10-K: Good Times Restaurants Reports Mixed Fiscal 2025 Results

Good Times Restaurants Inc. reported a slight revenue decrease and negative same-store sales for fiscal 2025, alongside a significant drop in net income, despite an increase in Bad Daddys' operating income.

Summary

• Net revenues for fiscal 2025 decreased by $750,000 (0.5%) to $141,630,000 from $142,380,000 in fiscal 2024.
• Same store sales decreased by 2.1% at the Bad Daddys brand and by 5.0% at the Good Times brand during fiscal 2025.
• Net income for fiscal 2025 was $1,098,000, a decrease from $1,879,000 in fiscal 2024.
• Income from operations was $330,000 in fiscal 2025, down from $1,380,000 in fiscal 2024.
• Adjusted EBITDA decreased to $4,325,000 in fiscal 2025 from $5,363,000 in fiscal 2024.
• The company ended fiscal 2025 with $2.6 million in cash and $2.3 million in long-term debt.
• A lawsuit (White Winston Select Asset Funds, LLC and GT Acquisition Group, Inc. v. Good Times Restaurants, Inc.) was successfully resolved in the company's favor, with a final judgment of $3,826,715.07 in damages plus $813,845.34 in pre-judgment interest, and a preliminary settlement agreement reached post-fiscal year.
• The share repurchase program was expanded by $2.0 million, bringing the total authorization to $7.0 million, with approximately $1,981,000 remaining available as of September 30, 2025.
• Two underperforming Bad Daddys restaurants were closed near the end of fiscal 2025 and early fiscal 2026 due to poor site selection.

Sentiment

Score: 3

Explanation: The company experienced declines in key financial metrics such as net revenue, net income, income from operations, and Adjusted EBITDA, coupled with negative same-store sales for both brands. While there was a positive legal outcome and a share repurchase program, the overall financial performance and outlook regarding inflation and labor costs are concerning.

Positives

• Bad Daddys segment income from operations increased year over year, despite a sales decline.
• Successfully resolved a significant lawsuit, resulting in a final judgment of $3,826,715.07 in damages plus $813,845.34 in pre-judgment interest in the company's favor, with a preliminary settlement agreement reached post-fiscal year.
• Expanded the share repurchase program by $2.0 million, totaling $7.0 million authorized, with $1,981,000 still available.
• Maintained compliance with all covenants under the Cadence Credit Facility.
• Good Times has a long-term track record of same-store sales growth, increasing in thirteen of the last fifteen years, with a compound annual growth rate of 3.5% between fiscal 2015 and 2025.
• General and administrative costs decreased by $847,000 in fiscal 2025, primarily due to insourcing accounting functions and reduced legal fees.
• Reported a tax benefit of $824,000 in fiscal 2025, primarily due to changes in available tax credits.

Negatives

• Net revenues decreased by $750,000 (0.5%) to $141,630,000 in fiscal 2025.
• Bad Daddys same-store sales decreased by 2.1% in fiscal 2025.
• Good Times same-store sales decreased by 5.0% in fiscal 2025.
• Net income decreased to $1,098,000 in fiscal 2025 from $1,879,000 in fiscal 2024.
• Income from operations decreased to $330,000 in fiscal 2025 from $1,380,000 in fiscal 2024.
• Adjusted EBITDA decreased to $4,325,000 in fiscal 2025 from $5,363,000 in fiscal 2024.
• Food and packaging costs for Good Times increased to 31.5% of restaurant sales in fiscal 2025 from 30.4% in fiscal 2024.
• Payroll and other employee benefit costs for Bad Daddys increased to 34.8% of restaurant sales in fiscal 2025 from 34.6% in fiscal 2024, and for Good Times increased to 35.6% from 33.8%.
• Occupancy costs for Good Times increased to 9.3% of restaurant sales in fiscal 2025 from 9.0% in fiscal 2024.
• Other operating costs for Bad Daddys increased to 15.2% of restaurant sales in fiscal 2025 from 14.8% in fiscal 2024, and for Good Times increased to 14.6% from 13.1%.
• The company ended fiscal 2025 with a working capital deficit of $9,124,000.
• Cash and cash equivalents decreased by $1,248,000 in fiscal 2025.
• Closed two underperforming Bad Daddys restaurants due to misjudgment of real estate quality.

Risks

• Operations are susceptible to the cost and availability of food, which could adversely affect operating results due to factors like adverse weather, governmental regulation, production issues, recalls, seasonality, and supply chain impacts.
• Macroeconomic conditions and inflation could affect operating results, labor, and product input costs, potentially leading to decreased consumer spending and sales.
• Tariffs implemented or threatened by the federal government may increase commodity costs, reduce supply, and lead to trade wars, which may not be offset by menu price increases without negatively impacting traffic.
• Price increases on menu items, intended to offset increased operating expenses, may deter customers from visiting restaurants or affect their purchasing decisions.
• Labor shortages, increased competition for qualified employees, and rising minimum wage regulations could slow growth, harm business, and lead to continued escalation of labor costs and margin compression.
• Labor organizing efforts could increase labor costs, limit workforce management, negatively impact guest service, and disrupt operations.
• The outbreak of, and governmental responses to, pandemics or other future health concerns could significantly disrupt business, affecting financial condition and operating results.
• The failure of banks where the company maintains uninsured deposits could materially affect its financial position and operating results.
• International conflicts could disrupt worldwide product supply chains, leading to higher food and packaging costs or reduced revenues, and may affect consumer behavior.
• The company has accumulated losses ($16,598,000 accumulated deficit as of September 30, 2025) and cannot guarantee future profits, especially given macroeconomic uncertainties.
• Inability to continue increasing same-store sales at existing restaurants could adversely affect profitability.
• New restaurants, when opened, may not be profitable for several months due to inefficiencies, lack of market awareness, and higher initial operating costs.
• The hamburger restaurant market is highly competitive, with many national and regional chains having greater financial resources, marketing programs, and name recognition.
• Sites for new restaurants may be difficult to acquire at a reasonable cost, and acquired sites may not be successful.
• Franchisees could take actions that harm the company's business, image, and reputation due to independent operations.
• Dependence on key management employees (Ryan Zink, Keri August); the loss of their services could have a material adverse effect on financial condition and results of operations.
• Security breaches of confidential customer information (credit/debit card transactions) and information technology system failures or network security breaches could interrupt operations, harm business, and lead to litigation or regulatory actions.
• Extensive government regulation (health, sanitation, safety, fire, labor, franchise operations, alcoholic beverages) may hinder or impact the ability to expand and develop restaurants.
• Concerns relating to food safety, food-borne illness, pandemics, and other diseases could reduce customer traffic or lead to litigation.
• The inability to successfully negotiate extended terms on leases reaching end-of-term may reduce future profitability due to significantly higher rental rates.
• Inability to protect the company's reputation from negative publicity could negatively impact brand value and sales.
• Ongoing capital expenditures at existing restaurants, including remodels, may not result in increased sales.
• Succeeding with the Bad Daddys Burger Bar concept requires significant capital expenditures and management attention, with no assurance of profitability or positive cash flow.
• Growth, particularly the development of Bad Daddys Burger Bar restaurants, may strain management and infrastructure.
• Bad Daddys Burger Bar is subject to the risks of a relatively new business, with substantial uncertainty about the success of additional restaurants in other locations.
• Costs associated with employee health care programs continue to escalate, and the company may not be able to fully pass along those cost increases to employees, potentially leading to higher claims costs.
• Evolving corporate governance and public disclosure regulations, including environmental, social, and governance (ESG) matters, could expose the company to numerous risks and increased general and administrative expenses.
• Changes in enforcement practices related to existing immigration laws and/or modified or newly adopted immigration legislation may affect labor markets related to suppliers or the QSR business segment.
• Significant shareholders or potential shareholders attempting to effect changes or acquire control could cause significant expense, hinder business strategy, and impact the trading value of securities.
• A future ownership change as defined by Section 382 of the Internal Revenue Code (IRC) could limit the ability to utilize tax loss and credit carryforwards to offset taxable income.
• Future changes in financial accounting standards may cause adverse unexpected operating results and affect reported results of operations.
• As a smaller reporting company, disclosures of non-financial and financial information are less than required by non-smaller reporting companies, which could make common stock less attractive to some investors.
• The price of common stock may fluctuate significantly due to various factors, including operating results, market performance of comparable companies, economic conditions, and social media speculation.
• Sales of a substantial number of shares of common stock in the public market by existing shareholders could cause the stock price to fall.
• Future sales or other dilution of equity may adversely affect the market price of common stock and/or dilute its value.
• Provisions in articles of incorporation and bylaws and provisions of Nevada law may prevent or delay an acquisition of the company, which could decrease the trading price of common stock.

Future Outlook

The company expects to have adequate cash from operations and credit facility borrowings to meet all future debt service, capital expenditure, and working capital requirements in fiscal 2026. It plans to continue re-imaging and remodeling restaurants, maintaining relevant menus, and communicating brand stories to sustain same-store sales growth. The primary growth strategy is disciplined unit expansion of the Bad Daddys brand, financed mainly by operating cash flow. There are no explicit plans for new Good Times restaurants, but opportunistic development in Colorado and surrounding states would focus on a new drive-thru prototype. The company anticipates investing in modern human resource and financial planning systems. However, it cannot assure future profitability for fiscal year 2026 due to macroeconomic conditions, increasing inflation, and supply chain/employee market factors.

Management Comments

• Inflation moderated, however economic indicators remain volatile and increases in inflation could affect the global and U.S. economies, which could have an adverse impact on our business and results of operations if we, and our franchisees, are not able to adjust prices sufficiently to offset the effect of cost increases without negatively impacting consumer demand.
• Within the restaurant industry, sales and traffic have exhibited greater weakness in the general casual dining sector than at any time since the post-pandemic recovery, and competitors in the QSR burger segment have been aggressively discounting to address pricing concerns that had been affecting traffic.
• We believe that both organic growth and unit growth is important to our brand and expect expansion to be disciplined and financed primarily from operating cash flow from both brands.
• Near the end of fiscal 2025 and early into fiscal 2026 we closed a total of two Bad Daddys restaurants, both having opened more than six years ago, both of which have demonstrated below average sales volumes during their entire operating history which current management attributes to misjudgment of the quality of real estate during the site selection process.
• We have historically used menu price increases to manage profitability in times of inflation, however the current unusually high rate of wage inflation, exceeds what we believe we can reasonably pass through to our customers without negatively affecting frequency and trial by our customers, and we are not able to predict the impact of beef price inflation or our ability to offset the potential increase in cost of beef with menu price increases.
• It is managements opinion that any reasonably possible losses associated with such contingencies have been adequately accrued or would be immaterial to our financial statements.
• Based on our review of this evidence, we determined that no valuation allowance against our deferred tax assets was necessary.

Industry Context

The restaurant industry is highly competitive across both limited-service and full-service segments. The general casual dining sector has experienced significant weakness in sales and traffic since the post-pandemic recovery, while the quick-service restaurant (QSR) burger segment faces aggressive discounting from competitors. Good Times faces increased competition in its primary Colorado market from expanding chains like In-N-Out and Whataburger, as well as fast-casual concepts incorporating drive-thru services and new slider-focused competitors. Industry-wide challenges include persistent inflation and labor shortages, leading to upward pressure on operating costs, particularly wages and commodity prices.

Comparison to Industry Standards

• Good Times competes with recognized national and regional fast-food hamburger chains such as McDonald's, Burger King, Wendy's, Carl's Jr., Sonic, Jack in the Box, Freddy's, and Culver's.
• In-N-Out and Whataburger, both burger-focused quick-service concepts, have expanded into Colorado, directly increasing competition in Good Times' key markets.
• Bad Daddys Burger Bar competes with local, regional, and national gourmet/better burger concepts, as well as legacy grill and bar establishments.
• Fast casual burger restaurants like Shake Shack are increasingly incorporating drive-thru service, presenting more relevant competition, despite their higher average per-person check compared to Good Times.
• The company believes Good Times has a competitive advantage in product quality compared to traditional quick-service burger chains.
• Bad Daddys Burger Bar believes it has an advantage in the premium quality of its ingredients, unparalleled customization options, distinctive atmosphere, and bold, unique flavors.
• Acknowledges that many competitors in the fast-food business operate more restaurants, have been established longer, and possess greater financial resources and name recognition.

Management Changes

Corporate Governance

Legal Proceedings

• White Winston Select Asset Funds, LLC and GT Acquisition Group, Inc. v. Good Times Restaurants, Inc.: A lawsuit arising from failed negotiations for the sale of the Good Times Drive Thru subsidiary. The company successfully defended against plaintiffs' claims, and its counterclaim for breach of covenant not to sue was affirmed on appeal. A final judgment was entered in the company's favor on July 30, 2025, for $3,826,715.07 in damages and $813,845.34 in pre-judgment interest. A preliminary settlement agreement for a significantly lesser amount was reached post-fiscal year, pending final documentation.

Related Party Transactions

• On May 5, 2025, the company purchased 11,331 shares of its common stock at $2.00 per share in a private transaction with its Senior Vice President of Operations, who retired on May 30, 2025.
• Good Times Drive Thru, Inc., a wholly owned subsidiary, is the maker of an unsecured promissory note to JGN Management, Inc., the former franchisee of the Parker, Colorado restaurant, in connection with its purchase. The outstanding principal balance was $342,000 as of September 30, 2025.

Stakeholder Impact

• Shareholders: Negative impact from decreased net income, operating income, and same-store sales. Potential positive from the share repurchase program and successful litigation outcome (though settlement amount is less than judgment). Risks include stock price volatility, dilution from future equity sales, and anti-takeover provisions limiting change of control premiums.
• Employees: Affected by labor shortages, increased competition for talent, and wage inflation. The company offers competitive wages, benefits (401k, medical), and incentive plans. There is a risk of unionization efforts.
• Customers: May be affected by potential menu price increases to offset rising costs. Customer traffic could be impacted by price increases or negative publicity related to food safety or health concerns.
• Suppliers: Impacted by supply chain constraints, international conflicts, and tariffs, leading to higher costs. The company relies on US Foods for distribution.
• Creditors: The company is in compliance with all covenants under the Cadence Credit Facility, which is secured by substantially all assets, indicating a stable relationship with its primary lender.

Next Steps

• Continue to periodically re-image and remodel restaurants.
• Maintain a relevant menu with a laser focus on speed and accuracy in execution for Good Times.
• Shift media mix periodically to maximize advertising effectiveness and efficiency for Good Times.
• Increase Bad Daddys same-store sales through ongoing menu engineering, expanding beverage sales, and creating energy in bar areas.
• Leverage third parties specializing in social and digital media advertising for Bad Daddys.
• Focus on managing expenses, with a particular focus on cost of sales, labor, and operating expense controls and efficiencies.
• Implement programs to mitigate the impact of external factors on operating costs and explore other opportunities to improve efficiency of general and administrative costs.
• Invest in modern human resource and financial planning systems.
• Pursue disciplined unit growth of company-operated Bad Daddys Burger Bar restaurants, primarily financed from operating cash flow.
• Assess development strategies for Bad Daddys, which may include both company-owned and franchisee-owned units.
• Continue to refine the economic model of the Good Times drive-thru business; any opportunistic development would be in Colorado and surrounding states with a new prototype restaurant design.
• Complete the implementation of a new cloud-based point-of-sale system at all traditional Bad Daddys restaurants in the next eighteen months.
• Final documentation of the settlement agreement for the White Winston lawsuit will conclude the litigation.

Key Dates

Recommendation

While the company faces significant headwinds with declining same-store sales, reduced net income, and persistent inflationary pressures on labor and commodities, it has demonstrated financial discipline by reducing G&A costs and maintaining compliance with debt covenants. The successful resolution of a major lawsuit and an ongoing share repurchase program provide some stability. However, the negative operational trends and competitive landscape warrant caution. A 'Hold' recommendation reflects the mixed signals: the company is navigating a challenging environment with some strategic actions, but the core business performance shows weakness, making it difficult to recommend a 'Buy' or 'Sell' without further clarity on future operational improvements and market conditions.

Keywords

Restaurant industry, Quick-service restaurant, Full-service restaurant, Bad Daddys Burger Bar, Good Times Burgers & Frozen Custard, SEC filing, 10-K, Financial results, Same-store sales, Revenue, Net income, EBITDA, Debt, Share repurchase, Corporate governance, Risk factors, Labor costs, Food costs, Inflation, Cybersecurity, Nevada corporation, NASDAQ