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What changed in KURA SUSHI USA, INC.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of KURA SUSHI USA, INC.'s 2024 and 2025 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 2025 report.

+181 added−188 removedSource: 10-K (2025-11-06) vs 10-K (2024-11-08)

Top changes in KURA SUSHI USA, INC.'s 2025 10-K

181 paragraphs added · 188 removed · 159 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeFor every five plates placed into the plate slot, the tableside touch screen plays a short anime video, and for every 15 plates, our proprietary tableside Bikkura-Pon rewards machine dispenses a toy. We believe our Bikkura-Pon rewards machines encourage guests to consume a greater quantity of plates as they work towards achieving the next dining milestone.
Biggest changeWe believe our Bikkura-Pon rewards machines encourage guests to consume a greater quantity of plates as they work towards achieving the next dining milestone.
Fresh registers over two hours, a robotic arm in our kitchen automatically removes the plate from the revolving conveyor belt; and 8 • Suppliers and Third-Party Reviews. Our restaurants undergo internal safety audits and routine health inspections. We also consider food safety and quality assurance when selecting our distributors and suppliers.
Fresh registers over two hours, a robotic arm in our kitchen automatically removes the plate from the revolving conveyor belt. 8 • Suppliers and Third-Party Reviews. Our restaurants undergo internal safety audits and routine health inspections. We also consider food safety and quality assurance when selecting our distributors and suppliers.
Third parties may also make claims against owners or operators of properties for personal injuries and property damage associated with releases of, or actual or alleged exposure to, such substances. We are not aware of any environmental laws that will materially affect our earnings or competitive position, or result in material capital expenditures relating to our restaurants.
Third parties may also make claims against owners or operators of properties for 12 personal injuries and property damage associated with releases of, or actual or alleged exposure to, such substances. We are not aware of any environmental laws that will materially affect our earnings or competitive position, or result in material capital expenditures relating to our restaurants.
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.
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.
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.
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.
We promote these new menu additions through various social media platforms, our website and in-restaurant signage. We offer guests our monthly limited-time offer promotions which feature premium, seasonal, and limited-availability ingredients. Most premium items are priced the same as standard menu items, thereby offering significant value to our guests.
We promote these new menu additions through various social media platforms, our website and in-restaurant signage. We offer guests our limited-time offer promotions which feature premium, seasonal, and limited-availability ingredients. Most premium items are priced the same as standard menu items, thereby offering significant value to our guests.
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.
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.
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 11 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.
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.
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.
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 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 2025, we sourced through the following two major Japanese-related distributors: JFC International Inc.
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.
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 $3.79, which appeals to guests with appetites and budgets both large and small.
We limit the amount of time that our dishes remain on the revolving conveyor belt to two hours, which is shorter than the time required by local health authorities where we operate our restaurants. Once the RFID or QR Code tag on Mr.
We limit the amount of time that our dishes remain on the revolving conveyor belt to two hours, which is shorter than the time required by local health authorities where we operate our restaurants. Once the QR Code tag on Mr.
At Kura Sushi, we leverage the disciplined operational expertise honed over the more than 40-year history of Kura Japan to help us achieve strong restaurant-level economics.
At Kura Sushi, we leverage the disciplined operational expertise honed over the more than 45-year history of Kura Japan to help us achieve strong restaurant-level economics.
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.
On average, our restaurants opened during fiscal year 2025 required a cash build-out cost of approximately $2.5 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.
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.
For our office employees, we have work from home flexibility. For our restaurant employees, we continue to maintain our increased cleaning protocols and provide additional personal protective equipment.
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.
Our purchases from Mutual were 32% and 34% of our total food and beverage cost for fiscal year 2025 and 2024, and were not significant for fiscal year 2023. 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.
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.
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 650 restaurants internationally and 45 years of brand history.
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.
Human Capital Resources As of August 31, 2025, we had approximately 3,900 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.
Kura Japan’s combined ownership of Class A common stock and Class B common stock represents 70% of the combined voting power of our equity interests.
Kura Japan’s combined ownership of Class A common stock and Class B common stock represents 67% of the combined voting power of our equity interests.
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.
Fresh 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.
(“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.
(“JFC”), a subsidiary of Kikkoman Corporation, and Mutual Trading Co., Inc. (“Mutual”). Our spend with JFC accounted for 58%, 55%, and 49% of total food and beverage costs for fiscal years 2025, 2024, and 2023, respectively.
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.
Kura Sushi opened its first restaurant in Irvine, California in 2009, and currently operates 82 restaurants across 22 U.S. 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.
Cultivating and maintaining our culture is a key focus and fosters retention and engagement of our members. Our core values and purpose reflect who we are and how our employees interact with one another, as well as with our guests and other external stakeholders. Diversity, Equity, Inclusion and Belonging is a key initiative for us.
Cultivating and maintaining our culture is a key focus and fosters retention and engagement of our members. Our core values and purpose reflect who we are and how our employees interact with one another, as well as with our guests and other external stakeholders.
We also seek to delight and reward our guests for achieving dining milestones with short anime videos and a rotating selection of small toys from our Bikkura-Pon rewards machines.
We also seek to delight and reward our guests for achieving dining milestones with short anime videos and a rotating selection of small toys from our Bikkura-Pon rewards machines. Our proprietary tableside Bikkura-Pon rewards machine dispenses a toy after guests reach certain dining milestones.
We use our current point-of-sale system to tally food consumption and produce the final bill. All credit card transactions are processed through third-party terminals using secure network and processing systems. Transaction data is used to generate customizable reports that our restaurant managers, operations team, and senior management use to analyze sales, product mix, and check averages.
All credit card transactions are processed through third-party terminals using secure network and processing systems. Transaction data is used to generate customizable reports that our restaurant managers, operations team, and senior management use to analyze sales, product mix, and check averages.
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.
Our human capital objectives include attracting, developing, motivating, rewarding, and retaining our existing and new employees. We are committed to providing equal opportunities and building a diverse and inclusive workplace. We provide inclusive leadership training for our employees and our interview processes focus on enhancing opportunity 10 and development for candidates.
We will continue to manage our menu and pricing as part of our overall strategy to drive traffic and increase average check. We continue to explore initiatives to increase off-premises sales, enhance our rewards program, and improve our mobile application.
We will continue to manage our menu and pricing as part of our overall strategy to drive traffic and increase average check. We continue to explore initiatives to increase off-premises sales, enhance our rewards program, and improve our mobile application. Our rewards program tracks participants’ spending and provides a discount voucher if a spending threshold is achieved. Increase Profitability.
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.
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. We use our current point-of-sale system to tally food consumption and produce the final bill.
Fresh dome, developed by Kura Japan, to protect each plate on the revolving conveyor belt. The Mr. Fresh dome is a plastic cover that opens when a guest selects the plate beneath the dome; • Revolving Conveyor Belt Time Limit.
Fresh dome, developed by Kura Japan, to protect each plate on the revolving conveyor belt keeping food fresh by limiting exposure to airborne contaminants. • Revolving Conveyor Belt Time Limit.
Our rewards program, which has been rolled out across our entire restaurant base, tracks participants’ spending and provides a discount voucher if a spending threshold is achieved. Increase Profitability. During our expansion, we have invested in our infrastructure and personnel, which we believe positions us to continue to scale our business operations.
During our expansion, we have invested in our infrastructure and personnel, which we believe positions us to continue to scale our business operations.
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We strive to offer an atmosphere of inclusion and belonging for all. We believe the cultural alignment we cultivate around respect and inclusion builds trust and promotes teamwork to achieve our common goals.
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Furthermore, when our employees feel valued and respected for their worth as individuals, they are better able to maximize their potential at work and more likely to share their perspectives, opinions and ideas, which contributes to our ability to innovate.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

52 edited+4 added−11 removed244 unchanged
Biggest changeIn addition, we filed registration statements on Form S-8 under the Securities Act whereby 1,350,000 shares of Class A common stock are reserved for issuance under our 2018 Incentive Compensation Plan. In the future, we may also issue common stock or other securities.
Biggest changeShares of our Class A common stock and Class B common stock held by our affiliates are subject to the volume and other restrictions of Rule 144 under the Securities Act. 30 In addition, we filed registration statements on Form S-8 under the Securities Act whereby 1,350,000 shares of Class A common stock are reserved for issuance under our 2018 Incentive Compensation Plan.
Our amended and restated certificate of incorporation and amended and restated bylaws each contain an exclusive forum provision providing that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for: (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by, or other wrongdoing by, any of our directors, officers, employees, agents or stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws, or (iv) any action asserting a claim that is governed by the internal affairs doctrine.
Our amended and restated certificate of incorporation and amended and restated bylaws each contain an exclusive forum provision providing that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for: (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by, or other wrongdoing by, any of our directors, officers, employees, agents or stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws, or (iv) 31 any action asserting a claim that is governed by the internal affairs doctrine.
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.
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, equipment 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.
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 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 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.
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.
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.
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.
There are types of losses we may incur that cannot be insured against or that we believe are not economically reasonable to insure, such as losses due to natural disasters, acts of terrorism or the declaration of war. Such losses could have a material adverse effect on our business, financial condition or results of operations.
There are types of losses we may incur that cannot be insured against or that we believe are not economically reasonable to insure, such as losses due to natural disasters, acts of terrorism or the declaration of war. Such losses 28 could have a material adverse effect on our business, financial condition or results of operations.
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.
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.
Our directors and officers who have interests in both Kura Japan and us may also face conflicts of interest with regard to the allocation of their time between Kura Japan and us. 33 The corporate opportunity provisions in our amended and restated certificate of incorporation could enable Kura Japan to benefit from corporate opportunities that might otherwise be available to us.
Our directors and officers who have interests in both Kura Japan and us may also face conflicts of interest with regard to the allocation of their time between Kura Japan and us. The corporate opportunity provisions in our amended and restated certificate of incorporation could enable Kura Japan to benefit from corporate opportunities that might otherwise be available to us.
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.
In addition, our success depends in part upon our ability to attract, motivate and retain a 26 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.
In our kitchens, we use automated equipment and systems such as sushi robots, RFID and QR Code readers, robotic arms, vinegar mixing machines, rice washers and dishwashers. Our ability to safely, efficiently and effectively manage our restaurants depends significantly on the reliability and capacity of these systems.
In our kitchens, we use automated equipment and systems such as sushi robots, QR Code readers, robotic arms, vinegar mixing machines, rice washers and dishwashers. Our ability to safely, efficiently and effectively manage our restaurants depends significantly on the reliability and capacity of these systems.
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.
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.
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.
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.
Significant additional government-imposed increases in the following areas could materially affect our business, financial condition or operating results: minimum wages; tips and gratuities; mandatory health benefits; vacation accruals; paid leaves of absence, including paid sick leave; and tax reporting.
Significant additional government-imposed increases in the following areas could materially affect our business, financial condition or operating results: minimum wages; tips and gratuities; mandatory health benefits; vacation accruals; paid leaves of 27 absence, including paid sick leave; and tax reporting.
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.
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 32 of a majority of independent directors and our Compensation Committee is composed entirely of independent directors.
Our ability to operate new restaurants profitably and increase average restaurant sales and comparable restaurant sales will depend on many factors, some of which are beyond our control, including: consumer awareness and understanding of our brand and our revolving sushi bar concept; general economic conditions, which can affect restaurant traffic, local labor costs and prices we pay for the food products and other supplies we use; changes in consumer preferences and discretionary spending; competition, either from our competitors in the restaurant industry or our own restaurants; temporary and permanent site characteristics of new restaurants; and changes in government regulation.
Our ability to operate new restaurants profitably and increase average restaurant sales and comparable restaurant sales will depend on many factors, some of which are beyond our control, including: consumer awareness and understanding of our brand and our revolving sushi bar concept; general economic conditions, including inflationary pressures, which can affect restaurant traffic, local labor costs and prices we pay for the food products and other supplies we use; changes in consumer preferences and discretionary spending; competition, either from our competitors in the restaurant industry or our own restaurants; temporary and permanent site characteristics of new restaurants; and changes in government regulation.
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.
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.
Our indebtedness to Kura Japan may limit our ability to be acquired by a third party or acquire a third party. Our Revolving Credit Agreement (“Credit Facility”) with Kura Japan dated April 10, 2020 and amended on September 2, 2020 and April 9, 2021, provides for a $45.0 million revolving credit line.
Our indebtedness to Kura Japan may limit our ability to be acquired by a third party or acquire a third party. Our Revolving Credit Agreement (“Credit Facility”) with Kura Japan dated April 10, 2020 and amended on September 2, 2020, April 9, 2021 and April 4, 2025, provides for a $45.0 million revolving credit line.
As of the date of this report, Kura Japan controls 70% of the combined voting power of our equity interests through their ownership of both Class A common stock and Class B common stock, and effectively controls the outcome of matters submitted to stockholders that require a majority vote based on our outstanding equity interests.
As of the date of this report, Kura Japan controls 67% of the combined voting power of our equity interests through their ownership of both Class A common stock and Class B common stock, and effectively controls the outcome of matters submitted to stockholders that require a majority vote based on our outstanding equity interests.
In 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.
In fiscal year 2025, 2024 and 2023, 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.
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.
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 result of factors beyond our control, such as general economic conditions, including new tariff policies, 21 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.
We incur costs and expend other resources in our marketing efforts on new menu items, advertising campaigns and restaurant designs and remodels to raise brand awareness and attract and retain guests. These initiatives may not be successful, resulting in expenses incurred without the benefit of higher sales.
We also incur other costs and expend other resources in our marketing efforts on new menu items, advertising campaigns and restaurant designs and remodels to raise brand awareness and attract and retain guests. These initiatives may not be successful, resulting in expenses incurred without the benefit of higher sales or increased brand recognition.
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.
As of August 31, 2025 and 2024, we had no outstanding balance and $45.0 million available under our Credit Facility. In the future, we may, from time to time, incur additional indebtedness under our Credit Facility.
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.
On average, our restaurants opened during fiscal year 2025 required a cash build-out cost of approximately $2.5 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. 47% 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. Approximately 44% of our restaurants are located in California and Texas.
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 ours is a consumer-based business, certain changes in macroeconomic and societal conditions including an economic slowdown, political instability, changing U.S. and global trade policy, 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 .
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 marketing efforts rely heavily on the use of social media. 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.
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.
JFC provided us with food products and supplies equaling 58%, 55%, and 49% of our total food and beverage costs in fiscal years 2025, 2024, and 2023 respectively.
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.
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, 2025, 11,110,742 shares of Class A common stock and 1,000,050 shares of Class B common stock are outstanding, and 591,421 shares of Class A common stock will be issuable upon the exercise of outstanding stock options.
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.
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.
Changes in economic conditions could materially affect our ability to maintain or increase sales at our restaurants or open new restaurants. The restaurant industry depends on consumer discretionary spending.
Changes in economic conditions including changes in U.S. or global trade policy could materially affect our ability to maintain or increase sales at our restaurants or open new restaurants. The restaurant industry depends on consumer discretionary spending.
If restaurant sales decrease, our profitability could decline as we spread fixed costs across a lower level of sales. Reductions in staff levels, asset impairment charges and potential restaurant closures could result from prolonged negative restaurant sales, which could materially adversely affect our business, financial condition or results of operations.
If restaurant sales decrease, our profitability could decline as we spread fixed costs across a lower level of sales, which could result in asset impairment charges and potential restaurant closures that materially adversely affects our business, financial condition or results of operations.
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.
As of August 31, 2025, we had federal net operating loss carryforwards of approximately $39.6 million and federal tax credit carryover of approximately $10.3 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.
The number of new shares of our common stock issued in connection with raising additional capital could constitute a material portion of the then outstanding shares of our common stock and dilute our current stockholders.
In the future, we may also issue common stock or other securities. The number of new shares of our common stock issued in connection with raising additional capital could constitute a material portion of the then outstanding shares of our common stock and dilute our current stockholders.
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.
We also rely on Mutual which provided us with food products and supplies equaling 32% and 34% of our total food and beverage costs in fiscal year 2025 and 2024, and was not significant in 2023.
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.
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.
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 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. Governmental regulation may adversely affect our ability to open new restaurants or otherwise adversely affect our business, financial condition or results of operations.
Various federal and state labor laws govern the relationship with our employees and affect operating costs. These laws include employee classification as exempt/non-exempt for overtime and other purposes, minimum wage requirements, tips and gratuity payments, unemployment tax rates, workers’ compensation rates, immigration status and other wage and benefit requirements.
These laws include employee classification as exempt/non-exempt for overtime and other purposes, minimum wage requirements, tips and gratuity payments, unemployment tax rates, workers’ compensation rates, immigration status and other wage and benefit requirements.
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.
Changes in such areas, particularly in California, 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.
As information security laws and regulations change and cyber risks evolve, we may incur additional costs to ensure we remain in compliance and protect guest, employee and Company information.
We could also be subjected to litigation, regulatory investigations or the imposition of penalties. As information security laws and regulations change and cyber risks evolve, we may incur additional costs to ensure we remain in compliance and protect guest, employee and Company information.
In fiscal year 2021 Kura Japan purchased 126,500 shares of our Class A common stock as part of a secondary underwritten public offering of 1,265,000 shares of our Class A common stock. There is no guarantee that if we need to raise any additional capital, we will receive additional capital contributions from Kura Japan.
In fiscal year 2023 and fiscal year 2025, we completed public offerings of 1,265,000 shares of our Class A common stock and 800,328 shares of our Class A common stock, respectively. There is no guarantee that if we need to raise any additional capital, we will receive additional capital contributions from Kura Japan.
Sales in our restaurants could decline if consumers choose to dine out less frequently or reduce the amount they spend on meals while dining out. Negative economic conditions might cause consumers to make long-term changes to their discretionary spending behavior, including dining out less frequently on a permanent basis.
As a result, sales in our restaurants could decline if consumers choose to dine out less frequently or reduce the amount they spend on meals while dining out, including dining out less frequently on a permanent basis.
We also continue to invest in other digital marketing initiatives that allow us to reach our guests across multiple digital channels and build their awareness of, engagement with, and loyalty to our brand. These initiatives may not be successful, resulting in expenses incurred without the benefit of higher sales or increased brand recognition.
We also continue to invest in other digital marketing initiatives that allow us to reach our guests across multiple digital channels and build their awareness of, engagement with, and loyalty to our brand.
Our quarterly operating results may fluctuate significantly and could fall below the expectations of securities analysts and investors due to seasonality and other factors, some of which are beyond our control, resulting in a decline in our stock price.
In addition, if we issue additional shares of Class B common stock in the future, there will be further dilution to investors or potential future purchasers of our Class A common stock. 29 Our quarterly operating results may fluctuate significantly and could fall below the expectations of securities analysts and investors due to seasonality and other factors, some of which are beyond our control, resulting in a decline in our stock price.
Although we require all workers to provide us with government-specified documentation evidencing their employment eligibility, some of our employees may, without our knowledge, be unauthorized workers.
Although we require all workers to provide us with government-specified documentation evidencing their employment eligibility, some of our employees may, without our knowledge, be unauthorized workers. We currently participate in the “E-Verify” program, an Internet-based, free program run by the U.S. government to verify employment eligibility, in states in which participation is required.
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.
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.
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.
Our brand’s reputation and image as an employer could also be harmed by these types of security breaches or regulatory violations. 24 Our inability or failure to recognize, respond to and effectively manage the accelerated impact of social media and other digital platforms, and the overall success of our marketing programs, could materially adversely impact our business, financial condition or results of operations.
Restricted securities may not be sold in the public market unless the sale is registered under the Securities Act or an exemption from registration is available. Shares of our Class A common stock and Class B common stock held by our affiliates are subject to the volume and other restrictions of Rule 144 under the Securities Act.
Restricted securities may not be sold in the public market unless the sale is registered under the Securities Act or an exemption from registration is available.
These provisions create the possibility that a corporate opportunity that may be pertinent to us may be used for the benefit of Kura Japan. Future sales of our shares by Kura Japan could depress our Class A common stock price.
These provisions create the possibility that a corporate opportunity that may be pertinent to us may be used for the benefit of Kura Japan. Item 1B. Unresolve d Staff Comments None. 33
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.
If we are unable to successfully identify and implement new and emerging technologies, our business could be adversely affected. 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.
The minimum wage, particularly in California, continues to increase and is subject to factors outside of our control. We have a substantial number of hourly employees who are paid wage rates based on the applicable federal, state or local minimum wage.
Changes in employment laws may adversely affect our business, financial condition, or results of operations. Various federal and state labor laws govern the relationship with our employees and affect operating costs particularly because we have a substantial number of hourly employees who are paid wage rates based on the applicable federal, state or local minimum wage.
We currently participate in the “E-Verify” program, an Internet-based, free program run by the U.S. government to verify employment eligibility, in states in which participation is required, and we plan to introduce its use across all our restaurants. However, use of the “E-Verify” program does not guarantee that we will properly identify all applicants who are ineligible for employment.
However, use of the “E-Verify” program does not guarantee that we will properly identify all applicants who are ineligible for employment.
Removed
Our brand’s reputation and image as an employer could also be harmed by these types of security breaches or regulatory violations. 24 Our marketing programs may not be successful, and our new menu items, advertising campaigns and restaurant designs and remodels may not generate increased sales or profits.
Added
The introduction of or changes to tariffs or adverse impacts resulting from restrictive trade policies or trade disputes on imported food products, such as produce and seafood, and/or construction and equipment could increase our costs and possibly impact the supply of those products and our restaurant operating costs.
Removed
Additionally, some of our competitors have greater financial resources, which enable them to spend significantly more on marketing and advertising and other initiatives than we are able to.
Added
On a broader scale, shifts in U.S. trade policy and retaliatory measures by global trade partners may lead to widespread economic effects, including increased consumer prices and a reduction in discretionary income.
Removed
Should our competitors increase spending on marketing and advertising and other initiatives or our marketing funds decrease for any reason, or should our advertising, promotions, new menu items and restaurant designs and remodels be less effective than our competitors, there could be a material adverse effect on our business, financial condition or results of operations.
Added
Additionally, as technology systems continue to evolve and as consumers adopt new technologies, such as the use of artificial intelligence, we may need to enhance our systems or modify our strategies in order to remain relevant in our industry and to our guests.
Removed
Any of federally-mandated, state-mandated or municipality-mandated minimum wages may be raised in the future which would increase our labor costs and could have a materially adverse effect on our business, financial condition or results of operations.
Added
In fiscal year 2021 Kura Japan purchased 126,500 shares of our Class A common stock as part of a secondary underwritten public offering of 1,265,000 shares of our Class A common stock.
Removed
As a publicly traded company, we are required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which requires management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of internal controls over financial reporting.
Removed
To comply with the requirements of being a public company, we may need to undertake various actions, such as implementing new internal controls and procedures and hiring additional accounting or internal audit staff.
Removed
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.
Removed
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.
Removed
In addition, if we issue additional shares of Class B common stock in the future, there will be further dilution to investors or potential future purchasers of our Class A common stock.
Removed
Kura Japan may sell all or a portion of the shares of our Class A common stock and Class B common stock that it owns (which shares of Class B common stock would be converted automatically into Class A shares in connection with any sale).
Removed
Sales by Kura Japan in the public market could depress our Class A common stock price. Kura Japan is not subject to any contractual obligation to maintain its ownership position in our shares. Item 1B. Unresolve d Staff Comments None.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeIn addition, management will update the board of directors, as necessary, regarding any significant cybersecurity incidents that we may experience. Our management team is responsible for assessing and managing our material risks from cybersecurity threats. The team has primary responsibility for our overall cybersecurity risk management program and supervises both our internal cybersecurity personnel and our external cybersecurity consultants.
Biggest changeThe board of directors receives quarterly reports from management regarding the status of the cybersecurity risk management program, current activities, planned projects, and security assessments. In addition, management will update the board of directors, as necessary, regarding any significant cybersecurity incidents that we may experience. Our management team is responsible for assessing and managing our material risks from cybersecurity threats.
Our cybersecurity risk management program includes: 34 • Ongoing risk assessments to help identify material cybersecurity risks to our critical systems and information by performing regular scans of our environment, assessing incident trends and engaging third parties to assess the effectiveness of our cybersecurity practices; • The use of external service providers, where appropriate, to monitor, identify, assess, test and remediate, or otherwise assist with aspects of our security controls; • Mandatory cybersecurity awareness training for employees and simulated phishing attacks; • A disaster recovery and business-continuity plan and controls designed to protect against business interruption, including the backing up of our critical systems; • A cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents, internal reporting to management and the board of directors; • Cybersecurity insurance which is assessed annually; and • Risk management process for service providers, suppliers, and vendors.
Our cybersecurity risk management program includes: • Ongoing risk assessments to help identify material cybersecurity risks to our critical systems and information by performing regular scans of our environment, assessing incident trends, internal assessments and engaging third parties to assess the effectiveness of our cybersecurity practices; • The use of external service providers, where appropriate, to monitor, identify, assess, test and remediate, or otherwise assist with aspects of our security controls; • Mandatory cybersecurity awareness training for employees and simulated phishing attacks; • A disaster recovery and business-continuity plan and controls designed to protect against business interruption, including the backing up of our critical systems; • A cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents, internal reporting to management and the board of directors; • Cybersecurity insurance which is assessed annually; and • Risk management process for service providers, suppliers, and vendors.
Additional information on cybersecurity risks is discussed in Part I, Item 1A, “Risk Factors,” under the heading “We rely significantly on information technology and cybersecurity, and any material failure, weakness, interruption or breach of security could prevent us from effectively operating our business.”
Additional information on cybersecurity risks is discussed in Part I, Item 1A, “Risk Factors,” under the heading “We rely significantly on information technology and cybersecurity, and any material failure, weakness, interruption or breach of security could prevent us from effectively operating our business.” 34
Item 1C. Cybersecurit y Risk Management and Strategy Our cybersecurity program is designed to monitor and control cybersecurity risk exposure, response, mitigation and protect the confidentiality and integrity of our critical systems and information. Our cybersecurity policies and processes are fully integrated into the Company's Enterprise Risk Management program.
Item 1C. Cybersecurit y Risk Management and Strategy Our cybersecurity risk management program is designed to monitor and control cybersecurity risk exposure, response, mitigation and protect the confidentiality, integrity and availability of our critical systems and information. Our cybersecurity policies and processes are fully integrated into the Company's Enterprise Risk Management program.
Our cybersecurity program is based on industry recognized best practices, including the ISO 27001 Information Security, Cybersecurity and Privacy protection international best practice standard.
Our cybersecurity program is based on industry recognized best practices, including the ISO 27001 Information Security, Cybersecurity and Privacy protection international best practice standards.
Cybersecurity Governance Our board of directors considers cybersecurity risk as part of its risk oversight function and oversees management’s implementation of our cybersecurity risk management program, including the steps taken to monitor, minimize or control such risks or exposures. The board of directors receives quarterly reports from management regarding the status of the cybersecurity program, current activities and planned projects.
Cybersecurity Governance Our board of directors considers cybersecurity risk as part of its risk oversight function and oversees management’s implementation of our cybersecurity risk management program, including the steps taken to monitor, minimize or control such risks or exposures.
Our management team’s cybersecurity risk management is led by our Vice President of IT, who has over 20 years of experience in both restaurant and technology sectors and has held technology leadership roles at major national restaurant companies.
These individuals have collectively over 50 years of experience in both restaurant and technology sectors and have held technology leadership roles at national restaurant companies.
Added
The team has primary responsibility for our overall cybersecurity risk management program and supervises both our internal cybersecurity personnel and our external cybersecurity consultants. Our cybersecurity risk management team is led by our VP IT Security Compliance and our Head of IT .

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe majority of our restaurant leases have lease terms of twenty years, inclusive of customary extensions which are at our option. Our restaurant leases generally require us to pay a proportionate share of real estate taxes, insurance, common area maintenance charges, and other operating costs.
Biggest changeThe majority of our restaurant leases have lease terms of twenty years, inclusive of customary extensions which are at our option. Our restaurant leases generally require us to pay a proportionate share of real estate taxes, insurance, common area maintenance charges, and other operating costs. Some restaurant leases provide for contingent rental payments based on sales thresholds.
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.
Item 2. Properties As of August 31, 2025, we operate 79 restaurants in 22 U.S. 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. 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.
Added
We lease the property for our corporate offices and warehouse located in Irvine and Huntington Beach, California, respectively, and all of the properties on which we operate our restaurants.
Removed
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.
Added
The table below shows the locations of our restaurants as of August 31, 2025: Location Number of Restaurants Arizona 3 California 21 Colorado 1 Florida 4 Georgia 3 Illinois 4 Indiana 1 Maryland 1 Massachusetts 3 Michigan 2 Minnesota 1 Missouri 1 Nevada 1 New Jersey 5 New York 4 Ohio 1 Oregon 1 Pennsylvania 2 Texas 14 Utah 1 Virginia 1 Washington 3 Washington, D.C. 1 Total 79 We are obligated under non-cancelable leases for the majority of our restaurants, as well as our corporate offices.
Removed
Some restaurant leases provide for contingent rental payments based on sales thresholds, although we generally do not expect to pay significant rent on these properties based on the thresholds in those leases.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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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
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. 35 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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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.
Biggest changeTotal Return Analysis 8/31/2020 8/31/2021 8/31/2022 8/31/2023 8/31/2024 8/31/2025 Kura Sushi USA, Inc. $ 100.00 $ 415.79 $ 611.78 $ 714.98 $ 540.02 $ 694.03 Nasdaq Composite $ 100.00 $ 129.59 $ 100.35 $ 119.19 $ 150.43 $ 182.21 S&P 600 Restaurants Index $ 100.00 $ 138.77 $ 92.98 $ 104.59 $ 99.57 $ 128.25 Recent Sales of Unregistered Securities During fiscal year 2025, we did not sell any securities without registration under the Securities Act of 1933.
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
Issuer Purchases of Equity Securities We did not repurchase any of our equity securities during fiscal year 2025. 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
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.
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 31, 2020 through August 31, 2025 of the cumulative return of our common stock, the Nasdaq Composite Index and the S&P 600 Restaurants Index.
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.
The graph assumes investment of $100 on August 31, 2020 in our common stock and in each of the two indices and the reinvestment of dividends.
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.
Holders of Record As of November 3, 2025, we had two 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 changeFiscal 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.
Biggest changeFiscal Years Ended August 31, 2025 2024 $ Change % Change (dollar amounts in thousands) Sales $ 282,763 $ 237,860 $ 44,903 18.9 % Restaurant operating costs: Food and beverage costs 80,772 69,509 11,263 16.2 Labor and related costs 93,014 76,614 16,400 21.4 Occupancy and related expenses 21,002 16,792 4,210 25.1 Depreciation and amortization expenses 13,598 11,362 2,236 19.7 Other costs 40,943 34,060 6,883 20.2 Total restaurant operating costs 249,329 208,337 40,992 19.7 General and administrative expenses 37,747 39,050 (1,303 ) (3.3 ) Depreciation and amortization expenses 448 425 23 5.4 Impairment of long-lived assets — 1,553 (1,553 ) (100 ) Total operating expenses 287,524 249,365 38,159 (78 ) Operating loss (4,761 ) (11,505 ) 6,744 (58.6 ) Other expense (income): Interest expense 70 47 23 48.9 Interest income (3,102 ) (2,915 ) (187 ) 6.4 Loss before income taxes (1,729 ) (8,637 ) 6,908 (80.0 ) Income tax expense 175 167 8 4.8 Net loss $ (1,904 ) $ (8,804 ) $ 6,900 (78.4 ) % Fiscal Years Ended August 31, 2025 2024 (as a percentage of sales) Sales 100.0 % 100.0 % Restaurant operating costs Food and beverage costs 28.6 29.2 Labor and related costs 32.9 32.2 Occupancy and related expenses 7.4 7.1 Depreciation and amortization expenses 4.8 4.8 Other costs 14.5 14.3 Total restaurant operating costs 88.2 87.6 General and administrative expenses 13.3 16.4 Depreciation and amortization expenses 0.2 0.2 Impairment of long-lived assets — 1 Total operating expenses 101.7 104.8 Operating loss (1.7 ) (4.8 ) Other expense (income): Interest expense 0.0 0.0 Interest income (1.1 ) (1.2 ) Loss before income taxes (0.6 ) (3.6 ) Income tax expense 0.1 0.1 Net loss (0.7 ) % (3.7 ) % 40 Fiscal Year Ended August 31, 2025 Compared to Fiscal Year Ended August 31, 2024 Sales.
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.
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.
General and administrative expenses include expenses associated with corporate and regional supervision functions that support the operations of existing restaurants and the development of new restaurants, including compensation and benefits, travel expenses, stock-based compensation expenses for corporate-level employees, legal and professional fees, marketing costs, information systems, corporate office rent and other related corporate costs.
General and administrative expenses include expenses associated with corporate and regional supervision functions that support the operations of existing restaurants and development of new restaurants, including compensation and benefits, travel expenses, stock-based compensation for corporate-level employees, legal and professional fees, information systems, corporate office rent and other related corporate costs.
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.
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.
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.
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 47 of operations.
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.
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; closure costs and restaurant impairments; less corporate-level stock-based compensation expense recognized within general and administrative expenses.
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.
Restaurant-level Operating Profit (Loss) margin allows us to evaluate the level of Restaurant-level Operating Profit (Loss) generated from sales. 43 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.
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.
AUVs are calculated by dividing (x) annual sales for the fiscal year presented 44 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 associated period.
We received aggregate net proceeds of $64.3 million after deducting the underwriting discounts and commissions and offering expenses payable by us. The proceeds are to be used for general corporate purposes, including capital expenditures, working capital, and other business purposes.
We received aggregate net proceeds of $64.4 million after deducting the underwriting discounts and commissions and offering expenses payable by us. The proceeds are to be used for general corporate purposes, including capital expenditures, working capital, and other business purposes.
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.
The increase in purchases of property and equipment in fiscal year 2025 is primarily related to capital expenditures for current and future restaurant openings and renovations, maintaining our existing restaurants and other projects.
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.
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 units.
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.
For a discussion of our results of operations comparing fiscal year 2024 to fiscal year 2023 and a discussion of our cash flows for fiscal year 2023, 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, 2024, filed with the SEC on November 8, 2024.
An impairment test is performed on an annual basis or whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. In determining the recoverability of the asset value, an analysis is performed at the individual restaurant level.
An impairment test is performed whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. In determining the recoverability of the asset value, an analysis is performed at the individual restaurant level.
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.
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, 2025 compared to the fiscal year ended August 31, 2024.
The following MD&A includes a discussion comparing our results in fiscal year 2024 to fiscal year 2023.
The following MD&A includes a discussion comparing our results in fiscal year 2025 to fiscal year 2024.
EBITDA, Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP measures which are intended as supplemental measures of our performance and are neither required by, nor presented in accordance with, GAAP.
Adjusted EBITDA margin is defined as Adjusted EBITDA divided by sales. EBITDA, Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP measures which are intended as supplemental measures of our performance and are neither required by, nor presented in accordance with, GAAP.
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 money market funds and investments. Income tax expense.
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.
The following table shows the AUVs for the fiscal years ended August 31, 2025 and August 31, 2024: Fiscal Years Ended August 31, 2025 2024 (amounts in thousands) Average Unit Volumes $ 3,947 $ 4,228 Comparable Restaurant Sales Performance Comparable restaurant sales performance refers to the percent change in year-over-year sales for the comparable restaurant base.
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, stock-based compensation for restaurant-level employees and 38 payroll taxes.
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, occupancy and other operating expenses remained relatively consistent at 7.4% in fiscal year 2025 and 7.1% in fiscal year 2024. Depreciation and amortization expenses.
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.
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 loss to EBITDA, Adjusted EBITDA and Adjusted EBITDA margin for the fiscal years ended August 31, 2025 and August 31, 2024: Fiscal Years Ended August 31, 2025 2024 (amounts in thousands) Net loss $ (1,904 ) $ (8,804 ) Interest income (3,032 ) (2,868 ) Taxes 175 167 Depreciation and amortization 14,046 11,787 EBITDA 9,285 282 Stock-based compensation expense (a) 4,735 4,314 Non-cash lease expense (b) 2,731 2,965 Impairment of long-lived assets (c) — 1,553 Litigation (d) 2,314 5,450 Adjusted EBITDA $ 19,065 $ 14,564 Adjusted EBITDA margin 6.7 % 6.1 % _______________ (a) Stock-based compensation expense includes non-cash stock-based compensation, which is comprised of restaurant-level stock-based compensation included in labor and related costs 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.
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.
We expect to open 16 new restaurants in fiscal year 2026 and therefore, we expect our revenue and restaurant operating costs to increase in fiscal year 2026. We also expect our general and administrative expenses to increase on a dollar basis in fiscal year 2026 to support the growth of the company.
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.
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 2025, we opened 15 restaurants and expanded our restaurant base to 79 restaurants in 22 U.S. states and Washington, DC as of fiscal year end 2025.
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.
We believe that cash provided by operating activities, cash on hand, cash equivalents and short-term investments will be sufficient to fund our lease obligations, capital expenditures and working capital needs for at least the next 12 months.
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.
The following table shows the comparable restaurant sales performance for the fiscal years ended August 31, 2025 and August 31, 2024: Fiscal Years Ended August 31, 2025 2024 Comparable restaurant sales performance (%) (1.3 )% 0.7 % Comparable restaurant base 57 43 45 Number of Restaurant Openings The number of restaurant openings reflects the number of restaurants opened during a particular reporting period.
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 following table reconciles operating loss to Restaurant-level Operating Profit and Restaurant-level Operating Profit margin for the fiscal years ended August 31, 2025 and August 31, 2024: Fiscal Years Ended August 31, 2025 2024 (amounts in thousands) Operating loss $ (4,761 ) $ (11,505 ) Depreciation and amortization 14,046 11,787 Stock-based compensation expense (a) 4,735 4,314 Pre-opening costs (b) 1,565 3,165 Non-cash lease expense (c) 2,731 2,965 Impairment of long-lived assets (d) — 1,553 General and administrative expenses 37,747 39,050 Corporate-level stock-based compensation included in general and administrative expenses (3,942 ) (3,626 ) Restaurant-level operating profit $ 52,121 $ 47,703 Operating loss margin (1.7 )% (4.8 )% Restaurant-level operating profit margin 18.4 % 20.1 % _______________ (a) Stock-based compensation expense includes non-cash stock-based compensation, which is comprised of restaurant-level stock-based compensation included in labor and related costs 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.
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.
Occupancy and related expenses were $21.0 million for fiscal year 2025 compared to $16.8 million for fiscal year 2024, representing an increase of $4.2 million, or 25.1%. This increase was primarily a result of additional lease expense incurred with respect to 15 new restaurants that opened during fiscal year 2025.
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 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.
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.
EBITDA and Adjusted EBITDA EBITDA is defined as net income (loss) before interest, income taxes and depreciation and amortization. Adjusted EBITDA is defined as EBITDA plus stock-based compensation expense, non-cash lease, closure costs and restaurant impairments, as well as certain items, such as litigation, that we believe are not indicative of our core operating results.
On April 13, 2023, we completed an underwritten public offering of common stock pursuant to our universal shelf registration statement on Form S-3, selling an aggregate of 1,265,000 shares of Class A common stock, including the exercise in full of the underwriters’ option to purchase 165,000 additional shares, at the price of $54.00 per share less an underwriting discount of $2.70 per share.
On November 13, 2024, we completed an underwritten public offering of common stock pursuant to our universal shelf registration statement on Form S-3, selling an aggregate of 800,328 shares of Class A common stock, including the exercise in full of the underwriters’ option to purchase 104,390 additional shares, at the price of $85.00 per share less an underwriting discount of $4.25 per share.
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.
As a percentage of sales, food and beverage costs decreased to 28.6% in fiscal year 2025, as compared to 29.2% in fiscal year 2024, primarily due to increases in menu prices and supply chain initiatives, which was partially offset by food cost inflation. Labor and related costs.
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.
Labor and related costs were $93.0 million for fiscal year 2025 compared to $76.6 million for fiscal year 2024, representing an increase of $16.4 million, or 21.4%. This increase in labor and related costs was primarily driven by additional labor costs incurred from 15 new restaurants opened during fiscal year 2025 coupled with wage rate increases during the same period.
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.
We include restaurants in the comparable restaurant base that have been in operation for at least 18 full calendar months by the end of the accounting period presented due to new restaurants experiencing a period of higher sales upon opening. For restaurants that were temporarily closed the comparative period was also adjusted accordingly.
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.
Food and beverage costs were $80.8 million for fiscal year 2025 compared to $69.5 million for fiscal year 2024, representing an increase of $11.3 million, or 16.2%. This increase was primarily driven by costs associated with sales from 15 new restaurants opened during fiscal year 2025.
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.
We believe the following incremental borrowing rates and impairment of long-lived assets estimate are affected by significant judgments and estimates used in the preparation of our financial statements and that the judgments and estimates are reasonable.
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.
As a percentage of sales, labor and related costs increased to 32.9% in fiscal year 2025, compared to 32.2% in fiscal year 2024. The increase in cost as a percentage of sales was primarily due to increases in wage rates subsequent to August 31, 2024, partially offset by increases in menu prices and operational efficiencies. Occupancy and related expenses.
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.
Interest income was $3.1 million for fiscal year 2025 and $2.9 million for fiscal year 2024. The increase was primarily driven by investing our net cash proceeds from our $64.3 million follow-on offering completed in November 2024, partially offset by lower interest rates. Income tax expense. Income tax expense was $0.2 million for both fiscal years 2025 and 2024.
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.
This decrease was primarily due to $3.1 million in lower litigation settlement costs and $0.9 million in lower professional fees, partially offset by an increase in compensation-related costs of $2.3 million due to additional headcount and $0.3 million in other costs.
The key measures for determining how our business is performing include sales, EBITDA, Adjusted EBITDA, Restaurant-level Operating Profit, Restaurant-level Operating Profit margin, Average Unit Volumes (“AUVs”), comparable restaurant sales performance, and the number of restaurant openings. Sales Sales represents sales of food and beverages in restaurants, as shown on our statements of operations and comprehensive income (loss).
Key Performance Indicators In assessing the performance of our business, we consider a variety of financial and performance measures. The key measures for determining how our business is performing include sales, EBITDA, Adjusted EBITDA, Restaurant-level Operating Profit, Restaurant-level Operating Profit margin, Average Unit Volumes (“AUVs”), comparable restaurant sales performance, and the number of restaurant openings.
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.
Cash Flows Used in Investing Activities Net cash used in investing activities during the fiscal year 2025 was $93.7 million, primarily due to $74.7 million in purchases of investments, $46.1 million in purchases of property and equipment, $2.2 million in purchases of liquor licenses and $0.5 million for payments of initial direct costs, offset by $29.8 million of redemption of investments.
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%.
As a percentage of sales, depreciation and amortization expenses at the restaurant-level was 4.8% in both fiscal year 2025 and fiscal year 2024. Depreciation and amortization expenses incurred at the corporate level were $0.4 million for fiscal year 2025 and fiscal year 2024, and as a percentage of sales were both 0.2%. Other costs .
Several factors affect our restaurant sales in any given period including the number of restaurants in operation, guest traffic and average check. EBITDA and Adjusted EBITDA EBITDA is defined as net income (loss) before interest, income taxes and depreciation and amortization.
Sales Sales represents sales of food and beverages in restaurants, as shown on our statements of operations and comprehensive income (loss). Several factors affect our restaurant sales in any given period including the number of restaurants in operation, guest traffic and average check.
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.
The following table shows the growth in our restaurant base for the fiscal years ended August 31, 2025 and August 31, 2024: Fiscal Years Ended August 31, 2025 2024 Restaurant activity: Beginning of period 64 50 Openings 15 14 End of period 79 64 Liquidity and Capital Resources Our primary sources of liquidity and cash flows are cash and cash equivalents on hand and cash provided by operating activities.
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%.
Depreciation and amortization expenses incurred as part of restaurant operating costs were $13.6 million for fiscal year 2025 compared to $11.4 million for fiscal year 2024, representing an increase of $2.2 million or 19.7%. This increase was primarily due to the depreciation of property and equipment related to the opening of 15 new restaurants in fiscal year 2025.
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.
Similar to the food and beverage costs that we incur, labor and related expenses are expected to grow proportionally as our sales grow. 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 by the performance of our restaurants.
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.
Sales were $282.8 million for fiscal year 2025 compared to $237.9 million for fiscal year 2024, representing an increase of $44.9 million, or 18.9%. The increase in sales was primarily driven by the sales resulting from 15 new restaurants opened during fiscal year 2025, as well as increases in menu prices during the same period.
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.
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.
Our 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.
Summary of Cash Flows The following table summarizes our cash flows for the periods presented: Fiscal Years Ended August 31, 2025 2024 (amounts in thousands) Statement of Cash Flow Data: Net cash provided by operating activities $ 24,711 $ 15,612 Net cash used in investing activities (93,725 ) (36,460 ) Net cash provided by financing activities 65,526 2,137 46 Cash Flows Provided by Operating Activities Net cash provided by operating activities during the fiscal year 2025 was $24.7 million, which primarily results from net loss of $1.9 million, non-cash charges of $14.0 million for depreciation and amortization, $4.7 million for stock-based compensation, bond premium amortization of $0.3 million, and net cash inflows of $7.4 million from changes in operating assets and liabilities.
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.
Impairment of long-lived assets was none for fiscal year 2025 and $1.6 million for fiscal year 2024 due to impairment charges related to the property and equipment of one underperforming restaurant location. Interest expense. Interest expense was $70 thousand for fiscal year 2025 and $47 thousand for fiscal year 2024. 41 Interest income.
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.
Cash Flows Provided by Financing Activities Net cash provided by financing activities during fiscal year 2025 was $65.5 million and is primarily due to aggregate net proceeds from the issuance of stock of $64.4 million after deducting the underwriting discounts and commissions and offering expenses, $1.6 million of proceeds from exercise of stock options offset by $0.3 million in tax payments in relation to vested restricted stock units.
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.
Our primary uses of cash are for operational expenditures and capital investments, including new restaurants, costs incurred for restaurant remodels and restaurant fixtures. The significant components of our working capital are liquid assets such as cash, cash equivalents and receivables reduced by accounts payable and accrued 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.
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 credit card processing fees, repairs and maintenance, restaurant-level advertising and promotions, restaurant supplies, royalty payments to Kura Japan, utilities and other restaurant-level expenses. General and administrative expenses.
For restaurants that were temporarily closed for renovations during the year, we make fractional adjustments to sales such that sales are annualized in the associated period. Measuring our comparable restaurant sales performance allows us to evaluate the performance of our existing restaurant base.
Measuring our comparable restaurant sales performance allows us to evaluate the performance of our existing restaurant base.
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%.
As a percentage of sales, other costs remained relatively consistent at 14.5% in fiscal year 2025 compared to 14.3% in fiscal year 2024. General and administrative expenses. General and administrative expenses were $37.7 million for fiscal year 2025 compared to $39.1 million for fiscal year 2024, representing a decrease of $1.4 million, or negative 3.3%.
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.
Comparable restaurant sales decreased 1.3%, consisting of negative traffic of 3.1% and price/mix of 1.8%, for fiscal year 2025 as compared to fiscal year 2024. AUV was $3.9 million for fiscal year 2025 compared to $4.2 million for fiscal year 2024. Food and beverage costs.
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.
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.
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Similar to the food and beverage costs that we incur, labor and related expenses are expected to grow proportionally as our sales grow.
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We have evaluated and will continue to evaluate the impact of import laws and tariffs on our operations. As of August 31, 2025, there was no significant impact on our business, financial condition, results of operations or cash flows.
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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.
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Based on the current economic environment, tariffs are expected to have a considerable impact on our operations in certain areas, such as food and beverage costs, construction and equipment costs and other restaurant operating costs in fiscal year 2026.
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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.
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We have historically used menu price increases to manage profitability in times of inflation or tariff increases, which we expect will partially offset the impact on our operations in fiscal year 2026. See “Part I, Item 1A, “Risk Factors — Risks Related to Our Operations and Growth Strategy”. Key Financial Definitions Sales.
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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.
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Other costs were $40.9 million for the fiscal year 2025 compared to $34.1 million for fiscal year 2024, representing an increase of $6.8 million, or 20.2%. The increase was primarily driven by an increase in costs related to 15 new restaurants opened in fiscal year 2025.
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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.
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As a percentage of sales, general and administrative expenses decreased to 13.3% in fiscal year 2025 from 16.4% in fiscal year 2024, primarily driven by the items mentioned above. Impairment of long-lived assets.
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Summary of Cash Flows Our primary sources of liquidity and cash flows are operating cash flows, cash on hand and short-term investments. We use this to fund investing expenditures for new restaurant openings, reinvest in our existing restaurants, and increase our working capital.
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We also maintain a Revolving Credit Agreement with Kura Japan, of which the maturity date has been extended to April 10, 2028 pursuant to the Third Amendment with Kura Japan. As of August 31, 2025, we had no outstanding borrowings under the Revolving Credit Agreement and have $45.0 million of availability remaining.
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At the commencement of a lease, we determine the appropriate classification as an operating lease or a finance lease. All of our restaurant and office leases are classified as operating leases. Our office leases provide for fixed minimum rent payments.
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As of August 31, 2025, we did not have any material off-balance sheet arrangements.
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Most of our restaurants provide for fixed minimum rent payments and some require additional contingent rent payments based upon sales in excess of specified thresholds. When such sales thresholds are deemed probable, contingent rent is accrued in proportion to the sales recognized in the period.
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Material Cash Requirements As of August 31, 2025, we had an aggregate of approximately $17.2 million in contractual obligations which consisted of $9.8 million related to the construction of new restaurants and $7.4 million in purchase commitments for food related to restaurant operations.
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We recognize rent expense based on the straight-line method for operating leases that include free-rent periods and rent escalation clauses. For the purpose of calculating rent expenses under the straight-line method, the lease term commences on the date we obtain control of the property.
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Operating Leases At inception of a contract, we assess whether the contract is a lease based on whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
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Lease incentives used to fund leasehold improvements are recognized when probable of being earned upon signing the lease and reduce the operating right-of-use asset related to the lease. These incentives are amortized through the operating right-of-use asset as reductions of expense over the lease term.
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Lease classification, measurement, and recognition are determined at lease commencement, which is the date the underlying asset is available for use by us. The accounting classification of a lease is based on whether the arrangement is effectively a financed purchase of the underlying asset (finance lease) or not (operating lease).
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Restaurant lease expense is included in the occupancy and related expenses financial statement line item, while office lease expense is included in general and administrative expenses financial statement line item, on the accompanying financial statements.
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We currently lease all of our restaurant locations and our corporate offices, and all of them are classified as operating leases. For leases with renewal periods at our option, we determine the expected lease period based on whether the renewal of any options is reasonably assured at the inception of the lease.
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As of fiscal year-end August 31, 2024, the Company performed an impairment assessment and determined that the carrying value of an asset group at one individual restaurant may not be recoverable due to underperforming historical and projected future operating results. Based on the impairment testing, the Company recorded impairment charges of $1.6 million related to property and equipment.
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All lease liabilities are measured at the present value of the lease payments not yet paid. To determine the present value of lease payments not yet paid, we estimate the incremental borrowing rates corresponding to the maturities of the leases.

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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 changeTo the extent permitted by competition and the economy, we have mitigated increased costs by increasing menu prices and may continue to do so if deemed necessary in future years. Substantial increases in costs and expenses could impact our operating results to the extent such increases cannot be passed through to our guests.
Biggest changeSignificant numbers of our restaurant personnel are paid at rates related to the federal and/or state minimum wage and, accordingly, increases in the minimum wage increase our labor costs. To the extent permitted by competition and the economy, we have mitigated increased costs by increasing menu prices and may continue to do so if deemed necessary in future years.
While we have been able to partially offset inflation and other changes in the costs of core operating resources by gradually increasing menu prices, coupled with more efficient purchasing practices, productivity improvements and greater economies of scale, there can be no assurance that we will be able to continue to do so in the future.
While we have been able to offset inflation and other changes in the costs of core operating resources by gradually increasing menu prices, coupled with more efficient purchasing practices, productivity improvements and greater economies of scale, there can be no assurance that we will be able to continue to do so in the future.
In 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
In 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. 49
Severe increases in inflation, however, could affect the global and U.S. economies and could have an adverse impact on our business, financial condition or results of operations.
Substantial increases in costs and expenses could impact our operating results to the extent such increases cannot be passed through to our guests. Severe increases in inflation, however, could affect the global and U.S. economies and could have an adverse impact on our business, financial condition or results of operations.
However, substantial increases in costs and expenses could impact our operating results to the extent that menu prices increase or operational adjustments cannot offset such increases. Inflation Risk The primary inflationary factors affecting our operations are food and beverage costs, labor costs, construction costs and energy costs.
However, substantial increases in costs and expenses, including due to changes to tariffs or adverse impacts resulting from restrictive trade policies or trade disputes, could impact our operating results to the extent that menu prices increase or operational adjustments cannot offset such increases.
Our restaurant operations are subject to federal and state minimum wage and other laws governing working conditions, overtime and tip credits. Significant numbers of our restaurant personnel are paid at rates related to the federal and/or state minimum wage and, accordingly, increases in the minimum wage increase our labor costs.
Inflation Risk The primary inflationary factors affecting our operations are food and beverage costs, labor costs, construction costs and energy costs. Our restaurant operations are subject to federal and state minimum wage and other laws governing working conditions, overtime and tip credits.

Other KRUS 10-K year-over-year comparisons