v3.25.4
Income Taxes
 12 Months Ended
Dec. 28, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
(Loss)/income before income taxes consists of:
Fiscal Years Ended
December 28, 2025December 29, 2024December 31, 2023
Domestic$(452,522)$20,439 $(59,174)
Foreign(92,077)(670)18,180 
(Loss)/income before income taxes$(544,599)$19,769 $(40,994)
Domestic (loss)/income before income taxes includes unallocated corporate costs, which include general corporate expenses. Presentation of prior year amounts relating to U.S. and Foreign income before taxes have been recast to conform with the current year presentation, in which intercompany eliminations are reflected in U.S. results. This had no effect on the reported results of operations.
The components of the provision for income taxes are as follows:
Fiscal Years Ended
December 28, 2025December 29, 2024December 31, 2023
Current:
Federal$(4)$112 $(2,213)
State341 (147)138 
Foreign
14,395 12,922 16,214 
Total current$14,732 $12,887 $14,139 
Deferred and other:
Federal$(26,003)$6,232 $(10,971)
State(1,125)(619)(2,552)
Foreign
(8,424)(2,546)(4,963)
Total deferred and other$(35,552)$3,067 $(18,486)
Income tax (benefit)/expense$(20,820)$15,954 $(4,347)
Following the adoption of ASU 2023-09, the reconciliation of income taxes at the U.S. federal statutory income tax rate to the Company’s income tax provision (benefit) is as follows:
December 28, 2025
AmountPercent
U.S. federal statutory rate$(114,366)21.0 %
State and local income taxes, net of federal income tax effect(1)
(620)0.1 %
Foreign tax effects:
United Kingdom
Goodwill impairment14,485 (2.7)%
Other813 (0.1)%
Other foreign jurisdictions10,096 (1.9)%
Effect of cross-border tax laws(396)0.1 %
Tax credits(404)0.1 %
Changes in valuation allowances8,873 (1.6)%
Nontaxable or nondeductible items:
Goodwill impairment52,216 (9.6)%
Other4,873 (0.9)%
Changes in unrecognized tax benefits222 (0.1)%
Other adjustments3,388 (0.6)%
Effective tax rate$(20,820)3.8 %
(1)State taxes in California, Florida, Georgia, New York City, South Carolina, Tennessee, and Virginia made up the majority (greater than 50 percent) of the tax effect in this category.
A reconciliation of the statutory U.S. federal income tax rate and the Company’s effective tax rate for years prior to the adoption of ASU 2023-09 is as follows:
December 29, 2024December 31, 2023
Statutory federal rate21.0 %21.0 %
State income taxes, net of federal benefit0.2 6.3 
Foreign operations22.5 (11.0)
Change in valuation allowance13.6 (2.0)
Noncontrolling interest1.1 (0.2)
Impact of uncertain tax positions(3.3)6.2 
Other permanent differences4.2 (0.6)
Deferred adjustments0.5 (3.8)
Share-based compensation25.4 (6.3)
Other(4.5)1.0 
Effective tax rate80.7 %10.6 %
The Company establishes valuation allowances for deferred income tax assets in accordance with GAAP, which provides that such valuation allowances shall be established unless realization of the income tax benefits is more likely than not.
The Company recognizes deferred income tax assets and liabilities based upon its expectation of the future tax consequences of temporary differences between the income tax and financial reporting bases of assets and liabilities. Deferred tax liabilities generally represent tax expense recognized for which payment has been deferred, or expenses which have been deducted in the Company’s tax returns, but which have not yet been recognized as an expense in the financial statements. Deferred tax assets generally represent tax deductions or credits that will be reflected in future tax returns for which the Company has already recorded a tax benefit in the audited Consolidated Financial Statements.
The Company continues to assert permanent reinvestment with respect to its initial basis differences of international affiliates but does not assert indefinite reinvestment on the earnings of the foreign subsidiaries with the exception of its subsidiaries in Canada. Furthermore, with the sale of its operations in Japan, the Company no longer asserts permanent reinvestment on the basis differences of KK Japan. No deferred taxes have been provided for with regard to the Company’s initial basis difference in international affiliates, with exception of KK Japan. Due to the complexities of tax law in the respective jurisdictions, it is not practicable to estimate the tax liability that might be incurred if such earnings were remitted to the U.S. The Company has not established a deferred tax liability for the earnings of the foreign subsidiaries (except KK Japan) as any distributions made from the corresponding relevant jurisdictions are expected to be made in a tax neutral manner.
The tax effects of temporary differences are as follows:
As of
December 28,
2025		December 29,
2024
Deferred income tax assets:
Disallowed interest expense
44,764 35,291 
Lease liabilities
115,016 117,619 
Foreign net operating loss carryforward
5,955 3,024 
Federal net operating loss carryforward
19,110 10,541 
Federal tax credits
13,606 18,058 
State net operating loss and credit carryforwards
11,446 10,702 
Other
30,600 35,033 
Gross deferred income tax assets
240,497 230,268 
Valuation allowance
(41,665)(30,617)
Deferred income tax assets, net of valuation allowance
$198,832 $199,651 
Deferred income tax liabilities:
Intangible assets
$(150,145)$(157,245)
Subsidiary investments
— (19,070)
Property and equipment
(16,955)(20,484)
Foreign reacquired franchise rights
(27,500)(23,112)
Lease right of use assets
(97,956)(106,592)
Other
(1,601)(1,824)
Gross deferred income tax liabilities
(294,157)(328,327)
Net deferred income tax liabilities
$(95,325)$(128,676)
The components of the deferred tax assets and liabilities as of December 28, 2025 exclude $2.3 million of deferred tax assets classified as held for sale.
The presentation of deferred income taxes on the Consolidated Balance Sheets is as follows:
As of
December 28,
2025		December 29,
2024
Included in:
Other assets$911 $2,069 
Deferred income taxes, net(96,236)(130,745)
Net deferred income tax liabilities$(95,325)$(128,676)
As of December 28, 2025, the Company had net operating loss (“NOL”) carryforwards of approximately $236.1 million for U.S. state tax purposes and $91.0 million for U.S. federal tax purposes. As of December 29, 2024, the Company had NOL carryforwards of approximately $220.4 million for U.S. state tax purposes and $50.2 million for U.S. federal tax purposes. U.S. federal NOL carryforwards are eligible to be carried forward indefinitely. A portion of the Company’s U.S. state tax carryforwards began to expire in fiscal 2024. As of December 28, 2025 and December 29, 2024 the Company had foreign NOL carryforwards of approximately $22.4 million and $10.9 million, respectively. As of December 28, 2025, $6.7 million of the foreign NOL carryforwards have a 10-year carryover period and the remaining $15.7 million have no expiration.
As of December 28, 2025, the Company had various tax credit carryforwards of $13.6 million for U.S. federal purposes and none for U.S. state purposes. As of December 29, 2024, the Company had various tax credit carryforwards of $18.1 million for U.S. federal purposes and none for U.S. state purposes. If not utilized, the credits can be carried forward between 10 and 20 years. A portion of the U.S. tax credit carryforwards expired in fiscal 2025. If certain substantial changes in the entity’s ownership occur, there would be an annual limitation on the amount of the NOLs and credits that can be utilized.
The valuation allowances of $41.7 million and $30.6 million as of December 28, 2025 and December 29, 2024 respectively, represent the portion of its deferred tax assets that the Company does not believe would more likely than not be realized in the future. As of December 28, 2025, the Company established a full valuation allowance against U.S. net definite lived deferred tax assets based on its evaluation of available evidence, including cumulative historical results.
Realization of net deferred tax assets generally is dependent on generation of taxable income in future periods. While the Company believes its forecast of future taxable income is reasonable, actual results will inevitably vary from management’s forecasts. Such variances could result in adjustments to the valuation allowance on deferred tax assets in future periods, and such adjustments could be material to the financial statements.
On July 4, 2025, the One Big Beautiful Bill Act (the “OBBBA”) was enacted in the U.S. The legislation permanently extends certain expiring provisions of the Tax Cuts and Jobs Act, alters aspects of the U.S. international tax regime, and reinstates certain business tax provisions, among other changes. The OBBBA has multiple effective dates, with provisions becoming effective in 2025 through 2027. While we expect certain provisions of OBBBA to change the timing of U.S. cash taxes related to the current and future periods, OBBBA did not have a material impact to the Company’s income tax expense.
The Company files income tax returns in the U.S. federal jurisdiction and various U.S. state and foreign jurisdictions. With few exceptions, the Company is no longer subject to examination by U.S., state, or foreign tax authorities for years before 2020.
The amounts of cash income taxes paid by the Company were as follows:
As of
December 28,
2025
Federal$152 
State724 
Foreign:
Australia1,275 
Canada1,478 
Japan2,019 
Mexico3,302 
New Zealand545 
South Korea861 
United Kingdom(3,623)
Other3,082 
Total$9,815 
Income tax payments, net of refunds, were $18.5 million, and $11.1 million in the fiscal years ended December 29, 2024 and December 31, 2023, respectively.
The following table presents a reconciliation of the beginning and ending amounts of unrecognized tax benefits:
As of
December 28,
2025		December 29,
2024
Unrecognized tax benefits at beginning of year
$9,903 $10,536 
Decreases related to positions taken in prior years
(74)(559)
Decreases related to positions taken in prior years due to lapse of statute(226)(74)
Unrecognized tax benefits at end of year
$9,603 $9,903 
Approximately all of the aggregate $9.6 million and $9.9 million of unrecognized income tax benefits as of December 28, 2025 and December 29, 2024, respectively, would, if recognized, impact the annual effective tax rate. The Company does not believe that changes in its uncertain tax benefits will result in a material impact during the next 12 months.
The Company’s policy is to recognize interest and penalties related to income tax issues as components of income tax expense. The Company’s Consolidated Balance Sheets reflect approximately $1.6 million of accrued interest and penalties as of both December 28, 2025 and December 29, 2024. Interest and penalties were not material during the years presented in the Company’s Consolidated Statements of Operations.