GTIM

Business Context and Reporting Period

Company: Good Times Restaurants Inc. (GTIM)
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal Year 2025 (53 weeks ended September 30, 2025)
Business Overview: The Company operates two distinct restaurant concepts: Bad Daddy's Burger Bar (full-service casual dining) and Good Times Burgers & Frozen Custard (quick-service drive-thru). As of September 30, 2025, the Company owned or operated 37 Bad Daddy's locations across seven states and 27 Good Times locations, primarily in Colorado.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Decline: Net revenues decreased 0.5% to $141.63 million. This was driven by a 2.1% decline in same-store sales at Bad Daddy's and a 5.0% decline at Good Times, partially offset by the acquisition of three Good Times restaurants from franchisees.
• Profitability Compression: Net income decreased 41.8% to $1.02 million (attributable to common shareholders). Operating income fell from $1.38 million to $0.33 million due to increased labor costs, higher food commodity prices (specifically beef), and asset impairment charges of $0.63 million.
• Cost Structure: Payroll and employee benefit costs increased to 35.0% of restaurant sales (from 34.4%) due to wage inflation and decreased labor productivity. Food and packaging costs rose to 31.2% of sales (from 30.9%).
• Debt Position: The Company increased borrowings under its Cadence Credit Facility to $2.0 million (from $0.84 million) to fund operations and acquisitions. Interest expense rose to $0.20 million.
• Share Repurchases: The Company repurchased 162,859 shares for $0.39 million during the fiscal year, leaving approximately $1.98 million remaining under its $7.0 million authorization.

Guidance, Outlook, and Risks

Management Commentary: Management cites macroeconomic volatility, inflation, and supply chain disruptions as primary headwinds. While inflation has moderated, wage inflation remains persistent, and beef prices reached record highs in late fiscal 2025. The Company closed two underperforming Bad Daddy's locations near the end of the fiscal year and early in fiscal 2026.

Outlook: The Company expects to fund fiscal 2026 commitments through existing cash and borrowings against its credit facility. Growth strategy remains focused on disciplined unit expansion of Bad Daddy's and organic sales growth at Good Times, though no explicit plans for new Good Times units were stated.

Risks and Contingencies:

• Legal Proceedings: A significant lawsuit against White Winston Select Asset Funds was resolved with a final judgment of $3.83 million in favor of the Company. However, a preliminary settlement agreement was reached post-fiscal year for an amount significantly less than the judgment.
• Liquidity: The Company maintains a working capital deficit, largely due to the recognition of short-term lease liabilities. It relies on its $8.0 million credit facility (with $5.99 million available) for liquidity.
• Operational Risks: Risks include labor shortages, food cost volatility (tariffs on beef), and the potential inability to pass cost increases to consumers without reducing traffic.

Investor Verification Checklist

• Same-Store Sales Trend: Verify the sustainability of the 5.0% same-store sales decline at Good Times, a brand that had grown sales in 13 of the previous 15 years.
• Debt Covenants: Confirm continued compliance with the Cadence Credit Facility covenants, specifically the minimum liquidity and leverage ratios, given the working capital deficit.
• Legal Settlement: Monitor the final documentation of the White Winston settlement to determine the actual cash recovery versus the $3.83 million judgment.
• Cost Inflation: Assess the Company's ability to offset rising beef and labor costs through menu pricing without further eroding traffic.
• Asset Impairments: Review the specific locations impaired ($0.63 million charge) to gauge the health of the restaurant portfolio.