The Company accounts for assets held for sale in accordance with ASC 360 at the lower of carrying value or fair value less costs to sell. The reclassification occurs when the assets are available for immediate sale and the sale is probable. These conditions are usually met from the date on which a letter of intent or agreement to sell is ready for signing. Assets and liabilities of a component classified as held for sale are presented separately in the condensed consolidated balance sheets as “Assets held for sale” and “Lease liabilities held for sale.”

On March 24, 2026, the Company entered into a partnership agreement with Chubby Cattle, Inc. (“Chubby Cattle”), related to five of its existing restaurants. Pursuant to the partnership agreement, the Company contributes substantially all of the assets of each restaurant to a newly formed entity in exchange for a 49% ownership interest in that entity, with Chubby Cattle holding the remaining 51% interest and serving as manager of each entity. Upon signing, the Company classified the related assets and lease liabilities of the five restaurants as held for sale, measured at the lower of their carrying value or fair value less costs to sell.

During the three months ended June 30, 2026, the Company completed the transfer of four of the five restaurants: Jacksonville, Florida and San Antonio, Texas on April 30, 2026, and Mountain View, California, and Edison, New Jersey on May 31, 2026. At each transfer date, the Company deconsolidated the restaurant and derecognized the related assets and liabilities, consisting in the aggregate of assets held for sale of $10.8 million (operating lease assets of $9.2 million and property and equipment of $1.6 million) and lease liabilities held for sale of $11.0 million. The Company’s retained 49% interests were recorded at an initial fair value of zero, consistent with the fair value of the underlying restaurant assets reflected in the Company’s impairment assessment as of December 31, 2025 and are accounted for under the equity method. The Company also committed to fund two months of rent for each restaurant following its transfer, and these amounts, totaling $0.2 million, were charged against the gain on deconsolidation. The resulting net gain of $53 thousand is presented as “Gain on deconsolidation of restaurants” in the condensed consolidated statements of comprehensive loss. Because the carrying amount of the Company’s equity investment is zero and the Company has no obligation to fund losses of the new entities, the Company will not record its share of the entities’ losses, if any, and will resume recognizing its share of earnings only if and when its share of cumulative earnings exceeds its share of cumulative unrecognized losses.

The remaining restaurant, located in Sacramento, California, continues to be classified as held for sale as of June 30, 2026, with assets held for sale of $3.0 million, primarily consisting of operating lease assets and property and equipment, and lease liabilities held for sale of $3.7 million, consisting of operating lease liabilities. The transfer of this restaurant is expected to be completed in the third quarter of 2026.