Basis of Presentation and Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2024

Accounting Policies [Abstract]

Basis of Presentation

(a)Basis of Presentation

The accompanying consolidated financial statements of the Company, collectively, have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”).

Recently Issued Accounting Pronouncements

(b)Recently Issued Accounting Pronouncements

In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2024-03, “Disaggregation of Income Statement Expenses” and in January 2025, the FASB issued ASU 2025-01, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures”, which requires public companies additional disclosure of the nature of expenses included in the income statement as well as disclosures about specific type of expense included in the expense captions presented in the income statement. ASU 2024-03, as clarified by ASU 2025-01, is effective for fiscal years beginning after December 15, 2026. The Company is in the process of evaluating the impact that the adoption of these ASUs will have on the consolidated financial statements and related disclosures.

In March 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-01, Leases (Topic 842): Common Control Arrangements. The new guidance requires all lessees in a lease with a lessor under common control to amortize leasehold improvement over the useful life of the common control group and provides new guidance for recognizing a transfer of assets between entities under common control as an adjustment to equity when the lessee no longer controls the use of the underlying asset. This guidance is effective for fiscal years beginning after December 15, 2023. ASU 2023-01 became effective for the Company in 2024 and did not have a significant effect on our financial statements.

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” which provides guidance to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The guidance is effective for fiscal years beginning after December 15, 2023, and interim within fiscal years beginning after December 15, 2024. The Company adopted this ASU in the fourth quarter of 2024, and as a result, there was no material impact on the consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740),” “Improvement for Income Tax Disclosure,” which is effective for fiscal years beginning after December 15, 2024. The Company is evaluating the presentational effect that ASU 2023-09 will have on the consolidation financial statements.

The Company adopted FASB ASC 260, “Earnings per Share” after the IPO. The consolidated income statements of the Company include a presentation of income (loss) per share. The Company calculates this on the income (loss) attributable to the activity after the IPO. As of December 31, 2024 and 2023, the Company did not have any dilutive securities that could, potentially, be exercised or converted into Class A common stock and then share in the earnings of the Company. As a result, diluted income (loss) per share is the same as basic income (loss) per share for the period presented.

Use of Estimates

(c)Use of Estimates

The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities in the accompanying consolidated financial statements of the Company. The accompanying consolidated financial statements have been prepared in conformity with GAAP and applicable rules, and regulations of the SEC.

Equity-Based Compensation

(d)Equity-Based Compensation

The Company accounts for equity-based compensation grants of equity awards to employees in accordance with ASC Topic 718, “Stock Based Compensation”. The Company issued restricted stock units to its employees in 2023.

The Company estimates the fair value of the restricted stock units on the grant-date and recognizes the resulting fair value over the requisite service period. The fair value of each restricted stock unit or award is determined based upon the value of the common stock granted or sold. The Company has elected to treat stock-based awards with graded vesting schedules and time-based service conditions as a single award and recognizes stock-based compensation on a straight-line basis over the requisite service period. Forfeitures are accounted for as they occur.

Cash and Cash Equivalents

(e)Cash and Cash Equivalents

The Company and its related entities consider all highly liquid instruments with a maturity of three months or less when purchased to be cash equivalents. As of December 31, 2024, cash and cash equivalents consist principally of cash, money market accounts and short-term investments. Short-term investments are classified available for sale securities, which are carried at fair value, with changes in fair value reported in earnings. Cash equivalents also include credit card transactions in transit. As of December 31, 2024 and December 31, 2023, there were deposits in excess of federally insured amounts of $2.9 million and $8.8 million, respectively.

	Fair Value Measurements at December 31, 2024
	Carrying Value/Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Total
(in thousands)
Money Market Accounts (included in cash and cash equivalents)	$	6,459	$	—	$	—	$	6,459
U.S. Treasury Securities (included in cash and cash equivalents)	$	13,000	$	1,317	$	—	$	14,317
	$	19,459	$	1,317	$	—	$	20,776
Represent money market accounts. Excludes $2.9 million of cash and cash equivalents at December 31, 2024.
	Fair Value Measurements at December 31, 2023
	Carrying Value/Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Total
Money Market Accounts (included in cash and cash equivalents)	$	9,079	$	—	$	—	$	9,079
U.S. Treasury Securities (included in cash and cash equivalents)	$	20,000	$	322	$	—	$	20,322
	$	29,079	$	322	$	—	$	29,401
Represent money market accounts. Excludes $2.5 million of cash and cash equivalents at December 31, 2023.

Concentration Risk

(f)Concentration Risk

The Company relies on third parties for specified food products and supplies. In instances where these parties fail to perform their obligation, the Company may be unable to find alternative suppliers.

The Company relies on Sysco Los Angeles, Inc., or Sysco, an unrelated third-party, for a significant portion of its food products. During the fourth quarter of 2023, the Company entered into an agreement with Sysco to purchase certain food supplies. For the year ended December 31, 2024, Sysco accounted for approximately 76.3% of total food costs. For the year ended December 31, 2023, Sysco accounted for approximately 15.1% of total food costs.

The Company previously relied on U.S. Foods, an unrelated third-party for a significant portion of its food products. For the year ended December 31, 2023, U.S. Foods accounted for approximately 36.0% of total food costs, respectively.

The Company relies on Pacific Global Distribution, Inc. (“PGD”), which provides restaurant supplies such as tableware, napkins, soda, and sauces. PGD is owned by a related party. For the years ended December 31, 2024 and December 31, 2023, PGD accounted for approximately 3.2% and 16.4% of total operating expenses, respectively.

The Company previously relied on Wise Universal, Inc. (“Wise”), an entity 60% owned by a related party, which provided food products. For the year ended December 31, 2023, Wise accounted for approximately 21.3% of total food costs.

During the twelve months ended December 31, 2024 and 2023 two third party vendors accounted for 24.2% and 11.0% of total food costs, respectively.

Inventories

(g)Inventories

Inventories consist principally of food and beverages and are valued at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method (FIFO) for all inventories.

Revenue Recognition

(h)Revenue Recognition

The Company recognizes revenue in accordance with ASC 606, “Revenue from Contracts with Customers.” Revenue from the operation of the restaurants is recognized as food and beverage products are delivered to customers and payment is tendered at the time of sale.

Sales tax amounts collected from customers are remitted to governmental authorities and are excluded from sales.

The Company started selling gift cards primarily during the fourth quarter of 2024. The Company sells gift card which do not have expiration dates. Gift cards balances are initially recorded as unearned income. Revenue from gift cards is recognized when gift cards are redeemed by the guest or, in the event a gift card is not expected to be redeemed, in proportion to actual redemptions of gift cards (“gift card breakage”). Gift card breakage income is included in revenue on the consolidated income statements.

Property and Equipment

(i)Property and Equipment

Property and equipment are stated at cost and are depreciated using the straight-line method over the estimated useful lives of the assets. Property and equipment under finance leases are stated at the present value of minimum lease payments.

The estimated useful service lives are as follows:

Equipment	5 - 7 Years
Furniture and fixtures	5 - 7 Years
Leasehold improvements	Shorter of useful life or remaining lease term

The Company and its related entities capitalize certain costs in conjunction with improvements to specific sites for planned future restaurants. The Company and its related entities also capitalize certain costs, including interest, in conjunction with constructing new restaurants. These costs are included in property and equipment and are amortized over the shorter of the life of the related leasehold improvements or the remaining lease term. Costs related to abandoned sites and other site selection costs that cannot be identified with specific restaurants are charged to general and administrative expenses in the accompanying consolidated income statements. The Company and its related entities did not capitalize any internal costs related to site preparation and construction activities during the years ended December 31, 2024 and 2023 as any amounts were deemed immaterial.

Other Assets and Other Current Liabilities

(j)Other Assets and Other Current Liabilities

Other assets as of December 31, 2024 and December 31, 2023 consist of the following:

(in thousands)	December 31, 2024		December 31, 2023
Other Assets
Security Deposits	$	933	$	534
Liquor Licenses		224		215
Total Other Assets	$	1,157	$	749

Other Current Liabilities as of December 31, 2024 and December 31, 2023 consist of the following:

(in thousands)	December 31, 2024		December 31, 2023
Other Current Liabilities
Sales tax payable	$	1,645	$	1,447
Accrued percentage rent		1,221		1,163
Misc. accrued expenses		2,732		2,756
Total Other Current Liabilities	$	5,598	$	5,366

Advances from Members

(k)Advances from members

Advances from members consist of funding received from member owners. As of December 31, 2024, the Company satisfied $2.7 million of advances from members through cash payments of $864 thousand, the issuance of Class A common stock valued at $550 thousand, and offsets against $1.3 million of advances to satisfy certain costs incurred by the Company related to the restructuring transaction in connection with the IPO. As of December 31, 2024, the Company did not owe any balance related to these advances from members, and as of December 31, 2023 the balance was $2.7 million.

Pre-Opening Costs

(l)Pre-Opening Costs

Pre-opening costs, incurred in connection with the opening of new restaurants, are expensed as incurred. Pre-opening costs were $7.6 million and $3.7 million for the years ended December 31, 2024 and December 31, 2023, respectively.

Income Taxes

(m)Income Taxes

Prior to the IPO, the Operating Company and its related entities were organized as limited liability companies or limited partnerships and are treated as pass-through entities for federal and state income tax purposes. As the Operating Company and its related entities (other than Gen, Inc.) have elected to be treated as partnerships for income tax purposes and are not subject to federal or state income taxes, income or loss is included in the tax returns of the members or the partners of the Operating Company and its related entities based on their respective shares.

Deferred tax assets are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company recognizes positions taken or expected to be taken in a tax return in accordance with existing accounting guidance on income taxes which prescribes a recognition threshold and measurement process. Under GAAP, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Interest and penalties on tax liabilities, if any, would be recorded in interest expense and other non-interest expense, respectively.

In assessing the realizability of deferred tax assets, management considered whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.

Long-Lived Assets

(n)Long-Lived Assets

Long-lived assets, such as property and equipment owned, are reviewed quarterly for impairment and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long- lived asset or asset group to be tested for possible impairment, undiscounted cash flows expected to be generated by that asset or asset group are compared to its carrying amount. If the carrying amount of the long-lived asset or asset group is not expected to be recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques, including discounted cash flow models, quoted market values, and third-party independent appraisals, as considered necessary. We assessed our long-lived assets for potential impairment with the result that no impairment charges were recorded in any of the periods presented.

Interest Expense

(o)Interest Expense

A reconciliation of total interest cost to interest expense as reported in the consolidated income statement for the years ended December 31, 2024 and December 31, 2023 is as follows:

	For the year ended December 31,
(in thousands)	2024			2023
Interest expense	$	399		$	617
Interest income		(1,228	)		(964	)
Interest income, net	$	(829	)	$	(347	)

Liquor Licenses

(p)Liquor Licenses

Liquor licenses are deemed to have indefinite useful lives and are quantitatively tested on an annual basis for impairment. Liquor licenses are included in other assets in the accompanying balance sheets.

Sales Taxes

(q)Sales Taxes

Sales taxes are imposed by state, county, and city governmental authorities, collected from customers and remitted to the appropriate governmental agency. The Company’s policy is to record the sales taxes collected as a liability on the books and then remove the liability when the sales tax is remitted. There is no impact on the consolidated income statements as restaurant sales are recorded net of sales tax.

Advertising Costs

(r)Advertising Costs

Advertising costs are expensed as incurred and are included in general and administrative expenses in the accompanying consolidated income statements. The Company incurred approximately $661 thousand and $187 thousand in advertising expenses for the years ended December 31, 2024 and December 31, 2023, respectively.

Risks and Uncertainties

(s)Risks and Uncertainties.

We are subject to continued risks and uncertainties as a result of the outbreak of, and local, state and federal governmental responses to a pandemic. We cannot predict whether future pandemic outbreaks will reoccur or whether additional restrictions may be enacted, to what extent we can maintain sales volumes during or following any resumption of mandated social distancing protocols or vaccination or mask mandates and what long-lasting effects a pandemic may have on the restaurant industry as a whole.

The Company has experienced, and in the future may experience, inflation related to its purchase of certain food products that the Company needs to operate its business. This price volatility could potentially have a material impact on the Company’s financial condition and/or its results of operations. In order to mitigate price volatility, the Company monitors cost fluctuations and may adjust its menu prices accordingly. The Company’s ability to compensate for higher costs through increased pricing may be limited by the competitive environment in which the Company operates.

Restaurant Revitalization Fund

(t)Restaurant Revitalization Fund

In 2021, several of the Company’s restaurants received a total of approximately $16.8 million from the Restaurant Revitalization Fund (“RRF”). The RRF funds must be used for specific purposes, and the Company was required to provide use of funds validation on an annual basis through March 2023. The Company accounted for the RRF funds as a government grant and has recognized the amounts as income as related expenses were incurred. During the year ended December 31, 2022, the Company recognized approximately $13.0 million as RRF grant income and had deferred the remaining balance of $3.8 million. No RRF grant income was recognized during the year ended December 31, 2024 and December 31, 2023.

Employee Retention Credits

(u)Employee Retention Credits

In March 2020, the Coronavirus Aid, Relief, and Economic Security Act was signed into law, providing numerous tax provisions and other stimulus measures, including the Employee Retention Credit (“ERC”), a refundable tax credit against certain employment taxes. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the American Rescue Plan Act of 2021 extended and expanded the availability of the ERC. We qualified for the ERC in the first and second quarters of 2019, second and fourth quarters of 2020 and first, second and third quarters of 2021. During the years ended December 31, 2024 and 2023, we recorded an aggregate benefit of $199 thousand and $2.5 million, respectively, in our consolidated income statements to reflect the ERC.

Deferred Offering Costs

(u)Deferred Offering Costs

The Company capitalized certain legal, accounting, and other third-party fees that were directly attributable to the IPO. Following the successful consummation of the IPO in June 2023, deferred offering costs of approximately $3.3 million were recorded in the Company’s stockholders’ equity as a reduction of additional paid-in capital. The Company had no remaining deferred offering costs assets at December 31, 2024.

Net Income Per Share

(v)Net Income Per Share

Basic net income per share is computed by dividing net income attributable to the Company by the weighted average number of shares outstanding during the period. Diluted net income per share is computed by giving effect to all potential weighted average dilutive shares including stock options, restricted stock units, dividend equivalent units, restricted stock awards, and Class B Common Units exchangeable for shares of Class A common stock for the periods after the closing of the IPO on June 30, 2023. The dilutive effect of outstanding awards, if any, is reflected in diluted earnings per share by application of the treasury stock method or if-converted method, as applicable. See “Note 16—Net Income per Share.”

Goodwill

(w) Goodwill

Goodwill is calculated under ASC 805-30-30, which represent the excess of the fair value of purchase consideration of an acquired business over the fair value of the identifiable net assets acquired. Goodwill is not amortized but is tested for impairment at a reporting unit level on an annual basis, or more frequently if circumstances change or an event occurs that would more likely than not reduce the fair value of the reporting unit below its carrying amount.

Accounts Receivable

(x) Accounts Receivable

Accounts receivable consist primarily of receivables from Costco for gift card sales. The collectability of accounts receivable is evaluated based on a variety of factors, including historical experience, current economic conditions and other factors.