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What changed in KURA SUSHI USA, INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of KURA SUSHI USA, INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+189 added−179 removedSource: 10-K (2024-11-08) vs 10-K (2023-11-09)

Top changes in KURA SUSHI USA, INC.'s 2024 10-K

189 paragraphs added · 179 removed · 159 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeSite Development and Expansion Site Selection Process We consider site selection and real estate development to be critical to our success. As part of our strategic site selection process, our national broker team receives potential site locations within pre-approved target markets from networks of local brokers, which are then reviewed by our restaurant development and senior management teams.
Biggest changeOur national broker team receives potential site locations within the aforementioned targeted trade area from networks of local brokers, which are then reviewed by our restaurant development and senior management teams. This review includes multiple site visits, key deal terms, analyses of the estimated profitability and cash-on-cash returns of proposed properties.
These requirements may be different or inconsistent with requirements that we are subject to under the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act (collectively, the “ACA”), which establishes a uniform, federal requirement for certain restaurants to post nutritional information on their menus.
These requirements may be different or inconsistent with requirements that we are subject to under the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act (collectively, the “ACA”), which establishes a uniform, federal requirement for 12 certain restaurants to post nutritional information on their menus.
However, we believe such uses will not adversely affect us. 13 Available Information Our website is located at www.kurasushi.com , including an investor relations section at ir.kurausa.com in which we routinely post important information, such as webcasts of quarterly calls and other investor events in which we participate or host, and any related materials.
However, we believe such uses will not adversely affect us. Available Information Our website is located at www.kurasushi.com , including an investor relations section at ir.kurausa.com in which we routinely post important information, such as webcasts of quarterly calls and other investor events in which we participate or host, and any related materials.
Our human capital objectives include attracting, developing, motivating, rewarding, and retaining our existing and new employees. We are committed to providing equal opportunities and seek to ensure there is equity in hiring, development, and advancement. We provide inclusive leadership training for our employees and our interview processes focus on enhancing opportunity and development for candidates.
Our human capital objectives include attracting, developing, motivating, rewarding, and retaining our existing and new employees. 10 We are committed to providing equal opportunities and seek to ensure there is equity in hiring, development, and advancement. We provide inclusive leadership training for our employees and our interview processes focus on enhancing opportunity and development for candidates.
To help ensure that we are paying fairly and equitably, we are committed to conducting both internal reviews and external 10 third-party audits and verification. We have also trained our recruiters to help enable them to identify and address pay equity issues during the hiring process utilizing internal reporting and partnership with the compensation team.
To help ensure that we are paying fairly and equitably, we are committed to conducting both internal reviews and external third-party audits and verification. We have also trained our recruiters to help enable them to identify and address pay equity issues during the hiring process utilizing internal reporting and partnership with the compensation team.
Additionally, difficulties, delays or failure to retain or renew licenses, permits or approvals, or increased compliance costs due to changed regulations, could adversely affect operations at existing restaurants. In addition, to develop and construct restaurants, we must comply with applicable zoning, land use and environmental regulations.
Additionally, difficulties, delays or failure to retain or renew licenses, permits or approvals, or increased compliance costs due to changed regulations, could adversely affect operations at existing restaurants. 11 In addition, to develop and construct restaurants, we must comply with applicable zoning, land use and environmental regulations.
If we could no longer source through any of our suppliers, we would intend to replace the supplier with a different source, but there can be no assurance that any such replacement would provide goods at the prices and level of 9 quality of our current suppliers.
If we could no longer source through any of our suppliers, we would intend to replace the supplier with a different source, but there can be no assurance that any such replacement would provide goods at the prices and level of quality of our current suppliers.
These environmental laws can provide for significant fines and penalties for non-compliance and liabilities for remediation, sometimes without regard to whether the owner or operator of the property knew of, or was responsible for, the release or presence of the 12 hazardous or toxic substances.
These environmental laws can provide for significant fines and penalties for non-compliance and liabilities for remediation, sometimes without regard to whether the owner or operator of the property knew of, or was responsible for, the release or presence of the hazardous or toxic substances.
However, we cannot predict whether steps taken to protect such rights will be adequate or whether Kura Japan will take steps to enforce such rights with regard to any intellectual property that we license from them. See “Item 1A.
However, we cannot predict whether steps taken to protect such rights will be adequate or whether Kura 13 Japan will take steps to enforce such rights with regard to any intellectual property that we license from them. See “Item 1A.
We aim to make quality Japanese cuisine accessible to our guests across the United States through affordable prices and an inviting atmosphere. Kura Sushi is headquartered in Irvine, California and was established in 2008 as a subsidiary of Kura Sushi, Inc. (“Kura Japan”), a Japan-based revolving sushi chain with over 500 restaurants and 40 years of brand history.
We aim to make quality Japanese cuisine accessible to our guests across the United States through affordable prices and an inviting atmosphere. Kura Sushi is headquartered in Irvine, California and was established in 2008 as a subsidiary of Kura Sushi, Inc. (“Kura Japan”), a Japan-based revolving sushi chain with over 550 restaurants and 40 years of brand history.
Our various sushi items are made fresh using high-quality fish and rice. Our vinegar, made using old-world methods, is sourced from Japan. Our broths are made in-house daily using ingredients that impart complex umami flavors. To complement our sushi selection, we offer a variety of side dishes and desserts including gyoza, tempura, soups, ramen, ojyu boxes, mochi, and cheesecake.
Our various sushi items are made fresh using high-quality fish and rice. Our vinegar, made using old-world methods, is sourced from Japan. Our broths are made in-house daily using ingredients that impart complex umami flavors. To complement our sushi selection, we offer a variety of side dishes and desserts including gyoza, tempura, soups, ramen, mochi, and cheesecake.
Our guests can enjoy high-quality dishes at affordable prices because of our efficient kitchen operations and low front-of-house labor needs. The average plate price on the revolving conveyor belt of our restaurants is around $3.55, which appeals to guests with appetites and budgets both large and small.
Our guests can enjoy high-quality dishes at affordable prices because of our efficient kitchen operations and low front-of-house labor needs. The average plate price on the revolving conveyor belt of our restaurants is around $3.65, which appeals to guests with appetites and budgets both large and small.
As we continue to grow, we expect to drive higher profitability at the corporate level by leveraging our existing support infrastructure, as we believe that as our restaurant base grows, our general and administrative costs over several years will increase at a slower rate than our 6 sales.
As we continue to grow, we expect to drive higher profitability at the corporate level by leveraging our existing support infrastructure, as we believe that as our 6 restaurant base grows, our general and administrative costs over several years will increase at a slower rate than our sales. Heighten Brand Awareness .
Fresh RFID or QR Code tags for plates on the revolving conveyor belt, and plate classification and quantities on the revolving conveyor belt. Our systems communicate restaurant-level data to our corporate headquarters to track and manage inventory and labor at the restaurant-level and generate reports for our management team to track performance.
Fresh RFID, QR Code tags, or AI Powered Camera Systems for plates on the revolving conveyor belt, and plate classification and quantities on the revolving conveyor belt. Our systems communicate restaurant-level data to our corporate headquarters to track and manage inventory and labor at the restaurant-level and generate reports for our management team to track performance.
On average, our restaurants opened during fiscal year 2023 required a cash build-out cost of approximately $2.56 million per restaurant, net of landlord tenant improvement allowances; however, this amount could be materially higher or lower depending on the utilization of union labor, geography, restaurant size, and condition of the premises upon landlord delivery.
On average, our restaurants opened during fiscal year 2024 required a cash build-out cost of approximately $2.4 million per restaurant, net of landlord tenant improvement allowances; however, this amount could be materially higher or lower depending on the utilization of union labor, geography, restaurant size, and condition of the premises upon landlord delivery.
Kura Sushi opened its first restaurant in Irvine, California in 2009, and currently operates 54 restaurants across fifteen states and Washington, DC. Kura Japan owns 4,126,500 shares of our Class A common stock and all of our 1,000,050 Class B common stock.
Kura Sushi opened its first restaurant in Irvine, California in 2009, and currently operates 70 restaurants across twenty states and Washington, DC. Kura Japan owns 4,126,500 shares of our Class A common stock and all of our 1,000,050 Class B common stock.
While our ability to adapt to consumer preferences is a strength of our concepts, the effect of such labeling requirements on consumer choices, if any, is unclear at this time.
While our ability to adapt to consumer preferences and spending behavior is a strength of our concepts, the effect of such labeling requirements on consumer choices, if any, is unclear at this time.
In fiscal year 2024, we expect our two major suppliers to be JFC and Mutual Trading Co., Inc. Management Information Systems All of our restaurants use computerized management information systems, which we believe are scalable to support our future growth plans. We use proprietary technology developed by Kura Japan to predict a restaurant’s food consumption.
In fiscal year 2025, we expect our two major suppliers to be JFC and Mutual. Management Information Systems All of our restaurants use computerized management information systems, which we believe are scalable to support our future growth plans. We use proprietary technology developed by Kura Japan to predict a restaurant’s food consumption.
Human Capital Resources As of August 31, 2023, we had approximately 3,219 employees, of whom 161 were exempt employees and the remainder were non-exempt employees. None of our employees are unionized or covered by collective bargaining agreements, and we consider our current employee relations to be good.
Human Capital Resources As of August 31, 2024, we had approximately 3,300 employees, of whom 200 were exempt employees and the remainder were non-exempt employees. None of our employees are unionized or covered by collective bargaining agreements, and we consider our current employee relations to be good.
We believe access to healthcare is a compelling benefit for many employees, and we provide benefits and wellness offerings, including free mental health resources, to support our employees, and their families. The health and safety of our employees is our highest priority.
We believe access to healthcare is a compelling benefit for many employees, and we provide benefits and wellness offerings, including free mental health resources, to support our employees, and their families. The health and safety of our employees is our highest priority. In protecting our employees’ safety, we have invested in creating a safe work environment.
We have an amended and restated exclusive license agreement with regard to the intellectual property we license from Kura Japan and shall remain in effect until mutually agreed upon to terminate by both parties.
We have an amended and restated exclusive license agreement with regard to the intellectual property we license from Kura Japan which shall remain in effect unless and until terminated by mutual agreement of the parties.
Our spend with Wismettac was 20%, 25% and 27% of our total food and beverage cost for fiscal year 2023, 2022 and 2021. Our relationships with both JFC and Wismettac have been in place since 2009. We also source from other distributors. Our suppliers deliver to our restaurants approximately three times per week.
Our purchases from Mutual were 34% of our total food and beverage cost for fiscal year 2024, and were not significant for fiscal years 2023 and 2022. Our relationships with both JFC and Mutual have been in place since 2009. We also source from other distributors. Our suppliers deliver to our restaurants approximately three times per week.
The first of these patents is set to expire in August 2032. In addition, we have registered the Internet domain name www.kurasushi.com. The information on, or that can be accessed through, our website is not part of this report.
No. 5,557,000), and “Mr. Fresh” (Trademark App. Ser. No. 98/042,118). The first of the patents is set to expire in August 2032. In addition, we have registered the Internet domain name www.kurasushi.com, which points to our company website. The information on, or that can be accessed through, our website is not part of this report.
We identify and procure high-quality ingredients at competitive prices. We make a portion of our purchases annually in bulk at fixed prices, and we do not engage in any hedging agreements to manage our exposure to fluctuations in the price of seafood or other food commodities.
We make a portion of our purchases annually in bulk at fixed prices, and we do not engage in any hedging agreements to manage our exposure to fluctuations in the price of seafood or other food commodities. 9 In fiscal year 2024, we sourced through the following two major Japanese-related distributors: JFC International Inc.
We believe this expansion is crucial to executing our growth strategy and building awareness of Kura Sushi as a national Japanese casual dining brand. Expansion into new markets occurs in parallel with ongoing growth in existing markets, with the goal of maintaining a pipeline of top-tier development opportunities.
Expansion Strategy We have a two-pronged expansion strategy by opening new restaurants in both new and existing markets. We believe this expansion is crucial to executing our growth strategy and building awareness of Kura Sushi as a national Japanese casual dining brand.
Alcoholic beverage control regulations require each of our restaurants to apply to a state authority and, in certain locations, county or municipal authorities for a license that must be renewed annually and may be revoked or suspended for cause at any time. 11 Alcoholic beverage control regulations relate to numerous aspects of daily operations of our restaurants, including minimum age of patrons and employees, hours of operation, advertising, trade practices, wholesale purchasing, other relationships with alcohol manufacturers, wholesalers and distributors, inventory control and handling, storage and dispensing of alcoholic beverages.
Alcoholic beverage control regulations relate to numerous aspects of daily operations of our restaurants, including minimum age of patrons and employees, hours of operation, advertising, trade practices, wholesale purchasing, other relationships with alcohol manufacturers, wholesalers and distributors, inventory control and handling, storage and dispensing of alcoholic beverages.
Our flexible physical footprint allows us to open in-line, end-cap, and free-standing restaurant formats at strip malls and shopping centers and penetrate markets in both suburban and urban areas. Expansion Strategy We have a two-pronged expansion strategy by opening new restaurants in both new and existing markets.
In site selection, we also consider attributes such as visibility, traffic patterns, accessibility, parking and competition. Our flexible physical footprint allows us to open in-line, end-cap, and free-standing restaurant formats at strip malls and shopping centers and penetrate markets in both suburban and urban areas.
Kura Japan has registered the following patents and marks with the PTO: Food Management System (Patent No.: US 9,193,535 B2), Food Plate Carrier (Patent No.: US 8,550,229 B2) which is known to us as “Mr. Fresh,” “Kura Sushi” (Trademark Reg. No 5,460,596) and “Kura Revolving Sushi Bar” (Trademark Reg. No. 5,557,000).
Risk Factors.” Intellectual Property and Trademarks Kura Japan owns several patents, trademarks and service marks registered or pending with the U.S. Patent and Trademark Office (“PTO”), including, but not limited to Food Management System (Patent No.: US 9,193,535 B2), Food Plate Carrier (Patent No.: US 8,550,229 B2), “Kura Sushi” (Trademark Reg. No 5,460,596) and “Kura Revolving Sushi Bar” (Trademark Reg.
We frequently reevaluate our market area development plan (targeted areas and pacing for development) and our site selection strategy within those targeted areas. Restaurant Design Our in-house development team handles restaurant design in conjunction with outsourced vendor relationships. Our restaurant size currently averages approximately 3,400 square feet.
When selecting sites, we look to replicate the site attributes, trade area quality, and co-tenant mix of our most successful restaurants. We frequently reevaluate our market area development plan (targeted areas and pacing for development) and our site selection strategy within those targeted areas. Restaurant Design Our in-house development team handles restaurant design in conjunction with outsourced vendor relationships.
Upon selecting a new market, we typically build one to two restaurants to prove concept viability in that market. We have a remote management system whereby our operations team can monitor restaurants in real-time from our headquarters to maintain operational quality in new markets.
We have a remote management system whereby our operations team can monitor restaurants in real-time from our headquarters to maintain operational quality in new markets. Due to our relatively small restaurant count, new restaurants have an outsized impact on our financial performance.
Additionally, we believe we will be able to optimize labor costs at existing restaurants as our restaurant base matures and AUVs increase. Heighten Brand Awareness . We intend to continue to pursue targeted local marketing efforts and plan to increase our investment in advertising. We intend to continue to promote limited time offerings to build guest loyalty and brand awareness.
We intend to continue to pursue targeted local marketing efforts and plan to increase our investment in advertising. We intend to continue to promote limited time offerings to build guest loyalty and brand awareness. Site Development and Expansion Site Selection Process We consider site selection and real estate development to be critical to our success.
In fiscal year 2023, we sourced through the following two major Japanese-related distributors: JFC International Inc. (“JFC”), a subsidiary of Kikkoman Corporation, and Wismettac Asian Foods, Inc. (“Wismettac”). Our spend with JFC accounted for 49%, 52%, and 58% of total food and beverage costs for fiscal years 2023, 2022, and 2021, respectively.
(“JFC”), a subsidiary of Kikkoman Corporation, and Mutual Trading Co., Inc. (“Mutual”). Our spend with JFC accounted for 55%, 49%, and 52% of total food and beverage costs for fiscal years 2024, 2023, and 2022, respectively.
In protecting our employees’ safety, we have invested in creating a safe work environment for our employees by taking additional measures. For our office employees, we have added work from home flexibility. For our restaurant employees, we have increased cleaning protocols, implemented temperature screenings and provided additional personal protective equipment and cleaning supplies.
For our office employees, we have work from home flexibility. For our restaurant employees, we continue to maintain our increased cleaning protocols and provided additional personal protective equipment.
Seating in our restaurants is comprised of a combination of booths and counter seats, with an average seating capacity of approximately 110 guests. Our restaurant layout evokes a Japanese dining experience characterized by wooden booths and wood paneling to house the revolving conveyor belt and the Bikkura-Pon rewards machines. 7 Construction of a new restaurant takes approximately five months.
Our restaurant layout blends a traditional Japanese dining experience characterized by wood designs throughout the dining room mixed with the brand’s modern technology utilizing the revolving conveyor belt, the express belt, the robot server, the tablet ordering and the Bikkura-Pon rewards machines. 7 Construction of a new restaurant takes approximately five months.
We also maintain a loyalty program while focusing on member growth and high engagement. This program allows us to build relationships with our guests while increasing brand loyalty. Suppliers We carefully select suppliers based on product quality and authenticity and their understanding of our brand, and we seek to develop long-term relationships with them.
We also maintain a loyalty program while focusing on member growth and high engagement. This program allows us to build relationships with our guests while increasing brand loyalty. In addition to our national marketing initiatives, we implement regional and local store marketing efforts tailored to the specific demographics and preferences of each community we serve.
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This review includes multiple site visits, key deal terms, analyses of the estimated profitability and cash-on-cash returns of proposed properties. Our current real estate strategy focuses on high-traffic retail centers in markets with a highly educated and diverse population with above-average household incomes. In site selection, we also consider factors such as visibility, traffic patterns, accessibility, parking and competition.
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We invest in a 3 rd party data analytics tool that directs us to trade areas and sites that will give us the best chance at success, and more importantly, will identify potential demographic characteristics that could result in underperformance. With this data and local market knowledge, we identify pre- approved targeted trade areas.
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We also utilize site analytics tools for demographic analysis and data collection for both existing and new market areas, which we believe allows us to further understand the market area and set clear market development strategies.
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Further analysis is done to assess the proposed property’s sales and profit impact on nearby Kura restaurants to ensure that the site is accretive to the overall market return even when considering impact on the existing portfolio. Our current real estate strategy focuses on high-traffic retail centers in markets with a highly educated and diverse population with above-average household incomes.
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Due to our relatively small restaurant count, new restaurants have an outsized impact on our financial performance. When selecting sites, we look to replicate the site attributes, trade area quality, and co-tenant mix of our most successful restaurants.
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Expansion into new markets occurs in parallel with ongoing growth in existing markets, with the goal of maintaining a pipeline of top-tier development opportunities. Upon selecting a new market, we typically build one to two restaurants to prove concept viability in that market.
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Risk Factors.” Intellectual Property and Trademarks Kura Japan owns several patents, trademarks and service marks registered or pending with the U.S. Patent and Trademark Office (“PTO”).
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Our restaurant size currently averages approximately 3,400 square feet. Seating in our restaurants is comprised of a combination of booths and counter seats, with an average seating capacity of approximately 110 guests.
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These localized campaigns help us better connect with our guests on a more personal level and drive traffic to individual locations. Furthermore, we are committed to utilizing meaningful cause marketing strategies where possible.
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By partnering with local charities and community organizations, we aim to give back to the communities that support us, enhance our brand reputation, and foster a sense of goodwill among our guests. Suppliers We carefully select suppliers based on product quality and authenticity and their understanding of our brand, and we seek to develop long-term relationships with them.
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We identify and procure high-quality ingredients at competitive prices.
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Alcoholic beverage control regulations require each of our restaurants to apply to a state authority and, in certain locations, county or municipal authorities for a license that must be renewed annually and may be revoked or suspended for cause at any time.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe strength of our revenues and results of operations are dependent upon, among other things, the price and availability of food, ingredients, labor, construction and utilities. In fiscal year 2021, 2022 and 2023, the costs of commodities, labor, energy and other inputs necessary to operate our restaurants significantly increased.
Biggest changeIn fiscal year 2024, 2023 and 2022, the costs of commodities, labor, energy and other inputs necessary to operate our restaurants significantly increased. Fluctuations in economic conditions, weather, demand and other factors also affect the cost of the ingredients and products that we buy.
The number and timing of new restaurants opened during any given period may be negatively impacted by a number of factors including, without limitation: • identification and availability of locations with the appropriate size, traffic patterns, local retail and business attractions and infrastructure that will drive high levels of guest traffic and sales per unit; • competition in existing and new markets, including competition for restaurant sites; • the ability to negotiate suitable lease terms; • the lack of development and overall decrease in commercial real estate due to a macroeconomic downturn; • recruitment and training of qualified personnel in the local market; • our ability to obtain all required governmental permits, including zoning approvals, on a timely basis; • our ability to control construction and development costs of new restaurants; • landlord delays; • the proximity of potential sites to an existing restaurant, and the impact of cannibalization on future growth; 17 • anticipated commercial, residential and infrastructure development near our new restaurants; and • the cost and availability of capital to fund construction costs and pre-opening costs.
The number and timing of new restaurants opened during any given period may be negatively impacted by a number of factors including, without limitation: • identification and availability of locations with the appropriate size, traffic patterns, local retail and business attractions and infrastructure that will drive high levels of guest traffic and sales per unit; • competition in existing and new markets, including competition for restaurant sites; • the ability to negotiate suitable lease terms; • the lack of development and overall decrease in commercial real estate due to a macroeconomic downturn; • recruitment and training of qualified personnel in the local market; • our ability to obtain all required governmental permits, including zoning approvals, on a timely basis; • our ability to control construction and development costs of new restaurants; • landlord delays; • the proximity of potential sites to an existing restaurant, and the impact of cannibalization on future growth; • anticipated commercial, residential and infrastructure development near our new restaurants; and • the cost and availability of capital to fund construction costs and pre-opening costs.
Those fluctuations could be based on various factors in addition to those otherwise described in this report, including those described under “—Risks Related to Our Business and Industry” and the following: our operating performance and the performance of our competitors or restaurant companies in general; the public’s reaction to our press releases, our other public announcements and our filings with the SEC; changes in earnings estimates or recommendations by research analysts who follow us or other companies in our industry; global, national or local economic, legal and regulatory factors unrelated to our performance; future sales 30 of our common stock or our equity interests by our officers, directors and significant stockholders; the arrival or departure of key personnel; and other developments affecting us, our industry or our competitors.
Those fluctuations could be based on various factors in addition to those otherwise described in this report, including those described under “—Risks Related to Our Business and Industry” and the following: our operating performance and the performance of our competitors or restaurant companies in general; the public’s reaction to our press releases, our other public announcements and our filings with the SEC; changes in earnings estimates or recommendations by research analysts who follow us or other companies in our industry; global, national or local economic, legal and regulatory factors unrelated to our performance; future sales of our common stock or our equity interests by our officers, directors and significant stockholders; the arrival or departure of key personnel; and other developments affecting us, our industry or our competitors.
We are also subject to a variety of other claims arising in the ordinary course of our business, including personal injury claims, contract claims and claims alleging violations of federal and state law regarding workplace and employment matters, equal opportunity, discrimination and similar matters, and we are presently subject to class action and other lawsuits with regard to certain of these matters and could become subject to additional class action or other lawsuits related to these or different matters in the future.
We are also subject to a variety of other claims arising in the ordinary course of our business, including personal injury claims, contract claims and claims alleging violations of federal and state law regarding workplace and employment matters, equal opportunity, discrimination and similar matters, and we are presently subject to class action and other lawsuits with regard to certain of these matters and could become subject to additional class action or other lawsuits related to 28 these or different matters in the future.
We also rely on our leadership team in setting our strategic direction, operating our business, identifying, recruiting and training key personnel, identifying expansion opportunities, arranging necessary financing, and for general and administrative functions. From time to time, there may be changes in our executive management team resulting from the hiring or departure of executives, which could disrupt our business.
We also rely on our leadership team in setting our strategic direction, operating our business, identifying, recruiting and training key personnel, identifying expansion opportunities, arranging necessary financing, and for general and administrative functions. From time to time, there may be changes in our executive management team resulting from the hiring or 26 departure of executives, which could disrupt our business.
Our quarterly operating results may fluctuate significantly because of several factors, including: recent and ongoing inflationary trends impacting our cost of food, labor and other costs: the timing of new restaurant openings and related expense; restaurant operating costs for our newly-opened restaurants, which are often materially greater during the first several months of operation than thereafter; labor availability and costs for hourly and management personnel; profitability of our restaurants, especially in new markets; changes in interest rates; increases and decreases in AUVs and comparable restaurant sales; impairment of long-lived assets and any loss on restaurant closures; macroeconomic conditions, both nationally and locally; negative publicity relating to the consumption of seafood or other food products we serve; changes in consumer preferences and competitive conditions; expansion in existing and new markets; increases in infrastructure costs; and fluctuations in commodity prices.
Our quarterly operating results may fluctuate significantly because of several factors, including: recent and ongoing inflationary trends impacting our cost of food, labor and other costs: the timing of new restaurant openings and related expense; restaurant operating costs for our newly-opened restaurants, which are often materially greater during the first several months of operation than thereafter; labor availability and costs for hourly and management personnel; profitability of our restaurants, especially in new markets; changes in interest rates; increases and decreases in AUVs and comparable restaurant sales; impairment of long-lived assets and any loss on restaurant closures; macroeconomic conditions, both nationally and locally; negative publicity relating to the consumption of seafood or other food products we serve; changes in consumer preferences, spending behavior and competitive conditions; expansion in existing and new markets; increases in infrastructure costs; and fluctuations in commodity prices.
Alternatively, if a court were to find the exclusive forum provisions to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
Alternatively, if a court were to find the exclusive forum provisions to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could have a material adverse effect on our business, financial condition, 32 results of operations and growth prospects.
It is possible such initiatives will not be successful, that we will not achieve our target comparable restaurant sales growth or that the change in comparable restaurant sales could be negative, which may cause a decrease in our profitability and would 18 materially adversely affect our business, financial condition or results of operations. See “Item 7.
It is possible such initiatives will not be successful, that we will not achieve our target comparable restaurant sales growth or that the change in comparable restaurant sales could be negative, which may cause a decrease in our profitability and would materially adversely affect our business, financial condition or results of operations. See “Item 7.
Accordingly, results for any one quarter are not necessarily indicative of results to be expected for any other quarter or for any year and comparable restaurant sales for any particular future period may decrease. In addition, as we expand by opening more restaurants in cold weather climates, the seasonality of our business may be amplified.
Accordingly, results for any one quarter are not necessarily indicative of results to be expected for any other quarter or for any year and comparable restaurant sales for any particular future period may decrease. In addition, as we expand by opening more restaurants in cold weather climates, the seasonality of our business may be 30 amplified.
In addition, our success depends in part upon our ability to attract, motivate and retain a sufficient number of well-qualified restaurant operators and management personnel, as well as a sufficient number of other qualified employees, to keep pace with our expansion schedule. Qualified individuals needed to fill these 26 positions are in short supply in some geographic areas.
In addition, our success depends in part upon our ability to attract, motivate and retain a sufficient number of well-qualified restaurant operators and management personnel, as well as a sufficient number of other qualified employees, to keep pace with our expansion schedule. Qualified individuals needed to fill these positions are in short supply in some geographic areas.
The majority of our operating leases have lease terms of twenty years, inclusive of customary extensions which are at the option of the Company. Most of our leases require a fixed annual rent which generally increases each year, and some require 25 the payment of additional rent if restaurant sales exceed a negotiated amount.
The majority of our operating leases have lease terms of twenty years, inclusive of customary extensions which are at the option of the Company. Most of our leases require a fixed annual rent which generally increases each year, and some require the payment of additional rent if restaurant sales exceed a negotiated amount.
As an employer, we are presently, and may in the future be, subject to various employment-related claims, such as individual or class actions or government enforcement actions relating to alleged employment discrimination, employee classification and related withholding, wage-hour, labor standards or healthcare and benefit issues.
As an employer, we are presently, and may in the future be, subject to various employment-related claims, such as individual or class actions or government enforcement actions relating to alleged employment discrimination, employee classification and related withholding, wage-hour, labor standards or healthcare and 27 benefit issues.
A judgment in such an action significantly in excess of, or not covered by, our insurance coverage could adversely affect our business, financial condition or results of operations. Further, adverse publicity resulting from any such allegations may adversely affect our business, financial condition or results of operations. 28 Our current insurance may not provide adequate levels of coverage against claims.
A judgment in such an action significantly in excess of, or not covered by, our insurance coverage could adversely affect our business, financial condition or results of operations. Further, adverse publicity resulting from any such allegations may adversely affect our business, financial condition or results of operations. Our current insurance may not provide adequate levels of coverage against claims.
Shortages or interruptions in the availability of certain supplies caused by unanticipated demand, problems in production or distribution, food contamination, inclement weather, natural disasters, or other conditions could adversely affect the availability, quality and cost of our ingredients, which could harm our operations.
Shortages or interruptions in the availability of certain supplies caused by unanticipated demand, problems in production or distribution, food contamination, inclement weather, natural disasters, or other conditions could adversely affect the productivity, availability, quality and cost of our ingredients, which could harm our operations.
Our restaurants are concentrated in California and Texas and in retail centers and shopping malls and could be negatively affected by conditions specific to these states and locations. • Reliance on Kura Japan . We rely on our majority stockholder, Kura Japan, in strategic, operational and financial respects.
Our restaurants are concentrated in California and Texas and in retail centers and shopping malls and could be negatively affected by conditions specific to these states and locations. • Reliance on Kura Japan . We rely on our majority stockholder, Kura Japan, in strategic and operational respects.
If menu prices are increased by us to cover increased labor costs, the higher prices could adversely affect sales and thereby reduce our margins and adversely affect our business, financial condition or results of operations. 27 Changes in employment laws may adversely affect our business, financial condition, or results of operations.
If menu prices are increased by us to cover increased labor costs, the higher prices could adversely affect sales and thereby reduce our margins and adversely affect our business, financial condition or results of operations. Changes in employment laws may adversely affect our business, financial condition, or results of operations.
If we face labor shortages, increased labor costs or unionization activities, our growth, business, financial condition and operating results could be adversely affected. Labor is a primary component in the cost of operating our restaurants.
As we face labor shortages and increased labor costs, or if we face unionization activities, our growth, business, financial condition and operating results could be adversely affected. Labor is a primary component in the cost of operating our restaurants.
Our growth strategy, and the substantial investment associated with the development of each new restaurant, may cause our operating results to fluctuate and be unpredictable or adversely affect our business, financial condition or results of operations.
Our growth strategy, and the substantial investment associated with the development of each new restaurant, may cause our operating results to fluctuate and be unpredictable or adversely affect our business, financial condition or results 17 of operations.
If one or more of the analysts who cover us downgrades our common stock or publishes inaccurate or unfavorable research about our business, our stock price would likely decline.
If one or more of the analysts who cover us downgrades our 31 common stock or publishes inaccurate or unfavorable research about our business, our stock price would likely decline.
Failures of these systems to operate effectively, maintenance problems, upgrading or transitioning to new platforms, or a breach in security of these systems as a result of a cyber-attack, phishing attack, ransomware attack or any other failure to maintain a continuous and secure cyber network could result in substantial harm or inconvenience to our Company, our team members or guests.
Failures of these systems to operate effectively, maintenance problems, upgrading or transitioning to new platforms, or a breach in security of these systems as a result of a cybersecurity incident, phishing attack, ransomware attack or any other failure to maintain a continuous and secure cyber network could result in substantial harm or inconvenience to our Company, our team members or guests.
We rely significantly on information and cybersecurity systems, many of which are controlled by third-party providers, including point-of-sale processing in our restaurants for management of our supply chain, payment of obligations, collection of cash, credit and debit card transactions and other processes and procedures.
We rely significantly on information and cybersecurity systems, many of which are controlled by third-party providers, including point-of-sale processing in our restaurants for management of our supply chain, payment of obligations, collection of cash, credit and debit card transactions, third-party delivery services and other processes and procedures.
The level of comparable restaurant sales growth, which represents the change in year-over-year sales for restaurants open for at least 18 months, could affect our sales growth. Our ability to increase comparable restaurant sales depends in part on our ability to successfully implement our initiatives to build sales.
The level of comparable restaurant sales growth, which represents the change in year-over-year sales for restaurants open for at least 18 full calendar months, could affect our sales growth. Our ability to increase comparable restaurant sales depends in part on our ability to successfully implement our initiatives to build sales.
As ours is a consumer-based business, certain changes in macroeconomic and societal conditions including an economic slowdown, changing consumer preferences, food safety and foodborne illness concerns as well as outbreaks of flu, viruses or other diseases transmitted by human contact could adversely affect our business, financial position and results of operations. • Use of Technologies .
As ours is a consumer-based business, certain changes in macroeconomic and societal conditions including an economic slowdown, changing consumer preferences and spending behavior, food safety and foodborne illness concerns as well as outbreaks of flu, viruses or other diseases transmitted by human contact could adversely affect our business, financial position and results of operations. • Cybersecurity and Use of Technologies .
As of August 31, 2023 and 2022, we had no outstanding balance and $45.0 million available under our Credit Facility, respectively. In the future, we may, from time to time, incur additional indebtedness under our Credit Facility.
As of August 31, 2024 and 2023, we had no outstanding balance and $45.0 million available under our Credit Facility, respectively. In the future, we may, from time to time, incur additional indebtedness under our Credit Facility.
See “Note 11 — Commitments and Contingencies” to the financial statements included in this Annual Report on Form 10-K. Any future actions, if brought against us and successful in whole or in part, may affect our ability to compete or could materially adversely affect our business, financial condition or results of operations.
See “Note 11 — Commitments and Contingencies” to the financial statements included in this Annual Report on Form 10-K. If any current or future actions brought against us, are successful in whole or in part, such actions may affect our ability to compete or could materially adversely affect our business, financial condition or results of operations.
Such reliance could subject us to risks including difficulty replacing certain services, supplies and financial assistance provided by Kura Japan. • Reliance on Certain Vendors and Suppliers . We rely significantly on certain vendors and suppliers.
Such reliance could subject us to risks including difficulty replacing certain services and supplies provided by Kura Japan. • Reliance on Certain Vendors and Suppliers . We rely significantly on certain vendors and suppliers.
In recent years, there has been a marked increase in the use of social media platforms, including weblogs (blogs), mini-blogs, chat platforms, social media websites, and other forms of Internet-based communications which allow individuals access to a broad audience of consumers and other interested persons.
In recent years, there has been a marked increase in the use of social media platforms, including weblogs (blogs), social media platforms, and other forms of Internet-based communications which allow individuals access to a broad audience of consumers and other interested persons.
Our new restaurants have historically opened with above-average volumes, which then decline after the initial sales surge that comes with interest in a new restaurant opening. New restaurants may not be profitable and their sales performance may not follow historical patterns as expected, which could adversely affect our business, financial condition or results of operations.
Our new restaurants have historically opened with higher sales, which then decline after the initial sales surge that comes with interest in a new restaurant opening. New restaurants may not be profitable and their sales performance may not follow historical patterns as expected, which could adversely affect our business, financial condition or results of operations.
Our inability or failure to recognize, respond to and effectively manage the accelerated impact of social media could materially adversely impact our business, financial condition or results of operations. Our marketing efforts rely heavily on the use of social media.
Our inability or failure to recognize, respond to and effectively manage the accelerated impact of social media and other digital platforms could materially adversely impact our business, financial condition or results of operations. Our marketing efforts rely heavily on the use of social media.
If we fail to conduct successful marketing programs and effectively manage our public image, our business will suffer. • Lease Management . We are subject to all of the risks associated with leasing space subject to long-term non-cancelable leases. • Capital Needs .
Our business depends on customer goodwill. If we fail to conduct successful marketing programs and effectively manage our public image, our business will suffer. • Lease Management . We are subject to all of the risks associated with leasing space subject to long-term non-cancelable leases. • Capital Needs .
On average, our restaurants opened during fiscal year 2023 required a cash build-out cost of approximately $2.56 million per restaurant, net of landlord tenant improvement allowances and assuming that we do not purchase the underlying real estate.
On average, our restaurants opened during fiscal year 2024 required a cash build-out cost of approximately $2.4 million per restaurant, net of landlord tenant improvement allowances and assuming that we do not purchase the underlying real estate.
Our restaurant base is geographically concentrated in California and Texas, and we could be negatively affected by conditions specific to these states. Approximately 54% of our restaurants are located in California and Texas.
Our restaurant base is geographically concentrated in California and Texas, and we could be negatively affected by conditions specific to these states. 47% of our restaurants are located in California and Texas.
Although we try to manage the impact that these fluctuations have on our operating results, we remain susceptible to increases in food costs and loss of supply as a 21 result of factors beyond our control, such as general economic conditions, inflationary pressures, seasonal fluctuations, weather conditions, demand, food safety concerns, generalized infectious diseases, product recalls and government regulations.
Although we try to manage the impact that these fluctuations have on our operating results, we remain susceptible to increases in food costs and loss of 21 supply as a result of factors beyond our control, such as general economic conditions, political instability, inflationary pressures, seasonal fluctuations, the effects of climate change and related weather conditions, demand, food safety concerns, generalized infectious diseases, product recalls and government regulations.
Any such infringement of our intellectual property rights would also likely result in a commitment of our time and resources to protect these rights through litigation or otherwise. Our business prospects depend in part on our ability to develop favorable consumer recognition of the Kura Sushi name.
Any such infringement of our intellectual property rights would also likely result in a commitment of our time and resources to protect these rights through litigation or otherwise. Our business prospects depend in part on our ability to develop favorable consumer recognition of the Kura Sushi name. Although “Kura Sushi”, “Kura Revolving Sushi Bar” and “Mr.
This would include sales by Kura Japan, as detailed below under “—Risks Related to Our Organizational Structure—Future sales of our shares by Kura Japan could depress our Class A common stock price.” Our amended and restated certificate of incorporation authorize us to issue up to 50,000,000 shares of Class A common stock and 10,000,100 shares of Class B common stock, of which, as of August 31, 2023, 10,147,126 shares of Class A common stock and 1,000,050 shares of Class B common stock are outstanding, and 653,395 shares of Class A common stock will be issuable upon the exercise of outstanding stock options.
This would include sales by Kura Japan, as detailed below under “—Risks Related to Our Organizational Structure—Future sales of our shares by Kura Japan could depress our Class A common stock price.” Our amended and restated certificate of incorporation authorize us to issue up to 50,000,000 shares of Class A common stock and 10,000,100 shares of Class B common stock, of which, as of August 31, 2024, 10,252,907 shares of Class A common stock and 1,000,050 shares of Class B common stock are outstanding, and 610,514 shares of Class A common stock will be issuable upon the exercise of outstanding stock options.
JFC provided us with food products and supplies equaling 49% and 52%, and 58% of our total food and beverage costs in fiscal years 2023, 2022, and 2021 respectively.
JFC provided us with food products and supplies equaling 55% and 49%, and 52% of our total food and beverage costs in fiscal years 2024, 2023, and 2022 respectively.
Although “Kura Sushi” and “Kura Revolving Sushi Bar” are federally registered service marks owned by Kura Japan, such marks could be imitated in ways that we or Kura Japan cannot prevent. Alternatively, third parties may attempt to cause us to change our name or not operate in a certain geographic region if our name is confusingly similar to their name.
Fresh” are federally registered service marks owned by Kura Japan, such marks could be imitated in ways that we or Kura Japan cannot prevent. Alternatively, third parties may attempt to cause us to change our name or not operate in a certain geographic region if our name is confusingly similar to their name.
Risks Related to Our Operations and Growth Strategy We have experienced and continue to experience inflationary conditions with respect to the cost for food, ingredients, labor, construction and utilities, and we may not be able to increase prices or implement operational improvements sufficient to fully offset inflationary pressures on such costs, which may adversely impact our revenues and results of operations.
Risks Related to Our Operations and Growth Strategy We have experienced and continue to experience inflationary conditions with respect to the cost for food, ingredients, labor, construction and utilities, and we may not be able to increase prices or implement operational improvements sufficient to fully offset inflationary pressures on such costs, which may adversely impact our revenues and results of operations. 16 The strength of our revenues and results of operations are dependent upon, among other things, the price and availability of food, ingredients, labor, construction and utilities.
In addition, we may identify material weaknesses in our internal control over financial reporting that we may not be able to remediate in time to meet the applicable deadline imposed upon us for compliance with the requirements of Section 404. 29 If we identify weaknesses in our internal control over financial reporting, are unable to comply with the requirements of Section 404 in a timely manner or to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected, and we could become subject to investigations by the SEC or other regulatory authorities, which could require additional financial and management resources.
If we identify weaknesses in our internal control over financial reporting, are unable to comply with the requirements of Section 404 in a timely manner or to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected, and we could become subject to investigations by the SEC or other regulatory authorities, which could require additional financial and management resources.
Additionally, employee claims against us based on, among other things, wage and hour violations, discrimination, harassment or wrongful termination may also create negative publicity that could adversely affect us and divert our financial and management resources that would otherwise be used to benefit the future performance of our operations.
The damage may be immediate without affording us an opportunity for redress or correction. 25 Additionally, employee claims against us based on, among other things, wage and hour violations, discrimination, harassment or wrongful termination may also create negative publicity that could adversely affect us and divert our financial and management resources that would otherwise be used to benefit the future performance of our operations.
Provisions in our charter documents and Delaware law may delay or prevent our acquisition by a third party. Our amended and restated certificate of incorporation and amended and restated bylaws, and Delaware law, contain several provisions that may make it more difficult for a third party to acquire control of us without the approval of our board of directors.
Our amended and restated certificate of incorporation and amended and restated bylaws, and Delaware law, contain several provisions that may make it more difficult for a third party to acquire control of us without the approval of our board of directors.
Any such failures or disruptions may cause delays in customer service and reduce efficiency in our operations. Remediation of such problems could result in significant, unplanned capital investments. We could also be subjected to litigation, regulatory investigations or the imposition of penalties.
The rapid evolution and increased adoption of artificial intelligence technologies also may intensify our cybersecurity risks. Any such failures or disruptions may cause delays in customer service and reduce efficiency in our operations. Remediation of such problems could result in significant, unplanned capital investments. We could also be subjected to litigation, regulatory investigations or the imposition of penalties.
Information posted on such platforms may be adverse to our interests and/or may be inaccurate. The dissemination of inaccurate or irresponsible information online could harm our business, reputation, prospects, financial condition, or results of operations, regardless of the information’s accuracy. The damage may be immediate without affording us an opportunity for redress or correction.
Information posted on such platforms may be adverse to our interests and/or may be inaccurate. The dissemination of inaccurate or irresponsible information online could harm our business, reputation, prospects, financial condition, or results of operations, regardless of the information’s accuracy.
We also rely on Wismettac which provided us with food products and supplies equaling 20%, 25% and 27% of our total food and beverage costs in fiscal year 2023, 2022 and 2021, respectively. In fiscal year 2024, we expect our two major suppliers to be JFC and Mutual Trading Co., Inc.
We also rely on Mutual which provided us with food products and supplies equaling 34% of our total food and beverage costs in fiscal year 2024, and was not significant in 2023 and 2022. In fiscal year 2025, we expect our two major suppliers to be JFC and Mutual.
As of August 31, 2023, we had federal net operating loss carryforwards of approximately $31.0 million and federal tax credit carryover of approximately $6.1 million. We recorded a full valuation allowance against these current net operating loss carryforwards as there can be no assurance that the benefit of such net operating loss carryforwards will be fully utilized.
As of August 31, 2024, we had federal net operating loss carryforwards of approximately $32.9 million and federal tax credit carryover of approximately $8.0 million. We recorded a full valuation allowance against these current net operating loss carryforwards as the benefit of such net operating loss carryforwards may not be fully utilized.
Any one or more of these could have a material adverse impact on our business, prospects, financial condition, results of operations, or cash flows, in addition to presenting other possible adverse consequences, many of which are described below. 16 These risk factors and other risks we may face are also discussed further in other sections of this Annual Report on Form 10-K.
Any one or more of these could have a material adverse impact on our business, prospects, financial condition, results of operations, or cash flows, in addition to presenting other possible adverse consequences, many of which are described below.
Managing our growth effectively will require us to continue to enhance these systems, procedures and controls and to hire, train and retain managers and team members. We may not respond quickly enough to the changing demands that our expansion will impose on our management, restaurant teams and existing infrastructure, which could harm our business, financial condition or results of operations.
We may not respond quickly enough to the changing demands that our expansion will impose on our management, restaurant teams and existing infrastructure, which could harm our business, financial condition or results of operations.
Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the Nasdaq Stock Market.
Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the Nasdaq Stock Market. We currently have a board composed of a majority of independent directors and our Compensation Committee is composed entirely of independent directors.
Governmental regulation may adversely affect our ability to open new restaurants or otherwise adversely affect our business, financial condition or results of operations. We are subject to various federal, state and local regulations. Our restaurants are subject to state and local licensing and regulation by health, alcoholic beverage, sanitation, food and occupational safety and other agencies.
We are subject to various federal, state and local regulations. Our restaurants are subject to state and local licensing and regulation by health, alcoholic beverage, sanitation, food and occupational safety and other agencies.
For example, the Court of Chancery of the State of Delaware recently determined that a provision stating that U.S. federal district courts are the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act is not enforceable. 32 Risks Related to Our Organizational Structure We are controlled by Kura Japan, whose interests may differ from those of our other stockholders.
For example, the Court of Chancery of the State of Delaware has previously determined that a provision stating that U.S. federal district courts are the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act is not enforceable.
Our charter documents contain certain provisions which make it more difficult for a third party to acquire control of us without Board approval and for a stockholder to bring claims in a judicial forum that it finds favorable for disputes with us. • Our Status Being an “Emerging Growth Company .” We are an “emerging growth company,” and we cannot be certain if the reduced reporting and disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.
Our charter documents contain certain provisions which make it more difficult for a third party to acquire control of us without Board approval and for a stockholder to bring claims in a judicial forum that it finds favorable for disputes with us.
Failure to establish and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and stock price.
In addition, our effective income tax rate and our results may be impacted by our ability to realize deferred tax benefits and any increases or decreases of our valuation allowance applied to our deferred tax assets. 29 Failure to establish and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and stock price.
Our ability to pay dividends may also be limited by covenants under our Credit Facility, terms loans or of any future outstanding indebtedness we, our subsidiaries or affiliates (including Kura Japan) incur. 31 As a result, you may not receive any return on an investment in our common stock unless you sell our common stock for a price greater than that which you paid for it.
Our ability to pay dividends may also be limited by covenants under our Credit Facility, terms loans or of any future outstanding indebtedness we, our subsidiaries or affiliates (including Kura Japan) incur.
We currently have a board composed of a majority of independent directors and our Compensation Committee is composed entirely of independent directors, but we do not have a Nominating and Corporate Governance Committee. The interests of Kura Japan may conflict with ours or yours in the future. Various conflicts of interest between Kura Japan and us could arise.
The interests of Kura Japan may conflict with ours or yours in the future. Various conflicts of interest between Kura Japan and us could arise.
Fluctuations in economic conditions, weather, demand and other factors also affect the cost of the ingredients and products that we buy. Our inability to anticipate and respond effectively to one or more adverse changes in any of these factors could have a significant adverse effect on our results of operations.
Our inability to anticipate and respond effectively to one or more adverse changes in any of these factors could have a significant adverse effect on our results of operations. Our attempts to offset cost pressures, such as through menu price increases and operational improvements, may not be successful.
We use revolving and express conveyor belts, other automated equipment and other technologies including information technology in our operations. Failure of such technologies could prevent us from effectively operating our business. • Marketing and Public Relations . Our business depends on customer goodwill.
We rely significantly on information and cybersecurity systems, as well as use revolving and express conveyor belts, other automated equipment and other technologies including information technology in our operations.
Removed
We expect the inflationary pressures and other fluctuations impacting the cost of these items to continue to impact our business in fiscal year 2024. Our attempts to offset cost pressures, such as through menu price increases and operational improvements, may not be successful.
Added
Failures of these systems and technologies to operate effectively, or a breach in security of these systems as a result of a cybersecurity incident, phishing attack, ransomware attack or any other failure to maintain a continuous and secure cyber network could result in substantial harm or inconvenience to our Company, our team members or guests. • Marketing and Public Relations .
Removed
In addition, our effective income tax rate and our results may be impacted by our ability to realize deferred tax benefits and any increases or decreases of our valuation allowance applied to our deferred tax assets.
Added
These risk factors and other risks we may face are also discussed further in other sections of this Annual Report on Form 10-K.
Removed
Pursuant to the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting until the date we are no longer an emerging growth company, which may be up to five full fiscal years following our IPO.
Added
Managing our 18 growth effectively will require us to continue to enhance these systems, procedures and controls and to hire, train and retain managers and team members.
Added
As the digital space around us continues to evolve, our technology needs to evolve concurrently to stay competitive with the industry, including the digital and delivery business. We rely on third-party service providers to fulfill delivery orders timely to attract guests to our restaurants.
Added
Errors in providing adequate delivery services may result in guest dissatisfaction, which could also result in loss of guest retention, loss in sales and damage to our brand image. Additionally, with such third-parties handling food, delivery services increase the risk of food tampering while in transit.
Added
We are also subject to risk if there is a shortage of delivery drivers, which could result in a failure to meet our guests’ expectations. Also, if our third-party delivery partners fail to effectively compete with other third-party delivery providers in the sector, our delivery business may suffer resulting in a loss of sales.
Added
Changes in such areas may require us to implement additional pay increases or provide additional benefits in the future to continue to recruit, reward and retain the most qualified people, which could materially affect our business. Governmental regulation may adversely affect our ability to open new restaurants or otherwise adversely affect our business, financial condition or results of operations.
Added
In addition, we may identify material weaknesses in our internal control over financial reporting that we may not be able to remediate in time to meet the applicable deadline imposed upon us for compliance with the requirements of Section 404.
Added
As a result, you may not receive any return on an investment in our common stock unless you sell our common stock for a price greater than that which you paid for it. Provisions in our charter documents and Delaware law may delay or prevent our acquisition by a third party.
Added
Risks Related to Our Organizational Structure We are controlled by Kura Japan, whose interests may differ from those of our other stockholders.

Item 2. Properties

Properties — owned and leased real estate

2 edited+1 added−1 removed2 unchanged
Biggest changeNov-2020 Torrance California Apr-2012 Los Angeles (Koreatown) California Nov-2020 Brea California May-2012 Aventura Florida Jan-2021 Rancho Cucamonga California Aug-2012 Troy Michigan Feb-2021 Los Angeles (Sawtelle) California Aug-2013 Sherman Oaks California Apr-2021 San Diego California Mar-2015 Bellevue Washington Jun-2021 Cupertino California Feb-2016 Stonestown California Oct-2021 Plano Texas May-2016 Camelback Arizona Dec-2021 Carrollton Texas Jul-2016 Chandler Arizona Dec-2021 Austin Texas May-2017 San Antonio Texas Feb-2022 Doraville Georgia Jul-2017 Watertown Massachusetts Mar-2022 Houston (Westchase) Texas Aug-2017 Novi Michigan Jul-2022 Sugar Land Texas Jan-2018 Orlando Florida Aug-2022 Houston (Midtown) Texas Mar-2018 Tysons Virginia Aug-2022 Pleasanton California Apr-2018 Bloomington Minnesota Nov-2022 Frisco Texas May-2018 Jersey City New Jersey Nov-2022 Cerritos California Oct-2018 Philadelphia Pennsylvania Dec-2022 Schaumburg Illinois Nov-2018 Edison New Jersey Feb-2023 Cypress California Jan-2019 Oak Brook Illinois Feb-2023 Sacramento California Mar-2019 Buford Georgia May-2023 Las Vegas Nevada Jul-2019 Framingham Massachusetts Jun-2023 Garden Grove California Aug-2019 Carle Place New York Jul-2023 Katy Texas Dec-2019 San Jose California Jul-2023 Glendale California Feb-2020 Dorchester Massachusetts Aug-2033 We are obligated under non-cancelable leases for the majority of our restaurants, as well as our corporate offices.
Biggest changeWe lease the property for our corporate office located in Irvine, California and all of the properties on which we operate our restaurants. 35 The table below shows the locations of our restaurants as of August 31, 2024: City State Opened City State Opened Irvine California Sep-2009 San Francisco (Stonestown) California Oct-2021 Los Angeles (Little Tokyo) California Jan-2012 Camelback Arizona Dec-2021 Torrance California Apr-2012 Chandler Arizona Dec-2021 Brea California May-2012 San Antonio Texas Feb-2022 Rancho Cucamonga California Aug-2012 Watertown Massachusetts Mar-2022 Los Angeles (Sawtelle) California Aug-2013 Novi Michigan Jul-2022 San Diego California Mar-2015 Orlando Florida Aug-2022 Cupertino California Feb-2016 Tysons Virginia Aug-2022 Plano Texas May-2016 Bloomington Minnesota Nov-2022 Carrollton Texas Jul-2016 Jersey City New Jersey Nov-2022 Austin Texas May-2017 Philadelphia Pennsylvania Dec-2022 Doraville Georgia Jul-2017 Edison New Jersey Feb-2023 Houston (Westchase) Texas Aug-2017 Oakbrook Terrace Illinois Feb-2023 Sugar Land Texas Jan-2018 Buford Georgia May-2023 Houston (Midtown) Texas Mar-2018 Framingham Massachusetts Jun-2023 Pleasanton California Apr-2018 Carle Place New York Jul-2023 Frisco Texas May-2018 San Jose California Jul-2023 Cerritos California Oct-2018 Dorchester Massachusetts Aug-2023 Schaumburg Illinois Nov-2018 Pittsburgh Pennsylvania Oct-2023 Cypress California Jan-2019 Flushing New York Oct-2023 Sacramento California Mar-2019 Tampa Florida Oct-2023 Las Vegas Nevada Jul-2019 Naperville Illinois Nov-2023 Garden Grove California Aug-2019 Kansas City Missouri Dec-2023 Katy Texas Dec-2019 Skokie Illinois Jan-2024 Glendale California Feb-2020 Colombus Ohio Jan-2024 Fort Lee New Jersey Sep-2020 Euless Texas Feb-2024 Washington, D.C.
Item 2. Pr operties As of August 31, 2023, we operate 50 restaurants in fifteen states and Washington, D.C. We operate a variety of restaurant formats, including in-line and end-cap restaurants located in retail centers of varying sizes. Our restaurants range in size from 1,600 to 7,920 square feet, with an average of approximately 3,400 square feet.
Item 2. Properties As of August 31, 2024, we operate 64 restaurants in seventeen states and Washington, D.C. We operate a variety of restaurant formats, including in-line and end-cap restaurants located in retail centers of varying sizes. Our restaurants range in size from 1,600 to 7,920 square feet, with an average of approximately 3,400 square feet.
Removed
We lease the property for our corporate office located in Irvine, California and all of the properties on which we operate our restaurants. 34 The table below shows the locations of our restaurants as of August 31, 2023: City State Opened City State Opened Irvine California Sep-2009 Fort Lee New Jersey Sep-2020 Los Angeles (Little Tokyo) California Jan-2012 Washington, D.C.
Added
Washington, D.C. Nov-2020 Webster Texas Feb-2024 Los Angeles (Koreatown) California Nov-2020 Orlando Florida Mar-2024 Aventura Florida Jan-2021 Atlanta Georgia Apr-2024 Troy Michigan Feb-2021 Scarsdale New York Apr-2024 Sherman Oaks California Apr-2021 Roseville California May-2024 Bellevue Washington Jun-2021 Lake Grove New York Jun-2024 We are obligated under non-cancelable leases for the majority of our restaurants, as well as our corporate offices.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 3. Legal Proceedings For a description of our legal proceedings, see Part II, Item 8, Note 11 — Commitments and Contingencies, of the Notes to Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference. Item 4. Mine Saf ety Disclosures Not applicable. 35 PART II
Biggest changeItem 3. Legal Proceedings For a description of our legal proceedings, s ee Part II, Item 8, Note 11 — Commitments and Contingencies, of the Notes to Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference. Item 4. Mine Safety Disclosur es Not applicable. 36 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+0 added−0 removed4 unchanged
Biggest changeTotal Return Analysis 8/1/2019 8/31/2019 8/31/2020 8/31/2021 8/31/2022 8/31/2023 Kura Sushi USA, Inc. $ 100.00 $ 127.84 $ 62.32 $ 259.10 $ 381.23 $ 445.54 Nasdaq Composite $ 100.00 $ 98.17 $ 145.18 $ 188.13 $ 145.68 $ 173.03 S&P 600 Restaurants Index $ 100.00 $ 106.77 $ 103.04 $ 142.99 $ 95.81 $ 107.77 Recent Sales of Unregistered Securities During fiscal year 2023, we did not sell any securities without registration under the Securities Act of 1933.
Biggest changeTotal Return Analysis 8/31/2019 8/31/2020 8/31/2021 8/31/2022 8/31/2023 8/31/2024 Kura Sushi USA, Inc. $ 100.00 $ 48.74 $ 202.67 $ 298.21 $ 348.50 $ 263.22 Nasdaq Composite $ 100.00 $ 147.88 $ 191.63 $ 148.39 $ 176.25 $ 222.45 S&P 600 Restaurants Index $ 100.00 $ 96.51 $ 133.93 $ 89.74 $ 100.94 $ 96.10 Recent Sales of Unregistered Securities During fiscal year 2024, we did not sell any securities without registration under the Securities Act of 1933.
Any future determination to pay dividends on our common stock will be at the discretion of our board of directors and will depend upon many factors, including our financial condition, our results of operations, our liquidity, legal requirements, restrictions that may be imposed by the terms of current and future financing instruments and other factors deemed relevant by our board of directors. 36 Stock Performance Graph The following graph presents a comparison from August 1, 2019 through August 31, 2023 of the cumulative return of our common stock, the Nasdaq Composite Index and the S&P 600 Restaurants Index.
Any future determination to pay dividends on our common stock will be at the discretion of our board of directors and will depend upon many factors, including our financial condition, our results of operations, our liquidity, legal requirements, restrictions that may be imposed by the terms of current and future financing instruments and other factors deemed relevant by our board of directors. 37 Stock Performance Graph The following graph presents a comparison from August 31, 2019 through August 31, 2024 of the cumulative return of our common stock, the Nasdaq Composite Index and the S&P 600 Restaurants Index.
Issuer Purchases of Equity Securities We did not repurchase any of our equity securities during fiscal year 2023. Equity Compensation Plan Information For equity compensation plan information, refer to “Part III, Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of this Annual Report on Form 10-K. Item 6. [Reserved] 37
Issuer Purchases of Equity Securities We did not repurchase any of our equity securities during fiscal year 2024. Equity Compensation Plan Information For equity compensation plan information, refer to “Part III, Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of this Annual Report on Form 10-K. Item 6. [Reserved] 38
The graph assumes investment of $100 on August 1, 2019 in our common stock and in each of the two indices and the reinvestment of dividends.
The graph assumes investment of $100 on August 31, 2019 in our common stock and in each of the two indices and the reinvestment of dividends.
Holders of Record As of November 2, 2023, we had three holders of record of our Class A common stock and one holder of our Class B common stock.
Holders of Record As of November 1, 2024, we had four holders of record of our Class A common stock and one holder of our Class B common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeOur working capital position benefits from the fact that we generally collect cash from sales to guests the same day, or in the case of credit or debit card transactions, within several days of the related sale, and we typically have at least 30 days to pay our vendors.
Biggest changeOur working capital position benefits from the fact that we generally collect cash from sales to guests the same day, or in the case of credit or debit card transactions, within several days of the related sale, and we typically have at least 30 days to pay our vendors. 47 The following table summarizes our cash flows for the periods presented: Fiscal Years Ended August 31, 2024 2023 (amounts in thousands) Statement of Cash Flow Data: Net cash provided by operating activities $ 15,612 $ 18,064 Net cash used in investing activities (36,460 ) (49,903 ) Net cash provided by financing activities 2,137 65,754 Cash Flows Provided by Operating Activities Net cash provided by operating activities during the fiscal year 2024 was $15.6 million, which primarily results from net loss of $8.8 million, non-cash charges of $11.8 million for depreciation and amortization, $4.3 million for stock-based compensation, $4.6 million in noncash lease expense, $1.6 million in impairment of long-lived assets, and net cash inflows of $2.1 million from changes in operating assets and liabilities.
Various factors impact comparable restaurant sales, including: • consumer recognition of our brand and our ability to respond to changing consumer preferences; • overall economic trends, particularly those related to consumer spending; • our ability to operate restaurants effectively and efficiently to meet consumer expectations; • pricing; • guest traffic; • per-guest spend and average check; • marketing and promotional efforts; • local competition; and • opening of new restaurants in the vicinity of existing locations.
Various factors impact comparable restaurant sales, including: • consumer recognition of our brand and our ability to respond to changing consumer preferences and spending behavior; • overall economic trends, particularly those related to consumer spending; • our ability to operate restaurants effectively and efficiently to meet consumer expectations; • pricing; • guest traffic; • per-guest spend and average check; • marketing and promotional efforts; • local competition; and • opening of new restaurants in the vicinity of existing locations.
Cash Flows Used in Investing Activities Net cash used in investing activities during the fiscal year 2023 was $49.9 million, primarily due to $9.3 million in purchases of short-term investments, $39.1 million in purchases of property and equipment and $1.7 million in purchases of liquor licenses offset by $0.8 million of redemption of short-term investments.
Net cash used in investing activities during the fiscal year 2023 was $49.9 million, primarily due to $9.3 million in purchases of short-term investments, $39.1 million in purchases of property and equipment and $1.7 million in purchases of liquor licenses offset by $0.8 million of redemption of short-term investments.
Factors considered by us in estimating future cash flows include but are not limited to: significant underperformance relative to expected historical or projected future operating results; significant changes in the manner of use of the acquired assets; and significant negative industry or economic trends.
Factors considered by us in estimating future cash flows include but are not limited to: significant underperformance relative to expected historical or projected future operating results; significant changes 49 in the manner of use of the acquired assets; and significant negative industry or economic trends.
We believe the following impairment of long-lived assets estimate is affected by significant judgments and estimates used in the preparation of our financial statements and that the judgments and estimates are reasonable. 47 Operating Leases We currently lease all of our restaurant locations and our corporate office.
We believe the following impairment of long-lived assets estimate is affected by significant judgments and estimates used in the preparation of our financial statements and that the judgments and estimates are reasonable. Operating Leases We currently lease all of our restaurant locations and our corporate office.
No payments were made by us to directors, officers or persons owning 10% or more of our common stock or to their associates, or to our affiliates. As of August 31, 2023, we had no outstanding borrowings under the Revolving Credit Agreement and have $45.0 million of availability remaining.
No payments were made by us to directors, officers or persons owning 10% or more of our common stock or to their associates, or to our affiliates. As of August 31, 2024, we had no outstanding borrowings under the Revolving Credit Agreement and have $45.0 million of availability remaining.
AUVs are calculated by dividing (x) annual sales for the fiscal year presented for all such restaurants by (y) the total number of restaurants in that base. We make fractional adjustments to sales for restaurants that were not open for the entire fiscal year presented (such as a restaurant closed for renovation) to annualize sales for such period.
AUVs are calculated by dividing (x) annual sales for the fiscal year presented for all such restaurants by (y) the total number of restaurants in that base. We make fractional adjustments to sales for restaurants that were not open for the entire fiscal year presented (such as a restaurant closed for renovation) to 45 annualize sales for such associated period.
We include restaurants in the comparable restaurant base that have been in operation for at least 18 months prior to the start of the accounting period presented due to new restaurants experiencing a period of higher sales upon opening, including those temporarily closed for renovations during the year.
We include restaurants in the comparable restaurant base that have been in operation for at least 18 full calendar months prior to the start of the accounting period presented due to new restaurants experiencing a period of higher sales upon opening, including those temporarily closed for renovations during the year.
Restaurant-level Operating Profit (Loss) and Restaurant-level Operating Profit (Loss) Margin Restaurant-level Operating Profit (Loss) is defined as operating income (loss) plus depreciation and amortization; stock-based compensation expense; pre-opening costs and general and administrative expenses which are considered normal, recurring, cash operating expenses and are essential to support the development and operations of our restaurants; non-cash lease expense; asset disposals, closure costs and restaurant impairments; less corporate-level stock-based compensation expense and employee retention credit recognized within general and administrative expenses.
Restaurant-level Operating Profit (Loss) and Restaurant-level Operating Profit (Loss) Margin Restaurant-level Operating Profit (Loss) is defined as operating income (loss) plus depreciation and amortization; stock-based compensation expense; pre-opening costs and general and administrative expenses which are considered normal, recurring, cash operating expenses and are essential to support the development and operations of our restaurants; non-cash lease expense; asset disposals, closure costs and restaurant impairments; less corporate-level stock-based compensation expense recognized within general and administrative expenses.
For a discussion of our results of operations comparing fiscal year 2022 to fiscal year 2021 and a discussion of our cash flows for fiscal year 2021, refer to Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report on Form 10-K for the fiscal year ended August 31, 2022, filed with the SEC on November 10, 2022.
For a discussion of our results of operations comparing fiscal year 2023 to fiscal year 2022 and a discussion of our cash flows for fiscal year 2022, refer to Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report on Form 10-K for the fiscal year ended August 31, 2023, filed with the SEC on November 9, 2023.
We believe that cash provided by operating activities, cash on hand, short-term investments and availability under our existing line of credit will be sufficient to fund our lease obligations, capital expenditures and working capital needs for at least the next 12 months.
We believe that cash provided by operating activities, cash and cash equivalents on hand and availability under our existing line of credit will be sufficient to fund our lease obligations, capital expenditures and working capital needs for at least the next 12 months.
The increase in purchases of property and equipment in fiscal year 2022 is primarily related to capital expenditures for current and future restaurant openings, maintaining our existing restaurants and other projects.
The increase in purchases of property and equipment in fiscal year 2024 is primarily related to capital expenditures for current and future restaurant openings and renovations, maintaining our existing restaurants and other projects.
Provision for income taxes represents federal, state and local current and deferred income tax expense. 39 Results of Operations The following table presents selected comparative results of operations from our audited financial statements for the fiscal year ended August 31, 2023 compared to the fiscal year ended August 31, 2022.
Provision for income taxes represents federal, state and local current and deferred income tax expense. 40 Results of Operations The following table presents selected comparative results of operations from our audited financial statements for the fiscal year ended August 31, 2024 compared to the fiscal year ended August 31, 2023.
The following MD&A includes a discussion comparing our results in fiscal year 2023 to fiscal year 2022.
The following MD&A includes a discussion comparing our results in fiscal year 2024 to fiscal year 2023.
As of August 31, 2023, we did not have any material off-balance sheet arrangements. The significant components of our working capital are liquid assets such as cash and cash equivalents, receivables and short-term investments reduced by accounts payable and accrued expenses.
As of August 31, 2024, we did not have any material off-balance sheet arrangements. The significant components of our working capital are liquid assets such as cash, cash equivalents, and receivables reduced by accounts payable and accrued expenses.
The increase in sales was primarily driven by the sales resulting from ten new restaurants opened during fiscal year 2023, as well as increases in menu prices during the same period. Food and beverage costs.
The increase in sales was primarily driven by the sales resulting from fourteen new restaurants opened during fiscal year 2024, as well as increases in menu prices during the same period. Food and beverage costs.
Adjusted EBITDA is defined as EBITDA plus stock-based compensation expense, non-cash lease expense and asset disposals, closure costs and restaurant impairments, as well as certain items, such as employee retention credit, litigation accrual, and certain executive transition costs, that we believe are not indicative of our core operating results. Adjusted EBITDA margin is defined as Adjusted EBITDA divided by sales.
Adjusted EBITDA is defined as EBITDA plus stock-based compensation expense, non-cash lease expense and asset disposals, closure costs and restaurant impairments, as well as certain items, such as litigation, that we believe are not indicative of our core operating results. Adjusted EBITDA margin is defined as Adjusted EBITDA divided by sales.
If the carrying amount of the asset group exceeds its estimated undiscounted future cash flows, an impairment charge is recognized as the amount by which the carrying amount of the asset exceeds the fair value of the asset.
If the carrying amount of the asset group exceeds its estimated undiscounted future cash flows, an impairment charge is recognized as the amount by which the carrying amount of the asset exceeds the fair value of the asset, which is determined by the cost approach method.
The following table shows the growth in our restaurant base for the fiscal years ended August 31, 2023 and August 31, 2022: Fiscal Years Ended August 31, 2023 2022 Restaurant activity: Beginning of period 40 32 Openings 10 8 End of period 50 40 45 Liquidity and Capital Resources Our primary uses of cash are for operational expenditures and capital investments, including new restaurants, costs incurred for restaurant remodels and restaurant fixtures.
The following table shows the growth in our restaurant base for the fiscal years ended August 31, 2024 and August 31, 2023: Fiscal Years Ended August 31, 2024 2023 Restaurant activity: Beginning of period 50 40 Openings 14 10 End of period 64 50 Liquidity and Capital Resources Our primary uses of cash are for operational expenditures and capital investments, including new restaurants, costs incurred for restaurant remodels and restaurant fixtures and equipment.
We present Restaurant-level Operating Profit (Loss) because it excludes the impact of general and administrative expenses, which are not incurred at the restaurant-level. We also use Restaurant-level Operating Profit (Loss) to measure operating performance and returns from opening new restaurants. Restaurant-level Operating Profit (Loss) margin allows us to evaluate the level of Restaurant-level Operating Profit (Loss) generated from sales.
We present Restaurant-level Operating Profit (Loss) because it excludes the impact of general and administrative expenses, which are not incurred at the restaurant-level. We also use Restaurant-level Operating Profit (Loss) to measure operating performance and returns from opening new restaurants.
However, you should be aware that Restaurant-level Operating Profit (Loss) and Restaurant-level Operating Profit (Loss) margin are financial measures which are not indicative of overall results for the Company, and 43 Restaurant-level Operating Profit (Loss) and Restaurant-level Operating Profit (Loss) margin do not accrue directly to the benefit of stockholders because of corporate-level expenses excluded from such measures.
Restaurant-level Operating Profit (Loss) margin allows us to evaluate the level of Restaurant-level Operating Profit (Loss) generated from sales. 44 However, you should be aware that Restaurant-level Operating Profit (Loss) and Restaurant-level Operating Profit (Loss) margin are financial measures which are not indicative of overall results for the Company, and Restaurant-level Operating Profit (Loss) and Restaurant-level Operating Profit (Loss) margin do not accrue directly to the benefit of stockholders because of corporate-level expenses excluded from such measures.
We aim to make quality Japanese cuisine accessible to our guests across the United States through affordable prices and an inviting atmosphere. Business Trends During fiscal year 2023, we opened ten restaurants and expanded our restaurant base to 50 restaurants in fifteen states and Washington, DC as of the end of fiscal year 2023.
We aim to make quality Japanese cuisine accessible to our guests across the United States through affordable prices and an inviting atmosphere. Business Trends During fiscal year 2024, we opened fourteen restaurants and expanded our restaurant base to 64 restaurants in seventeen states and Washington, DC as of the end of fiscal year 2024.
Interest income was $1.5 million for fiscal year 2023 and $0.2 million for fiscal year 2022. The increase was primarily driven by investing our net cash proceeds from our $64.3 million follow-on offering completed in April 2023 into cash and cash equivalents and short-term investments. Income tax expense.
The increase was primarily driven by investing our net cash proceeds from our $64.3 million follow-on offering completed in April 2023 into cash and cash equivalents and short-term investments. Income tax expense. Income tax expense was $0.2 million for both fiscal years 2024 and 2023.
We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. Our critical accounting policies are those that materially affect our financial statements. Our critical accounting estimates are those that involve subjective or complex judgments by management.
We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. Our critical accounting policies are those that materially affect our financial statements.
The following table shows the comparable restaurant sales performance for the fiscal years ended August 31, 2023 and August 31, 2022: Fiscal Years Ended August 31, 2023 2022 Comparable restaurant sales performance (%) 9.5 % 81.9 % Comparable restaurant base 30 25 Number of Restaurant Openings The number of restaurant openings reflects the number of restaurants opened during a particular reporting period.
The following table shows the comparable restaurant sales performance for the fiscal years ended August 31, 2024 and August 31, 2023: Fiscal Years Ended August 31, 2024 2023 Comparable restaurant sales performance (%) 0.7 % 9.5 % Comparable restaurant base 43 30 46 Number of Restaurant Openings The number of restaurant openings reflects the number of restaurants opened during a particular reporting period.
Other important factors causing fluctuations in food and beverage costs include seasonality and restaurant-level management of food waste. Food and beverage costs are a substantial expense and are expected to grow proportionally as our sales grow. Labor and related expenses. Labor and related expenses include all restaurant-level management and hourly labor costs, including wages, employee benefits and payroll taxes.
Food and beverage costs are a substantial expense and are expected to grow proportionally as our sales grow. Labor and related expenses. Labor and related expenses include all restaurant-level management and hourly labor costs, including wages, employee benefits and payroll taxes.
There were no impairment tests performed for the fiscal years ended August 31, 2023 or August 31, 2022 and no impairment loss was recognized during fiscal years ended August 31, 2023 and August 31, 2022.
There was no impairment test performed for the fiscal year ended August 31, 2023, and no impairment loss was recognized during fiscal years ended August 31, 2023 and August 31, 2022. 50
You should review the reconciliation of net (loss) income to EBITDA, Adjusted EBITDA and Adjusted EBITDA margin below and not rely on any single financial measure to evaluate our business. 42 The following table reconciles net income (loss) to EBITDA, Adjusted EBITDA and Adjusted EBITDA margin for the fiscal years ended August 31, 2023 and August 31, 2022: Fiscal Years Ended August 31, 2023 2022 (amounts in thousands) Net income (loss) $ 1,502 $ (764 ) Interest (income) expense, net (1,403 ) (64 ) Taxes 233 74 Depreciation and amortization 7,832 5,613 EBITDA 8,164 4,859 Stock-based compensation expense (a) 3,550 2,409 Non-cash lease expense (b) 2,628 1,712 Executive transition costs (c) — 175 Adjusted EBITDA 14,342 9,155 Adjusted EBITDA margin 7.7 % 6.5 % _______________ (a) Stock-based compensation expense includes non-cash stock-based compensation, which is comprised of restaurant-level stock-based compensation included in other costs in the statements of operations and comprehensive income (loss) and of corporate-level stock-based compensation included in general and administrative expenses in the statements of operations and comprehensive income (loss), see “Note 6 — Stock-based Compensation” to the financial statements in this Annual Report on Form 10-K.
You should review the reconciliation of net (loss) income to EBITDA, Adjusted EBITDA and Adjusted EBITDA margin below and not rely on any single financial measure to evaluate our business. 43 The following table reconciles net income (loss) to EBITDA, Adjusted EBITDA and Adjusted EBITDA margin for the fiscal years ended August 31, 2024 and August 31, 2023: Fiscal Years Ended August 31, 2024 2023 (amounts in thousands) Net income (loss) $ (8,804 ) $ 1,502 Interest income, net (2,868 ) (1,403 ) Taxes 167 233 Depreciation and amortization 11,787 7,832 EBITDA 282 8,164 Stock-based compensation expense (a) 4,314 3,550 Non-cash lease expense (b) 2,965 2,628 Impairment of long-lived assets (c) 1,553 — Litigation (d) 5,450 — Adjusted EBITDA $ 14,564 $ 14,342 Adjusted EBITDA margin 6.1 % 7.7 % _______________ (a) Stock-based compensation expense includes non-cash stock-based compensation, which is comprised of restaurant-level stock-based compensation included in other costs in the statements of operations and comprehensive income (loss) and of corporate-level stock-based compensation included in general and administrative expenses in the statements of operations and comprehensive income (loss), see “Note 6 — Stock-based Compensation” to the financial statements in this Annual Report on Form 10-K.
The preparation of our financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales, expenses and related disclosures of contingent assets and liabilities.
Critical Accounting Policies and Estimates Our discussion and analysis of operating results and financial condition are based upon our financial statements. The preparation of our financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales, expenses and related disclosures of contingent assets and liabilities.
The following table reconciles operating income (loss) to Restaurant-level Operating Profit (Loss) and Restaurant-level Operating Profit (Loss) margin for the fiscal years ended August 31, 2023 and August 31, 2022: Fiscal Years Ended August 31, 2023 2022 (amounts in thousands) Operating income (loss) $ 332 $ (754 ) Depreciation and amortization 7,832 5,613 Stock-based compensation expense (a) 3,550 2,409 Pre-opening costs (b) 1,730 784 Non-cash lease expense (c) 2,628 1,712 General and administrative expenses 28,035 22,289 Corporate-level stock-based compensation included in general and administrative expenses (3,044 ) (2,112 ) Restaurant-level operating profit 41,063 29,941 Operating income (loss) margin 0.2 % (0.5 )% Restaurant-level operating profit margin 21.9 % 21.2 % _______________ (a) Stock-based compensation expense includes non-cash stock-based compensation, which is comprised of restaurant-level stock-based compensation included in other costs in the statements of operations and comprehensive income (loss) and of corporate-level stock-based compensation included in general and administrative expenses in the statements of operations and comprehensive income (loss), see “Note 6 — Stock-based Compensation” to the financial statements in this Annual Report on Form 10-K.
The following table reconciles operating income (loss) to Restaurant-level Operating Profit (Loss) and Restaurant-level Operating Profit (Loss) margin for the fiscal years ended August 31, 2024 and August 31, 2023: Fiscal Years Ended August 31, 2024 2023 (amounts in thousands) Operating income (loss) $ (11,505 ) $ 332 Depreciation and amortization 11,787 7,832 Stock-based compensation expense (a) 4,314 3,550 Pre-opening costs (b) 3,165 1,730 Non-cash lease expense (c) 2,965 2,628 Impairment of long-lived assets (d) 1,553 — General and administrative expenses 39,050 28,035 Corporate-level stock-based compensation included in general and administrative expenses (3,626 ) (3,044 ) Restaurant-level operating profit $ 47,703 $ 41,063 Operating income (loss) margin (4.8 )% 0.2 % Restaurant-level operating profit margin 20.1 % 21.9 % _______________ (a) Stock-based compensation expense includes non-cash stock-based compensation, which is comprised of restaurant-level stock-based compensation included in other costs in the statements of operations and comprehensive income (loss) and of corporate-level stock-based compensation included in general and administrative expenses in the statements of operations and comprehensive income (loss), see “Note 6 — Stock-based Compensation” to the financial statements in this Annual Report on Form 10-K.
The increase in purchases of property and equipment in fiscal year 2023 is primarily related to capital expenditures for current and future restaurant openings and renovations, maintaining our existing restaurants and other projects. Net cash used in investing activities during the fiscal year 2022 was $28.2 million, primarily due to purchases of property and equipment.
The increase in purchases of property and equipment in fiscal year 2023 is primarily related to capital expenditures for current and future restaurant openings and renovations, maintaining our existing restaurants and other projects.
Food and beverage costs were $56.6 million for fiscal year 2023 compared to $42.5 million for fiscal year 2022, representing an increase of $14.1 million, or 33.2%. This increase was primarily driven by costs associated with sales from ten new restaurants opened during fiscal year 2023.
Food and beverage costs were $69.5 million for fiscal year 2024 compared to $56.6 million for fiscal year 2023, representing an increase of $12.9 million, or 22.7%. This increase was primarily driven by costs associated with sales from fourteen new restaurants opened during fiscal year 2024.
Income tax expense was $0.2 million for fiscal year 2023 and $0.1 million for fiscal year 2022. For further discussion of our income taxes, see “Note 12 — Income Taxes.” 41 Key Performance Indicators In assessing the performance of our business, we consider a variety of financial and performance measures.
For further discussion of our income taxes, see “Note 12 — Income Taxes.” Key Performance Indicators In assessing the performance of our business, we consider a variety of financial and performance measures.
Depreciation and amortization expenses incurred at the corporate level were $0.4 million for fiscal year 2023 as compared to $0.3 million for fiscal year 2022, and as a percentage of sales were 0.2% and 0.3%, respectively. Other costs.
Depreciation and amortization expenses incurred at the corporate level were $0.4 million for fiscal year 2024 and fiscal year 2023, and as a percentage of sales were 0.2%, respectively. Other costs . Other costs were $34.7 million for the fiscal year 2024 compared to $24.9 million for fiscal year 2023, representing an increase of $9.8 million, or 39.5%.
Sales were $187.4 million for fiscal year 2023 compared to $141.1 million for fiscal year 2022, representing an increase of $46.3 million, or 32.8%. Comparable restaurant sales increased 9.5% for fiscal year 2023 as compared to fiscal year 2022. AUV was $4.3 million for fiscal year 2023 compared to $3.8 million for fiscal year 2022.
Sales were $237.9 million for fiscal year 2024 compared to $187.4 million for fiscal year 2023, representing an increase of $50.5 million, or 26.9%. Comparable restaurant sales increased 0.7% for fiscal year 2024 as compared to fiscal year 2023. AUV was $4.2 million for fiscal year 2024 compared to $4.3 million for fiscal year 2023.
(c) Non-cash lease expense includes lease expense from the date of possession of our restaurants that did not require cash outlay in the respective periods Average Unit Volumes (“AUVs”) “Average Unit Volumes” or “AUVs” consist of the average annual sales of all restaurants that have been open for 18 months or longer at the end of the fiscal year presented due to new restaurants experiencing a period of higher sales upon opening.
Average Unit Volumes (“AUVs”) “Average Unit Volumes” or “AUVs” consist of the average annual sales of all restaurants that have been open for 18 full calendar months or longer at the end of the fiscal year presented due to new restaurants experiencing a period of higher sales upon opening.
Cash Flows Provided by (Used in) Financing Activities Net cash provided by financing activities during fiscal year 2023 was $65.8 million, primarily due to aggregate net proceeds of $64.3 million after deducting the underwriting discounts and commissions and offering expenses payable, and $2.0 million of proceeds from exercise of stock options offset by $0.5 million in repayments of principal on finance leases.
Net cash provided by financing activities during fiscal year 2023 was $65.8 million, primarily due to aggregate net proceeds of $64.3 million after deducting the underwriting discounts and commissions and offering expenses payable, and $2.0 million of proceeds from exercise of stock options offset by $0.5 million in repayments of principal on finance leases. 48 Material Cash Requirements As of August 31, 2024, we had $11.1 million in contractual obligations relating to the construction of new restaurants and purchase commitments for goods related to restaurant operations.
The following table summarizes our cash flows for the periods presented: Fiscal Years Ended August 31, 2023 2022 (amounts in thousands) Statement of Cash Flow Data: Net cash provided by operating activities $ 18,064 $ 23,694 Net cash used in investing activities (49,903 ) (28,172 ) Net cash provided by (used in) financing activities 65,754 (170 ) Cash Flows Provided by Operating Activities Net cash provided by operating activities during the fiscal year 2023 was $18.1 million, which primarily results from net income of $1.5 million, non-cash charges of $7.8 million for depreciation and amortization, $3.6 million for stock-based compensation, $3.7 million in noncash lease expense, and net cash inflows of $1.3 million from changes in operating assets and liabilities.
Net cash provided by operating activities during the fiscal year 2023 was $18.1 million, which primarily results from net income of $1.5 million, non-cash charges of $7.8 million for depreciation and amortization, $3.6 million for stock-based compensation, $3.7 million in noncash lease expense, and net cash inflows of $1.3 million from changes in operating assets and liabilities.
This measurement allows management to assess changes in consumer spending patterns at our restaurants and the overall performance of our restaurant base. 44 The following table shows the AUVs for the fiscal years ended August 31, 2023 and August 31, 2022: Fiscal Years Ended August 31, 2023 2022 (in thousands) Average Unit Volumes $ 4,281 $ 3,825 Comparable Restaurant Sales Performance Comparable restaurant sales performance refers to the change in year-over-year sales for the comparable restaurant base.
The following table shows the AUVs for the fiscal years ended August 31, 2024 and August 31, 2023: Fiscal Years Ended August 31, 2024 2023 (amounts in thousands) Average Unit Volumes $ 4,228 $ 4,281 Comparable Restaurant Sales Performance Comparable restaurant sales performance refers to the change in year-over-year sales for the comparable restaurant base.
Depreciation is determined using the straight-line method over the assets’ estimated useful lives, ranging from three to 20 years. Other costs. Other costs include utilities, repairs and maintenance, credit card fees, royalty payments to Kura Japan, stock-based compensation expenses for restaurant-level employees and other restaurant-level expenses. General and administrative expenses.
Other costs include utilities, repairs and maintenance, credit card fees, royalty payments to Kura Japan, stock-based compensation expenses for restaurant-level employees and other restaurant-level expenses. General and administrative expenses.
General and administrative expenses are expected to grow as our unit base grows, including incremental legal, accounting, insurance and other expenses. Interest expense. Interest expense includes cash and non-cash charges related to our line of credit and finance lease obligations. Interest income. Interest income includes income earned on our investments. Income tax expense (benefit).
Interest expense includes cash and non-cash charges related to our line of credit and finance lease obligations. Interest income. Interest income includes income earned on our investments. Income tax expense (benefit).
Restaurant sales in a given period are directly impacted by the number of restaurants we operate and comparable restaurant sales growth. Food and beverage costs. Food and beverage costs are variable in nature, change with sales volume and are influenced by menu mix and subject to increases or decreases based on fluctuations in commodity costs.
Food and beverage costs are variable in nature, change with sales volume and are influenced by menu mix and subject to increases or decreases based on fluctuations in commodity costs. Other important factors causing fluctuations in food and beverage costs include seasonality and restaurant-level management of food waste.
General and administrative expenses were $28.0 million for fiscal year 2023 compared to $22.3 million for fiscal year 2022, representing an increase of $5.7 million, or 25.8%. This increase was primarily due to increases in compensation related costs of $4.9 million due to additional headcount, $0.5 million in travel expenses and $0.3 million in professional fees.
This increase was primarily due to $5.5 million in litigation costs, an increase in compensation-related costs of $3.2 million due to additional headcount, $2.0 million in professional fees, and $0.4 million in travel expenses.
Depreciation and amortization expenses incurred as part of restaurant operating costs were $7.4 million for fiscal year 2023 compared to $5.3 million for fiscal year 2022, representing an increase of $2.1 million or 41.2%. This increase was primarily due to the depreciation of property and equipment related to the opening of ten new restaurants in fiscal year 2023.
Depreciation and amortization expenses incurred as part of restaurant operating costs were $11.4 million for fiscal year 2024 compared to $7.4 million for fiscal year 2023, representing an increase of $4.0 million or 53.1%.
Net cash used in financing activities during fiscal year 2022 was $0.2 million, primarily due to $1.0 million repayment of principal on financing leases of equipment, $0.2 million taxes paid on vested restricted stock awards, partially offset by $1.0 million proceeds from stock option exercises.
Cash Flows Provided by Financing Activities Net cash provided by financing activities during fiscal year 2024 was $2.1 million, primarily due to $2.5 million of proceeds from exercise of stock options offset by $0.3 million in tax payments in relation to vested restricted stock awards.
Similar to the food and beverage costs that we incur, labor and related expenses are expected to grow proportionally as our sales grows. Factors that influence 38 fluctuations in our labor and related expenses include minimum wage and payroll tax legislation, the frequency and severity of workers’ compensation claims, healthcare costs and the performance of our restaurants.
Factors that influence fluctuations in our labor and related expenses include minimum wage and payroll tax legislation, the frequency and severity of workers’ compensation claims, healthcare costs and the performance of our restaurants. 39 Occupancy and related expenses. Occupancy and related expenses include rent for all restaurant locations and related taxes. Depreciation and amortization expenses.
This increase was primarily a result of additional lease expense incurred with respect to ten new restaurants that opened during fiscal year 2023. As a percentage of sales, occupancy and other operating expenses remained consistent at 7.0% in fiscal year 2023 and fiscal year 2022. Depreciation and amortization expenses.
As a percentage of sales, occupancy and other operating expenses remained consistent at 7.1% in fiscal year 2024 and 7.0% in fiscal year 2023. Depreciation and amortization expenses.
As a percentage of sales, depreciation and amortization expenses at the restaurant-level increased to 4.0% in fiscal year 2023 as compared to 3.7% in fiscal year 2022.
This increase was primarily due to the depreciation of property and equipment related to the opening of fourteen new restaurants in fiscal year 2024 as well as accelerated depreciation on planned restaurant remodels. As a percentage of sales, depreciation and amortization expenses at the restaurant-level increased to 4.8% in fiscal year 2024 as compared to 4.0% in fiscal year 2023.
Other costs were $24.9 million for fiscal year 2023 compared to $17.5 million for fiscal year 2022, representing an increase of $7.4 million, or 42.2%. The increase was primarily driven by an increase in costs related to ten new restaurants opened in fiscal year 2023.
Labor and related costs were $75.9 million for fiscal year 2024 compared to $56.5 million for fiscal year 2023, representing an increase of $19.4 million, or 34.3%. This increase in labor and related costs was primarily driven by additional labor costs incurred from fourteen new restaurants opened during fiscal year 2024 coupled with wage rate increases during the same period.
The decrease in cost as a percentage of sales was primarily due to increases in menu prices and technological initiatives, partially offset by increases in wage rates. Occupancy and related expenses. Occupancy and related expenses were $13.1 million for fiscal year 2023 compared to $9.9 million for fiscal year 2022, representing an increase of $3.2 million, or 32.5%.
As a percentage of sales, labor and related costs increased to 31.9% in fiscal year 2024, compared to 30.2% in fiscal year 2023. The increase in cost as a percentage of sales was primarily due to increases in wage rates and higher pre-opening labor costs. Occupancy and related expenses.
Fiscal Years Ended August 31, 2023 2022 $ Change % Change (dollar amounts in thousands) Sales $ 187,429 $ 141,089 $ 46,340 32.8 % Restaurant operating costs: Food and beverage costs 56,631 42,510 14,121 33.2 Labor and related costs 56,547 43,997 12,550 28.5 Occupancy and related expenses 13,141 9,917 3,224 32.5 Depreciation and amortization expenses 7,422 5,258 2,164 41.2 Other costs 24,911 17,517 7,394 42.2 Total restaurant operating costs 158,652 119,199 39,453 33.1 General and administrative expenses 28,035 22,289 5,746 25.8 Depreciation and amortization expenses 410 355 55 15.5 Total operating expenses 187,097 141,843 45,254 31.9 Operating income (loss) 332 (754 ) 1,086 (144.0 ) Other expense (income): Interest expense 69 87 (18 ) (20.7 ) Interest income (1,472 ) (151 ) (1,321 ) 874.8 Income (loss) before income taxes 1,735 (690 ) 2,425 (351.4 ) Income tax expense 233 74 159 214.9 Net income (loss) $ 1,502 $ (764 ) $ 2,266 (296.6 ) % Fiscal Years Ended August 31, 2023 2022 (as a percentage of sales) Sales 100.0 % 100.0 % Restaurant operating costs Food and beverage costs 30.2 30.1 Labor and related costs 30.2 31.2 Occupancy and related expenses 7.0 7.0 Depreciation and amortization expenses 4.0 3.7 Other costs 13.3 12.4 Total restaurant operating costs 84.6 84.5 General and administrative expenses 15.0 15.8 Depreciation and amortization expenses 0.2 0.3 Total operating expenses 99.8 100.5 Operating income (loss) 0.2 (0.5 ) Other expense (income): Interest expense 0.0 0.1 Interest income (0.8 ) (0.1 ) Income (loss) before income taxes 0.9 (0.5 ) Income tax expense 0.1 0.1 Net income (loss) 0.8 % (0.5 ) % 40 Fiscal Year Ended August 31, 2023 Compared to Fiscal Year Ended August 31, 2022 Sales.
Fiscal Years Ended August 31, 2024 2023 $ Change % Change (dollar amounts in thousands) Sales $ 237,860 $ 187,429 $ 50,431 26.9 % Restaurant operating costs: Food and beverage costs 69,509 56,631 12,878 22.7 Labor and related costs 75,926 56,547 19,379 34.3 Occupancy and related expenses 16,792 13,141 3,651 27.8 Depreciation and amortization expenses 11,362 7,422 3,940 53.1 Other costs 34,748 24,911 9,837 39.5 Total restaurant operating costs 208,337 158,652 49,685 31.3 General and administrative expenses 39,050 28,035 11,015 39.3 Depreciation and amortization expenses 425 410 15 3.7 Impairment of long-lived assets 1,553 — 1,553 — Total operating expenses 249,365 187,097 62,268 74 Operating income (loss) (11,505 ) 332 (11,837 ) (3,565.4 ) Other expense (income): Interest expense 47 69 (22 ) (31.9 ) Interest income, net (2,915 ) (1,472 ) (1,443 ) 98.0 Income (loss) before income taxes (8,637 ) 1,735 (10,372 ) (597.8 ) Income tax expense 167 233 (66 ) (28.3 ) Net income (loss) $ (8,804 ) $ 1,502 $ (10,306 ) (686.2 ) % Fiscal Years Ended August 31, 2024 2023 (as a percentage of sales) Sales 100.0 % 100.0 % Restaurant operating costs Food and beverage costs 29.2 30.2 Labor and related costs 31.9 30.2 Occupancy and related expenses 7.1 7.0 Depreciation and amortization expenses 4.8 4.0 Other costs 14.6 13.3 Total restaurant operating costs 87.6 84.6 General and administrative expenses 16.4 15.0 Depreciation and amortization expenses 0.2 0.2 Impairment of long-lived assets 0.7 — Total operating expenses 104.8 99.8 Operating income (loss) (4.8 ) 0.2 Other expense (income): Interest expense 0.0 0.0 Interest income (1.2 ) (0.8 ) Income (loss) before income taxes (3.6 ) 0.9 Income tax expense 0.1 0.1 Net income (loss) (3.7 ) % 0.8 % 41 Fiscal Year Ended August 31, 2024 Compared to Fiscal Year Ended August 31, 2023 Sales.
For operating and finance lease obligations, see “Note 4 — Leases” to the financial statements included in this Annual Report on Form 10-K. Critical Accounting Policies and Estimates Our discussion and analysis of operating results and financial condition are based upon our financial statements.
All contractual obligations are expected to be paid during the next 12 months utilizing cash and cash equivalents on hand and provided by operations. For operating and finance lease obligations, see “Note 4 — Leases” to the financial statements included in this Annual Report on Form 10-K.
As a percentage of sales, other costs increased to 13.3% in fiscal year 2023 from 12.4% in fiscal year 2022, primarily driven by general inflationary pressures on advertising costs, repair and maintenance fees, utilities and restaurant supplies. General and administrative expenses.
The increase was primarily driven by an increase in costs related to fourteen new restaurants opened in fiscal year 2024. As a percentage of sales, other costs increased to 14.6% in fiscal year 2024 from 13.3% in fiscal year 2023, primarily driven by increases in advertising and promotion, software licenses, repairs and maintenance, utilities, operating supplies and travel expenses.
(b) Non-cash lease expense includes lease expense from the date of possession of our restaurants that did not require cash outlay in the respective periods. (c) Executive transition costs include severance and search fees associated with the transition of our Chief Financial Officer.
(c) Non-cash lease expense includes lease expense from the date of possession of our restaurants that did not require cash outlay in the respective periods. (d) Impairment of long-lived assets include losses incurred due to the impairment of property and equipment on one underperforming restaurant location.
We expect to open 11 to 13 new restaurants in fiscal year 2024 and therefore, we expect our revenue and restaurant operating costs to increase in fiscal year 2024.
We expect to open 14 new restaurants in fiscal year 2025 and therefore, we expect our revenue and restaurant operating costs to increase in fiscal year 2025. We also expect our general and administrative expenses to increase on a dollar basis in fiscal year 2025 to support the growth of the company. Key Financial Definitions Sales.
As a percentage of sales, general and administrative expenses decreased to 15.0% in fiscal year 2023 from 15.8% in fiscal year 2022, primarily driven by leverage benefits from the increase in sales. Interest expense. Interest expense was $69 thousand for fiscal year 2023 and $87 thousand for fiscal year 2022. Interest income.
As a percentage of sales, general and administrative expenses increased to 16.4% in fiscal year 2024 from 15.0% in fiscal year 2023, primarily driven by litigation costs. Impairment of long-lived assets. Impairment of long-lived assets was $1.6 million for fiscal year 2024 due to impairment charges related to the property and equipment on one underperforming restaurant location. Interest expense.
This increase in labor and related costs was primarily driven by additional labor costs incurred from ten new restaurants opened during fiscal year 2023. As a percentage of sales, labor and related costs decreased to 30.2% in fiscal year 2023, compared to 31.2% in fiscal year 2022.
As a percentage of sales, food and beverage costs decreased to 29.2% in fiscal year 2024, as compared to 30.2% in fiscal year 2023, primarily due to increases in menu prices and supply chain initiatives. Labor and related costs.
Occupancy and related expenses. Occupancy and related expenses include rent for all restaurant locations and related taxes. Depreciation and amortization expenses. Depreciation and amortization expenses are periodic non-cash charges that consist of depreciation of fixed assets, including equipment and capitalized leasehold improvements.
Depreciation and amortization expenses are periodic non-cash charges that consist of depreciation of fixed assets, including equipment and capitalized leasehold improvements. Depreciation is determined using the straight-line method over the assets’ estimated useful lives, ranging from three to 20 years. Other costs.
As a percentage of sales, food and beverage costs remained consistent at 30.2% in fiscal year 2023, as compared to 30.1% in fiscal year 2022. Labor and related costs. Labor and related costs were $56.5 million for fiscal year 2023 compared to $44.0 million for fiscal year 2022, representing an increase of $12.5 million, or 28.5%.
General and administrative expenses. General and administrative expenses were $39.1 million for fiscal year 2024 compared to $28.0 million for fiscal year 2023, representing an increase of $11.1 million, or 39.3%.
Removed
We also expect our general and administrative expenses to increase in fiscal 2024 to support the growth of the company and the compliance requirements of no longer being an emerging growth company. We have experienced inflationary pressures affecting our operations in certain areas such as food and beverage costs, labor costs, construction costs and energy costs.
Added
Sales represent sales of food and beverages in restaurants. Restaurant sales in a given period are directly impacted by the number of restaurants we operate and comparable restaurant sales growth. Food and beverage costs.
Removed
We have been able to offset to some extent these inflationary and other cost pressures through various actions, such as increasing menu prices, productivity improvements, and supply chain initiatives, however, we expect these inflationary and other cost pressures to level out in fiscal year 2024. Key Financial Definitions Sales. Sales represent sales of food and beverages in restaurants.
Added
Similar to the food and beverage costs that we incur, labor and related expenses are expected to grow proportionally as our sales grow.
Removed
The net cash inflows from changes in operating assets and liabilities were primarily the result of increases of $1.7 million of accounts payable and $1.6 million for salary and wages payable, $0.3 million in sales tax payable offset by decreases of $1.2 million in prepaid expenses and other current assets, $0.6 million of inventory, $0.3 million in accrued expenses and other current liabilities and $0.4 million of accounts and other receivables. 46 Net cash provided by operating activities during the fiscal year 2022 was $23.7 million, which results from net loss of $0.8 million, non-cash charges of $5.6 million for depreciation and amortization, $2.4 million for stock-based compensation, $3.2 million in noncash lease expense, and net cash inflows of $13.2 million from changes in operating assets and liabilities.
Added
General and administrative expenses are expected to grow as our unit base grows. Impairment of long-lived assets. Impairment of long-lived assets include the resulting charges when facts and circumstances indicate that the carrying amount of an asset may not be fully recoverable.
Removed
The net cash inflows from changes in operating assets and liabilities were primarily the result of increases of $0.9 million for accrued expenses and other current liabilities and $1.3 million for salary and wages payable, as well as an increase of $11.5 million in prepaid expenses and other current assets.
Added
If an indicator of impairment exists, an estimate of the aggregate undiscounted cash flows is compared to the carrying value of the asset. If an asset is determined to be impaired, the loss is recorded as the excess of the carrying amount of the asset over its fair value. Interest expense.
Removed
The increase in the above-mentioned items was primarily due to the timing of cash payments. The increase in cash inflows from prepaid expenses and other current assets was primarily due to employee retention credit refunds received under the CARES Act.
Added
Occupancy and related expenses were $16.8 million for fiscal year 2024 compared to $13.1 million for fiscal year 2023, representing an increase of $3.7 million, or 27.8%. This increase was primarily a result of additional lease expense incurred with respect to fourteen new restaurants that opened during fiscal year 2024.
Removed
Material Cash Requirements As of August 31, 2023, we had $9.8 million in contractual obligations relating to the construction of new restaurants and purchase commitments for goods related to restaurant operations. All contractual obligations are expected to be paid during the next 12 months utilizing cash and cash equivalents on hand and provided by operations.
Added
Interest expense was $47 thousand for fiscal year 2024 and $69 thousand for fiscal year 2023. 42 Interest income. Interest income was $2.9 million for fiscal year 2024 and $1.5 million for fiscal year 2023.
Removed
Jumpstart Our Business Startups Act of 2012 We qualify as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the JOBS Act.
Added
(b) Non-cash lease expense includes lease expense from the date of possession of our restaurants that did not require cash outlay in the respective periods. (c) Impairment of long-lived assets include losses incurred due to the impairment of property and equipment on one underperforming restaurant location. (d) Litigation includes expenses related to legal claims or settlements.
Removed
Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.
Added
This measurement allows management to assess changes in consumer spending patterns at our restaurants and the overall performance of our restaurant base.
Removed
We have irrevocably elected not to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies. 48 Subject to certain conditions set forth in the JOBS Act, we are also eligible for and intend to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies, including (i) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, (ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (iii) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.
Added
Cash Flows Used in Investing Activities Net cash used in investing activities during the fiscal year 2024 was $36.5 million, primarily due to $44.3 million in purchases of property and equipment $3.5 million in purchases of short-term investments, and $0.4 million for payments of initial direct costs, $0.3 million in purchases of liquor licenses offset by $12.0 million of redemption of short-term investments.
Removed
We may take advantage of these exemptions until we are no longer an emerging growth company.
Added
Our critical accounting estimates are those estimates that are made in accordance with GAAP, involve subjective or complex judgments by management, and are reasonably likely to have a material impact on our financial statements or results of operations.
Removed
We will continue to be an emerging growth company until the earliest to occur of (i) the last day of the fiscal year in which the market value of our Class A common stock that is held by non-affiliates exceeds $700 million as of June 30 of that fiscal year, (ii) the last day of the fiscal year in which our annual gross revenues exceed $1.235 billion during such fiscal year (as indexed for inflation), (iii) the date on which we have issued more than $1 billion in non-convertible debt in the prior three-year period or (iv) the last day of the fiscal year following the fifth anniversary of the date of the completion of our IPO, or August 31, 2024. 49

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeIn addition, there can be no assurance that we will generate the same sales growth in an amount sufficient to offset inflationary or other cost pressures. 50
Biggest changeIn addition, there can be no assurance that we will generate the same sales growth in an amount sufficient to offset inflationary or other cost pressures. 51
Removed
Historically, inflation has not had a material effect on our results of operations, although inflationary pressures have increased across our business, including with respect to food and beverage costs, due in part to supply chain impacts of overall economic conditions in the markets in which we operate.

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