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INCOME TAXES | 12 Months Ended
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Dec. 28, 2025
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The Company’s entire pretax loss for the fiscal years ended December 28, 2025, December 29, 2024, and December 31, 2023 was from its U.S domestic operations. For the fiscal years ended December 28, 2025, December 29, 2024 and December 31, 2023, the Company recorded an income tax expense (benefit) of $0.05 million, $(1.3) million, and $0.4 million, respectively. The components of the provision for income taxes for the fiscal year ended December 28, 2025, December 29, 2024, and December 31, 2023 are as follows (in thousands):
(dollar amounts in thousands) | Fiscal Year Ended December 28, 2025 |  | Fiscal Year Ended December 29, 2024 |  | Fiscal Year Ended December 31, 2023
Current: |  |  |  |  |
State | $ | 134 |  |  | $ | 111 |  |  | $ | 21 |
Total Current | 134 |  |  | 111 |  |  | 21 |
Deferred: |  |  |  |  |
Federal | (103) |  |  | (1,432) |  |  | 323 |
State | 15 |  |  | 20 |  |  | 35 |
Total deferred | (88) |  |  | (1,412) |  |  | 358 |
Total provision for income taxes (benefit) expense | $ | 46 |  |  | $ | (1,301) |  |  | $ | 379 |
The following table provides the updated requirements of ASU 2023-09 for 2025. See Note 1: Description of business and summary of significant accounting policies - recently adopted accounting pronouncements. The effective income tax rate for the fiscal year ended December 28, 2025 differs from the statutory federal income tax rate as follows (dollars in thousands):
(dollar amounts in thousands) | December 28, 2025
U.S. federal income tax at statutory rate | $ | (28,320) |  |  | 21.0 | %
State and local income taxes, net of federal income tax effect(1) | (342) |  |  | 0.3 | %
Changes in valuation allowance | 29,020 |  |  | (21.5 | %)
Nontaxable or nondeductible items |  |  |
Officer compensation | 4,072 |  |  | (3.0 | %)
Other, net | 1,099 |  |  | (0.8 | %)
Changes in unrecognized tax benefits | 1,897 |  |  | (1.4 | %)
Other Adjustments |  |  |
Federal net operating loss true-up | (1,437) |  |  | 1.1 | %
Outside basis difference in Spyce Foods | (6,990) |  |  | 5.2 | %
Other, net | 1,047 |  |  | (0.8 | %)
Effective income tax rate | $ | 46 |  |  | — | %
(1)For the fiscal year ended December 28, 2025, t he state of Texas contributes to the majority (greater than 50%) of the tax effect in this category. As previously disclosed for the fiscal years ended December 29, 2024 and December 31, 2023, prior to the adoption of ASU 2023-09, the Company’s effective income tax rate differs from the statutory federal income tax rate as follows:
| December 29, 2024 |  | December 31, 2023
Federal statutory rate | 21.0 | % |  | 21.0 | %
Effect of: |  |  |
State taxes, net of federal benefit | 4.2 | % |  | 6.7 | %
Permanent differences | (1.9 | %) |  | (0.8 | %)
Change in valuation allowance | (19.5 | %) |  | (18.5 | %)
Nondeductible executive compensation | (20.0 | %) |  | (8.2 | %)
Stock compensation and related items | 15.8 | % |  | — | %
Other | 1.8 | % |  | (0.5 | %)
Total | 1.4 | % |  | (0.3 | %)
Components of the Company’s net deferred tax assets/(liabilities) consisted of the following:
(dollar amounts in thousands) | December 28, 2025 |  | December 29, 2024
Deferred tax assets: |  |  |
Net operating loss carryforward | $ | 244,898 |  |  | $ | 219,918 |
Charitable contributions | 99 |  |  | 178 |
Stock-based compensation expense | 5,611 |  |  | 5,458 |
Accrued expenses | 440 |  |  | 614 |
Deferred revenue | 1,078 |  |  | 1,331 |
Operating lease liabilities(1) | 106,738 |  |  | 99,861 |
Outside tax basis in Spyce Foods | 9,831 |  |  | — |
Other | 4,637 |  |  | 6,627 |
Total deferred tax assets | 373,332 |  |  | 333,987 |
Valuation allowance | (240,676) |  |  | (202,709) |
Total deferred tax assets, net of valuation allowance | 132,656 |  |  | 131,278 |
Deferred tax (liabilities): |  |  |
Depreciation and amortization differences | (32,015) |  |  | (39,580) |
Operating lease assets(1) | (84,122) |  |  | (77,639) |
State deferred taxes | (16,793) |  |  | (14,420) |
Total deferred tax liabilities | (132,930) |  |  | (131,639) |
Net deferred tax (liability) asset | $ | (274) |  |  | $ | (361) |
(1) Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations or the consolidated balance sheets. As of December 28, 2025 and December 29, 2024, Company management assessed the realizability of deferred tax assets, in order to determine the need for a valuation allowance. As of the fiscal years ended December 28, 2025 and December 29, 2024, the Company is in a net deferred tax asset position of $240.4 million and $202.7 million, respectively. The deferred tax assets consist principally of net operating loss carryforwards. The future realization of the tax benefits from existing temporary differences and tax attributes ultimately depends on the existence of sufficient taxable income. In assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. In concluding on its evaluation, Company management placed significant emphasis on guidance in ASC 740, which states that “a cumulative loss in recent years is a significant piece of negative evidence that is difficult to overcome.” Such objective evidence limits the ability to consider other subjective evidence, such as the Company’s projections for future growth. On the basis of this evaluation, as of December 28, 2025 and December 29, 2024, a full valuation allowance of $240.7 million and $202.7 million, respectively, has been recorded against the deferred tax assets, which represents an increase of $38.0 million year over year. As of December 28, 2025, the Company had U.S. Federal net operating loss carryforwards of $867.6 million, of which $765.7 million may be carried forward indefinitely, and the remaining carryforwards $101.9 million expire at various dates from 2029 through 2037. As of December 28, 2025, the Company had state net operating loss carryforwards of $787.6 million, of which $93.5 million may be carried forward indefinitely, and the remaining carryforwards of $694.1 million expire at various dates from 2025 through 2044. The future realization of the Company’s net operating loss carryforwards and other tax attributes may also be limited by the change in ownership rules under the U.S. Internal Revenue Code Section 382. In general, under Section 382 of the Internal Revenue Code (Section 382), a corporation that undergoes an ownership change is subject to limitations on its ability to utilize its pre-change net operating loss carryovers and tax credits to offset future taxable income. The Company completed a Section 382 analysis to evaluate whether any ownership changes and related limitations impacted the Company’s ability to utilize net operating loss carryforwards or other attributes prior to their expiration dates. The Company’s existing net operating loss carryforwards and tax credits are subject to annual limitations arising from ownership changes which occurred in previous periods. Currently, the limitations imposed by Section 382 are not expected to impair the Company’s ability to fully realize its net operating losses. Future changes in the Company’s stock ownership, some of which are outside of the Company’s control, could result in an additional ownership change under Section 382 of the Code; if that occurs, the Company’s ability to utilize net operating losses could be further limited. Furthermore, the Company’s ability to utilize net operating losses of companies that the Company may acquire in the future may be subject to limitations under Section 382 of the Code. The Company files income tax returns in the U.S. federal jurisdiction and in various state and local jurisdictions in which it operates, and therefore is subject to tax examination by various taxing authorities. The Company is not aware of any issues under review that could result in a material deviation from its tax positions. The Company is not currently under examination by the Internal Revenue Service or any major state and local tax jurisdictions. In general, our tax returns for years 2020 to 2024 remain open to examination by the major jurisdictions in which the Company is subject to tax. Fiscal years outside the normal statute of limitation remain open to audit by tax authorities due to tax attributes, such as net operating losses, generated in those early years, which have been carried forward and may be audited in subsequent years when utilized. The calculation and assessment of the Company’s tax exposures generally involve the uncertainties in the application of complex tax laws and regulations for federal, state and local jurisdictions. A tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation, on the basis of the technical merits. As of December 28, 2025 and December 29, 2024, the Company had approximately $2.1 million and $0.1 million of unrecognized tax benefits, respectively. Due to the valuation allowance position, none of the unrecognized tax benefits, if recognized, will impact the Company’s effective tax rate. The Company recognizes accrued interest and penalties, if any, related to uncertain tax positions in income tax provision in its financial statements, if applicable. The Company did not have any accrued interest of penalties associated with any uncertain tax positions, and no interest expense was recognized during the fiscal years ended December 28, 2025 and December 29, 2024. The following table summarizes the activity related to the Company’s gross uncertain tax positions for the fiscal years ended December 28, 2025 and December 29, 2024:
(dollar amounts in thousands) | December 28, 2025 |  | December 29, 2024 |
Uncertain Tax Positions |  |  |  |
Beginning of year balance | $ | 93 |  |  | $ | 431 |  |
Increases (decreases) related to current year tax positions | 2,019 |  |  | (338) |  |
End of year balance | $ | 2,112 |  |  | $ | 93 |  |
On March 27, 2020, President Trump signed into law the CARES Act (as defined below). Intended to provide economic relief to those impacted by the COVID-19 pandemic, the CARES Act includes provisions, among others, to enhance business’ liquidity and provide for refundable employee retention tax credits, which could be used to offset payroll tax liabilities. On March 11, 2021, President Biden signed the American Rescue Plan Act (“ARPA”). The ARPA includes several provisions, such as measures that extend and expand the employee retention credit, previously enacted under the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), through December 31, 2021. The ARPA did not have a material impact on the Company’s consolidated financial statements. As authoritative guidance is currently pending under U.S. GAAP on accounting for government assistance to for-profit business entities, the Company accounts for the ERC by analogy to International Accounting Standard (“IAS”) 20, Accounting for Government Grants and Disclosure of Government Assistance. In accordance with IAS 20, management determined it has reasonable assurance for receipt of the ERC and recorded the ERC benefit of $1.8 million within Labor and other related expenses and $5.1 million within general and administrative expenses in the consolidated statement of operations for the fiscal year ended December 31, 2023 as an offset to Social Security tax expense. During fiscal year 2025, the Company received the remaining $3.6 million in cash related to the ERC receivable, resulting in the full collection of the outstanding balance previously reported within other current assets. Accordingly, as of December 28, 2025, there is no ERC receivable balance within other current assets on the consolidated balance sheet. Income taxes paid (net of refunds) are as follows:
(dollar amounts in thousands) | December 28, 2025
Federal | $ | — |
State | — |
Texas | (67) |
Other States | — |
Total | $ | (67) |
On July 4, 2025, H.R.1, commonly referred to as the One Big Beautiful Bill Act, was enacted in the U.S., which includes a broad range of tax reform provisions, including extending and modifying certain key Tax Cuts and Jobs Act provisions (both domestic and international), and provisions allowing accelerated tax deductions for qualified property and research expenditures. The legislation has multiple effective dates, with certain provisions effective in 2025 and others to be implemented through 2027. The legislation's enactment did not materially impact the Company’s effective income tax rate or cash tax position for the year ended December 28, 2025.

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