the use, storage, discharge, emission and disposal of hazardous substances or other regulated materials, release of pollutants into the air, soil and water, and the remediation of contaminated sites.

Failure to comply with environmental laws could result in the imposition of fines or penalties, restrictions on operations by governmental agencies or courts of law, as well as investigatory or remedial liabilities and claims for alleged personal injury or damages to property or natural resources. Some environmental laws impose strict, and under some circumstances joint and several, liability for costs of investigation and remediation of contaminated sites on current and prior owners or operators of the sites, as well as those entities that send regulated materials to the sites. Cambridge cannot assure you that it has been or will be at all times in complete compliance with such laws, regulations and permits. Therefore, Cambridge’s costs of complying with current and future environmental, health and safety laws could adversely affect its results of operations.

Cambridge is subject to all of the risks associated with leasing property subject to long-term non-cancelable leases.

The leases for Cambridge’s restaurant locations generally have initial terms of 20 years (except for certain acquired restaurants, the leases for which have remaining terms of less than 20 years at the time of acquisition), and typically provide for renewal options in five-year increments, as well as for rent escalations. Generally, Cambridge’s leases are “net” leases, which require Cambridge to pay all of the costs of insurance, taxes, maintenance and utilities. Additional sites that Cambridge leases are likely to be subject to similar long-term, non-cancelable leases. Cambridge generally cannot cancel its leases. If an existing or future restaurant is not profitable, and Cambridge decides to close it, Cambridge may nonetheless be obligated to perform its monetary obligations under the applicable lease including, among other things, paying all amounts due for the balance of the lease term. In addition, as each of Cambridge’s leases expire, Cambridge may fail to negotiate renewals, either on commercially acceptable terms or any terms at all, which could cause it to close restaurants in desirable locations.

An increase in food costs could adversely affect Cambridge’s operating results.

Cambridge’s profitability and operating margins are dependent in part on Cambridge’s ability to anticipate and react to changes in food costs. Changes in the price or availability of certain food products could affect Cambridge’s ability to offer broad menu and price offerings to guests and could materially adversely affect its profitability and reputation. The type, variety, quality and price of beef, chicken, produce and cheese can be subject to change and to factors beyond Cambridge’s control, including weather, governmental regulation, availability and seasonality, each of which may affect Cambridge’s food costs or cause a disruption in its supply. Cambridge’s food distributors or suppliers may also be affected by higher costs to produce and transport commodities used in Cambridge’s restaurants, higher minimum wage and benefit costs and other expenses that they pass through to their customers, which could result in higher costs for goods and services supplied to Cambridge. Cambridge may not be able to anticipate and react to changing food costs through menu price adjustments in the future, which could negatively impact its results of operations.

Security breaches of confidential guest information in connection with Cambridge’s electronic processing of credit and debit card transactions may adversely affect Cambridge’s business.

Many of Cambridge’s customers pay for their purchases using credit or debit cards. Other restaurants and retailers have experienced security breaches in which credit and debit card information of their customers was compromised. Cambridge may in the future become subject to lawsuits or other proceedings for purportedly fraudulent transactions arising out of the actual or alleged theft of its guests’ credit or debit card information. Any such allegation, claim or proceeding, regardless of its validity or whether Cambridge is ultimately held liable, or any resulting adverse publicity, may have a material adverse effect on Cambridge and its restaurants.

Cambridge depends on information technology and any material failure of that technology could impair its ability to efficiently operate its business.

Cambridge relies on information systems across its operations, including, for example, point-of-sale processing in its restaurants, procurement and payment to significant suppliers, collection of cash, and payment of other financial obligations and various other processes and procedures. Cambridge’s ability to efficiently manage its business depends significantly on the reliability and capacity of these systems. The failure of these systems to operate effectively, problems with maintenance, upgrading or transitioning to replacement systems or a breach in security of these systems could cause delays in customer service and reduce efficiency in Cambridge’s operations. Significant capital investments might be required to remediate any problems.

This prospectus contains statements which constitute forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Statements that are predictive in nature or that depend upon or refer to future events or conditions are forward-looking statements. Words such as “may”, “might”, “will”, “should”, “anticipate”, “believe”, “expect”, “intend”, “estimate”, “hope”, “plan” or similar expressions are intended to identify such forward-looking statements. In addition, expressions of our strategies, intentions or plans are also forward-looking statements. These statements reflect management’s best judgment based on current views with respect to future events and are subject to risks and uncertainties, both known and unknown. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their date. Actual results could differ materially from those stated or implied in these forward-looking statements as a result of a number of factors, included but not limited to, the factors discussed in “Risk Factors”. We believe important factors that could cause actual results to differ materially from our expectations include the following, in addition to other risks and uncertainties discussed herein:

Occurrence of any of the events or circumstances described above could also have a material adverse effect on Carrols’ or Cambridge’s business, financial condition, results of operations, cash flows or the market price of Carrols Common Stock or NewCRG’s Common Stock.

No assurance can be given that any future transaction about which forward-looking statements may be made will be completed or as to the timing or terms of any such transaction.

All subsequent written and oral forward-looking statements by or attributable to Carrols or Cambridge or persons acting on their behalf are expressly qualified in their entirety by these factors. Except as otherwise required to be disclosed in periodic reports required to be filed by public companies with the SEC pursuant to the SEC’s rules, we have no duty to update these statements.

The following summary describes the material provisions of the Merger Agreement and is qualified in its entirety by reference to the complete text of the Merger Agreement, which is incorporated by reference in this prospectus. The provisions of the Merger Agreement are extensive and not easily summarized. Accordingly, this summary may not contain all of the information about the Merger Agreement that is important to you. We encourage you to read the Merger Agreement carefully in its entirety for a more complete understanding of the Merger Agreement.

The Merger Agreement and this summary of its terms have been included with this prospectus to provide you with information regarding the terms of the Merger Agreement and are not intended to modify or supplement any factual disclosures about Carrols or NewCRG in our public reports filed with the SEC. In particular, the Merger Agreement and related summary are not intended to be, and should not be relied upon as, disclosures regarding any facts and circumstances relating to Carrols, NewCRG, Cambridge or New CFH. The representations and warranties contained in the Merger Agreement have been negotiated with the principal purpose of establishing the circumstances in which a party may have the right not to close the Mergers if the representations and warranties of the other party prove to be untrue due to a change of circumstances or otherwise, and allocate risk between the parties, rather than establishing matters as facts. The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to public disclosures.

In connection with a reorganization of its holding company structure, and to complete the acquisition of New CFH, pursuant to the Merger Agreement and Section 251(g) of the General Corporation Law of the State of Delaware, Carrols has formed NewCRG, and NewCRG has formed (i) Carrols Merger Sub, which will merge with and into Carrols, and (ii) Carrols Acquisition Sub, which will merge with and into New CFH.

Upon satisfaction or waiver of the conditions to the transactions specified in the Merger Agreement, Carrols Merger Sub will merge with and into Carrols with Carrols as the surviving entity. As a result of the Carrols Merger, Carrols will, by operation of law, become a wholly owned subsidiary of NewCRG. Upon consummation of the Carrols Merger, NewCRG will be renamed “Carrols Restaurant Group, Inc.” The officers and directors of NewCRG immediately after consummation of the Carrols Merger will be the same as the officers and directors of Carrols immediately prior to the consummation of the Carrols Merger. In addition, upon consummation of the Carrols Merger, the certificate of incorporation (except for certain technical matters) and by-laws of NewCRG will be the same as the certificate of incorporation and by-laws of Carrols immediately prior to the consummation of the Carrols Merger and Carrols’ certificate of incorporation and bylaws will be amended to remove the classified board of directors and for certain technical matters. Each share of (i) Carrols Common Stock outstanding immediately prior to the consummation of the Carrols Merger will be converted into one share of NewCRG Common Stock and (ii) Carrols Series B Preferred Stock outstanding immediately prior to the consummation of the Carrols Merger will be converted into one share of NewCRG Series B Convertible Preferred Stock. NewCRG Common Stock will be listed on the NASDAQ Global Market and will trade under Carrols’ current ticker symbol “TAST”. Holders of Carrols Series B Preferred Stock immediately prior to the consummation of the Carrols Merger will not be required to exchange their certificates representing shares of Carrols Series B Preferred Stock for certificates representing shares of NewCRG Series B Preferred Stock. The certificates representing shares of Carrols Series B Preferred Stock will continue to represent an equal number of shares of NewCRG Series B Preferred Stock. Holders of Carrols Common Stock immediately prior to the consummation of the Carrols Merger will not be required to exchange their certificates representing shares of Carrols Common Stock for certificates representing shares of NewCRG Common Stock. The certificates representing your shares of Carrols Common Stock will continue to represent an equal number of shares of NewCRG Common Stock. Each person entered as the owner in a book entry that, immediately prior to the Carrols Merger, represented any outstanding shares of Carrols Common Stock shall be deemed to have received an equivalent number of shares of NewCRG Common Stock.

Upon satisfaction or waiver of the conditions to the transactions specified in the Merger Agreement, Carrols Acquisition Sub will merge with and into New CFH with New CFH as the surviving entity. As a result of the Cambridge Merger, New CFH will become a wholly owned subsidiary of NewCRG.

Upon consummation of the Carrols Merger, each share of Carrols restricted stock and each restricted stock unit of Carrols under any compensation or benefit agreement, plan or arrangement of Carrols shall cease to represent or relate to a share of Carrols Common Stock and shall be converted automatically to represent or relate to a share of NewCRG Common Stock, on substantially the same terms and conditions as were applicable to such Carrols restricted stock or restricted stock unit. To accomplish the foregoing, effective as of the initial effective time of the Carrols Merger, the parties intend that Carrols shall assign, and NewCRG shall assume, all of its rights and obligations under each such agreement, plan and arrangement pursuant to which any such restricted stock or restricted stock unit is granted under the Carrols 2006 Stock Incentive Plan, as amended, Carrols 2016 Stock Incentive Plan, as amended and all agreements thereunder. In addition, all obligations of Carrols under any deferred compensation plan, retirement savings plan or employment agreement and change of control/severance agreement will be assigned to NewCRG.

The Cambridge Merger Consideration payable by NewCRG to Cambridge at the closing of the Cambridge Merger will consist of (i) the NewCRG Investor Shares, which consist of a number of shares of NewCRG Common Stock equal to 19.9% of the number of shares of NewCRG Common Stock outstanding immediately prior to the issuance of such shares of NewCRG Common Stock to Cambridge (which is equal to approximately 7.4 million shares of NewCRG Common Stock, based on the 37,007,107 shares of Carrols Common Stock outstanding on April 8, 2019), and (ii) 10,000 shares of NewCRG Series C Preferred Stock. At the effective time of the Cambridge Merger, Cambridge’s equity interest in New CFH will automatically be converted into the right to receive the Cambridge Merger Consideration. See “Summary—NewCRG Series C Convertible Preferred Stock” for a description of the terms of the NewCRG Series C Preferred Stock.

Under Delaware law, none of the stockholders of Carrols or the equity holders of New CFH have appraisal rights in connection with the Mergers.

The Merger Agreement contains representations and warranties made by Carrols, Cambridge, CFP and New CFH that are customary for transactions of this type and that are subject in certain cases to exceptions and qualifications, including materiality qualifications. Cambridge’s and New CFH’s representations and warranties in the Merger Agreement relate to, among other things:

Certain representations and warranties of Cambridge and CFP in the Merger Agreement are qualified by “materiality” or “Material Adverse Effect.” For purposes of the Merger Agreement, “Material Adverse Effect” means any change, event, occurrence or circumstance, that, individually or in the aggregate with all other changes, events, occurrences and circumstances, results in or would reasonably be expected to result in, a material adverse effect on the financial condition, business, results of operations, assets or liabilities of Cambridge and its subsidiaries, taken as a whole, or on the ability of CFP and Cambridge and its subsidiaries to consummate the transactions contemplated by the Merger Agreement, except to the extent resulting from:

provided that clause (i) shall not prevent a determination that any change, cause or effect underlying any such failure to meet such estimates or forecasts has resulted in a Material Adverse Effect (to the extent such change, cause or effect is not otherwise excluded from this definition of Material Adverse Effect)); provided further that in the case of clauses (a), (b), (c), (d) and (h), such change, event, occurrence or circumstance does not affect Cambridge and its subsidiaries, taken as a whole, in a substantially disproportionate manner relative to other companies operating in the industries in which Cambridge and its subsidiaries conduct business, in which case only the incremental disproportionate adverse impact may be taken into account in determining whether there has occurred a Material Adverse Effect.

Subject to certain limited exceptions described in the Merger Agreement, each of CFP, New CFH and their respective subsidiaries (collectively, the “CFP Entities”) have agreed to cause each of their respective subsidiaries to conduct, its business in the usual, regular and ordinary course in substantially the same manner as currently conducted and use commercially reasonable efforts to (a) preserve intact its corporate existence and current business organization, (b) preserve the goodwill and present business relationships (contractual or otherwise) with customers, suppliers, distributors and others having business dealings with them, (c) keep available the services of its current officers, directors, managers, employees and consultants, (d) preserve in all material respects its present properties and its tangible and intangible assets, (e) comply in all material respects with all applicable laws and material contracts, (f) pay all material taxes as such taxes become due and payable other than taxes that are being contested in good faith or for which adequate reserve has been established and (g) maintain all material existing permits applicable to its operations and businesses. Subject to certain limited exceptions described in the Merger Agreement, neither the Cambridge nor New CFH shall (directly or indirectly), and CFP, Cambridge and New CFH shall cause each of their respective subsidiaries not to, do any of the following without the prior written consent of Carrols (which consent shall not be unreasonably withheld, conditioned or delayed), during the period prior to the effective time of the Cambridge Merger:

Subject to certain limited exceptions described in the Merger Agreement, Carrols has agreed to conduct its business in the usual, regular and ordinary course in substantially the same manner as currently conducted and use commercially reasonable efforts to preserve intact its corporate existence and current business organization, keep available the services of its current officers and employees and keep its relationships with customers, suppliers, distributors and others having business dealings with them. Subject to certain limited exceptions described in the Merger Agreement, Carrols has agreed not to, and shall cause each of its subsidiaries not to, (directly or indirectly) do any of the following without the prior written consent of Cambridge (which consent shall not be unreasonably withheld) during the period prior to the effective time of the Cambridge Merger:

Any of the foregoing provisions (other than item (e) above) to the contrary notwithstanding, nothing shall prevent Carrols or any of its subsidiaries from taking any of the following actions, to the extent such actions would not reasonably be expected to prevent or materially delay or adversely affect the ability of Carrols, NewCRG, Carrols Merger Sub or Carrols Acquisition Sub to consummate the transactions contemplated in the Merger Agreement and by the other related transaction agreements:

In the Merger Agreement, the CFP Entities have agreed that they will not, and will not authorize or permit any of their respective affiliates, including any subsidiaries, or any of its or their respective officers, directors, representatives or agents, to, directly or indirectly:

An Acquisition Proposal includes any request, solicitation or proposal to abandon, terminate or fail to consummate any of the transactions contemplated by the Merger Agreement. Upon executing the Merger Agreement, Cambridge agreed to:

In the Merger Agreement, Carrols has agreed that it will not, and will not authorize or permit any of its respective affiliates, including any subsidiaries, or any of its or its respective officers, directors, representatives or agents, to, directly or indirectly pursue, solicit, initiate, knowingly facilitate or encourage, or otherwise enter into any discussions, negotiations, agreements or other arrangements regarding or which would reasonably be expected to lead to, an acquisition, sale, disposition or other transaction, other than any transaction set forth in the applicable disclosure schedule, with any person other than the Cambridge or its affiliates that would reasonably be expected to have a material adverse effect for Carrols (a “Conflicting Transaction”) or enter into a contract with any other person in respect of a Conflicting Transaction, and shall, and shall cause its subsidiaries and direct its and their respective officers, directors, representatives and agents, immediately cease and cause to be terminated, all existing discussions or negotiations with any persons conducted heretofore with respect to, or that would reasonably be expected to lead to, a Conflicting Transaction. A Conflicting Transaction includes any request, solicitation or proposal to abandon, terminate or fail to consummate any of the transactions contemplated by the Merger Agreement or by the related transaction agreements.

From the date of the Merger Agreement until the closing, each of the CFP Entities shall, and shall cause each of its subsidiaries to, and shall use its commercially reasonable efforts to cause its and their respective representatives to, provide, or cause to be provided, to NewCRG and Carrols and their actual or prospective financing sources reasonable access to such information concerning the CFP Entities, their subsidiaries and their respective businesses as may be reasonably requested by NewCRG, Carrols or such financing source(s) in order to secure the financing under the Commitment Letter. In connection with the transactions contemplated by the Merger Agreement, NewCRG or Carrols may assign or pledge all or any portion of its rights or obligations under the Merger Agreement to such financing source(s) in connection with the financing under the Commitment Letter; provided that such assignment or pledge shall not relinquish NewCRG or Carrols from their obligations under the Merger Agreement. From the date of the Merger Agreement until the closing, each of the CFP Entities shall, and shall cause each of its subsidiaries to, use their commercially reasonable efforts to provide, and to use commercially reasonable efforts to cause its and their respective representatives to provide, such cooperation as is customary for financings of a type similar to the financing under the Commitment Letter and/or as may be reasonably requested by NewCRG, Carrols or any of their financing sources in connection with the procurement of the financing under the Commitment Letter, including, without limitation:

In the Merger Agreement, NewCRG and Carrols have agreed to as promptly as reasonably practicable, to prepare and will file with the SEC a registration statement on Form S-4 (or other appropriate form) registering the shares of NewCRG Common Stock issuable in the Carrols Merger (the “Registration Statement”). NewCRG and Carrols have agreed to provide Cambridge and its counsel a reasonable opportunity to review and comment on the Registration Statement (and any amendments or supplements thereto) prior to the filing thereof with the SEC. NewCRG and Carrols have agreed to respond to any comments of the SEC and NewCRG and Carrols shall use their respective commercially reasonable efforts to have the Registration Statement declared effective under the Securities Act by the SEC as promptly as practicable after such filing. NewCRG and Carrols have agreed to use their commercially reasonable efforts to keep the Registration Statement effective as long as is necessary to consummate the Carrols Merger and the transactions contemplated thereby. NewCRG and Carrols have agreed to advise Cambridge and its counsel promptly after they receive notice thereof, of the time when the Registration Statement has become effective, the issuance of any stop order or the suspension of the qualification of the NewCRG Common Stock issuable in connection with the Carrols Merger for offering or sale in any jurisdiction. As promptly as practicable following the date hereof, each of NewCRG and Carrols have agreed to make all other filings required to be made by it with respect to the Mergers and the transactions contemplated hereby under the Securities Act and the Exchange Act and applicable state “blue sky” laws and the rules and regulations thereunder.

No later than March 15, 2019, and prior to the Registration Statement being filed with the SEC, Cambridge and New CFH shall furnish Carrols with the audited combined balance sheet of the CFP Business (as defined in the Merger Agreement) as of December 31, 2018 and the related audited combined statements of income, net investment and cash flows of the CFP Business for the fiscal year ended December 31, 2018 and, if necessary (prior to the Registration Statement being declared effective under the Securities Act by the SEC), the unaudited balance sheet of the CFP Business as of the last day of any interim fiscal quarter (other than the fourth fiscal quarter of any fiscal year) ended at least forty-five (45) days prior to the date on which the Registration Statement is declared effective under the Securities Act by the SEC (the “CFP 2019 Interim Balance Sheet Date”) and the related unaudited combined statements of income, net investment and cash flows of the CFP Business for the period beginning on January 1, 2019 and ended as of the CFP 2019 Interim Balance Sheet Date. Cambridge and New CFH shall further furnish any other information as may be reasonably requested by NewCRG or Carrols in connection with the Registration Statement and any such filings, including providing any such information as may be required to be included in the Registration Statement or any such filings under applicable law. The Registration Statement and such filings shall comply in all material respects with all applicable requirements of law and the rules and regulations promulgated thereunder. NewCRG and Carrols shall, as promptly as practicable after receipt thereof, provide Cambridge and its counsel with copies of any written comments and all other correspondence with the SEC or any other governmental officials, and advise Cambridge and its counsel of any oral comments, with respect to the Registration Statement (or any amendment or supplement thereto) received from the SEC. Each of NewCRG, Carrols, Cambridge and New CFH shall ensure that information supplied by it for inclusion or incorporation in such Registration Statement does not at the time the Registration Statement is filed with the SEC or at the time such Registration Statement is first published, sent or given to the Carrols stockholders contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. If, at any time prior to the effective time of the Cambridge Merger, any information relating to NewCRG, Carrols, Cambridge or New CFH, or any of their respective affiliates, officers, directors, members or managers, is discovered by NewCRG, Carrols Cambridge or New CFH that should be set forth in an amendment or supplement to the Registration Statement so that the Registration Statement would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the party hereto discovering such information shall promptly notify the other parties and, to the extent required by law, NewCRG and Carrols shall cause an appropriate amendment or supplement describing such information to be promptly filed with the SEC and, to the extent required by law disseminated to the Carrols stockholders.

Except with respect to efforts relating to approvals or requirements under applicable antitrust laws, each of the parties to the Merger Agreement has agreed to use its commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws to consummate the Mergers and the other transactions contemplated thereby and other agreements related thereto as promptly as practicable after the date of the Merger Agreement.

Notwithstanding the foregoing, Carrols, Cambridge and New CFH, will each make or cause to be made all filings and submissions required under the HSR Act as promptly as practicable after the date of the Merger Agreement, and thereafter make any other required submissions with respect to the transactions contemplated under the Merger Agreement and thereby under the HSR Act and otherwise use its reasonable best efforts to cause the expiration or termination of the applicable waiting period under the HSR Act as soon as practicable.

Carrols, Cambridge and New CFH each has agreed in the Merger Agreement to cooperate regarding, and keep the others reasonably apprised of the status of, matters relating to the completion of the transactions contemplated by the Merger Agreement and work cooperatively in connection (i) with obtaining all required approvals or consents of any governmental authority and (ii) all other communications with any governmental authority with respect to the Mergers.

Carrols has agreed in the Merger Agreement to consult with the Cambridge before issuing any press release or other public statement with respect to the Merger Agreement or the transactions contemplated thereby and not to issue any such press release or make any such public statement prior to such consultation, except as may be required by applicable law, court process or obligations pursuant to any listing agreement with any national securities exchange. Each CFP Entity has agreed to obtain the approval of Carrols before issuing any press release or other public statement with respect to the Merger Agreement or the transactions contemplated thereby and not to issue any such press release or make any such public statement prior to such approval, except as may be required by applicable law, court process or obligations pursuant to any listing agreement with any national securities exchange.

NewCRG has agreed in the Merger Agreement to provide each stockholder entitled to vote at the annual meeting of the stockholders of NewCRG to be held in 2019, which shall be held no later than 120 days following the closing of the Mergers or at any special meeting of the stockholders of NewCRG held prior to such date (as applicable, the “NewCRG Stockholder Meeting”) or any subsequent meeting of NewCRG Stockholders, if necessary, until Stockholder Approval is obtained or is no longer required, a proxy statement meeting the requirements of Section 14 of the Exchange Act and the related rules and regulations promulgated thereunder and the applicable rules promulgated by NASDAQ (the “NewCRG Proxy Statement”) soliciting each such stockholder’s affirmative vote at the NewCRG Stockholder Meeting for Stockholder Approval, and NewCRG shall use its commercially reasonable efforts to solicit its stockholders to obtain the Stockholder Approval (which efforts shall include, without limitation, hiring a reputable proxy solicitor selected by NewCRG in its sole discretion) and causing the NewCRG Board to recommend to the stockholders that they provide the Stockholder Approval, unless the NewCRG Board determines in good faith, after consultation with outside legal counsel, that making such recommendation would reasonably be expected to cause the NewCRG Board to be in breach of its fiduciary duties under applicable law.

On or prior to the Effective Time, NewCRG shall pay for and cause to be obtained, and to be effective at the Effective Time, one or more prepaid “tail” insurance policies covering all past and present directors and officers of Cambridge and its subsidiaries (the “D&O Insurance”) with a claims period of at least six years from the Effective Time containing terms and conditions that are, taken as a whole, at least as favorable as Cambridge’s and its subsidiaries’ existing D&O Insurance for claims arising from facts or events that occurred at or prior to the Effective Time; provided that the maximum aggregate premium for such “tail” insurance policies that NewCRG shall be required to expend shall not exceed three hundred percent (300%) of the amount paid by the Cambridge and its subsidiaries for coverage during the last full fiscal year (such three hundred percent (300%) amount, the “Maximum Annual Premium”) which annual premiums are set forth in the applicable disclosure schedule. If such insurance can only be obtained at an annual premium in excess of the Maximum Annual Premium, then NewCRG and New CFH shall only be obligated to obtain a policy or policies with the greatest coverage available for a cost not exceeding the Maximum Annual Premium in the aggregate.

Pursuant to the Merger Agreement, effective immediately before the effective time of the Carrols Merger, (i) the Carrols board of directors shall increase its size by two directors and shall appoint two persons nominated by Cambridge to the Carrols board of directors, which initial nominees shall be Matthew Perelman and Alexander Sloane, and (ii) the Carrols board of directors shall cause such nominees to be elected and appointed as directors of NewCRG.

Each of Carrols, NewCRG, Cambridge and New CFH agreed in the Merger Agreement to report, and cause its affiliates to report, the exchanges of Carrols Common Stock and equity in New CFH for NewCRG Common Stock as exchanges described in Section 351 of the Code for all income tax purposes and to otherwise use its reasonable best efforts to, and cause its affiliates to, cause such exchanges to qualify as exchanges described in Section 351 of the Code and to not take any action that would, or that would be reasonably likely to cause the exchanges not to so qualify. Without limitation of the foregoing, NewCRG agreed to not cause, in connection with the transactions provided for in the Merger Agreement, New CFH to be a subsidiary of Carrols or cause Carrols not to be recognized as an entity whose separate existence from NewCRG is regarded for federal (and applicable state, local, and non-U.S.) income tax purposes.

NewCRG and Carrols agreed in the Merger Agreement to use their respective best efforts to cause the shares of NewCRG Common Stock to be issued in connection with the transactions contemplated thereby to be approved for listing on the NASDAQ, subject to official notice of issuance, prior to the effective time of the Cambridge Merger.

In the Merger Agreement, NewCRG and Cambridge agreed to enter into a Registration Rights and Stockholders’ Agreement to be effective as of the closing thereunder substantially in the form attached to the Merger Agreement. For a detailed description of the Registration Rights and Stockholders’ Agreement, see “Terms of the Transactions—Description of the Registration Rights and Stockholders’ Agreement.”

The respective obligation of each party to the Merger Agreement to effect the Mergers is subject to the satisfaction or waiver on or prior to the closing date of the following conditions:

In addition, the obligation of Carrols is subject to the following conditions (the “Carrols Closing Conditions”):

In addition, the obligation of the CFP Entities is subject to the following conditions (the “Cambridge Closing Conditions”):

The Merger Agreement provides that it may be terminated and the Mergers and other transactions contemplated thereby may be abandoned at any time before the closing:

Any provision of the Merger Agreement may be amended or waived prior to the effective time if such amendment or waiver is in writing and is signed, in the case of an amendment, by each party thereto or, in the case of a waiver, by each party against whom the waiver is to be effective.

As part of the consideration for the acquisition of Cambridge, NewCRG will issue 10,000 shares of NewCRG Series C Preferred Stock to Cambridge upon consummation of the Cambridge Merger.

See “Summary—NewCRG Series C Convertible Preferred Stock” for a description of the terms of the NewCRG Series C Preferred Stock.

Simultaneously with the closing of the Mergers, NewCRG and Cambridge will enter into the Registration Rights and Stockholders’ Agreement. See “Summary—Registration Rights and Stockholders’ Agreement” for a description of the terms of the Registration Rights and Stockholders’ Agreement.

Carrols LLC, Carrols, Carrols Corp and BKC have entered into the Area Development and Remodeling Agreement which is subject to the closing of the transactions contemplated by the Merger Agreement, and effective and having a term commencing on, the date of the closing of the transactions contemplated by the Merger Agreement and ending on September 30, 2024. See “Summary—Area Development and Remodeling Agreement” for a description of the terms of Area Development and Remodeling Agreement.

In connection with the execution of the Merger Agreement, Carrols entered into the Commitment Letter, with Wells Fargo Bank, Wels Fargo Securities, Rabobank, M&T Bank, SunTrust Bank and STRH, pursuant to which, and subject to the satisfaction or waiver of the conditions set forth in the Commitment Letter, the Lenders have committed to provide to NewCRG, substantially contemporaneously with the consummation of the Mergers, senior secured credit facilities in an aggregate principal amount of $500.0 million, consisting of (i) the Term Loan B Facility in an aggregate principal amount of $400.0 million and (ii) the New Revolving Credit Facility (including a sub-facility for standby letters of credit) in an aggregate principal amount of $100.0 million, all on the terms set forth in the Commitment Letter.

See “Summary—Commitment Letter” for a description of the terms of Commitment Letter and the New Senior Credit Facilities.

Subject to the limitations and qualifications described in “Material U.S. Federal Income Tax Consequences of the Mergers” below, the exchange by U.S. holders of shares of Carrols Common Stock for shares of NewCRG Common Stock and shares of Carrols Series B Preferred Stock for shares of NewCRG Series B Preferred Stock pursuant to the Carrols Merger, taken together with the Cambridge Merger, is intended to qualify as a transaction described in Section 351 of the Code, and separately is intended qualify as a reorganization within the meaning of Section 368(a) of the Code. As a result, it is intended that no gain or loss be recognized by Carrols, NewCRG, or the stockholders of Carrols as a result of the exchange of shares of Carrols Common Stock for shares of NewCRG Common Stock and shares of Carrols Series B Preferred Stock for shares of NewCRG Series B Preferred Stock pursuant to the Carrols Merger. In addition, it is intended that no gain or loss be recognized by Carrols or NewCRG as a result of the issuance of shares of NewCRG Common Stock and shares of NewCRG Series C Preferred Stock in exchange for the equity interests in New CFH pursuant to the Merger Agreement. Your tax consequences will depend on your own situation. You should consult your tax advisor to fully understand the tax consequences of the Mergers to you.

The following is a discussion of the material factors considered by the board of directors of Carrols in reaching its decisions to adopt the Merger Agreement and approve the Mergers and the other transactions contemplated by the Merger Agreement. This discussion is only a summary and does not include all of the factors considered by Carrols’ board of directors. In reaching its decisions to adopt the Merger Agreement and approve the Mergers and the other transactions contemplated by the Merger Agreement, Carrols’ board of directors consulted with Carrols’ management, as well as with Carrols’ tax and legal advisors, and considered a number of factors, including:

In addition to the factors described above, Carrols’ board of directors identified and considered a variety of risks and potentially negative factors concerning the acquisitions, including:

In view of the wide variety of factors considered in connection with its evaluation of the Mergers and the complexity of those matters, Carrols’ board of directors did not find it useful to, and did not attempt to, quantify, rank or otherwise assign relative weights to these factors.

In addition, Carrols’ board of directors did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable to its ultimate determination, but rather Carrols’ board of directors conducted an overall analysis of the factors described above, including discussions with Carrols’ management and legal and tax advisors. In considering the factors described above, individual members of Carrols’ board of directors may have given different weight to different factors.

On June 18, 2018, Daniel T. Accordino, Carrols’ Chairman and Chief Executive Officer, received an email from Matthew Perelman and Alexander Sloane, Co-Presidents of Cambridge, requesting a meeting to discuss the possibility of a business combination transaction between Carrols and Cambridge.

On June 25, 2018, Mr. Accordino and Paul R. Flanders, Carrols’ Chief Financial Officer, met with Messrs. Perelman and Sloane. At this meeting, Messrs. Perelman and Sloane first presented to Carrols the possibility of a business combination transaction between Carrols and Cambridge, although no specific terms were discussed.

Between June 27, 2018 and July 11, 2018, Cambridge and Carrols negotiated and entered into a confidentiality agreement effective as of June 29, 2018.

During the month of July, Messrs. Accordino, Flanders, Perelman and Sloane continued to discuss telephonically the merits of exploring a possible business combination transaction.

On August 2, 2018, at a regularly scheduled meeting of the board of directors of Carrols, Messrs. Accordino and Flanders briefed the Carrols board of directors on the initial discussions between Carrols and Cambridge regarding a potential business combination transaction. The Carrols board of directors expressed its interest in Carrols continuing its discussions with Cambridge and obtaining more information regarding Cambridge and its business.

Between August 3, 2018 and August 31, 2018, Carrols and Cambridge discussed Cambridge’s business, including certain preliminary financial information provided by Cambridge, and potential structures of a business combination transaction, telephonically and in person.

On September 4, 2018, Messrs. Accordino and Flanders discussed with the Finance Committee of Carrols’ board of directors the potential business combination transaction with Cambridge. On the same day, Cambridge informed its counsel, Kirkland & Ellis LLP (“Kirkland”), of the ongoing discussions concerning a potential business combination transaction with Carrols.

On September 7, 2018, Messrs. Accordino and Flanders updated the Carrols board of directors on the status of the discussions with Cambridge on a potential business combination transaction.

During the week of September 10, 2019, Mr. Accordino and Richard Cross, Carrols’ Vice President of Real Estate, conducted site visits of restaurants operated by Cambridge in Tennessee.

On September 14, 2018, Kirkland, on behalf of Cambridge, presented to Carrols and its counsel, Akerman LLP (“Akerman”), an initial non-binding term sheet and proposed structure of a potential business combination transaction between Carrols and Cambridge, which included a holding company reorganization of Carrols and which would be tax-free to Cambridge and CFP and Carrols and its stockholders. Also on September 14, 2018, Carrols, Akerman, Cambridge and Kirkland discussed the non-binding term sheet and proposed structure of a potential business combination transaction between Carrols and Cambridge presented by Cambridge.

On September 17, 2018, Carrols met with BKC to begin discussing the proposed business combination transaction between Carrols and Cambridge, including the development and capital expenditure requirements of the combined business after the completion of such potential business combination.

On September 19, 2018, Messrs. Accordino and Flanders updated Messrs. Perelman and Sloane regarding the meeting with BKC.

From September 19, 2018 through October 23, 2018, further discussions and communications between representatives of Carrols and Cambridge ensued regarding the terms and structure of the potential business combination transaction. During this period, on September 25, 2018 and on October 9, 2018, Cambridge provided additional financial information to Carrols.

On October 15, 2018, Messrs. Accordino and Flanders updated the Carrols board of directors on the status of the discussions with Cambridge.

On November 1, 2018, at a regularly scheduled meeting of the Carrols board of directors, Messrs. Accordino and Flanders updated the Carrols board of directors on the status of the discussions with Cambridge.

There were no further discussions between Carrols and Cambridge after October 23, 2018 until November 8, 2018, when Messrs. Perelman and Sloane contacted Messrs. Accordino and Flanders to request an in-person meeting to potentially restart discussions regarding a potential business combination transaction between Carrols and Cambridge.

On November 19, 2018, Messrs. Accordino and Flanders met with Messrs. Perelman and Sloane in person and discussed a revised proposal of terms of a potential business combination transaction provided by Cambridge.

On November 28, 2018, Messrs. Accordino and Flanders updated the Carrols board of directors on the status of the discussions with Cambridge and the terms of the revised proposal for a potential business combination transaction between Carrols and Cambridge provided by Cambridge, including the need to refinance the existing outstanding indebtedness of Cambridge and Carrols in connection with such potential business combination transaction. The Carrols board of directors directed Carrols’ management to proceed and continue discussions with Cambridge including proceeding with a detailed due diligence investigation of Cambridge and its business.

On November 29, 2018 and November 30, 2018, Messrs. Accordino, Flanders, Perelman and Sloane continued discussions regarding a potential business combination transaction including a detailed due diligence investigation to be conducted by Carrols of Cambridge’s business.

On December 4, 2018, Carrols, Akerman, Cambridge and Kirkland discussed the proposed transaction structure and terms of a potential business combination transaction between Carrols and Cambridge. From December 4, 2018 through February 19, 2019, Carrols and its advisors conducted extensive due diligence of Cambridge’s business.

On December 14, 2018, Carrols and Cambridge met with BKC to discuss a potential business combination transaction between Carrols and Cambridge, and the terms of the Area Development Agreement. From December 14, 2018 through February 19, 2019, Carrols, and BKC discussed the proposed terms of the Area Development Agreement and exchanged and reviewed multiple drafts of the Area Development Agreement in consultation with their respective advisors.

During the week of December 17, 2018, Messrs. Accordino and Cross conducted additional site visits in Tennessee and visited most of the restaurants operated by Cambridge in Mississippi and Louisiana.

On December 20, 2018, Akerman provided Kirkland with an initial draft of the Merger Agreement. From December 20, 2018 through February 19, 2019, Carrols and Cambridge and their respective counsel, discussed the terms of the Mergers and exchanged multiple drafts of the Merger Agreement and the other transaction documentation in consultation with their respective advisors.

On January 4, 2019 and January 24, 2019, Mr. Accordino updated the Carrols board of directors on the status of the possible business combination with Cambridge, the Area Development Agreement and the Financing.

On January 7, 2019, Carrols and Wells Fargo Bank discussed the structure and terms of the Mergers and the need for committed financing in connection therewith. From January 12, 2019 through February 19, 2019, Carrols and Wells Fargo Bank discussed the structure and terms of the financing in connection with the Mergers.

On January 25, 2019, Carrols management updated the Carrols board of directors (which did not include participation by the two Class B directors appointed by BKC and another affiliate of RBI, José E. Cil and Matthew Dunnigan) on the status of the possible business combination transaction with Cambridge, the Area Development Agreement with BKC and the Financing.

On February 2, 2019, Cahill Gordon & Reindel LLP (“Cahill”), counsel to Wells Fargo Bank and Wells Fargo Securities, provided an initial draft of the Commitment Letter to Carrols and Akerman. From February 2, 2019 through February 19, 2019, Wells Fargo Bank and Wells Fargo Securities and Carrols discussed the terms of the Financing and the Commitment Letter and exchanged multiple drafts of the Commitment Letter in consultation with their respective advisors.

On February 12, 2019, at a meeting of the Carrols board of directors which included participation by a representative of Akerman, Carrols’ legal counsel, and which did not include participation by the two Class B directors, Messrs. Cil and Dunnigan, Carrols management discussed the status of the negotiations of the Merger Agreement, the Area Development Agreement, the Commitment Letter and the other transaction documentation, the proposed terms of the Mergers and the Financing, the results of the due diligence investigation of Cambridge’s business and the opportunities and risks presented in connection with the Mergers, the Area Development Agreement and the Financing.

On February 14, 2019, at a meeting of the Carrols board of directors which included a representative of Akerman, Carrols’ legal counsel, Carrols’ management and Carrols’ board of directors, which had been provided drafts of the Merger Agreement, the Area Development Agreement, the Commitment Letter and other transaction documentation, discussed the status of the negotiations of the Merger Agreement, the Area Development Agreement, the Commitment Letter and the other transaction documentation, the proposed terms of the Mergers and the Financing, the results of the due diligence investigation of Cambridge’s business and the opportunities and risks presented in connection with the Mergers and the Financing. Following such discussion, the two Class B directors, Messrs. Cil and Dunnigan, recused themselves and left the meeting of the Carrols board of directors and Carrols management with participation by Akerman, Carrols’ legal counsel, continued a discussion of the Merger Agreement, the Area Development Agreement, the Commitment Letter and the other transaction documentation, the proposed terms of the Mergers and the Financing, the results of the due diligence investigation of Cambridge’s business and the opportunities and risks presented in connection with the Mergers, the Financing and the Area Development Agreement. Following such discussion, the Carrols board of directors (with Messrs. Cil and Dunnigan not in attendance and not participating in such vote) approved the Merger Agreement, Area Development Agreement, Commitment Letter and the other transaction documentation and the transactions contemplated thereby including the Mergers and the Financing.

On February 19, 2019, Carrols and Cambridge executed the Merger Agreement and Messrs. Accordino, Flanders, Myers, Cross and Cambridge executed the Voting Agreements. On February 19, 2019, Carrols, Wells Fargo Bank and Wells Fargo Securities executed the Commitment Letter. On February 19, 2019, Carrols, Carrols Corp, Carrols LLC and BKC executed the Area Development Agreement.

Carrols prepares its financial statements in accordance with generally accepted accounting principles in the United States. Carrols will account for the Cambridge Merger as a business combination using the acquisition method of accounting based on Accounting Standards Codification Topic 805, Business Combinations. Carrols will record all assets acquired and liabilities assumed at their respective fair values at the date of completion of the Cambridge Merger. Carrols will value the franchise rights intangible and any excess of the consideration transferred over the fair value of net identifiable assets acquired and liabilities assumed will be recorded as goodwill.

The following discussion summarizes the material U.S. federal income tax consequences of the Mergers that are expected to apply generally to U.S. holders (as defined below) of shares of Carrols Common Stock and/or Carrols Series B Preferred Stock. For purposes of this discussion, a “U.S. holder” is a beneficial owner of a share of Carrols Common Stock and/or Carrols Series B Preferred Stock that is:

This discussion is based on the Code, applicable U.S. Treasury Regulations, administrative interpretations and court decisions as in effect as of the date of this prospectus, all of which may change, possibly with retroactive effect. This discussion assumes that the Mergers will be completed in accordance with the terms of the Merger Agreement. No ruling has been or will be sought from the U.S. Internal Revenue Service (the “IRS”) as to the U.S. federal income tax consequences of the Mergers, and the following summary is not binding on the IRS or the courts. As a result, the IRS could adopt a contrary position, and such a contrary position could be sustained by a court.

This discussion only addresses U.S. holders who hold shares of Carrols Common Stock and/or Carrols Series B Preferred Stock (and will hold shares of NewCRG Common Stock and/or NewCRG Series B Preferred Stock) as capital assets and does not purport to be a complete analysis of all potential tax consequences of the Mergers. In addition, this discussion does not address the tax consequences of transactions effectuated prior to or after the Mergers (whether or not such transactions occur in connection with the Mergers), including, without limitation, any exercise of a Carrols’ option or the acquisition or disposition of shares of Carrols Common Stock and/or Carrols Series B Preferred Stock other than pursuant to the Mergers. It does not address the U.S. federal income tax considerations applicable to holders of options or warrants to purchase Carrols Common Stock, or holders of debt instruments convertible into Carrols Common Stock. It also does not address all aspects of U.S. federal income taxation that may be important to a U.S. holder in light of that holder’s particular circumstances or to a U.S. holder subject to special rules, such as:

This discussion of material U.S. federal income tax consequences is not a complete analysis or description of all potential U.S. federal income tax consequences of the Mergers. This discussion does not address tax consequences that may vary with, or are contingent on, individual circumstances. In addition, it does not address any non-income tax or any non-U.S., state or local tax consequences of the Mergers, or the consequences under any proposed U.S. Treasury Regulations that have not taken effect as of the date of this prospectus. Accordingly, we strongly urge that you consult your tax advisor to determine the particular U.S. federal, state or local or non-U.S. income or other tax consequences to you of the Mergers.

The exchange by U.S. holders of shares of Carrols Common Stock for shares of NewCRG Common Stock and shares of Carrols Series B Preferred Stock for shares of NewCRG Series B Preferred Stock pursuant to the Carrols Merger. taken together with the Cambridge Merger, is intended to qualify as a transaction described in Section 351 of the Code, and separately the Carrols Merger is intended to qualify as a reorganization within the meaning of Section 368(a) of the Code. It is intended that a U.S. holder not recognize any gain or loss for U.S. federal income tax purposes upon its exchange of shares of Carrols Common Stock for shares of NewCRG Common Stock and/or its exchange of shares of Carrols Series B Preferred Stock for shares of NewCRG Series B Preferred Stock. It is intended that such holder have a tax basis in the shares of NewCRG Common Stock and/or shares of NewCRG Series B Preferred Stock received in the Carrols Merger equal to the tax basis of the shares of Carrols Common Stock and/or shares of Carrols Series B Preferred Stock surrendered therefor (assuming that no election to reduce such basis is made). It is intended that the holding period for shares of NewCRG Common Stock and/or shares of NewCRG Series B Preferred Stock received in the Carrols Merger include the holding period for the shares of Carrols Common Stock and/or shares of Carrols Series B Preferred Stock surrendered therefor.

It is intended that neither Carrols nor NewCRG recognize any gain or loss for U.S. federal income tax purposes as a result of the exchange of shares of Carrols stock for shares of NewCRG stock pursuant to the Carrols Merger. In addition, it is intended that no gain or loss be recognized by Carrols or NewCRG as a result of the issuance of shares of NewCRG Common Stock in exchange for the equity interests in New CFH pursuant to the Cambridge Merger.

A U.S. holder that qualifies as a “significant transferor” or “significant holder” and certain U.S. shareholders of a foreign corporation that qualifies as a significant transferor or significant holder will be required to attach statements to their tax returns for the year in which the Mergers are consummated that contain the information listed in Treasury Regulation Section 1.351-3 and Treasury Regulation Section 1.368-3. With respect to a statement required by Treasury Regulation Section 1.351-3, a significant transferor includes a person that transfers property to a corporation and receives stock of the transferee corporation in an exchange described in Section 351 of the Code if, immediately after the exchange, (a) such person owns at least five percent (by vote or value) of the total outstanding stock of the transferee corporation and the stock owned by such person is publicly traded or (b) such person owns at least one percent (by vote or value) of the total outstanding stock of the transferee corporation and the stock owned by such person is not publicly traded. With respect to a statement required by Treasury Regulation Section 1.368-3, a significant holder includes a person who transfer stock of a target corporation and received stock of an acquirer in a reorganization transaction if, immediately before the exchange (a) the person owned at least five percent (by vote or value) of the total outstanding stock of the target corporation and the stock owned by such person was publicly traded or (b) such person owned at least one percent (by vote or value) of the total outstanding stock of the target corporation, and the stock owned by such person was not publicly traded. Under Treasury Regulation Section 1.368-3, a significant holder also applies to holders who owned stock of the target corporation that had, immediately before the exchange, a tax basis of $1,000,000 or more. The statements must include, among other things, the significant transferor’s tax basis in and the fair market value of the shares of Carrols stock that it exchanges for shares of NewCRG Common Stock

See the Index to Financial Statements at page F-1 of this prospectus for a complete list of the historical consolidated financial statements of Carrols and the historical combined financial statements of the Cambridge Business included in this prospectus.

Carrols’ common stock is traded on The NASDAQ Global Market under the symbol “TAST”.

On April 8, 2019, there were 37,007,107 shares of our common stock outstanding held by 490 holders of record. The number of record holders was determined from the records of our transfer agent and does not include beneficial owners of our common stock whose shares are held in the names of various securities brokers, dealers, and registered clearing agencies. The closing price of our common stock on April 8, 2019 was $9.78.

The following graph compares from December 31, 2013 the cumulative total stockholder return on our common stock relative to the cumulative total returns of The NASDAQ Composite Index and a peer group, The S&P SmallCap 600 Restaurants Index. We have elected to use the S&P SmallCap 600 Restaurant Index in compiling our stock performance graph because we believe the S&P SmallCap 600 Restaurant Index represents a comparison to competitors with similar market capitalization as us. The graph assumes an investment of $100 in our common stock and each index on December 31, 2013.

Carrols did not pay any cash dividends during the fiscal years 2018 or 2017. Carrols currently intends to continue to retain all available funds to fund the development and growth of its business and does not anticipate paying any cash dividends on its common stock in the foreseeable future. In addition, Carrols is a holding company and conducts all of its operations through our direct and indirect subsidiaries. As a result, for Carrols to pay dividends, it needs to rely on dividends or distributions to it from Carrols Corp and indirectly from subsidiaries of Carrols Corp. The indenture governing the Carrols 8% Notes and our senior credit facility limit, and the New Senior Credit Facilities and other debt instruments that we and our subsidiaries may enter into in the future may limit, our ability to pay dividends to our stockholders.

We are one of the largest restaurant companies in the United States and have been operating restaurants for more than 55 years. We are the largest Burger King franchisee in the United States, based on number of restaurants, and have operated Burger King restaurants since 1976. As of December 30, 2018, we owned and operated 849 Burger King restaurants located in 18 Northeastern, Midwestern and Southeastern states. Burger King restaurants feature the popular flame-broiled Whopper sandwich, as well as a variety of hamburgers, chicken and other specialty sandwiches, french fries, salads, breakfast items, snacks, soft drinks and other offerings. We believe that our size, seasoned management team, extensive operating infrastructure, experience and proven operating disciplines differentiate us from many of our competitors as well as many other Burger King operators.

According to BKC, as of December 31, 2018 there were a total of 17,796 Burger King restaurants, of which almost all were franchised and 7,330 were located in the United States. Burger King is the second largest quick service hamburger restaurant chain in the world (as measured by number of restaurants) and we believe that the Burger King brand is one of the world’s most recognized consumer brands. Burger King restaurants have a distinctive image and are generally located in high-traffic areas throughout the United States. Burger King restaurants are designed to appeal to a broad spectrum of consumers, with multiple day-part meal segments targeted to different groups of consumers. We believe that the competitive attributes of Burger King restaurants include significant brand recognition, convenience of location, quality, speed of service and price.

Our Burger King restaurants are typically open seven days per week and generally have operating hours ranging from 6:00 am to midnight on Sunday to Wednesday and to 2:00 am on Thursday to Saturday.

Our existing restaurants consist of one of several building types with various seating capacities. Our typical freestanding restaurant contains approximately 2,600 square feet with seating capacity for 60 to 70 customers, has drive-thru service windows and has adjacent parking areas. As of December 30, 2018, almost all of our restaurants were freestanding. We operate our restaurants under franchise agreements with BKC.

Our acquisition of 278 Burger King restaurants on May 30, 2012 from BKC, which we refer to as the “2012 acquisition”, included BKC’s assignment to us of its right of first refusal on franchise restaurant transfers in 20 states as follows: Connecticut (except Hartford county), Delaware, Indiana, Kentucky, Maine, Maryland, Massachusetts (except for Middlesex, Norfolk and Suffolk counties), Michigan, New Hampshire, New Jersey, New York (except for Bronx, Kings, Nassau, New York, Queens, Richmond, Suffolk and Westchester counties), North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Vermont, Virginia, Washington DC and West Virginia (the “ROFR”) pursuant to an operating agreement with BKC dated May 30, 2012, and which was amended on January 26, 2015 and December 17, 2015, which we refer to as the “amended operating agreement”. In addition, pursuant to the amended operating agreement, BKC granted us, on a non-exclusive basis, franchise pre-approval to acquire restaurants from Burger King franchisees in the 20 states covered by the ROFR until we operate 1,000 Burger King restaurants. Newly constructed or acquired restaurants beyond 1,000 or acquisitions in states not subject to the ROFR would be subject to BKC’s customary approval process.

During 2018, we acquired a total of 44 restaurants from other franchisees in four separate transactions. During 2017, we acquired a total of 64 restaurants in three separate transactions and in 2016, we acquired 56 restaurants in seven separate transactions.

For the fiscal year ended December 30, 2018, our restaurants generated total revenues of $1,179.3 million and our comparable restaurant sales increased 3.8%. Our average annual restaurant sales for all restaurants were approximately $1.45 million per restaurant.

Largest Burger King Franchisee in the United States. We are the largest Burger King franchisee in the United States based on number of restaurants, and are well positioned to leverage the scale and marketing of one of the most recognized brands in the restaurant industry. We believe the geographic dispersion of our restaurants provides us with stability and enhanced growth opportunities in many of the markets in which we operate. We also believe that our large number of restaurants increases our ability to effectively manage the awareness of the Burger King brand in certain markets through our ability to influence local advertising and promotional activities.

Operational Expertise. We have been operating Burger King restaurants since 1976 and have developed sophisticated information and operating systems that enable us to measure and monitor key metrics for operational performance, sales and profitability that may not be available to other restaurant operators. Our focus on leveraging our operational expertise, infrastructure and systems allows us to optimize the performance of our restaurants and restaurants that we may acquire or open. Our size and history with the Burger King brand enable us to effectively track operating metrics and leverage best practices across our organization. We believe that our experienced management team, operating culture, effective operating systems and infrastructure enable us to operate more efficiently than many other Burger King operators, resulting in higher restaurant margins and improved overall financial results.

Consistent Operating History and Financial Strength. We believe that the quality and sophistication of our restaurant operations have helped drive our strong restaurant level performance. Comparable restaurant sales for our restaurants have generally outperformed the Burger King system. Our strong restaurant level operations coupled with our financial management capabilities have resulted in consistent and stable cash flows. We have demonstrated our ability to prudently manage our capital structure and financial leverage through a variety of economic cycles. We believe that our cash flow from operations, cash balances and the availability of revolving credit borrowings under our amended senior credit facility (and, in the event the Mergers and Financing, are consummated, our New Senior Credit Facilities) are sufficient to fund our ongoing operations and capital expenditures.

Distinct Brand with Global Recognition, Innovative Marketing and New Product Development. As a Burger King franchisee, we benefit from, and rely on, BKC’s extensive marketing, advertising and product development capabilities to drive sales and generate increased restaurant traffic. Over the years, BKC has launched innovative and creative multimedia advertising campaigns and products that highlight the relevance of the Burger King brand. BKC has also introduced promotions that leverage both value and premium menu offerings as well as providing a platform for new premium sandwich offerings. We believe these campaigns continue to positively impact the brand today as BKC focuses on a well-balanced promotional mix and remains committed to focusing on impactful new product launches and limited time offers, both of which continue to show positive trends. BKC is also aggressively working with franchisees throughout the system to encourage the renovation and remodeling of restaurants to BKC’s current image, which we believe will continue to increase customer traffic and restaurant sales.

Strategic Relationship with Burger King Corporation and RBI. We believe that the structure of the 2012 acquisition strengthened our well-established relationship with BKC and RBI and has further aligned our common interests to grow our business. We intend to continue to expand by making acquisitions, including acquisitions resulting from the exercise of the ROFR as well as other negotiated acquisitions under our pre-approval rights. The consideration to BKC associated with the 2012 acquisition included a preferred stock equity interest in Carrols, which is convertible into approximately 20.3% of our outstanding shares of common stock as of April 8, 2019. Since the 2012 acquisition, two of BKC’s or RBI’s senior executives have served on our board of directors. José Cil, Chief Executive Officer of RBI, and Matthew Dunnigan, Chief Financial Officer of RBI, the indirect parent company of BKC, currently serve on our board of directors. Our restaurants represented approximately 11.6% of the Burger King locations in the United States as of December 30, 2018. We believe that the combination of our rights under the amended operating agreement (and the Area Development Agreement should such agreement become effective), BKC’s equity interest and its board level representation will continue to reinforce the alignment of our common interests with BKC for the long term.

Multiple Growth Levers. We believe our historical track record of acquiring and integrating restaurants and our commitment to remodel, upgrade and open new restaurants provides multiple avenues to grow our business. With more than 55 years of restaurant operating experience, we have successfully grown our business through acquisitions. We have experienced increases in comparable restaurant sales, increased restaurant-level profitability and improved operating metrics at the restaurants we have acquired in the last five years. In addition, we have remodeled a total of 560 restaurants to BKC’s 20/20 restaurant image as of December 30, 2018 which we believe has improved our guests’ overall experience and increased customer traffic. At December 30, 2018, 681 of our restaurants had the BKC 20/20 image, which includes restaurants converted prior to our acquisition.

Experienced Management Team with a Proven Track Record. We believe that our senior management team’s extensive experience in the restaurant industry and its long and successful history of developing, acquiring, integrating and operating quick-service restaurants provide us with a competitive advantage. Our management team has a successful history of integrating acquired restaurants, and over the past 20 years, we have significantly increased the number of Burger King restaurants we own and operate, largely through acquisitions. Our operations are overseen by our Chief Executive Officer, Dan Accordino, who has over 45 years of Burger King and quick-service restaurant experience, a Divisional VP, and ten Regional Directors that have an average of 24 years of Burger King restaurant experience. Our 124 district managers that have an average tenure of over 16 years in the Burger King system support the Regional Directors. Our operations management is further supported by our infrastructure of financial, information systems, real estate, human resources and legal professionals.

Selectively Acquire and Develop Additional Burger King Restaurants. As of December 30, 2018, we operated 849 Burger King restaurants, making us the largest Burger King franchisees in the United States. We acquired the ROFR in the 2012 acquisition and were granted certain pre-approval rights to acquire additional franchised restaurants and to develop new restaurants. Due to the number of restaurants and franchisees in the Burger King system and our historical success in acquiring and integrating restaurants, we believe that there is considerable opportunity for future growth. There are more than 2,000 Burger King restaurants we do not own in states in which we have the ROFR and pre-approval rights. Furthermore, we believe there are additional Burger King restaurants in states not subject to the ROFR that could be attractive acquisition candidates, subject to BKC’s customary approval. We believe that the assignment of the ROFR and the pre-approval to acquire and develop additional restaurants provide us with the opportunity to significantly expand our ownership of Burger King restaurants in the future. While we may evaluate and discuss potential acquisitions of additional restaurants from time to time, we currently have no understandings, commitments or agreements with respect to any material acquisitions, other than the Merger Agreement with Cambridge. We may be required to obtain additional financing to fund future acquisitions. There can be no assurance that we will be able to obtain additional financing, if necessary, on acceptable terms or at all.

Under the new Area Development Agreement which is subject to and effective upon the closing of the Mergers, BKC will assign to Carrols LLC the ADA ROFR in the ADA DMAs until the date that Carrols LLC has acquired an aggregate of 500 Burger King restaurants. In addition, pursuant to the Area Development Agreement, BKC will grant Carrols LLC the Franchise Pre-Approval.

Improve Profitability of Restaurants We Acquire by Leveraging Our Existing Infrastructure and Best-Practices. For acquired restaurants, we believe we can realize benefits from economies of scale, including leveraging our existing infrastructure across a larger number of restaurants. Additionally, we believe that our skilled management team, sophisticated information technology, operating systems and training and development programs support our ability to enhance operating efficiencies at restaurants we may acquire. We have demonstrated our ability to increase the profitability of acquired restaurants and we believe, over time, that we will improve profitability and operational efficiency at the restaurants we have and may acquire.

Increase Restaurant Sales and Customer Traffic. BKC has identified and implemented a number of strategies to increase brand awareness, increase market share, improve overall operations and drive sales. These strategies are central to our strategic objectives to deliver profitable growth.

Strategically Remodel to Elevate Brand Profile and Increase Profit Potential. In 2019, we plan to remodel 20 to 25 locations to BKC’s current image standard, including rebuilding 3 to 5 restaurants and to upgrade 60 to 70 restaurants from BKC 20/20 restaurant image to the Burger King of Tomorrow image, with a contribution from BKC of approximately $7.0 million to $8.0 million under the Area Development Agreement, should it become effective, for restaurants whereby BKC is landlord on the lease. We also plan to construct 15 to 20 new restaurants (including relocations of 3 to 4 existing restaurants). We believe there are opportunities to increase profitability by remodeling additional restaurants including restaurants that we have acquired or may acquire in the future.

The initial cost of the franchise fee, equipment, seating, signage and other interior costs of a standard new Burger King restaurant currently is approximately $450,000 (which excludes the cost of the land, building and site improvements). In the markets in which we operate, the cost of land generally ranges from $500,000 to $900,000 and the cost of building and site improvements generally ranges from $850,000 to $1,025,000.

With respect to development of freestanding restaurants, if we acquire the land to construct the building, we typically seek to thereafter enter into an arrangement to sell and leaseback the land and building under a long-term lease. Historically, we have been able to acquire and finance many of our locations under such leasing arrangements. Where we are unable to purchase the underlying land, we enter into a long-term lease for the land followed by construction of the building using cash generated from our operations or with borrowings under our senior credit facility.

The cost of securing real estate and developing and equipping new restaurants can vary significantly and depends on a number of factors, including the local economic conditions and the characteristics of a particular site. Accordingly, the cost of opening new restaurants in the future may differ substantially from the historical cost of restaurants previously opened and the estimated costs above.

BKC’s current image restaurant design draws inspiration from its signature flame-grilled cooking process and incorporates a variety of innovative elements to a backdrop that evokes the warm and welcoming look of the outdoors including corrugated metal, brick, wood and concrete. The cost of remodeling a restaurant to the BKC current image varies depending upon the age and condition of the restaurant and the amount of new equipment needed and can range from $250,000 to $650,000 per restaurant with a cost of approximately $650,000 per restaurant in 2018 and an average cost of $500,000 over the past three years. The total cost of a remodel has increased over time due to construction cost increases and the replacement of certain kitchen equipment at the time of the remodel which is incremental to the cost to upgrade to the BKC current image design. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Carrols—Recent and Future Events Affecting our Results of Operations”.

We believe that the location of our restaurants is a critical component of each restaurant’s success. We evaluate potential new sites on many critical criteria including accessibility, visibility, costs, surrounding traffic patterns, competition and demographic characteristics. Our senior management determines the acceptability of all acquisition prospects and new sites, based upon analyses prepared by our real estate, financial and operations professionals.

Our business is moderately seasonal due to regional weather conditions. Due to the location of our restaurants, sales are generally higher during the summer months than during the winter months.

The following table details the locations of our 849 Burger King restaurants as of December 30, 2018:

We conduct substantially all of our executive management, finance, marketing and operations support functions from our corporate headquarters in Syracuse, New York. Carrols is led by our Chief Executive Officer and President, Daniel T. Accordino, who has over 45 years of Burger King and quick-service restaurant experience at our company.

Operations for our restaurants are overseen by one Division VP and ten Regional Directors that have an average of over 24 years of Burger King restaurant experience. Our 124 district managers support the Regional Directors in the management of our restaurants.

A district manager is responsible for the direct oversight of the day-to-day operations of an average of approximately seven to eight restaurants. Typically, district managers have previously served as restaurant managers at one of our restaurants. Regional directors, district managers and restaurant managers are compensated with a fixed salary plus an incentive bonus based upon the performance of the restaurants under their supervision, and for our regional directors and district managers, the combined performance of all of our restaurants. Typically, our restaurants are staffed with hourly employees who are supervised by a salaried general manager and one to three assistant managers.

We maintain a comprehensive training and development program for all of our personnel and provide both classroom and in-restaurant training for our salaried and hourly personnel. The program emphasizes system-wide operating procedures, food preparation methods, food safety and customer service standards. BKC’s training and development programs are also available to us as a franchisee through web access in all of our restaurants.

Our sophisticated management information systems provide us the ability to efficiently and effectively manage our restaurants and to ensure consistent application of operating controls at our restaurants. Our size affords us the ability to maintain an in-house staff of information technology and restaurant systems professionals dedicated to continuously enhancing our systems. In addition, these capabilities allow us to quickly integrate restaurants that we acquire and achieve greater economies of scale and operating efficiencies.

We typically replace the POS systems at restaurants we acquire shortly after acquisition and implement our POS, labor and inventory management systems. Our restaurants employ touch-screen POS systems that are designed to facilitate accuracy and speed of order taking. These systems are user-friendly, require limited cashier training and improve speed-of-service through the use of conversational order-taking techniques. The POS systems are integrated with PC-based applications at the restaurant and hosted systems at our corporate office that are designed to facilitate financial and management control of our restaurant operations.

Our restaurant systems provide daily tracking and reporting of traffic counts, menu item sales, labor and food data including costs and inventories, and other key operating metrics for each restaurant. We communicate electronically with our restaurants on a continuous basis via a high-speed data network, which enables us to collect this information for use in our corporate management systems in near real-time. Our corporate headquarters manages systems that support all of our accounting, operating and reporting systems. We also operate a 24-hour, seven-day help desk at our corporate headquarters that enables us to provide systems and operational support to our restaurant operations as required. Among other things, our restaurant information systems provide us with the ability to:

Critical information from our systems is available in near real-time to our restaurant managers, who are expected to react quickly to trends or situations in their restaurant. Our district managers also receive near real-time information for their respective restaurants and have access to key operating data on a remote basis using our corporate intranet-based reporting. Management personnel at all levels, from the restaurant manager through senior management, utilize and monitor key restaurant performance indicators that are also included in our restaurant-level incentive bonus plans.

Each of our Burger King restaurants operates under a separate franchise agreement with BKC. Our franchise agreements with BKC generally require, among other things, that all restaurants comply with specified design criteria and operate in a prescribed manner, including utilization of the standard Burger King menu. In addition, our Burger King franchise agreements generally require that our restaurants conform to BKC’s current image and may provide for updating our restaurants during the tenth year of the agreements to conform to such current image, which may require significant expenditures. We expect these update expenditures in 2019 to range from $100,000 to $300,000 per restaurant.

These franchise agreements with BKC generally provide for an initial term of 20 years and currently have an initial franchise fee of $50,000. In the event that we terminate any franchise agreement and close the related BKC restaurant prior to the expiration of its term, we generally are required to pay BKC an amount based on the net present value of the royalty stream that would have been realized by BKC had such franchise agreement not been terminated. Any franchise agreement, including renewals, can be extended at our discretion for an additional 20-year term, with BKC’s approval, provided that, among other things, the restaurant meets the current Burger King operating and image standards and that we are not in default under the terms of the franchise agreement. The franchise agreement fee for subsequent renewals is currently $50,000. BKC may terminate any of the franchise agreements if an act of default is committed by us under these agreements and such default is not cured. Defaults under the franchise agreements include, among other things, our failure to operate such Burger King restaurant in accordance with the operating standards and specifications established by BKC (including failure to use equipment, uniforms or decor approved by BKC), our failure to sell products approved or designated by BKC, our failure to pay royalties or advertising and sales promotion contributions as required, our unauthorized sale, transfer or assignment of such franchise agreement or the related restaurant, certain events of bankruptcy or insolvency with respect to us, conduct by us or our employees that has a harmful effect on the Burger King restaurant system, conviction of us or our executive officers for certain indictable offenses, our failure to maintain a responsible credit rating or our acquisition of an interest in any other hamburger restaurant business. At December 30, 2018, we were not in default under any of our franchise agreements with BKC.

In order to obtain a successor franchise agreement with BKC, a franchisee is typically required to make capital improvements to the restaurant to bring it up to BKC’s current image standards. The cost of these improvements may vary widely depending upon the magnitude of the required changes and the degree to which we have made interim improvements to the restaurant. At December 30, 2018, we had 33 franchise agreements due to expire in 2019, 55 franchise agreements due to expire in 2020 and 12 franchise agreements due to expire in 2021. In recent years, the historical costs of improving our Burger King restaurants in connection with franchise renewals generally have ranged from $250,000 to $650,000 per restaurant. The average cost of our remodels in 2018 was approximately $650,000 per restaurant. The cost of remodels can vary depending upon the age and condition of the restaurant and the amount of new equipment needed. The cost of capital improvements made in connection with future franchise agreement renewals may differ substantially from past franchise renewals depending on the current image requirements established from time to time by BKC.

We believe that we will be able to satisfy BKC’s normal franchise agreement renewal criteria. Accordingly, we believe that renewal franchise agreements will be granted on a timely basis by BKC at the expiration of our existing franchise agreements. Historically, BKC has granted all of our requests for successor franchise agreements. However, there can be no assurance that BKC will grant these requests in the future.

Large accelerated filer ☐		Accelerated filer ☒
Non-accelerated filer ☐		Smaller reporting company ☐
		Emerging growth company ☐

	12/31/2013		12/31/2014		12/31/2015		12/31/2016		12/31/2017		12/31/2018
Carrols Restaurant Group, Inc.	$	100.00	$	115.43	$	177.61	$	230.71	$	183.81	$	148.87
NASDAQ Composite	$	100.00	$	114.62	$	122.81	$	133.19	$	172.11	$	165.84
S&P SmallCap 600 Restaurants	$	100.00	$	117.34	$	105.44	$	112.22	$	107.66	$	117.68

	Year Ended
	January 1, 2017			December 31, 2017			December 30, 2018
Average annual sales per restaurant (1)	$	1,311,516		$	1,387,850		$	1,449,047
Average sales transaction	$	6.85		$	7.15		$	7.37
Drive-through sales as a percentage of total sales		67.0	%		67.9	%		68.4	%
Day-part sales percentages:
Breakfast		13.8	%		13.7	%		13.5	%
Lunch		32.4	%		32.3	%		31.9	%
Dinner		20.4	%		20.6	%		20.9	%
Afternoon and late night		33.4	%		33.4	%		33.6	%

	Page

PROSPECTUS SUMMARY	1

SELECTED HISTORICAL FINANCIAL DATA OF CARROLS	10

SELECTED HISTORICAL FINANCIAL DATA OF CAMBRIDGE	14

CARROLS HOLDCO INC. UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION	16

RISK FACTORS	23

FORWARD-LOOKING STATEMENTS	44

TERMS OF THE TRANSACTIONS	45

CARROLS’ REASONS FOR THE MERGERS	60

BACKGROUND OF THE MERGERS	62

ACCOUNTING TREATMENT OF THE MERGERS	65

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGERS	66

FINANCIAL STATEMENTS	68

CERTAIN MARKET INFORMATION WITH RESPECT TO CARROLS’ COMMON STOCK	69

DIVIDEND POLICIES AND RESTRICTIONS	70

BUSINESS OF CARROLS	71

BUSINESS OF CAMBRIDGE	82

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF CARROLS	83

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE CAMBRIDGE BUSINESS	98

NO REQUIREMENT FOR APPROVAL OF MERGERS BY CARROLS STOCKHOLDERS	107

CARROLS SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS	108

EXECUTIVE OFFICERS AND DIRECTORS OF CARROLS	110

COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS OF CARROLS	114

CERTAIN RELATIONSHIP AND RELATED PARTY TRANSACTIONS OF CARROLS	126

DESCRIPTION OF NEWCRG’S CAPITAL STOCK	128

EXPERTS	134

WHERE YOU CAN FIND MORE INFORMATION	135

LEGAL MATTERS	135

INDEX TO FINANCIAL STATEMENTS	F-1

State	Total Restaurants
Georgia		2
Illinois		18
Indiana		88
Kentucky		36
Maine		15
Maryland		17
Massachusetts		1
Michigan		56
New Jersey		10
New York		128
North Carolina		152
Ohio		118
Pennsylvania		62
South Carolina		40
Tennessee		31
Vermont		5
Virginia		66
West Virginia		4
Total		849