Note 11.

Long-Lived Assets and Trademarks

 

Long-Lived Assets. We review our long-lived assets including land, property, equipment, and lease right-of-use assets for impairment when there are factors that indicate that the carrying amount of an asset may not be recoverable. We assess recovery of assets at the individual restaurant level and typically include an analysis of historical cash flows, future operating plans, and cash flow projections in assessing whether there are indicators of impairment. The recoverability of assets to be held and used is measured by comparing the net book value of the assets of an individual restaurant to the fair value of those assets. This impairment process involves significant judgment in the use of estimates and assumptions pertaining to future projections and operating results.

 

There were impairments of long-lived assets of $245,000 in the three fiscal quarters ended June 30, 2026, primarily related to one Good Times restaurant which closed during the period. There were impairments of $494,000 in the three fiscal quarters ended July 1, 2025 related primarily to lease right-of-use assets for restaurants generating insufficient income to contribute to rent, and which the Company believes are probable to close at the end of the current lease term; and new assets deployed in restaurants where impairment was previously assessed, and the Company’s current analysis indicated impairment of assets associated with those restaurants.

 

During the quarter ended June 30, 2026 one of the Company’s locations was destroyed in a casualty event and the Company has exercised its right of termination under the terms of that lease. The Company recorded a net gain of $176,000 related to this casualty loss, which is due primarily to the elimination of the lease liability related to this site, as impairment of assets specific to this location had previously been recorded. The Company expects some recovery under its property and casualty insurance coverage, however the net recovery amount cannot yet be reasonably estimated and no amounts related to possible net proceeds from insurance have been recorded.

 

Trademarks. Trademarks have been determined to have an indefinite life. We evaluate our trademarks for impairment annually and on an interim basis as events and circumstances warrant by comparing the fair value of the trademarks with their carrying amount. There was no impairment required for the acquired trademarks as of June 30, 2026 and July 1, 2025.

 

Goodwill. Goodwill represents the excess of cost over fair value of the assets of businesses the Company acquired. Goodwill is not amortized, but rather, the Company is required to test goodwill for impairment on an annual basis or whenever indications of impairment arise. The Company considers its operations to be comprised of two reporting units: (1) Good Times and (2) Bad Daddy’s. As of June 30, 2026 and July 1, 2025, the Company had $96,000 of goodwill attributable to the Good Times reporting unit and $5,617,000 of goodwill attributable to its Bad Daddy’s reporting unit.