10-Q: Noble Roman's Reports Mixed Financial Results

Noble Roman's 10-Q filing for the period ending June 30, 2026, reveals a decrease in company-owned restaurant revenue and net income, while franchising revenue shows growth.

Summary

• Noble Roman's filed its Form 10-Q for the quarterly period ended June 30, 2026.
• Total revenue for the six months ended June 30, 2026, was $8,028,547, an increase from $7,840,588 in the same period of 2025.
• Net income for the six months ended June 30, 2026, was $311,390, a decrease from $329,248 in the comparable period of 2025.
• Company-owned Craft Pizza & Pub revenue decreased by 4.8% for the three-month period and 0.8% for the six-month period.
• Franchising revenue increased to $3,130,590 for the six-month period ended June 30, 2026, from $2,900,159 in the prior year.
• The company secured a new five-year term loan of $6,900,427 on June 10, 2026, to pay off existing debt and warrants.
• A material weakness in internal control over financial reporting persists, related to financial reporting and period-end close processes.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this filing as slightly negative due to declining revenue in company-owned restaurants and a decrease in net income, despite positive trends in franchising.

Positives

• Total revenue increased to $8,028,547 for the six months ended June 30, 2026, up from $7,840,588 in the prior year.
• Franchising revenue saw a significant increase, reaching $3,130,590 for the six-month period, up from $2,900,159.
• The company successfully refinanced its debt with a new $6.9 million term loan, improving its current ratio to 1.3-to-1 from 0.40-to-1.
• The company has a significant pipeline of leads and prospects for future non-traditional franchise sales.
• Margin contribution from franchising was strong at 73.1% for the six-month period.

Negatives

• Net income decreased to $311,390 for the six months ended June 30, 2026, down from $329,248 in the prior year.
• Company-owned Craft Pizza & Pub revenue declined by 4.8% for the three-month period and 0.8% for the six-month period.
• Margin contribution for Company-owned Craft Pizza & Pub decreased to 8.5% for the six-month period from 10.2% in the prior year.
• General and administrative expenses increased significantly, driven by higher group insurance, audit, and professional services costs.
• A material weakness in internal control over financial reporting remains un-remediated.

Risks

• General economic uncertainty and reduction in consumer discretionary spending due to factors like the Middle East war and fluctuating prices.
• Increased costs for labor due to shortages of qualified candidates and general competition for employees.
• Potential for increased interest expense due to variable-rate debt tied to SOFR plus 4%, with a $65,000 increase for each 1% rise in SOFR.
• The company is examining plans to discontinue its hospital non-traditional operation due to an expiring management contract.
• The continued existence of a material weakness in internal control over financial reporting.

Future Outlook

The company believes it will have sufficient cash flow to meet its obligations and carry out its current business plan, primarily based on growing the non-traditional franchising venue and operating existing Craft Pizza & Pub locations. However, forward-looking statements are subject to risks including competitive factors, pricing pressures, debt servicing ability, economic conditions, and global disruptions.

Management Comments

• The company refocused its development plans toward selling more non-traditional franchises as a result of the pandemic coming to an end and the owners of non-traditional locations becoming more willing to look at expansion options and to invest in their growth.
• The company plans to add sales staff capacity due to the tremendous opportunity for expansion in the franchising venue.
• The company is examining plans to discontinue its hospital non-traditional operation in the near future since it is under an expiring management contract.

Industry Context

StockSavvy.ai notes that the restaurant industry continues to face economic headwinds, including inflation and shifts in consumer spending. Noble Roman's focus on non-traditional franchising, particularly in convenience stores and travel plazas, aligns with a trend of seeking growth in less capital-intensive models. The decline in company-owned store performance, attributed partly to economic uncertainty and war-related impacts, is a concern, but the strong franchising segment offers a potential offset.

Comparison to Industry Standards

• The margin contribution from franchising at 73.1% for the six-month period is exceptionally high compared to typical franchise models in the restaurant industry, which often range from 40-60%.
• The decrease in company-owned restaurant margins to 8.5% for the six-month period is below industry averages, which can vary widely but often aim for higher single-digit to low double-digit percentages.
• The company's strategy of focusing on non-traditional franchising is a common approach for brands seeking rapid expansion with lower overhead compared to traditional brick-and-mortar locations.

Legal Proceedings

• Currently, there are no pending material litigation or regulatory proceedings.

Related Party Transactions

• In June 2026, the subordinated note owned by Paul Mobley in the amount of $300,000 was repaid.
• Interest of $15,000 was paid on the subordinated note owned by Paul Mobley during the six months ended June 30, 2026.
• Paul Mobley exercised a warrant for 450,000 shares during the second quarter of 2026.

Stakeholder Impact

• Shareholders may be concerned by the decrease in net income and company-owned restaurant performance, although franchising growth offers a positive outlook.
• Employees may face increased workload or changes in management roles due to the focus on franchising and potential discontinuation of certain operations.
• Creditors and lenders are impacted by the new credit agreement, which provides a more stable financial footing, but covenants must be adhered to.

Next Steps

• Continue to focus on selling more non-traditional franchises.
• Add sales staff capacity to capitalize on franchising opportunities.
• Examine plans to discontinue the hospital non-traditional operation.
• Continue remediation efforts for the material weakness in internal control over financial reporting.

Key Dates

Recommendation

The company shows positive momentum in its franchising segment and has successfully refinanced its debt, which are strong positives. However, the decline in company-owned restaurant performance and the persistence of a material weakness in internal controls temper enthusiasm. The mixed results and ongoing operational challenges suggest a 'hold' rating until clearer signs of sustained improvement across all segments are evident.

Keywords

Noble Roman's, Franchising, Craft Pizza & Pub, Restaurant Operations, Financial Statements, Debt Refinancing, Quarterly Report, SEC Filing