10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 25, 2016

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number 001-37374

Bojangles’, Inc.

(Exact name of registrant as specified in its charter)

Delaware	45-2988924
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
9432 Southern Pine Boulevard Charlotte, North Carolina	28273
(Address of principal executive offices)	(Zip Code)

(704) 527-2675

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒  (Do not check if a smaller reporting company)	Smaller reporting company	☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

As of October 31, 2016, there were 36,373,721 shares of the registrant’s common stock, par value $0.01 per share outstanding.

BOJANGLES’, INC. AND SUBSIDIARIES

INDEX

		Page
	PART I –FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of September 25, 2016 and December 27, 2015 (Unaudited)		1
	Condensed Consolidated Statements of Operations and Comprehensive Income for the thirteen and thirty-nine weeks ended September 25, 2016 and September 27, 2015 (Unaudited)		2
	Condensed Consolidated Statement of Stockholders’ Equity for the thirty-nine weeks ended September 25, 2016 (Unaudited)		3
	Condensed Consolidated Statements of Cash Flows for the thirty-nine weeks ended September 25, 2016 and September 27, 2015 (Unaudited)		4
	Notes to Condensed Consolidated Financial Statements (Unaudited)		5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		37
Item 4.	Controls and Procedures		38
	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings		40
Item 1A.	Risk Factors		40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		41
Item 3.	Defaults Upon Senior Securities		41
Item 4.	Mine Safety Disclosures		41
Item 5.	Other Information		41
Item 6.	Exhibits		41
	Signature		42

i

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Statements made in this Quarterly Report that are not statements of historical or current facts, such as those under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements discuss our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. These statements may be preceded by, followed by or include the words “aim,” “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “intend,” “outlook,” “plan,” “potential,” “project,” “projection,” “seek,” “may,” “could,” “would,” “will,” “should,” “can,” “can have,” “likely,” the negatives thereof and other words and terms of similar meaning.

Forward-looking statements are inherently subject to risks, uncertainties and assumptions; they are not guarantees of performance. You should not place undue reliance on these statements. We have based these forward-looking statements on our current expectations and projections about future events. Although we believe that our assumptions made in connection with the forward-looking statements are reasonable, we cannot assure you that the assumptions and expectations will prove to be correct.

You should understand that the following important factors could affect our future results and could cause those results or other outcomes to differ materially from those expressed or implied in our forward-looking statements:

• our vulnerability to changes in consumer preferences and economic conditions;

• our ability to open restaurants in new and existing markets and expand our franchise system;

• our ability to generate comparable restaurant sales growth;

• our restaurants and our franchisees’ restaurants may close due to financial or other difficulties;

• new menu items, advertising campaigns, changes in discounting strategy and restaurant designs and remodels may not generate increased sales or profits;

• anticipated future restaurant openings may be delayed or cancelled;

• increases in the cost of chicken, pork, dairy, wheat, corn and other products;

• our ability to compete successfully with other quick-service and fast-casual restaurants, including new entrants to the breakfast market and those newly expanding their breakfast menus for all day availability;

• our reliance on our franchisees, who may be adversely impacted by economic conditions and who may incur financial hardships, be unable to obtain credit, need to close their restaurants or declare bankruptcy;

• our ability to support our franchise system;

• our limited degree of control over the actions of our franchisees;

• our potential responsibility for certain acts of our franchisees;

• our vulnerability to conditions in the Southeastern United States;

• negative publicity, whether or not valid;

• concerns about food safety and quality and about food-borne illnesses, including adverse public perception due to the occurrence of avian flu, swine flu or other food-borne illnesses, such as E. coli;

• our dependence upon frequent and timely deliveries of restaurant food and other supplies;

• our reliance upon a limited number of suppliers for substantially all of our restaurant food and other supplies;

• our reliance upon just one third-party distributor for substantially all of our restaurant food and other supplies;

ii

• the adverse impact of economic conditions on our operating results and financial condition, on our ability to comply with the terms and covenants of our debt agreements and on our ability to pay or to refinance our existing debt or to obtain additional financing;

• our ability to protect our name and logo and other intellectual property;

• loss of the abilities, experience and knowledge of our existing directors and officers;

• matters relating to employment and labor laws;

• labor shortages or increases in labor costs;

• the impact of litigation, including wage and hour class action lawsuits;

• our ability and the ability of our franchisees to renew leases at the end of their terms;

• the impact of federal, state or local government regulations relating to the preparation and sale of food, zoning and building codes, employee wages and benefits, and environmental and other matters;

• the fact that we are considered a “controlled company” and exempt from certain corporate governance rules primarily relating to board independence, and we may use some or all of these exemptions;

• the fact that we are a holding company with no operations and will rely on our operating subsidiaries to provide us with funds;

• our expectations regarding the time during which we will be an emerging growth company under the JOBS Act; and

• changes in accounting standards.

In light of these risks and uncertainties, expected results or other anticipated events or circumstances discussed in this Form 10-Q (including the exhibits hereto) might not occur. We undertake no obligation, and specifically decline any obligation, to publicly update or revise any forward-looking statements, even if experience or future developments make it clear that projected results expressed or implied in such statements will not be realized, except as may be required by law.

See the section entitled “Risk Factors” in this Form 10-Q as well as our Annual Report on Form 10-K for the fiscal year ended December 27, 2015 filed with the United States Securities and Exchange Commission (the “SEC”) on March 11, 2016 for a more complete discussion of these risks and uncertainties and for other risks and uncertainties. Those factors and the other risk factors described therein are not necessarily all of the important factors that could cause actual results or developments to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors also could harm our results. Consequently, there can be no assurance that actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, us. Given these uncertainties, investors are cautioned not to place undue reliance on such forward-looking statements.

iii

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

BOJANGLES’, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands, except per share amounts)

	September 25,			December 27,
	2016			2015
Assets
Current assets:
Cash and cash equivalents	$	19,479			14,263
Accounts and vendor receivables, net of allowance for doubtful accounts of $142 and $329		3,889			4,736
Accounts receivable, related parties, net of allowance for doubtful accounts of $22 and $22		428			403
Inventories, net		3,080			3,080
Other current assets		3,504			5,639
Total current assets		30,380			28,121
Property and equipment, net		51,907			48,137
Goodwill		161,140			161,140
Brand		290,500			290,500
Franchise rights, net		24,518			25,341
Favorable leases, net		1,073			1,394
Other noncurrent assets		3,734			3,673
Total assets	$	563,252			558,306
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	14,058			17,893
Accrued expenses		23,850			19,086
Current maturities of long-term debt		—			—
Current maturities of capital lease obligations		6,568			5,968
Other current liabilities		5,795			2,155
Total current liabilities		50,271			45,102
Long-term debt, less current maturities and deferred debt issuance costs, net		168,566			197,735
Deferred income taxes		110,818			115,028
Capital lease obligations, less current maturities		21,906			21,483
Other noncurrent liabilities		13,571			11,834
Total liabilities		365,132			391,182
Commitments and contingencies (notes 2, 11 and 12)		—			—
Stockholders’ equity:
Preferred stock, $0.01 par value; 25,000 shares authorized and no shares issued and outstanding as of both September 25, 2016 and December 27, 2015		—			—
Common stock, $0.01 par value; 150,000 shares authorized and 36,374 and 36,009 shares issued and outstanding as of September 25, 2016 and December 27, 2015, respectively		364			360
Additional paid-in capital		122,660			119,084
Retained earnings		75,555			47,661
Accumulated other comprehensive (loss) income		(459	)		19
Total stockholders’ equity		198,120			167,124
Total liabilities and stockholders’ equity	$	563,252			558,306

See accompanying notes to condensed consolidated financial statements.

1

BOJANGLES’, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations and Comprehensive Income

(Unaudited)

(in thousands, except per share amounts)

	Thirteen Weeks Ended						Thirty-Nine Weeks Ended
	September 25, 2016			September 27, 2015			September 25, 2016			September 27, 2015
Revenues:
Company restaurant revenues	$	126,358			117,536			372,446			339,914
Franchise royalty revenues		6,739			6,436			19,532			18,740
Other franchise revenues		100			287			470			768
Total revenues		133,197			124,259			392,448			359,422
Company restaurant operating expenses:
Food and supplies costs		39,331			37,223			116,872			110,508
Restaurant labor costs		35,115			32,429			102,976			94,075
Operating costs		28,625			25,936			83,645			74,120
Depreciation and amortization		3,225			2,990			9,432			8,378
Total Company restaurant operating expenses		106,296			98,578			312,925			287,081
Operating income before other operating expenses		26,901			25,681			79,523			72,341
Other operating expenses:
General and administrative		9,276			10,064			28,189			32,694
Depreciation and amortization		745			725			2,178			2,075
Impairment		592			193			981			208
Loss (gain) on disposal of property and equipment		138			220			(51	)		232
Total other operating expenses		10,751			11,202			31,297			35,209
Operating income		16,150			14,479			48,226			37,132
Amortization of deferred debt issuance costs		(199	)		(208	)		(567	)		(622	)
Interest income		—			—			4			6
Interest expense		(1,819	)		(2,001	)		(5,782	)		(6,394	)
Income before income taxes		14,132			12,270			41,881			30,122
Income taxes		4,113			3,360			13,987			11,440
Net income		10,019			8,910			27,894			18,682
Other comprehensive income (loss), net of tax
Change in fair value on interest rate swaps, net of income tax (expense) benefit of $(184), $134, $290 and $342		293			(221	)		(478	)		(555	)
Comprehensive income	$	10,312			8,689			27,416			18,127
Net income per share:
Basic	$	0.28			0.25			0.77			0.99
Diluted	$	0.27			0.24			0.74			0.50

See accompanying notes to condensed consolidated financial statements.

2

BOJANGLES’, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Stockholders’ Equity

Thirty-Nine Weeks Ended September 25, 2016

(Unaudited)

(in thousands)

									Accumulated
					Additional				other			Total
	Common stock				paid-in		Retained		comprehensive			stockholders’
	Shares		Amount		capital		earnings		income (loss)			equity
Balance as of December 27, 2015		36,009	$	360		119,084		47,661		19			167,124
Net income		—		—		—		27,894		—			27,894
Change in fair value on interest rate swaps, net of income tax benefit of $290		—		—		—		—		(478	)		(478	)
Stock option exercises		357		4		853		—		—			857
Vesting of restricted stock units		8		—		—		—		—			—
Excess tax benefits from stock-based payment arrangements		—		—		1,770		—		—			1,770
Stock-based compensation		—		—		953		—		—			953
Balance as of September 25, 2016		36,374	$	364		122,660		75,555		(459	)		198,120

See accompanying notes to condensed consolidated financial statements.

3

BOJANGLES’, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

	Thirty-Nine Weeks Ended
	September 25, 2016			September 27, 2015
Cash flows from operating activities:
Net income	$	27,894			18,682
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income tax benefit		(2,244	)		(3,356	)
Depreciation and amortization		11,610			10,453
Amortization of deferred debt issuance costs		567			622
Impairment		981			208
(Gain) loss on disposal of property and equipment		(51	)		232
(Benefit) provision for doubtful accounts		(65	)		53
Provision for inventory spoilage		7			9
Benefit for closed stores		(51	)		(50	)
Stock-based compensation		953			1,711
Excess tax benefit from stock-based compensation		(1,770	)		(421	)
Changes in operating assets and liabilities		4,950			4,945
Net cash provided by operating activities		42,781			33,088
Cash flows from investing activities:
Purchases of franchisee’s assets		(100	)		(186	)
Purchases of property and equipment		(5,950	)		(8,591	)
Proceeds from disposition of property and equipment		49			36
Net cash used in investing activities		(6,001	)		(8,741	)
Cash flows from financing activities:
Principal payments on long-term debt		(29,736	)		(19,055	)
Debt issuance costs		—			(555	)
Stock option exercises		857			96
Excess tax benefit from stock-based compensation		1,770			421
Principal payments on capital lease obligations		(4,455	)		(3,405	)
Net cash used in financing activities		(31,564	)		(22,498	)
Net increase in cash and cash equivalents		5,216			1,849
Cash and cash equivalents balance, beginning of fiscal period		14,263			13,201
Cash and cash equivalents balance, end of fiscal period	$	19,479			15,050
Supplemental cash flow disclosures:
Non-cash conversion of preferred stock into common stock	$	—			172,691
Cash paid for interest		5,844			6,458
Cash paid for income taxes		12,820			14,654
Assets acquired under capital leases		5,957			6,192
Net change in assets under financing obligations		4,085			5,001
Reduction of capital lease obligations upon return of assets		160			117
Reduction of capital lease obligations upon early termination of lease		288			—

See accompanying notes to condensed consolidated financial statements.

4

BOJANGLES’, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(1) Summary of Significant Operations and Accounting Policies

(a) Operations

Bojangles’, Inc. (formerly known as BHI Holding Corp.) (together with its subsidiaries, “Bojangles’”, the “Company”, “we” or “our”) was formed on June 28, 2011 as a Delaware corporation. The Company’s principal business is the operations and development and franchising, as franchisor, of limited service restaurants. As of September 25, 2016, there were 301 Company-operated restaurants, 61 related party franchised restaurants, and 337 independent franchised restaurants operating under the Bojangles’^® name. The restaurants are located principally in the Southeastern United States. The Company’s franchising activity is regulated by the laws of the various states in which it is registered to sell franchises, as well as rules promulgated by the Federal Trade Commission. The legislation and rules, among other things, establish minimum disclosure requirements to a prospective franchisee and require periodic registration by the Company with state administrative agencies.

The following is the number of Bojangles’ franchised, Company-operated and system-wide restaurants at the beginning and end of the thirteen and thirty-nine weeks ended September 25, 2016:

	Thirteen Weeks Ended						Thirty-Nine Weeks Ended
	September 25, 2016						September 25, 2016
	Franchised		Company- Operated		System- Wide		Franchised		Company- Operated		System- Wide
Restaurants at the beginning of the period		394		295		689		381		281		662
Opened during the period		4		6		10		17		20		37
Closed during the period		—		—		—		—		—		—
Refranchised during the period		—		—		—		—		—		—
Restaurants at the end of the period		398		301		699		398		301		699

(b) Basis of Presentation and Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles and practices of the United States of America (“GAAP”) for interim financial information. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the results for interim periods have been included.

Certain information and footnote disclosures normally included in audited consolidated financial statements presented in accordance with GAAP have been condensed or omitted pursuant to rules and regulations of the SEC.

On May 13, 2015, the Company completed its initial public offering of 8,912,500 shares of common stock at a price to the public of $19.00 per share (the “IPO”), including 1,162,500 shares sold to the underwriters pursuant to their option to purchase additional shares. All of the shares of the Company’s common stock offered as part of the IPO were sold by selling stockholders. Accordingly, the Company did not receive any proceeds from the sale of the shares. Prior to the consummation of the IPO (i) a 359.03843-for-1 stock split of the Company’s common stock was effected (subject to rounding to eliminate any fractional shares), (ii) the conversion ratio of the Company’s Series A

5

BOJANGLES’, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)

Preferred Stock was automatically adjusted as a result of the stock split in accordance with certain anti-dilution provisions in the Company’s certificate of incorporation and (iii) each share of the Company’s Series A Preferred Stock converted into 359.03843 shares of the Company’s common stock (subject to rounding to eliminate any fractional shares). All share and per-share data herein have been adjusted to reflect the stock split as though it had occurred prior to the earliest data presented.

These condensed consolidated financial statements should be read in conjunction with the Company’s results of operations, financial positions and cash flows in the Company’s financial statements as of and for the fiscal year ended December 27, 2015. Certain prior period balances have been reclassified to conform to current period presentation, including the reclassification of the December 27, 2015 balance of $2.5 million of debt issuance costs from Deferred debt issuance costs, net to Long-term debt, less current maturities and deferred debt issuance costs, net on the condensed consolidated balance sheets.

The results of operations and cash flows reported in these condensed consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire fiscal year.

The Company consolidates entities in which we have a controlling financial interest, the usual condition of which is ownership of a majority voting interest. All significant intercompany accounts and transactions are eliminated in consolidation.

(c) Fiscal Year

The Company operates on a 52- or 53-week fiscal year ending on the last Sunday of December. Fiscal year 2016 will end on December 25, 2016 and will consist of 52 weeks. Fiscal year 2015 ended on December 27, 2015 and consisted of 52 weeks. Fiscal quarters within both fiscal years 2016 and 2015 are comprised of thirteen weeks.

(d) Use of Accounting Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Accordingly, the actual amounts could differ from those estimates. Any adjustments applied to estimated amounts are recognized in the fiscal year in which such adjustments are determined.

(e) New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). This update was issued to replace the current revenue recognition guidance, creating a more comprehensive revenue model. This update was originally to be effective in fiscal periods beginning after December 15, 2016 and early application was not permitted. In July 2015, the FASB affirmed its proposal to defer the effective date by one year to annual reporting periods beginning after December 15, 2017. The FASB also affirmed its proposal to permit early adoption of the standard, but not before the original effective date of December 15, 2016. The Company is currently evaluating the impact of the adoption of ASU 2014-09 on its consolidated financial statements.

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330) (“ASU 2015-11”). The pronouncement was issued to simplify the measurement of inventory and changes the measurement from lower of cost or market to lower of cost and net realizable value. This pronouncement is effective for reporting periods beginning after December 15, 2016. The adoption of ASU 2015-11 is not expected to have a significant impact on the Company’s consolidated financial statements.

6

BOJANGLES’, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 is a comprehensive new standard that amends various aspects of existing guidance for leases and requires additional disclosures about leasing arrangements. ASU 2016-02 will require companies to recognize lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. ASU 2016-02 retains a distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous guidance relating to leases. ASU 2016-02 is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of this guidance on its consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which simplifies several aspects of the accounting for employee share-based payment transactions. ASU 2016-09 addresses several aspects of the accounting for share-based payment award transactions, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of this guidance on its consolidated financial statements.

(2) Long-Term Debt

Long-term debt consist of the following (in thousands):

	September 25, 2016			December 27, 2015
Term Loan, due October 9, 2020	$	170,458			200,194
Revolving line of credit, due October 9, 2020		—			—
Total long-term debt		170,458			200,194
Less: Current maturities of long term debt		—			—
Less: Deferred debt issuance costs, net		(1,892	)		(2,459	)
Long-term debt, less current maturities and deferred debt issuance costs, net	$	168,566			197,735
	September 25, 2016			December 27, 2015
Deferred debt issuance costs	$	4,809			4,809
Less accumulated amortization		(2,917	)		(2,350	)
Deferred debt issuance costs, net	$	1,892			2,459

7

BOJANGLES’, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)

(a) Term Loan and Revolving Line of Credit

On October 9, 2012, the Company entered into a credit agreement (“Credit Agreement”) with several financial institutions, collateralized by all of the assets of the Company. The Credit Agreement contains both a term loan component and a revolving line of credit. The Credit Agreement was subsequently amended on May 15, 2013, April 11, 2014, July 23, 2015 and September 25, 2015. The Credit Agreement was further amended on October 19, 2016 to, among other things, increase allowable indebtedness associated with capital lease obligations, synthetic lease obligations and purchase money obligations, as well as to increase allowable cash capital expenditures during each fiscal year.

As of September 25, 2016, there were outstanding balances under the term loan in one-month Eurodollar loans of $170.5 million, all of which were accruing interest at a rate of approximately 2.77%. As of December 27, 2015, there were outstanding balances under the term loan in one-month Eurodollar loans of $200.2 million, all of which were accruing interest at a rate of approximately 2.48%.

As of September 25, 2016 and December 27, 2015, there were no outstanding balances under the revolving line of credit.

Pursuant to the Credit Agreement, certain covenants restrict the Company from exceeding a maximum consolidated total lease adjusted leverage ratio, require the Company to maintain a minimum consolidated fixed charge coverage ratio, and place certain limitations on cash capital expenditures. The Company was not in violation of any covenants under the Credit Agreement as of September 25, 2016.

Debt issuance costs are capitalized and amortized using the effective interest method over the initial term of the related loan.

(b) Interest Rate Swap Agreements

The Company enters into interest-rate-related derivative instruments to manage its exposure related to changes in interest rates on its variable-rate debt instruments. The Company does not enter into derivative instruments for any purpose other than cash flow hedging. The Company does not speculate using derivative instruments.

By using derivative financial instruments to hedge exposures to changes in interest rates, the Company exposes itself to credit risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the Company, which creates credit risk for the Company. When the fair value of a derivative contract is negative, the Company owes the counterparty and, therefore, the Company is not exposed to the counterparty’s credit risk in those circumstances. The Company minimizes counterparty credit risk in derivative instruments by entering into transactions with high-quality counterparties. The derivative instruments entered into by the Company do not contain credit-risk-related contingent features.

The Company assesses interest rate risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities. The Company maintains risk management control systems to monitor interest rate risk attributable to both the Company’s outstanding or forecasted debt obligations as well as the Company’s offsetting hedge positions.

The Company enters into variable-rate LIBOR debt under the term loan portion of the Credit Agreement. The debt obligations expose the Company to variability in interest payments due to changes in interest rates. Management believes that it is prudent to limit the variability of a portion of its interest payments. To meet this objective, management entered into LIBOR-based interest rate swap agreements to manage fluctuations in cash flows resulting from changes in the benchmark interest rate of LIBOR. These swaps change the variable-rate cash flow exposure on part of the debt obligations to fixed cash flows. Under the

8

BOJANGLES’, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)

terms of the interest rate swaps, the Company receives LIBOR-based variable interest rate payments and makes fixed interest rate payments, thereby creating the equivalent of fixed-rate debt for the notional amount of its debt hedged.

The activity in accumulated other comprehensive (loss) income is as follows (in thousands):

	Thirty-Nine Weeks Ended September 25, 2016			Fiscal Year Ended December 27, 2015
Opening balance, accumulated other comprehensive income	$	19			146
Unrealized loss from effective interest rate swap, net of tax		(478	)		(127	)
Ending balance, accumulated other comprehensive (loss) income	$	(459	)		19

(3) Fair Value Measurements

The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

• Cash and cash equivalents, accounts and vendor receivables, other assets (nonderivatives), notes payable to financial institutions, trade accounts payable, and accrued expenses (nonderivatives): The carrying amounts, at face value or cost plus accrued interest, approximate fair value because of the short maturity of these instruments.

• Interest rate swaps: The fair value of interest rate swaps is determined using an income approach using the following significant inputs: the term of the swaps, the notional amount of the swaps, the rate on the fixed leg of the swaps and counterparty credit worthiness. There were three interest rate swaps outstanding as of September 25, 2016.

9

BOJANGLES’, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)

The following table presents financial assets and liabilities measured at fair value on a recurring basis, which include derivatives designated as cash flow hedging instruments, and other investments, which consists of money market accounts and mutual funds held in a rabbi trust established by the Company to fund a portion of the Company’s current and future obligations under its deferred compensation plan (in thousands):

	Carrying value			Quoted Prices in active markets for identical instruments (Level 1)		Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)
Fair value measurement as of September 25, 2016:
Investments for nonqualified deferred compensation plan (included with other noncurrent assets on the consolidated balance sheets)	$	3,033			3,033		—			—
Interest rate swap (included with other current liabilities and other non current liabilities on the consolidated balance sheets)		(737	)		—		(737	)		—
Fair value measurement as of December 27, 2015:
Investments for nonqualified deferred compensation plan (included with other noncurrent assets on the consolidated balance sheets)	$	2,628			2,628		—			—
Interest rate swap (included with other noncurrent assets on the consolidated balance sheets)		437			—		437			—
Interest rate swap (included with other noncurrent liabilities on the consolidated balance sheets)		(405	)		—		(405	)		—

There were no transfers into or out of Level 1 and Level 2 fair value measurements during the thirty-nine weeks ended September 25, 2016.

Our investments for the nonqualified deferred compensation plan are comprised of investments held in a rabbi trust. These investments consist of money market funds and mutual funds and the fair value measurements are derived using quoted prices in active markets for the specific funds which are based on Level 1 inputs of the fair value hierarchy.

Our interest rate swaps are valued using a discounted cash flow analysis that incorporates observable market parameters, such as interest rate yield curves and currency rates, classified as Level 2 within the valuation hierarchy. Derivative valuations incorporate credit risk adjustments that are necessary to reflect the probability of default by us or the counterparty.

10

BOJANGLES’, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)

(4) Other Current Assets

Other current assets consist of the following (in thousands):

	September 25, 2016		December 27, 2015
Income taxes refundable	$	1,247		2,887
Prepaid expenses		2,257		1,076
Deferred income taxes		—		1,676
Other current assets	$	3,504		5,639

(5) Property and Equipment, Net

Property and equipment, net consist of the following (in thousands):

	Useful lives	September 25, 2016			December 27, 2015
Land	—	$	1,509			1,509
Buildings	Up to 40 years		1,330			1,330
Furniture, fixtures and equipment	Up to 5 years		18,009			16,798
Computer hardware and software	Up to 5 years		9,653			8,780
Leasehold improvements	Up to 20 years		25,646			22,987
Capital leases, buildings	Lesser of lease term or 40 years		8,286			8,553
Capital leases, equipment	Lesser of lease term or 5 years		25,193			22,956
Capital leases, automobiles	Lesser of lease term or 5 years		3,434			3,297
Construction-in-progress	—		8,926			3,408
Total			101,986			89,618
Less:
Accumulated depreciation			(32,361	)		(26,830	)
Accumulated amortization			(17,718	)		(14,651	)
Property and equipment, net		$	51,907			48,137

Depreciation and amortization expense related to property and equipment was $3.7 million and $3.4 million for the thirteen weeks ended September 25, 2016 and September 27, 2015, respectively, and $10.8 million and $9.6 million for the thirty-nine weeks ended September 25, 2016 and September 27, 2015, respectively.

(6) Franchise Rights, Net

Franchise rights, net are as follows (in thousands):

	September 25, 2016			December 27, 2015
Franchise rights, including reacquired franchise rights	$	29,623			29,623
Less accumulated amortization		(5,105	)		(4,282	)
Franchise rights, net	$	24,518			25,341

11

BOJANGLES’, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)

Amortization expense related to franchise rights was $0.3 million during each of the thirteen weeks ended September 25, 2016 and September 27, 2015 and $0.8 million during each of the thirty-nine weeks ended September 25, 2016 and September 27, 2015.

(7) Other Noncurrent Assets

Other noncurrent assets consist of the following (in thousands):

	September 25, 2016		December 27, 2015
Investments for nonqualified deferred compensation plan	$	3,033		2,628
Interest rate swap asset		—		437
Other noncurrent assets		701		608
Other noncurrent assets	$	3,734		3,673

(8) Accrued Expenses

Accrued expenses consist of the following (in thousands):

	September 25, 2016		December 27, 2015
Payroll & related	$	11,323		12,316
Sales and property taxes		5,915		2,472
Gift cards		683		974
Utilities		1,307		1,092
Occupancy		395		481
Interest		653		715
Other		3,574		1,036
Accrued expenses	$	23,850		19,086

(9) Other Current Liabilities

Other current liabilities consist of the following (in thousands):

	September 25, 2016		December 27, 2015
Financing obligations under build-to-suit transactions	$	5,679		1,594
Closed store obligation		106		184
Interest rate swap liability		10		—
Other		—		377
Other current liabilities	$	5,795		2,155

12

BOJANGLES’, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)

(10) Other Noncurrent Liabilities

Other noncurrent liabilities consist of the following (in thousands):

	September 25, 2016		December 27, 2015
Deferred rents	$	7,067		5,875
Unfavorable lease liability, net		1,596		1,817
Deferred compensation		3,033		2,628
Deferred revenue		785		717
Closed store obligation		275		356
Interest rate swap liability		727		405
Other noncurrent liabilities		88		36
Other noncurrent liabilities	$	13,571		11,834

Deferred revenue includes initial franchise license fees that have been received, but for which the Company has not completed its obligations under these franchise agreements; therefore, revenue has not been recognized.

(11) Commitments and Contingencies

(a) Litigation

The Company is subject to various claims and litigation that arise in the normal course of business. Management is of the opinion that, although the outcome of the litigation cannot be predicted with any certainty, the ultimate liability, if any, will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

(b) Concentration of Credit Risk

Certain financial instruments potentially subject the Company to a concentration of credit risk. These financial instruments consist primarily of cash and cash equivalents and accounts and vendor receivables. The Company places its cash and cash equivalents with high-credit, quality financial institutions. At times, the balances in the accounts exceed the amounts insured by the Federal Deposit Insurance Corporation.

Concentration of credit risk with respect to receivables is primarily limited to franchisees, which are primarily located in the Southeastern United States, and certain vendors. Royalty revenues from three franchisees, one of which is a related party, accounted for approximately 44% of the Company’s total franchise royalty revenues for each of the thirteen weeks ended September 25, 2016 and September 27, 2015 and approximately 44% of the Company’s total franchise royalty revenues for each of the thirty-nine weeks ended September 25, 2016 and September 27, 2015. Royalty and franchise fee accounts receivable from three franchisees, one of which is a related party, accounted for approximately 42% and 44% of the Company’s gross royalty and franchise fee accounts receivable as of September 25, 2016 and December 27, 2015, respectively. The Company continually evaluates and monitors the credit history of its franchisees and believes it has an adequate allowance for bad debts.

(c) Debt Guarantees

Prior to July 25, 2011, a franchisee of the Company assumed a portion of the Company’s then outstanding term debt, which the Company guarantees through 2018. The Company may be required to perform under this guarantee in the event of default or nonperformance by this franchisee. The Company has determined that default by the franchisee is unlikely due to its timely and consistent payments; therefore, the Company has not recorded a liability for this note on its condensed consolidated balance sheets. The carrying value of debt covered by this additional guarantee of the Company was $0.1 million as of both September 25, 2016 and December 27, 2015.

13

BOJANGLES’, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)

(12) Leases

The Company’s agreement with a financial institution providing up to $3.5 million for leasing of equipment that was originally scheduled to expire on March 1, 2016 was initially extended to September 30, 2016. As the Company had utilized all capacity under this agreement, on June 27, 2016, the financial institution increased the capacity under this agreement by an additional $8.1 million and further extended the expiration of the agreement to June 1, 2017. Under this leasing arrangement, each of the scheduled leases has a 60-month term, a fixed interest rate equal to the interest rate swap for a 2.61 year weighted average life as published by the Bloomberg Swap report on the lease commencement date for the specific equipment project plus 300 basis points, and a bargain purchase option at the end of the lease of $1. As a result of the bargain purchase option, the Company has classified the leases under this leasing arrangement as capital leases.

The Company’s agreement with another financial institution providing up to $1.4 million for leasing of equipment expired on April 30, 2016. Under this leasing arrangement, each of the scheduled leases had a 60-month term, a fixed interest rate equal to the 32-month interpolated interest rate swap on the lease commencement date for the specific equipment project plus 391 basis points, and a bargain purchase option at the end of the lease of $1. On April 22, 2016, the Company entered into a new agreement with the financial institution providing up to $2.0 million for leasing of equipment, which is scheduled to expire on April 30, 2017. Under this leasing arrangement, each of the scheduled leases has a 60-month term, a fixed interest rate equal to the 3-year interest rate swap on the lease commencement date for the specific equipment project plus 290 basis points, and a bargain purchase option at the end of the lease of $1. On October 11, 2016, the Company entered into a new agreement with the financial institution providing up to $2.1 million for leasing of equipment, which is scheduled to expire on September 30, 2017. Under this leasing arrangement, each of the scheduled leases has a 60-month term, a fixed interest rate equal to the 3-year interest rate swap on the lease commencement date for the specific equipment project plus 290 basis points, and a bargain purchase option at the end of the lease of $1. As a result of the bargain purchase option, the Company has classified the leases under these leasing arrangements as capital leases.

On August 15, 2016, the Company entered into an agreement with a third financial institution providing up to $3.0 million for leasing of equipment, which is scheduled to expire on June 30, 2017. Under this leasing arrangement, each of the scheduled leases has a 60-month term, a fixed interest rate equal to the average of two- and three-year interest rate swap rates as published by the Bloomberg Swap report on the lease commencement date for the specific equipment project plus 300 basis points, and a bargain purchase option at the end of the lease of $1. As a result of the bargain purchase option, the Company has classified the leases under this leasing arrangement as capital leases.

(13) Net Income per Share

Basic net income per share is calculated using the weighted-average number of shares of common stock outstanding during the thirteen and thirty-nine weeks ended September 25, 2016 and September 27, 2015.

Diluted net income per share is calculated using the weighted-average number of shares of common stock outstanding and potentially dilutive during the period, using the treasury stock method, and assumes the conversion of the outstanding preferred stock into common stock.

14

BOJANGLES’, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)

The computations of basic and diluted net income per share for the thirteen and thirty-nine weeks ended September 25, 2016 and September 27, 2015 are as follows (in thousands, except per share amounts):

	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	September 25, 2016		September 27, 2015		September 25, 2016		September 27, 2015
Net income	$	10,019		8,910		27,894		18,682
Weighted average number of common shares outstanding-basic		36,355		35,951		36,195		18,830
Weighted average number of common shares assumed from the conversion of Series A Preferred Stock		—		—		—		17,097
Weighted average dilutive effect of stock-based compensation		1,295		1,575		1,366		1,544
Weighted average number of common shares outstanding-diluted		37,650		37,526		37,561		37,471
Net income per share-basic	$	0.28		0.25		0.77		0.99
Net income per share-diluted	$	0.27		0.24		0.74		0.50

(14) Income Taxes

The Company’s effective income tax rates were 29.1% and 27.4% for the thirteen weeks ended September 25, 2016 and September 27, 2015, respectively, and 33.4% and 38.0% for the thirty-nine weeks ended September 25, 2016 and September 27, 2015, respectively. The effective income tax rate for both of the thirteen and thirty-nine weeks ended September 25, 2016 and September 27, 2015 was impacted by a deferred income tax benefit due to a reduction in the North Carolina corporate income tax rate and the recognition of certain tax credits. The effective income tax rate for the thirteen and thirty-nine weeks ended September 27, 2015 was also impacted by costs related to the IPO that were not deductible for income tax purposes.

(15) Stock Compensation Plan

Effective immediately prior to the IPO, the Company’s board of directors and stockholders approved the amendment and restatement of the 2011 Equity Incentive Plan. Under the Amended and Restated 2011 Equity Incentive Plan (the “Amended 2011 Plan”), the Company’s board of directors may grant awards representing up to 8.5 million shares of the Company’s common stock in the form of stock options, restricted stock awards, restricted stock units and performance awards to officers, directors, employees, and consultants of the Company and its subsidiaries. At September 25, 2016, there were 4.0 million shares remaining and available for future grants under the Amended 2011 Plan.

Stock Options

Stock options are granted at a price determined by the board of directors or a committee designated by the board at not less than the fair market value of a share on the date of grant. The term of each option shall be determined by the board of directors or a committee designated by the board at the time of grant and shall be no greater than ten years.

15

BOJANGLES’, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)

Stock option activity during the period indicated is as follows:

	Number of shares			Weighted average exercise price		Weighted average remaining contractual term		Aggregate intrinsic value (in thousands)
Balance as of December 27, 2015		4,347,024		$	3.78		6.8	$	51,198
Granted		151,000			18.05
Exercised		(356,329	)		2.41				5,317
Repurchased		—			—
Forfeited		(200,709	)		3.23
Expired		—			—
Balance as of September 25, 2016		3,940,986		$	4.48		6.1	$	47,651
Exercisable as of September 25, 2016		2,285,488		$	4.03		5.9	$	28,552

On June 8, 2016, the Company granted a total of 151,000 stock options to certain employees of the Company to purchase shares of its common stock at a price of $18.05 per share. The fair value of the stock options on the date of the grant was $5.48 per share. The stock options will vest in equal annual installments over four years, subject to continued service to the Company.

As of September 25, 2016, there was $2.2 million of total unrecognized compensation cost related to time based stock options, which is expected to be recognized over a weighted average period of approximately 2.5 years. As of September 25, 2016, there was approximately $3.0 million of total unrecognized compensation cost related to 1.1 million unvested performance based stock options. These performance based stock options will vest and become exercisable upon the achievement of certain performance metrics indicated in the stock option grant.

Restricted Stock Units

Restricted stock unit activity during the period indicated is as follows:

	Number of shares			Weighted average fair value at grant date
Nonvested as of December 27, 2015		7,893		$	19.00
Granted		92,120			18.05
Forfeited		(7,500	)		18.05
Vested		(7,893	)		19.00
Nonvested as of September 25, 2016		84,620		$	18.05

On June 8, 2016, the Company granted a total of 75,500 restricted stock units to certain employees of the Company. The restricted stock units will vest in equal annual installments over four years, subject to continued service to the Company. Vested shares will be delivered within ten days of the vesting date of such restricted stock unit.

16

BOJANGLES’, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)

On June 8, 2016, the Company granted 2,770 restricted stock units to each of its six non-employee directors who are not affiliated with Advent International Corporation (“Advent”). The restricted stock units will vest on the date of the Company’s next annual meeting, subject to continued service to the Company. Vested shares will be delivered within ten days of the vesting date of such restricted stock unit.

On May 13, 2015, the Company granted 2,631 restricted stock units to each of its then three non-employee directors who were not affiliated with Advent. All of these restricted stock units vested on June 8, 2016.

As of September 25, 2016, there was $1.3 million of total unrecognized compensation cost related to restricted stock units, which is expected to be recognized over a weighted average period of approximately 3.2 years.

(16) Related Party Transactions

Advent is related to the Company through members of the board of directors and ownership of the Company. The Company reimburses Advent for certain expenses. There were no amounts included in accounts payable due to Advent as of both September 25, 2016 and December 27, 2015.

Panthers Football, LLC (“The Panthers”) is owned by family members of certain indirect stockholders of the Company. The Company has a marketing and sponsorship agreement with The Panthers.

Cajun Jack’s, LLC (“Cajun”) is owned by family members of certain indirect stockholders and a member of the board of directors of the Company. Cajun is a franchisee of the Company. Cajun remits payments to the Company for royalties, marketing, and franchise license fees.

New Generation Foods, LLC (“New Generation”) is owned by family members of certain indirect stockholders and a member of the board of directors of the Company. New Generation is a franchisee of the Company. New Generation remits payments to the Company for royalties, marketing, and franchise license fees. From January 29, 2014 through July 31, 2015, the Company matched New Generation’s advertising expenditures in an amount up to 1% of New Generation’s sales.

Tri-Arc Food Systems, Inc. (“Tri-Arc”) owns an interest in the Company. In addition, an owner of Tri-Arc is a member of the board of directors of the Company. Tri-Arc is a franchisee of the Company. Tri-Arc remits payments to the Company for royalties, marketing, and franchise license fees. In addition, the Company reimburses Tri-Arc for shared marketing costs.

JZF Properties, LLC (“JZF”) is owned by family members of certain indirect stockholders and a member of the board of directors of the Company. JZF leases a building and land to the Company for use as a restaurant operated by the Company.

MAR Real Estate, LLC (“MRE”) is owned by a certain indirect stockholder of the Company. MRE leases land and buildings to the Company for use as restaurants operated by the Company.

Palmetto Lowcountry Properties, LLC (“PLP”) is owned by a certain indirect stockholder of the Company. PLP leases land and buildings to the Company for use as restaurants operated by the Company.

Catco Bo Memorial, LLC (“CBM”) is owned by a certain indirect stockholder of the Company. CBM leases land, equipment and a building to the Company for use as a restaurant operated by the Company.

MRMJ Holdings, LLC (“MRMJ”) is owned by a certain indirect stockholder of the Company. MRMJ leases land, equipment and a building to the Company for use as a restaurant operated by the Company.

17

BOJANGLES’, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)

The following table presents expenses incurred and payments made in transactions with the Company’s related parties (in thousands):

		Thirteen Weeks Ended				Thirty-Nine Weeks Ended
		September 25,		September 27,		September 25,		September 27,
Related Party	Description	2016		2015		2016		2015
Advent	Out-of-pocket expense reimbursement	$	8		15		12		28
The Panthers	Marketing/sponsorship expense		270		260		370		310
New Generation	Advertising expense		—		11		—		74
Tri-Arc	Marketing expense		18		18		54		54
JZF	Rent payments		48		47		169		149
MRE	Rent payments		35		72		105		156
PLP	Rent payments		—		40		57		91
CBM	Rent payments		25		—		75		—
MRMJ	Rent payments		16		—		16		—

The following tables present franchise royalty revenues and other franchise revenues from transactions with the Company’s related parties (in thousands):

	Franchise Royalty Revenues
	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	September 25,		September 27,		September 25,		September 27,
Related Party	2016		2015		2016		2015
Cajun	$	26		25		73		73
New Generation		143		127		419		383
Tri-Arc		1,276		1,221		3,777		3,678
	Other Franchise Revenues
	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	September 25,		September 27,		September 25,		September 27,
Related Party	2016		2015		2016		2015
Cajun	$	—		—		—		—
New Generation		—		—		—		35
Tri-Arc		—		—		13		13

The following table presents accounts receivable from transactions with the Company’s related parties (in thousands):

	Gross Accounts Receivable
	September 25,		December 27,
Related Party	2016		2015
Cajun	$	9		9
New Generation		51		52
Tri-Arc		382		387

18

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of the consolidated financial condition and results of operations for Bojangles’, Inc. (“Bojangles’” or the “Company”) should be read in conjunction with the financial statements of the Company and notes thereto included elsewhere in this Quarterly Report. In this Quarterly Report, unless the context otherwise requires, references to “we,” “us,” and “our” mean the Company, together with its subsidiaries, on a consolidated basis.

Operating results for any one fiscal quarter are not necessarily indicative of results to be expected for any other fiscal quarter or for the fiscal year, and our key performance indicators, as discussed below, may decrease for any future period. Unless otherwise stated, comparable restaurant sales and average unit volumes are presented on a system-wide basis, which means they include sales at both company-operated restaurants and franchised restaurants. Franchise sales represent sales at all franchised restaurants and are revenues to our franchisees. We do not record franchise sales as revenues; however, our franchise royalty revenues include royalties based on a percentage of franchise sales.

Overview

Bojangles’ is a highly differentiated and growing restaurant operator and franchisor dedicated to serving customers high-quality, craveable food made from our Southern recipes. We opened our first store in Charlotte, North Carolina in 1977 and, as of September 25, 2016, have expanded our system-wide restaurants to 699 across eleven states, the District of Columbia and Roatan Island, Honduras. Our system of restaurants, which includes both company-operated and franchised restaurants, generated approximately $312.6 million and $909.9 million of system-wide sales during the thirteen and thirty-nine weeks ended September 25, 2016, respectively. We offer fast-casual quality food and preparation combined with quick-service speed, convenience and value.

Key Performance Indicators

To evaluate the performance of our business, we utilize a variety of financial and performance measures. These key measures include company restaurant revenues, franchise royalty and other franchise revenues, system-wide average unit volumes (“AUVs”), comparable restaurant sales, restaurant openings and net income. In addition, we also evaluate Adjusted Net Income and Adjusted Diluted Net Income per Share, EBITDA and Adjusted EBITDA, and restaurant contribution and restaurant contribution margin, which are considered to be non-GAAP financial measures.

Company Restaurant Revenues

Company restaurant revenues consists of sales of food and beverages in company-operated restaurants. Company restaurant revenues in a period are influenced by several factors, including the number of operating weeks in such period, the number of open restaurants and comparable restaurant sales growth.

Seasonal factors cause our revenues to fluctuate from quarter to quarter. Our revenues per restaurant are typically lower in the first quarter. As a result, our quarterly and annual operating results and key performance indicators may fluctuate significantly.

Franchise Royalty and Other Franchise Revenues

Franchise royalty and other franchise revenues represents royalty income and initial and renewal franchise fees. While we expect the majority of our total revenue growth will be driven by company-operated restaurants, our franchised restaurants and growth in franchise royalty and other franchise revenues remain an important part of our financial success.

19

System-wide Average Unit Volumes

We measure system-wide AUVs on a fiscal year basis and on a trailing twelve-month basis for each non-fiscal year-end period for system-wide restaurants. Annual AUVs are calculated using the following methodology: first, we determine the domestic free-standing restaurants with both a drive-thru and interior seating that have been open for a full twelve-month period (excluding express units); and second, we calculate the revenues for these restaurants and divide by the number of restaurants in that base to arrive at our AUV calculation. This methodology is similar for each trailing twelve-month period outside the fiscal year end.

	Trailing Twelve Months Ended
	September 25, 2016		September 27, 2015
(Dollar amounts in thousands)
Average Unit Volumes
Total system-wide	$	1,825		1,832

Comparable Restaurant Sales

Comparable restaurant sales reflects the change in year-over-year sales for the comparable restaurant base. A restaurant enters our comparable restaurant base the first full day of the month after being open for fifteen months using a mid-month convention. While we do not record franchised restaurant sales as revenues, our royalty revenues are calculated based on a percentage of franchised restaurant sales.

	Thirteen Weeks Ended						Thirty-Nine Weeks Ended
	September 25, 2016			September 27, 2015			September 25, 2016			September 27, 2015
Comparable Restaurant Sales:
Company-operated		(0.2	)%		4.1	%		1.1	%		4.7	%
Franchised		1.4	%		4.1	%		0.9	%		5.8	%
Total system-wide		0.8	%		4.1	%		1.0	%		5.4	%

Restaurant Openings

The number of restaurant openings reflects the number of restaurants opened during a particular reporting period. Before we open company-operated restaurants, we incur preopening costs. System-wide, some of our restaurants open with an initial start-up period of higher than normal sales volume, which subsequently decreases to stabilized levels. Newly opened company-operated restaurants typically experience normal inefficiencies such as higher food and supplies, labor and other direct operating costs and, as a result, restaurant contribution margins are typically lower during the start-up period of operations. In addition, newly opened restaurants typically have high occupancy costs compared to existing restaurants. When entering new markets, we may be exposed to longer start-up times and lower contribution margins than reflected in our average historical experience.

20

The following is the number of Bojangles’ franchised, company-operated and system-wide restaurants at the beginning and end of the thirteen and thirty-nine weeks ended September 25, 2016:

	Thirteen Weeks Ended						Thirty-Nine Weeks Ended
	September 25, 2016						September 25, 2016
	Franchised		Company- Operated		System- Wide		Franchised		Company- Operated		System- Wide
Restaurants at the beginning of the period		394		295		689		381		281		662
Opened during the period		4		6		10		17		20		37
Closed during the period		—		—		—		—		—		—
Refranchised during the period		—		—		—		—		—		—
Restaurants at the end of the period		398		301		699		398		301		699

Net Income, Adjusted Net Income, Adjusted Diluted Net Income per Share, EBITDA and Adjusted EBITDA

We consider net income to be a key performance indicator that shows the overall health of our entire business. We typically utilize net income in conjunction with the non-GAAP financial measures Adjusted Net Income, Adjusted Diluted Net Income per Share, EBITDA and Adjusted EBITDA when assessing the operational strength and the performance of our business.

Adjusted Net Income represents company net income before items that we do not consider representative of our ongoing operating performance, as well as an estimate of recurring incremental legal, accounting, insurance and other operating and compliance costs we expect to incur as a public company for those periods where they had not yet been incurred, both as identified in the reconciliation table below. Adjusted Diluted Net Income per Share represents company diluted net income per share before items that we do not consider representative of our ongoing operating performance, as well as an estimate of recurring incremental legal, accounting, insurance and other operating and compliance costs we expect to incur as a public company for those periods where they had not yet been incurred, both as identified in the reconciliation table below.

EBITDA represents company net income before interest expense (net of interest income), provision for income taxes and depreciation and amortization. Adjusted EBITDA represents company net income before interest expense (net of interest income), provision for income taxes, depreciation and amortization, items that we do not consider representative of our ongoing operating performance and certain non-cash items, as identified in the reconciliation table below.

Adjusted Net Income, Adjusted Diluted Net Income per Share, EBITDA and Adjusted EBITDA as presented in this Form 10-Q are supplemental measures of our performance that are neither required by, nor presented in accordance with, GAAP. Adjusted Net Income, Adjusted Diluted Net Income per Share, EBITDA and Adjusted EBITDA are not measurements of our financial performance under GAAP and should not be considered as alternatives to net income, operating income or any other performance measures derived in accordance with GAAP or as alternatives to cash flow from operating activities as a measure of our liquidity. In addition, in evaluating Adjusted Net Income, Adjusted Diluted Net Income per Share, EBITDA and Adjusted EBITDA, you should be aware that in the future we will incur expenses or charges such as those added back to calculate Adjusted Net Income, Adjusted Diluted Net Income per Share, EBITDA and Adjusted EBITDA. Our presentation of Adjusted Net Income, Adjusted Diluted Net Income per Share, EBITDA and Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.

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Adjusted Net Income, Adjusted Diluted Net Income per share, EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation, or as substitutes for analysis of our results as reported under GAAP. Some of these limitations are (i) they do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments, (ii) they do not reflect changes in, or cash requirements for, our working capital needs, (iii) EBITDA and Adjusted EBITDA do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt, (iv) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted Net Income, Adjusted Diluted Net Income per Share, EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements, (v) they do not adjust for all non-cash income or expense items that are reflected in our statements of cash flows, (vi) they do not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations, and (vii) other companies in our industry may calculate these measures differently than we do, limiting their usefulness as comparative measures.

We compensate for these limitations by providing specific information regarding the GAAP amounts excluded from such non-GAAP financial measures. We further compensate for the limitations in our use of non-GAAP financial measures by presenting comparable GAAP measures more prominently.

We believe Adjusted Net Income, Adjusted Diluted Net Income per Share, EBITDA and Adjusted EBITDA facilitate operating performance comparisons from period to period by isolating the effects of some items that vary from period to period without any correlation to core operating performance or that vary significantly among similar companies. These potential differences may be caused by variations in capital structures (affecting interest expense), tax positions (such as the impact on periods or companies of changes in effective tax rates or net operating losses) and the age and book depreciation of facilities and equipment (affecting relative depreciation expense). We also present EBITDA and Adjusted EBITDA because (i) we believe these measures are frequently used by securities analysts, investors and other interested parties to evaluate companies in our industry, (ii) we believe investors will find these measures useful in assessing our ability to service or incur indebtedness, and (iii) we use EBITDA and Adjusted EBITDA internally as benchmarks to evaluate our operating performance or compare our performance to that of our competitors.

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The following tables set forth reconciliations of net income to Adjusted Net Income and diluted net income per share to Adjusted Diluted Net Income per Share:

	Thirteen Weeks Ended						Thirty-Nine Weeks Ended
(Dollar amounts in thousands)	September 25, 2016			September 27, 2015			September 25, 2016			September 27, 2015
Net income	$	10,019			8,910			27,894			18,682
Certain professional and transaction costs (a)		24			160			66			5,041
Incremental public company costs (b)		—			(104	)		—			(898	)
Vesting of performance-based stock options (c)		—			—			—			707
Payroll taxes associated with stock option exercises (d)		8			—			79			17
Distributor transition costs (e)		—			217			81			217
Executive separation expenses (f)		197			507			197			507
State income tax rate change (g)		(908	)		(903	)		(908	)		(903	)
Tax impact of adjustments (h)		(82	)		(296	)		(156	)		(469	)
Total adjustments		(761	)		(419	)		(641	)		4,219
Adjusted Net Income	$	9,258			8,491			27,253			22,901
	Thirteen Weeks Ended						Thirty-Nine Weeks Ended
	September 25, 2016			September 27, 2015			September 25, 2016			September 27, 2015
Diluted net income per share	$	0.27			0.24			0.74			0.50
Certain professional and transaction costs (a)		—			—			—			0.13
Incremental public company costs (b)		—			—			—			(0.02	)
Vesting of performance-based stock options (c)		—			—			—			0.02
Payroll taxes associated with stock option exercises (d)		—			—			—			—
Distributor transition costs (e)		—			0.01			—			0.01
Executive separation expenses (f)		—			0.01			0.01			0.01
State income tax rate change (g)		(0.02	)		(0.02	)		(0.02	)		(0.02	)
Tax impact of adjustments (h)		—			(0.01	)		—			(0.02	)
Total adjustments		(0.02	)		(0.01	)		(0.01	)		0.11
Adjusted Diluted Net Income per Share	$	0.25			0.23			0.73			0.61

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(a) Includes costs associated with third-party consultants for one-time projects, public offering expenses and certain professional fees and transaction costs related to financing transactions. We could incur similar expenses in future periods if we commence additional public offerings, financing transactions or other one-time projects.

(b) Reflects an estimate of recurring incremental legal, accounting, insurance and other operating and compliance costs we expect to incur as a public company in addition to actual amounts incurred. By its nature, this adjustment involves risks and uncertainties, and the actual costs incurred could be different than this adjustment. No adjustments will be made beyond the second fiscal quarter 2016 since the one year anniversary of our initial public offering (“IPO”) occurred during the thirteen weeks ended June 26, 2016.

(c) Includes non-cash, stock-based compensation related to the vesting of certain performance-based stock option awards. We could incur similar expenses in future periods upon the achievement of the performance metrics indicated in the stock option grants.

(d) Represents payroll taxes associated with stock option exercises related to stock options that were outstanding prior to our IPO. We expect to incur similar expenses in future periods when our directors or employees exercise stock options that were outstanding prior to our IPO.

(e) Includes expenses incurred in connection with the transition to our new distributor.

(f) Represents severance and legal fees associated with a former executive’s departure from the Company. Subsequent to September 25, 2016, we finalized the separation agreement with this former executive and incurred approximately $0.1 million of additional legal fees and other related expenses during the thirteen weeks ending December 25, 2016.

(g) As a result of the enacted reductions to the North Carolina corporate income tax rate during both of the thirteen weeks ended September 25, 2016 and September 27, 2015, we adjusted our deferred income taxes by applying the lower rate, which resulted in a corresponding decrease to income tax expense.

(h) Represents the income tax expense associated with the adjustments in (a) through (g) that are deductible for income tax purposes.

The following table sets forth reconciliations of net income to EBITDA and Adjusted EBITDA:

	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
(Dollar amounts in thousands)	September 25, 2016		September 27, 2015		September 25, 2016		September 27, 2015
Net income	$	10,019		8,910		27,894		18,682
Income taxes		4,113		3,360		13,987		11,440
Interest expense, net		1,819		2,001		5,778		6,388
Depreciation and amortization (a)		4,169		3,923		12,177		11,075
EBITDA		20,120		18,194		59,836		47,585
Non-cash rent (b)		414		389		1,185		1,168
Stock-based compensation (c)		404		309		953		1,711
Payroll taxes associated with stock option exercises (d)		8		—		79		17
Preopening expenses (e)		346		326		942		1,064
Sponsor and board member fees and expenses (f)		—		—		—		166
Certain professional, transaction and other costs (g)		24		160		66		5,041
Distributor transition costs (h)		—		217		81		217
Executive separation expenses (i)		197		507		197		507
Impairment and dispositions (j)		730		421		979		476
Adjusted EBITDA	$	22,243		20,523		64,318		57,952

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(a) Includes amortization of deferred debt issuance costs.

(b) Includes deferred rent, which represents the extent to which our rent expense has been above or below our cash rent payments, amortization of favorable (unfavorable) leases and closed store reserves for rent net of cash payments. We expect to continue to incur similar expenses in future periods as we record rent expense in accordance with GAAP, as well as continue to amortize favorable (unfavorable) leases and record closed store reserves.

(c) Represents non-cash, stock-based compensation. We expect to incur similar expenses in future periods as we record stock-based compensation related to existing grants (and any potential future grants) in accordance with GAAP.

(d) Represents payroll taxes associated with stock option exercises related to stock options that were outstanding prior to our IPO. We expect to incur similar expenses in future periods when our directors or employees exercise stock options that were outstanding prior to our IPO.

(e) Includes expenses directly associated with the opening of company-operated restaurants and incurred prior to the opening of a company-operated restaurant. We expect to continue to incur similar expenses as we open company-operated restaurants.

(f) Includes reimbursement of expenses to our sponsor prior to our IPO and compensation and expense reimbursement to members of our board prior to our IPO.

(g) Includes costs associated with third-party consultants for one-time projects, public offering expenses and certain professional fees and transaction costs related to financing transactions. We could incur similar expenses in future periods if we commence additional public offerings, financing transactions or other one-time projects.

(h) Includes expenses incurred in connection with the transition to our new distributor.

(i) Represents severance and legal fees associated with a former executive’s departure from the Company. Subsequent to September 25, 2016, we finalized the separation agreement with this former executive and incurred approximately $0.1 million of additional legal fees and other related expenses during the thirteen weeks ending December 25, 2016.

(j) Includes loss (gain) on disposal of property and equipment, impairment and cash proceeds on disposals from disposition of property and equipment. We could continue to record impairment expense in future periods if performance of company-operated restaurants is not sufficient to recover the carrying amount of the related long-lived assets. We expect to incur future losses (gains) and to receive cash proceeds on disposal of property and equipment associated with retirement, replacement or write-off of fixed assets.

Restaurant Contribution and Restaurant Contribution Margin

Restaurant contribution and restaurant contribution margin are neither required by, nor presented in accordance with, GAAP. Restaurant contribution is defined as company restaurant revenues less food and supplies costs, restaurant labor costs, and operating costs. We expect restaurant contribution to increase based on company-operated restaurants we open and our comparable restaurant sales growth. Restaurant contribution margin is defined as restaurant contribution as a percentage of company restaurant revenues. Fluctuations in restaurant contribution and restaurant contribution margin can be attributed to company comparable restaurant sales, sales volumes of newly opened company restaurants, and changes in company food and supplies costs, restaurant labor costs and operating costs.

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Restaurant contribution and restaurant contribution margin are supplemental measures of operating performance of our company-operated restaurants and our calculations thereof may not be comparable to those reported by other companies. Restaurant contribution and restaurant contribution margin have limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of our results as reported under GAAP. We believe that restaurant contribution and restaurant contribution margin are important tools for investors as they are widely-used metrics within the restaurant industry to evaluate restaurant-level productivity, efficiency and performance. We use restaurant contribution and restaurant contribution margin as key metrics to evaluate profitability and performance of our restaurants across periods and to evaluate our restaurant financial performance compared to our competitors.

The following table reconciles our restaurant contribution to the line item on the condensed consolidated statements of operations and comprehensive income entitled “Company restaurant revenues,” which we believe is the most directly comparable GAAP measure on our condensed consolidated statements of operations and comprehensive income.

	Thirteen Weeks Ended						Thirty-Nine Weeks Ended
(Dollar amounts in thousands)	September 25, 2016			September 27, 2015			September 25, 2016			September 27, 2015
Company restaurant revenues	$	126,358			117,536			372,446			339,914
Food and supplies costs		(39,331	)		(37,223	)		(116,872	)		(110,508	)
Restaurant labor costs		(35,115	)		(32,429	)		(102,976	)		(94,075	)
Operating costs		(28,625	)		(25,936	)		(83,645	)		(74,120	)
Restaurant contribution	$	23,287			21,948			68,953			61,211
Restaurant contribution margin		18.4	%		18.7	%		18.5	%		18.0	%

Key Financial Definitions

Total Revenues

Our revenues are derived from two primary sources: company restaurant revenues and franchise revenues. Franchise revenues are comprised of franchise royalty revenues and, to a lesser extent, other franchise revenues, which include initial and renewal franchisee fees.

Food and Supplies Costs

Food and supplies costs include the direct costs associated with food, beverage and packaging of our menu items at company-operated restaurants. The components of food and supplies are variable in nature, change with sales volume, are affected by menu mix and are subject to fluctuations in commodity costs.

Restaurant Labor Costs

Restaurant labor costs, including preopening labor, consist of company-operated restaurant-level management and hourly labor costs, including salaries, wages, payroll taxes, workers’ compensation expense, benefits and bonuses paid to our company-operated restaurant-level team members. Like other cost items, we expect restaurant labor costs at our company-operated restaurants to grow due to inflation and as our company restaurant revenues grows. Factors that influence labor costs include minimum wage and employer payroll tax legislation, exempt versus non-exempt classification, a tightening labor market, employee turnover levels, health care costs and the performance of our restaurants. In addition, the Patient Protection and Affordable Care Act (“PPACA”) has increased health care costs for our restaurants, and we expect the PPACA will continue to result in increased health care costs for our restaurants in the future. We expect that the newly enacted Department of Labor (“DOL”) regulations related to overtime and exempt versus non-exempt classification that are scheduled to become effective December 1, 2016, along with various labor initiatives we intend to implement, including table service and potentially employing more full-time versus part-time team members, will increase our restaurant labor costs.

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Operating Costs

Restaurant operating costs include all other company-operated restaurant-level operating expenses, such as repairs and maintenance, utilities, credit and debit card processing, occupancy expenses and other restaurant operating costs. In addition, our advertising costs are included in operating costs and are comprised of our company-operated restaurants’ portion of spending on all advertising which includes, but is not limited to, television, radio, social media, billboards, point-of-sale materials, sponsorships, and creation of media, such as commercials and marketing campaigns.

Company Restaurant Depreciation and Amortization

Company restaurant depreciation and amortization primarily consists of the depreciation of property and equipment and amortization of intangible assets at the restaurant level. We expect that growth in company-operated restaurant count, as well as restaurant remodels, investments in technology and other initiatives, will increase company restaurant depreciation and amortization.

General and Administrative Expenses

General and administrative expenses include expenses associated with corporate and administrative functions that support our operations, including compensation and benefits, travel expense, stock-based compensation expense, legal and professional fees, training, and other corporate costs. We expect we will incur incremental general and administrative expenses as a result of our IPO and as a public company.

Other Depreciation and Amortization

Other depreciation and amortization primarily consists of the depreciation of property and equipment and amortization of intangible assets not directly located at company-operated restaurants. We expect that growth in system-wide restaurant count, as well investments in technology and other initiatives, will increase other depreciation and amortization.

Impairment

Long-lived assets such as property, equipment and intangible assets are reviewed on a unit-by-unit basis for impairment. When circumstances indicate the carrying value of an asset may not be recoverable, an appropriate impairment is recorded. Impairments could increase if performance of company-operated restaurants is not sufficient to recover the carrying amount of the related long-lived assets.

Loss (Gain) on Disposal of Property and Equipment

Loss (gain) on disposal of property and equipment includes the net loss (gain) on disposal of assets related to retirements and replacements or write-off of leasehold improvements, equipment and other fixed assets. These losses (gains) are related to normal disposals in the ordinary course of business and gains from insurance proceeds, if any.

Amortization of Deferred Debt Issuance Costs

Deferred debt issuance costs are amortized over the term of the related debt on the effective interest method.

Interest Expense

Interest expense primarily consists of interest on our debt outstanding under our credit facility and capital lease obligations.

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Income Taxes

Income taxes represent federal, state, and local current and deferred income tax expense.

Results of Operations

Thirteen Weeks Ended September 25, 2016 Compared with the Thirteen Weeks Ended September 27, 2015

Our operating results for the thirteen weeks ended September 25, 2016 and September 27, 2015 are compared below:

	Thirteen Weeks Ended
	September 25, 2016			September 27, 2015			Increase/ (Decrease)			Percentage Change
	(Dollar amounts in thousands)
Statement of Operations Data:
Revenues:
Company restaurant revenues	$	126,358		$	117,536		$	8,822			7.5	%
Franchise royalty revenues		6,739			6,436			303			4.7	%
Other franchise revenues		100			287			(187	)		(65.2	)%
Total revenues		133,197			124,259			8,938			7.2	%
Company restaurant operating expenses:
Food and supplies costs		39,331			37,223			2,108			5.7	%
Restaurant labor costs		35,115			32,429			2,686			8.3	%
Operating costs		28,625			25,936			2,689			10.4	%
Depreciation and amortization		3,225			2,990			235			7.9	%
Total company restaurant operating expenses		106,296			98,578			7,718			7.8	%
Operating income before other operating expenses		26,901			25,681			1,220			4.8	%
Other operating expenses:
General and administrative		9,276			10,064			(788	)		(7.8	)%
Depreciation and amortization		745			725			20			2.8	%
Impairment		592			193			399			206.7	%
Loss on disposal of property and equipment		138			220			(82	)		(37.3	)%
Total other operating expenses		10,751			11,202			(451	)		(4.0	)%
Operating income		16,150			14,479			1,671			11.5	%
Amortization of deferred debt issuance costs		(199	)		(208	)		9			(4.3	)%
Interest expense		(1,819	)		(2,001	)		182			(9.1	)%
Income before income taxes		14,132			12,270			1,862			15.2	%
Income taxes		4,113			3,360			753			22.4	%
Net income	$	10,019		$	8,910		$	1,109			12.4	%

Company Restaurant Revenues

Company restaurant revenues increased $8.8 million, or 7.5%, during the thirteen weeks ended September 25, 2016 compared to the thirteen weeks ended September 27, 2015. The growth in company restaurant revenues was primarily due to an increase in the non-comparable restaurant base (net additions of 27 company-operated restaurants as of September 25, 2016 compared to September 27, 2015) accounting for $9.1 million, partially offset by a decrease in comparable company restaurant sales of $0.3 million, or 0.2%, composed of a decrease in transactions, partially offset by increases in price at our comparable restaurants.

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Franchise Royalty Revenues

Franchise royalty revenues increased $0.3 million during the thirteen weeks ended September 25, 2016 compared to the thirteen weeks ended September 27, 2015. The increase was primarily due to a net additional 15 franchised restaurants at September 25, 2016 compared to September 27, 2015 and franchised comparable restaurant sales growth of 1.4%.

Other Franchise Revenues

Other franchise revenues decreased $0.2 million during the thirteen weeks ended September 25, 2016 compared to the thirteen weeks ended September 27, 2015. The decrease was primarily due to the timing of the opening of franchised restaurants.

Food and Supplies Costs

Food and supplies costs increased $2.1 million during the thirteen weeks ended September 25, 2016 compared to the thirteen weeks ended September 27, 2015. This increase was primarily driven by an increase in company restaurant revenues. Food and supplies costs as a percentage of company restaurant revenues during the thirteen weeks ended September 25, 2016 was 31.1% versus 31.7% during the thirteen weeks ended September 27, 2015. This percentage decrease was primarily due to our menu price increases and lower commodity costs.

Restaurant Labor Costs

Company-operated restaurant labor costs increased $2.7 million during the thirteen weeks ended September 25, 2016 compared to the thirteen weeks ended September 27, 2015, primarily due to higher company restaurant revenues as a result of an increase in the number of company-operated restaurants. As a percentage of company restaurant revenues, restaurant labor costs increased to 27.8% during the thirteen weeks ended September 25, 2016 from 27.6% during the thirteen weeks ended September 27, 2015. This increase was primarily driven by an increase in direct labor, partially offset by lower medical claims, incentive compensation and payroll taxes.

We expect our restaurant labor costs will continue to increase due to the tightening labor market, as well as certain labor initiatives across company-operated restaurants, including the expansion of our table service and potentially increasing the number of full-time versus part-time team members. In addition, we expect that our restaurant labor costs will increase as a result of the newly enacted DOL regulations related to overtime and exempt versus non-exempt classification that are scheduled to become effective December 1, 2016.

Operating Costs

Operating costs increased $2.7 million during the thirteen weeks ended September 25, 2016 compared to the thirteen weeks ended September 27, 2015, primarily due to higher company restaurant revenues. As a percentage of company restaurant revenues, operating costs increased to 22.7% during the thirteen weeks ended September 25, 2016 from 22.1% during the thirteen weeks ended September 27, 2015. Operating costs as a percentage of company restaurant revenues increased primarily due to higher occupancy and utilities costs.

Restaurant Depreciation and Amortization

Restaurant depreciation and amortization increased $0.2 million during the thirteen weeks ended September 25, 2016 compared to the thirteen weeks ended September 27, 2015, due primarily to the increased number of company-operated restaurants and our new point-of-sale system. As a percentage of company restaurant revenues, depreciation and amortization was 2.6% and 2.5% during the thirteen weeks ended September 25, 2016 and September 27, 2015, respectively.

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General and Administrative Expenses

General and administrative expenses decreased $0.8 million during the thirteen weeks ended September 25, 2016 compared to the thirteen weeks ended September 27, 2015. The decrease was due primarily to $0.8 million of lower incentive compensation and $0.3 million of lower executive separation expenses during the thirteen weeks ended September 25, 2016, partially offset by headcount added to support an increased number of restaurants in our system. As a percentage of total revenues, general and administrative expenses were 7.0% and 8.1% during the thirteen weeks ended September 25, 2016 and September 27, 2015, respectively.

We expect our recurring general and administrative expenses will increase as we grow our business and incur additional expenses related to being a newer public company.

Interest Expense

Interest expense decreased $0.2 million during the thirteen weeks ended September 25, 2016 compared to the thirteen weeks ended September 27, 2015. The decrease was due primarily to principal payments of $38.7 million on our long-term debt from September 27, 2015 to September 25, 2016 and a reduction in our applicable rate, partially offset by an increase in the LIBOR rate and interest expense associated with interest rate swaps.

Income Taxes

Income taxes increased $0.8 million during the thirteen weeks ended September 25, 2016 compared to the thirteen weeks ended September 27, 2015. Our effective income tax rates were 29.1% and 27.4% during the thirteen weeks ended September 25, 2016 and September 27, 2015, respectively. The effective income tax rate for both of the thirteen weeks ended September 25, 2016 and September 27, 2015 was impacted by a deferred income tax benefit due to a reduction in the North Carolina corporate income tax rate and the recognition of certain tax credits.

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Thirty-Nine Weeks Ended September 25, 2016 Compared with the Thirty-Nine Weeks Ended September 27, 2015

Our operating results for the thirty-nine weeks ended September 25, 2016 and September 27, 2015 are compared below:

	Thirty-Nine Weeks Ended
	September 25, 2016			September 27, 2015			Increase/ (Decrease)			Percentage Change
	(Dollar amounts in thousands)
Statement of Operations Data:
Revenues:
Company restaurant revenues	$	372,446		$	339,914		$	32,532			9.6	%
Franchise royalty revenues		19,532			18,740			792			4.2	%
Other franchise revenues		470			768			(298	)		(38.8	)%
Total revenues		392,448			359,422			33,026			9.2	%
Company restaurant operating expenses:
Food and supplies costs		116,872			110,508			6,364			5.8	%
Restaurant labor costs		102,976			94,075			8,901			9.5	%
Operating costs		83,645			74,120			9,525			12.9	%
Depreciation and amortization		9,432			8,378			1,054			12.6	%
Total company restaurant operating expenses		312,925			287,081			25,844			9.0	%
Operating income before other operating expenses		79,523			72,341			7,182			9.9	%
Other operating expenses:
General and administrative		28,189			32,694			(4,505	)		(13.8	)%
Depreciation and amortization		2,178			2,075			103			5.0	%
Impairment		981			208			773			371.6	%
(Gain) loss on disposal of property and equipment		(51	)		232			(283	)		(122.0	)%
Total other operating expenses		31,297			35,209			(3,912	)		(11.1	)%
Operating income		48,226			37,132			11,094			29.9	%
Amortization of deferred debt issuance costs		(567	)		(622	)		55			(8.8	)%
Interest income		4			6			(2	)		n/m
Interest expense		(5,782	)		(6,394	)		612			(9.6	)%
Income before income taxes		41,881			30,122			11,759			39.0	%
Income taxes		13,987			11,440			2,547			22.3	%
Net income	$	27,894		$	18,682		$	9,212			49.3	%

n/m = not meaningful

Company Restaurant Revenues

Company restaurant revenues increased $32.5 million, or 9.6%, during the thirty-nine weeks ended September 25, 2016 compared to the thirty-nine weeks ended September 27, 2015. The growth in company restaurant revenues was primarily due to an increase in comparable company restaurant sales of $3.5 million, or 1.1%, composed of increases in price and transactions at our comparable restaurants, and an increase in the non-comparable restaurant base (net additions of 27 company-operated restaurants as of September 25, 2016 compared to September 27, 2015) accounting for $29.0 million.

Franchise Royalty Revenues

Franchise royalty revenues increased $0.8 million during the thirty-nine weeks ended September 25, 2016 compared to the thirty-nine weeks ended September 27, 2015. The increase was primarily due to a net additional 15 franchised restaurants at September 25, 2016 compared to September 27, 2015 and franchised comparable restaurant sales growth of 0.9%.

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Other Franchise Revenues

Other franchise revenues decreased $0.3 million during the thirty-nine weeks ended September 25, 2016 compared to the thirty-nine weeks ended September 27, 2015. The decrease was primarily due to the timing of the opening of franchised restaurants.

Food and Supplies Costs

Food and supplies costs increased $6.4 million during the thirty-nine weeks ended September 25, 2016 compared to the thirty-nine weeks ended September 27, 2015. This increase was primarily driven by an increase in company restaurant revenues. Food and supplies costs as a percentage of company restaurant revenues during the thirty-nine weeks ended September 25, 2016 was 31.4% versus 32.5% during the thirty-nine weeks ended September 27, 2015. This percentage decrease was primarily due to our menu price increases and lower commodity costs.

Restaurant Labor Costs

Company-operated restaurant labor costs increased $8.9 million during the thirty-nine weeks ended September 25, 2016 compared to the thirty-nine weeks ended September 27, 2015, primarily due to higher company restaurant revenues as a result of an increase in the number of company-operated restaurants. As a percentage of company restaurant revenues, restaurant labor costs decreased to 27.6% during the thirty-nine weeks ended September 25, 2016 from 27.7% during the thirty-nine weeks ended September 27, 2015. This decrease was primarily driven by lower medical claims, incentive compensation and payroll taxes, partially offset by an increase in direct labor costs.

We expect our restaurant labor costs will continue to increase due to the tightening labor market, as well as certain labor initiatives across company-operated restaurants, including the expansion of our table service and potentially increasing the number of full-time versus part-time team members. In addition, we expect our restaurant labor costs will increase as a result of the newly enacted DOL regulations related to overtime and exempt versus non-exempt classification that are scheduled to become effective December 1, 2016.

Operating Costs

Operating costs increased $9.5 million during the thirty-nine weeks ended September 25, 2016 compared to the thirty-nine weeks ended September 27, 2015, primarily due to higher company restaurant revenues. As a percentage of company restaurant revenues, operating costs increased to 22.5% for the thirty-nine weeks ended September 25, 2016 from 21.8% in the thirty-nine weeks ended September 27, 2015. This increase was primarily attributable to higher occupancy costs.

Restaurant Depreciation and Amortization

Restaurant depreciation and amortization increased $1.1 million during the thirty-nine weeks ended September 25, 2016 compared to the thirty-nine weeks ended September 27, 2015, due primarily to the increased number of company-operated restaurants and our new point-of-sale system. As a percentage of company restaurant revenues, depreciation and amortization was 2.5% during both of the thirty-nine weeks ended September 25, 2016 and September 27, 2015.

General and Administrative Expenses

General and administrative expenses decreased $4.5 million during the thirty-nine weeks ended September 25, 2016 compared to the thirty-nine weeks ended September 27, 2015. The decrease was due primarily to $4.5 million in legal, accounting and other expenses incurred during the thirty-nine weeks ended September 27, 2015 directly related to public offering expenses, $0.8 million of lower stock-based compensation expense primarily as a result of the vesting of certain performance awards during the thirty-nine weeks ended September 27, 2015 and

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$0.5 million of lower meetings and convention expenses primarily due to our bi-annual franchise convention and unit director leadership conference occurring during the thirty-nine weeks ended September 27, 2015, partially offset by headcount added to support an increased number of restaurants in our system and additional costs as a result of operating as a public company. As a percentage of total revenues, general and administrative expenses were 7.2% and 9.1% during the thirty-nine weeks ended September 25, 2016 and September 27, 2015, respectively.

We expect our recurring general and administrative expenses will increase as we grow our business and incur additional expenses related to being a newer public company.

Interest Expense

Interest expense decreased $0.6 million during the thirty-nine weeks ended September 25, 2016 compared to the thirty-nine weeks ended September 27, 2015. The decrease was due primarily to principal payments of $38.7 million on our long-term debt from September 27, 2015 to September 25, 2016 and a reduction in our applicable rate, partially offset by an increase in the LIBOR rate and interest expense associated with interest rate swaps.

Income Taxes

Income taxes increased $2.5 million during the thirty-nine weeks ended September 25, 2016 compared to the thirty-nine weeks ended September 27, 2015. Our effective income tax rates were 33.4% and 38.0% during the thirty-nine weeks ended September 25, 2016 and September 27, 2015, respectively. The effective income tax rate for both of the thirty-nine weeks ended September 25, 2016 and September 27, 2015 was impacted by a deferred income tax benefit due to a reduction in the North Carolina corporate income tax rate and the recognition of certain tax credits. The effective income tax rate for the thirty-nine weeks ended September 27, 2015 was also impacted by costs related to the IPO that were not deductible for income tax purposes.

Contractual Obligations

During the thirty-nine weeks ended September 25, 2016, there were no material changes to the contractual obligations as disclosed in the Annual Report on Form 10-K for the fiscal year ended December 27, 2015, other than those made in the ordinary course of business.

Off-Balance Sheet Arrangements

We have guaranteed through 2018 debt from a previous credit facility which was assumed by a franchisee. We may be required to perform this guarantee in the event of default or nonperformance by this franchisee. We have determined that default by the franchisee is unlikely due to its timely and consistent payments and have therefore not recorded a liability for the debt assumed by this franchisee on our condensed consolidated balance sheets. The carrying value of debt covered by this additional guarantee by us was approximately $0.1 million at both September 25, 2016 and December 27, 2015.

Emerging Growth Company

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as modified by the Jumpstart our Business Startups Act of 2012, or the JOBS Act (the “JOBS Act”). As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and of stockholder approval of any golden parachute payments not previously approved.

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In addition, Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933 for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption, and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not “emerging growth companies.”

We will remain an “emerging growth company” until the earliest of (a) December 27, 2020, (b) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (c) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (d) the date on which we have issued more than $1 billion in non-convertible debt securities in the preceding three-year period.

Critical Accounting Policies and Use of Estimates

Our discussion and analysis of operating results and financial condition are based upon our financial statements. The preparation of our financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures of contingent assets and liabilities. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis.

Accounting policies are an integral part of our financial statements. A thorough understanding of these accounting policies is essential when reviewing our reported results of operations and our financial position. Management believes that the critical accounting policies and estimates discussed herein involve the most difficult management judgments due to the sensitivity of the methods and assumptions used. Our significant accounting policies are described in Note 1 to our consolidated financial statements contained elsewhere in this Form 10-Q.

There have been no material changes to our critical accounting policies described in our Annual Report on Form 10-K for the fiscal year ended December 27, 2015.

New Accounting Standards

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). This update was issued to replace the current revenue recognition guidance, creating a more comprehensive revenue model. This update was originally to be effective in fiscal periods beginning after December 15, 2016 and early application was not permitted. In July 2015, the FASB affirmed its proposal to defer the effective date by one year to annual reporting periods beginning after December 15, 2017. The FASB also affirmed its proposal to permit early adoption of the standard, but not before the original effective date of December 15, 2016. We are currently evaluating the impact of the adoption of ASU 2014-09 on our consolidated financial statements.

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330) (“ASU 2015-11”). The pronouncement was issued to simplify the measurement of inventory and changes the measurement from lower of cost or market to lower of cost and net realizable value. This pronouncement is effective for reporting periods beginning after December 15, 2016. The adoption of ASU 2015-11 is not expected to have a significant impact on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 is a comprehensive new standard that amends various aspects of existing guidance for leases and requires additional disclosures about leasing arrangements. ASU 2016-02 will require companies to recognize lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. ASU 2016-02 retains a

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distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous guidance relating to leases. ASU 2016-02 is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact of the adoption of this guidance on our consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which simplifies several aspects of the accounting for employee share-based payment transactions. ASU 2016-09 addresses several aspects of the accounting for share-based payment award transactions, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact of the adoption of this guidance on our consolidated financial statements.

Liquidity and Capital Resources

Our primary requirements for liquidity and capital are new company-operated restaurants, existing restaurant capital investments (remodels and maintenance), information technology investments, principal and interest payments on our term debt and capital lease obligations, operating lease obligations and working capital and general corporate needs. Our customers pay for their purchases in cash or by payment card (credit or debit) at the time of sale. Therefore, we are able to sell many of our inventory items before we have to pay our suppliers for such items. Our restaurants do not require significant inventories or receivables. We have accounts receivable from our franchisees, which are primarily related to royalty revenues, as well as from certain vendors.

Our growth plan is dependent upon many factors, including economic conditions, real estate markets, restaurant locations and the nature of our lease agreements. Our capital expenditure outlays are also dependent on costs for maintenance in our existing restaurants as well as information technology and other general corporate expenditures. We primarily utilize build-to-suit developments and equipment financing leases for our new company-operated restaurants, requiring minimal upfront cash investment. While we currently primarily utilize a build-to-suit development strategy combined with equipment financing leases, our new restaurant strategy may change over time.

We currently expect that our capital expenditures for 2016 will range between $12.5 million and $13.5 million excluding approximately $1.7 million to $1.8 million of restaurant preopening costs for restaurants that are not capitalized. These capital estimates are based on restaurant capital expenditures for the opening of 28 to 29 company-operated restaurants as well as investments to remodel and improve our existing restaurants, investments in technology and expenditures for general corporate purposes.

We believe that cash and cash equivalents and expected cash flow from operations are adequate to fund debt service requirements, capital lease obligations, operating lease obligations, capital expenditures and working capital needs for at least the next twelve months. However, our ability to continue to meet these requirements and obligations will depend on, among other things, our ability to achieve anticipated levels of revenues and cash flow from operations, our ability to manage costs and working capital successfully and the continued availability of build-to-suit and equipment financing leases for our new company-operated restaurants. We have used excess cash flows to make payments on our outstanding long-term debt in advance of the required due date, and we may continue to do so in future periods.

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The following table presents summary cash flow information for the periods indicated (in thousands):

	Thirty-Nine Weeks Ended
	September 25, 2016			September 27, 2015
Net cash provided by (used in)
Operating activities	$	42,781		$	33,088
Investing activities		(6,001	)		(8,741	)
Financing activities		(31,564	)		(22,498	)
Net increase in cash	$	5,216		$	1,849

Operating Activities

Net cash provided by operating activities increased from $33.1 million during the thirty-nine weeks ended September 27, 2015 to $42.8 million during the thirty-nine weeks ended September 25, 2016. The increase was primarily attributable to an increase in cash generated from our operations due to the net increase in company-operated restaurants, an increase in franchise royalty revenues and an increase in comparable restaurant sales, as well as the costs associated with our IPO incurred during the thirty-nine weeks ended September 27, 2015.

Investing Activities

Net cash used in investing activities decreased from $8.7 million during the thirty-nine weeks ended September 27, 2015 to $6.0 million during the thirty-nine weeks ended September 25, 2016. The decrease was primarily attributable to a reduction in purchases of property and equipment.

Financing Activities

Net cash used in financing activities increased from $22.5 million during the thirty-nine weeks ended September 27, 2015 to $31.6 million during the thirty-nine weeks ended September 25, 2016. This increase was primarily due to $10.7 million and $1.1 million of higher principal payments on long-term debt and capital lease obligations, respectively, partially offset by a $0.8 million increase in proceeds received from the exercises of stock options and a $1.3 million increase in the associated excess tax benefit, as well as $0.6 million of debt issuance costs incurred during the thirty-nine weeks ended September 27, 2015.

Debt and Other Obligations

Credit Agreement

On October 9, 2012, we entered into a credit agreement (“Credit Agreement”) with several financial institutions. The Credit Agreement is secured by substantially all of our assets and originally provided for borrowings under a term loan of $175.0 million and a revolving credit facility of $25.0 million, with a maturity date of October 9, 2017. In May 2013, we amended the Credit Agreement to provide for an additional $50.0 million term loan, the proceeds of which were used to fund a distribution to the holders of our Series A preferred stock. In April 2014, we further amended the Credit Agreement to provide for an additional $50.0 million term loan, the proceeds of which were also used to fund a distribution to the holders of our Series A preferred stock, and to extend the maturity date to October 9, 2018. On July 23, 2015, we amended the Credit Agreement in order to permit the merger of BHI Intermediate Holding Corp., our former wholly owned subsidiary, into us. On September 25, 2015, we further amended the Credit Agreement to, among other things, extend the maturity date on the Credit Agreement to October 9, 2020 and lower the applicable interest rate. On October 19, 2016, we further amended the Credit Agreement to, among other things, increase allowable indebtedness associated with capital lease obligations, synthetic lease obligations and purchase money obligations, as well as to increase allowable cash capital expenditures during each fiscal year. We had $170.5 million of outstanding term loans and no outstanding borrowings under our revolving credit facility as of September 25, 2016.

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Borrowings under the Credit Agreement are allowed under base rate and Eurodollar rate loans. Base rate loans bear interest at the higher of (1) the Bank of America prime rate, (2) the Federal Funds Rate plus 0.50%, or (3) the LIBOR rate for one-month loans plus 1.00% and an applicable rate. Eurodollar rate loans may be entered or converted into one-, two-, three-, or six-month periods and are charged interest at the LIBOR rate on the effective date for the period selected, plus an applicable rate. As of September 25, 2016, all of our outstanding term loan debt was in one-month Eurodollar loans with an interest rate of approximately 2.77%.

Debt Covenants

Our Credit Agreement contains various covenants that, among other things, do not allow us to exceed a maximum consolidated total lease adjusted leverage ratio, require us to maintain a minimum consolidated fixed charge coverage ratio, and place certain limitations on cash capital expenditures. We were in compliance with all of the covenants under our Credit Agreement as of September 25, 2016.

Hedging Arrangements

In connection with our Credit Agreement, as of September 25, 2016, we have three variable-to-fixed interest rate swap agreements to manage fluctuations in cash flows resulting from changes in the benchmark interest rate of LIBOR. On May 17, 2013, we entered into an interest rate swap contract with a notional amount of $50.0 million, an effective date of November 30, 2015 and a termination date of September 29, 2017, under which we pay interest fixed at 1.3325% and receive the one-month LIBOR rate. Also on May 17, 2013, we entered into a separate interest rate swap contract with an effective date of May 31, 2013, a termination date of May 31, 2017 and a notional amount of $25.0 million, under which we pay interest fixed at 0.70125% and receive the one-month LIBOR rate. On October 26, 2015, we entered into another interest rate swap contract with an effective date of October 30, 2015, a termination date of October 31, 2019 and a notional amount of $50.0 million, under which we pay interest fixed at 1.115% and receive the one-month LIBOR rate.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Inflation Risk

The primary inflationary factors affecting our operations are food and supplies, labor costs, energy costs and materials used in the construction of new company-operated restaurants. Increases in the minimum wage directly affect our labor costs and the PPACA has increased our health insurance costs beginning in fiscal 2015. In addition to the factors we can control that could increase labor costs, such as our labor initiatives, we expect that a tightening labor market, as well as the newly enacted DOL regulations related to overtime and exempt versus non-exempt classification that are scheduled to become effective December 1, 2016 will also increase our restaurant labor costs. Our leases require us to pay taxes, maintenance, repairs, insurance and utilities, all of which are generally subject to inflationary increases. Finally, the cost of constructing our restaurants is subject to inflationary increases in the costs of labor and material which results in higher rent expense on new restaurants.

Interest Rate Risk

Interest rate risk is the exposure to loss resulting from changes in the level of interest rates and the spread between different interest rates. We are exposed to market risk from changes in interest rates on our debt, which bears interest at variable rates. As of September 25, 2016, we had outstanding borrowings of $170.5 million under our Credit Agreement. As of September 25, 2016, $125.0 million of our outstanding borrowings under the Credit Agreement were covered by interest rate swaps that effectively fix the interest rate on those borrowings for certain periods of time. A 1.00% increase in the effective interest rate applied to our borrowings currently subject to variable interest rates would result in a pre-tax interest expense increase of $0.5 million on an annualized basis.

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Interest rate risk is highly sensitive due to many factors, including U.S. monetary and tax policies, U.S. and international economic factors and other factors beyond our control. Debt under our Credit Agreement has floating interest rates. We are exposed to changes in the level of interest rates and to changes in the relationship or spread between interest rates for our floating rate debt. Our floating rate debt requires payments based on a variable interest rate index such as LIBOR. Therefore, increases in interest rates may reduce our net income by increasing the cost of our debt. However, we seek to mitigate our floating interest rate risk on the long-term debt under our Credit Agreement by entering into fixed pay interest rate derivatives on a portion of the long-term debt under our Credit Agreement, as discussed above under “Debt and Other Obligations – Hedging Arrangements”.

Commodity Market Risk

We purchase certain products that are affected by commodity prices and are, therefore, subject to price volatility caused by weather, market conditions and other factors which are not considered predictable or within our control. Although these products are subject to changes in commodity prices, certain purchasing contracts or pricing arrangements contain risk management techniques designed to minimize price volatility. The purchasing contracts and pricing arrangements we use may result in unconditional purchase obligations, which are not reflected in our condensed consolidated balance sheets. Typically, we use these types of purchasing techniques to control costs as an alternative to directly managing financial instruments to hedge commodity prices. In many cases, we believe we will be able to address material commodity cost increases by adjusting our menu pricing or promotional mix, or changing our product delivery strategy. However, increases in commodity prices, without adjustments to our menu prices, could increase food and supplies costs as a percentage of company restaurant revenues and customers may react negatively to increases in our menu prices which could adversely impact customer traffic and revenues.

Credit Risk

Credit risk relates to the risk of loss resulting from non-performance or non-payment by counterparties pursuant to the terms of their contractual obligations. Risks surrounding counterparty performance and credit could ultimately impact the amount and timing of expected cash flows.

Certain financial instruments potentially subject us to a concentration of credit risk. These financial instruments consist primarily of cash and cash equivalents and accounts and vendor receivables. We place our cash and cash equivalents with high-credit, quality financial institutions. At times, the balances in the accounts exceed the amounts insured by the Federal Deposit Insurance Corporation.

Concentration of credit risk with respect to receivables is primarily limited to franchisees, which are primarily located in the Southeastern United States, and vendors. Royalty revenues from three franchisees, one of which is a related party, accounted for approximately 44% of our total franchise royalty revenues for each of the thirteen weeks ended September 25, 2016 and September 27, 2015, and approximately 44% of our total franchise royalty revenues for each of the thirty-nine weeks ended September 25, 2016 and September 27, 2015. Royalty and franchise fee accounts receivable from three franchisees, one of which is a related party, accounted for approximately 42% and 44% of our gross royalty and franchise fee accounts receivable as of September 25, 2016 and December 27, 2015, respectively. We continually evaluate and monitor the credit history of our franchisees and believe we have an adequate allowance for bad debts.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 12a-15(e) of the Exchange Act) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

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As of the end of the period covered by this Quarterly Report, we carried out an evaluation under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures. Based upon this evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures were effective as of September 25, 2016.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the thirteen weeks ended September 25, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We are subject to various claims and litigation that arise in the normal course of business. Management is of the opinion that, although the outcome of the litigation cannot be predicted with any certainty, the ultimate liability, if any, will not have a material adverse effect on our financial position, results of operations or cash flows.

Item 1A. Risk Factors

Except with respect to the amended and restated risk factor below, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended December 27, 2015.

If we or our franchisees face labor shortages or increased labor costs, our results of operations and our growth could be adversely affected.

Labor is a primary component in the cost of operating our company-operated and franchised restaurants. If we or our franchisees face labor shortages or increased labor costs because of increased competition for employees, higher employee turnover rates, unionization of restaurant workers, or increases in the federally-mandated or state-mandated minimum wage, change in exempt and non-exempt status, or other employee benefits costs (including costs associated with health insurance coverage or workers’ compensation insurance), our and our franchisees’ operating expenses could increase and our growth could be adversely affected.

We have a substantial number of hourly employees who are paid wage rates at or based on the applicable federal or state minimum wage and increases in the minimum wage will increase our labor costs and the labor costs of our franchisees. The federal minimum wage has been $7.25 per hour since July 24, 2009. Federally-mandated, state-mandated or locally-mandated minimum wages may be raised in the future. Since January 1, 2014, lawmakers in twelve states and the District of Columbia have passed legislation to increase the state minimum wage. We may be unable to increase our menu prices in order to pass future increased labor costs on to our customers, in which case our margins would be negatively affected. Also, reduced margins of franchisees could make it more difficult to sell franchises. If menu prices are increased by us and our franchisees to cover increased labor costs, the higher prices could adversely affect transactions which could lower sales and thereby reduce our margins and the royalties that we receive from franchisees.

In addition, our success depends in part upon our and our franchisees’ ability to attract, motivate and retain a sufficient number of well-qualified restaurant operators, management personnel and other employees. Qualified individuals needed to fill these positions can be in short supply in some geographic areas, and in fiscal 2015 some of our stores experienced increased competition for qualified employees. In addition, limited service restaurants have traditionally experienced relatively high employee turnover rates. Our turnover increased in fiscal 2015 at company-operated restaurants and has continued to increase during the thirty-nine weeks ended September 25, 2016. Although we have not yet experienced any significant problems in recruiting employees, our and our franchisees’ ability to recruit and retain such individuals may delay the planned openings of new restaurants or result in higher employee turnover in existing restaurants, which could increase our and our franchisees’ labor costs and have a material adverse effect on our business, financial condition, results of operations or cash flows. If we or our franchisees are unable to recruit and retain sufficiently qualified individuals, our business and our growth could be adversely affected. Competition for these employees could require us or our franchisees to pay higher wages, which could also result in higher labor costs.

Finally, labor initiatives we or our franchisees implement across company-operated and franchised restaurants influence our labor costs. Certain initiatives, such as the expansion of our table service at company-operated restaurants, will increase our labor costs and overall operating expenses, which could adversely affect our growth. Changing the mix of full-time and part-time team members is another labor initiative that will influence our labor costs. Increasing our full-time team members at company-operated restaurants and/or franchised restaurants relative to part-time team members will result in higher labor costs for us and/or our franchisees, which could adversely affect our growth.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

On November 1, 2016, Bojangles’ Restaurants, Inc., our operating subsidiary (“Restaurants”), and Clifton Rutledge, our President and Chief Executive Officer, entered into an amendment to Mr. Rutledge’s Amended and Restated Employment Agreement dated December 18, 2014 (the “Rutledge Agreement”). The amendment clarifies the authority of our board over Mr. Rutledge and specifies that amendments to the Rutledge Agreement may only be adopted with the approval of our board or its delegate. The amendment also provides that expiration of the Rutledge Agreement due to non-renewal by Restaurants will trigger the same severance benefits under that agreement as a termination by Restaurants without cause or a resignation by Mr. Rutledge with good reason. Finally, the amendment eliminates the severance offset previously contained in the Rutledge Agreement, such that the severance benefit payable under that agreement upon termination without cause, a resignation with good reason or a non-renewal by Restaurants will in each case be equal to one times Mr. Rutledge’s annual base salary. The foregoing description is qualified in its entirety by reference to the full text of the amendment, which is filed as an exhibit to this Form 10-Q and incorporated herein by reference.

Item 6. Exhibits

The exhibits filed as part of this Quarterly Report are listed in the exhibit index immediately preceding such exhibits, which exhibit index is incorporated herein by reference.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: November 4, 2016

Bojangles’, Inc.
By:	/s/ M. John Jordan
	M. John Jordan
	Senior Vice President of Finance, Chief Financial Officer and Treasurer
	(Principal Financial Officer and Authorized Signatory)

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EXHIBIT INDEX

Exhibit No.	Description
10.1 †	Second Amendment to Master Distribution Agreement between McLane Foodservice, Inc. and Bojangles’ Restaurants, Inc. dated as of September 7, 2016. *
10.2	Amendment No. 5 dated as of October 19, 2016 between Bojangles’, Inc., Bojangles’ Restaurants, Inc., Bojangles’ International, LLC, BJ Georgia, LLC, BJ Restaurant Development, LLC, the lender parties thereto and Bank of America, N.A., as administrative agent. *
10.3 #	Amendment #1 to Amended and Restated Employment Agreement by and between Bojangles’ Inc. and Clifton W. Rutledge, dated November 1, 2016. *
31.1	Certification as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2	Certification as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1	Certification required by 18 United States Code Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.‡
32.2	Certification required by 18 United States Code Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.‡
101	Sections of the Bojangles’, Inc. Quarterly Report on Form 10-Q for the quarterly period ended September 25, 2016, formatted in XBRL (eXtensible Business Reporting Language), submitted in the following files:
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

* Filed herewith

† Indicates confidential treatment as to certain portions of this exhibit have been requested or granted. Omitted portions have been filed separately with the SEC.

# Indicates a management contract or compensatory plan or arrangement.

‡ Furnished herewith

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EX-10.1

Exhibit 10.1

* CONFIDENTIAL TREATEMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED SEPARATEDLY WITH THE SECURITIES AND EXCHANGE COMMISSION.

SECOND AMENDMENT TO MASTER DISTRIBUTION AGREEMENT

This Second Amendment to Master Distribution Agreement is entered into effective as of September 7, 2016 by and between Bojangles’ Restaurants, Inc. (“Company”) and McLane Foodservice, Inc. (“McLane”), and amends the Master Distribution Agreement between them dated September 9, 2015 (as previously amended by Amendment to Master Distribution Agreement dated October 20, 2015, the “Agreement”).

1.    Defined Terms. Each capitalized term used in this amendment without definition has the meaning given to that term in the Agreement.

2.    Amendment of Agreement. Effective as of the date first written above:

(a)    The third paragraph of Section 2 of Schedule 1 to the Agreement is amended by deleting the reference to “October 30, 2016” and replacing it with “November 1, 2017.”

(b)    The sentence in Schedule 5 to the Agreement that reads, * is deleted and replaced with the following sentence: *.

(c)    The second sentence of Section 2 of Schedule 1 to the Agreement is amended by deleting the reference to “and *-day payment terms will not be applied during the initial 12 months following the Effective Date” and replacing it with “will not be applied and will be waived until *.”

3.     Miscellaneous.

(a)    This amendment is limited as specified and does not constitute a modification, amendment or waiver of any other provision of the Agreement. Except as specifically amended by this amendment, the Agreement remains in full force and effect and is hereby ratified and confirmed.

(b)    This amendment may be executed in counterparts, each of which is to be deemed an original, and all of which constitute one and the same instrument.

(c)    The laws of the state of Texas, other than its conflict of law rules, govern this amendment.

* CONFIDENTIAL TREATEMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED SEPARATEDLY WITH THE SECURITIES AND EXCHANGE COMMISSION.

The parties have entered into this amendment as of the date first written above.

Bojangles’ Restaurants, Inc.		McLane Foodservice, Inc.
By:	/s/ Eric M. Newman	By:	/s/ Susan Adzick
Name:	Eric M. Newman	Name:	Susan Adzick
Title:	Executive Vice President	Title:	Vice President, Sales & Marketing
Date:	September 9, 2016	Date:	September 7, 2016

-2-

EX-10.2

Exhibit 10.2

EXECUTION VERSION

AMENDMENT NO. 5 TO CREDIT AGREEMENT

AND

AMENDMENT NO. 1 TO SECURITY AGREEMENT

This Amendment No. 5 to Credit Agreement and Amendment No. 1 to Security Agreement dated as of October 19, 2016 (this “Amendment”), is among BOJANGLES’ RESTAURANTS, INC., a Delaware corporation (the “Borrower”), BOJANGLES’, INC., a Delaware corporation (as successor in interest to BHI Intermediate Holding Corp.) (“Holdings”), BOJANGLES’ INTERNATIONAL, LLC, a Delaware limited liability company, BJ GEORGIA, LLC, a Georgia limited liability company, BJ RESTAURANT DEVELOPMENT, LLC, a North Carolina limited liability company, each lender party hereto (collectively, the “Lenders” and individually, a “Lender”) and BANK OF AMERICA, N.A., as administrative agent (the “Administrative Agent”) for the Secured Parties (under and as defined in the Credit Agreement as defined below), L/C Issuer and Swing Line Lender.

W I T N E S S E T H:

WHEREAS, reference is made to (a) the Credit Agreement, dated as of October 9, 2012 (as amended, amended and restated, restated, extended, supplemented, modified and otherwise in effect on the date hereof, the “Credit Agreement”) among, inter alios, the Borrower, Holdings, each lender from time to time party thereto and the Administrative Agent and (b) the Security Agreement, dated as of October 9, 2012 (as amended, amended and restated, restated, extended, supplemented, modified and otherwise in effect on the date hereof, the “Security Agreement”) among, inter alios, the Borrower, Holdings, the Guarantors, each grantor from time to time party thereto and the Administrative Agent; and

WHEREAS, subject to the terms and conditions set forth in this Amendment, the Administrative Agent and the Lenders agree to amend certain provisions of the Credit Agreement and the Security Agreement as herein set forth.

NOW THEREFORE, in consideration of the foregoing recitals, mutual agreements contained herein and for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the Borrower, the other Loan Parties, the Administrative Agent and the Lenders hereby agree as follows:

§1.    Defined Terms. Terms not otherwise defined herein which are defined in the Credit Agreement shall have the same respective meanings herein as therein.

§2.    Amendments to the Credit Agreement. Subject to the satisfaction of the conditions set forth in Section 4 of this Amendment, the Credit Agreement is hereby amended as follows:

(a)    Clause (f) of Section 7.02 to the Credit Agreement is hereby amended by deleting the amount “$25,000,000” contained therein and substituting the number “$35,000,000” in lieu thereof; and

(b)    Section 7.12 to the Credit Agreement is hereby amended by (i) deleting the amount “$15,000,000” contained therein and substituting the number “$30,000,000” in lieu thereof and (ii) deleting the amount “$7,500,000” contained therein and substituting the number “$15,000,000” in lieu thereof.

§3.    Amendments to Security Agreement. Subject to the satisfaction of the conditions set forth in Section 4 of this Amendment, the Security Agreement is hereby amended as follows:

(a)    Section 1 of the Security Agreement is hereby amended to add the following paragraph at the end thereof:

“The term ‘Franchisee Loans’, as used herein, shall mean one or more loans made by the Borrower or any other Grantor for the benefit of its franchisees in connection with the purchase and upgrade of information technology, including, without limitation, point of sale software and equipment, loyalty applications and mobile ordering and payment technology.”

(b)    Section 4.1 of the Security Agreement is hereby amended by amending and restating the first parenthetical as follows:

“(other than (a) any such promissory notes or tangible chattel paper with a value, either individually or in the aggregate, of less than $100,000 and (b) any such promissory notes received by any Grantor in connection with the Franchisee Loans which in the aggregate do not exceed $3,500,000)”

§4.    Conditions to Effectiveness. The effectiveness of this Amendment is subject to the satisfaction of the following conditions precedent or concurrent (the first date all such conditions are satisfied is herein referred to as the “Amendment No. 5 Effective Date”):

(a)    this Amendment shall have been duly executed and delivered by the Loan Parties and the Lenders to the Administrative Agent;

(b)    the representations and warranties set forth in Section 5 hereof shall be true and correct; and

(c)    the Borrower shall have paid on or prior to the Amendment No. 5 Effective Date all reasonable fees, charges and disbursements of counsel to the Administrative Agent (or directly to such counsel if requested by the Administrative Agent) required to be reimbursed or paid in accordance with Section 11.04 of the Credit Agreement to the extent invoiced at least two (2) days prior to the Amendment No. 5 Effective Date (for the avoidance of doubt, a summary statement of such fees, charges and disbursements shall be sufficient documentation for the obligations set forth in this Section 4(c)).

2

§5.    Representations and Warranties. To induce the Administrative Agent and the Lenders to enter into this Amendment, each Loan Party hereby represents and warrants to the Administrative Agent and the Lenders that:

(a)    the execution, delivery and performance of this Amendment has been duly authorized by all requisite corporate action on the part of the Loan Parties; this Amendment has been duly executed and delivered by Loan Parties; and this Amendment constitutes a valid and binding agreement of the Loan Parties, enforceable against the Loan Parties in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency or other similar laws relating to the enforcement of creditors’ rights generally and by general equitable principles;

(b)    immediately after giving effect to this Amendment and the consummation of the transactions contemplated hereby, no Default or Event of Default is in existence;

(c)    the representations and warranties of the Loan Parties contained in the Credit Agreement and the Loan Documents shall be true and correct as of the date hereof, with the same effect as though made on such date, except to the extent that such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall have been true and correct as of such earlier date, and except that for purposes of this clause (c) the representations and warranties contained in Section 5.05(a) and (b) of the Credit Agreement shall be deemed to refer to the most recent statements furnished pursuant to Sections 6.01(a) and (b), respectively, of the Credit Agreement; and

(d)    except as expressly amended hereby, the Credit Agreement (as amended hereby), the other Loan Documents and all documents, instruments and agreements related thereto, are hereby ratified and confirmed in all respects and shall continue in full force and effect. The Credit Agreement, together with this Amendment, shall be read and construed as a single agreement. All references in the Loan Documents to the Credit Agreement or any other Loan Document shall hereafter refer to the Credit Agreement or any other Loan Document as amended hereby.

§6.    Reaffirmation; Continued Validity of the Loan Documents. Except as specifically modified by this Amendment, the Loan Documents shall remain in full force and effect. Each Loan Party hereby acknowledges the provisions of this Amendment and hereby confirms that the Obligations are and remain secured pursuant to the Loan Documents (as modified by this Amendment) and pursuant to all other instruments and documents executed and delivered by such Loan Party (in each case, as modified by this Amendment) as security for the Obligations. Each Loan Party hereby affirms to the Administrative Agent and each Secured Party its grant of a continuing security interest and lien on, and hereby grants a security interest and lien on, all of the Collateral in favor of the Administrative Agent and each Secured Party, in each case, subject to no other Liens (other than Liens permitted by Section 7.01 of the Credit Agreement). Each of the Loan Documents and this Amendment shall be read and construed as a single agreement and each Loan Party agrees to be bound by the terms and conditions of the Loan Documents to which it is a party as modified hereby. All references in each of the Loan Documents or any related agreement or instrument to the Loan Documents shall hereafter refer to each of the Loan Documents as modified hereby.

3

§7.    Miscellaneous.

(a)    Loan Documents. Except as expressly provided in this Amendment, all of the terms and conditions of the Credit Agreement, the Collateral Documents and the other Loan Documents remain in full force and effect and are hereby ratified. The Borrower hereby reconfirms its obligations pursuant to the Credit Agreement to pay and reimburse the Administrative Agent and the Secured Parties for all costs and expenses (including without limitation, the fees and expenses of its counsel) incurred in connection with the negotiation, preparation, execution and delivery of this Amendment to the extent required by Section 11.04 of the Credit Agreement. This Amendment shall constitute a Loan Document.

(b)    Limitation of this Amendment. The amendments set forth herein are effective solely for the purposes set forth herein and shall be limited precisely as written. Except as expressly provided herein, this Amendment shall not be deemed to (i) be a consent to any amendment, waiver or modification of any other term or condition of the Credit Agreement or any other Loan Document, or (ii) operate as a waiver or otherwise prejudice any right, power or remedy that the Administrative Agent or Lenders may now have or may have in the future under or in connection with the Credit Agreement or any other Loan Document, except as specifically set forth herein. Upon the Amendment No. 5 Effective Date, (x) each reference in the Credit Agreement to “this Agreement”, “herein”, “hereof” and words of like import and each reference in the Credit Agreement and the Loan Documents to the Credit Agreement shall mean the Credit Agreement as amended hereby and (y) each reference in the Security Agreement to “this Agreement”, “herein”, “hereof” and words of like import and each reference in the Security Agreement and the Loan Documents to the Security Agreement shall mean the Security Agreement as amended hereby. This Amendment shall be construed in connection with and as part of each of the Credit Agreement and the Security Agreement, as applicable.

(c)    Captions. Section captions used in this Amendment are for convenience only, and shall not affect the construction of this Amendment.

(d)    Governing Law. This Amendment shall be a contract made under and governed by the laws of the State of New York, without regard to conflict of laws principles (other than Sections 5-1401 and 5-1402 of the New York General Obligations Law). Whenever possible each provision of this Amendment shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Amendment shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Amendment.

(e)    Counterparts. This Amendment may be executed in any number of counterparts and by the different parties on separate counterparts, and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Amendment. Receipt by facsimile or electronic transmission of any executed signature page to this Amendment shall constitute effective delivery of such signature page.

(f)    Successors and Assigns. This Amendment shall be binding upon and shall inure to the sole benefit of the Loan Parties, Administrative Agent and Secured Parties and their respective successors and assigns.

4

(g)    References. Any reference to the Credit Agreement or the Security Agreement contained in any notice, request, certificate, or other document executed concurrently with or after the execution and delivery of this Amendment shall be deemed to include this Amendment unless the context shall otherwise require.

[Remainder of Page Intentionally Left Blank.]

5

IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed and delivered as of the date first above written.

BANK OF AMERICA, N.A., as Administrative Agent
By:	/s/ Rhonda L. Baughn
Name:	Rhonda L. Baughn
Title:	Vice President

[Bojangles - Signature Page to Amendment No. 5 to Credit Agreement and

Amendment No. 1 to Security Agreement]

BANK OF AMERICA, N.A., as a Lender, L/C Issuer and Swing Line Lender
By:	/s/ Rhonda L. Baughn
Name:	Rhonda L. Baughn
Title:	Vice President

[Bojangles - Signature Page to Amendment No. 5 to Credit Agreement and

Amendment No. 1 to Security Agreement]

CADENCE BANK, as a Lender
By:	/s/ John M. Huss
Name:	John M. Huss
Title:	Managing Director

[Bojangles - Signature Page to Amendment No. 5 to Credit Agreement and

Amendment No. 1 to Security Agreement]

FIFTH THIRD BANK, as a Lender
By:	/s/ Jodie R. Ayres
Name:	Jodie R. Ayres
Title:	Vice President

[Bojangles - Signature Page to Amendment No. 5 to Credit Agreement and

Amendment No. 1 to Security Agreement]

KEYBANK NATIONAL ASSOCIATION, as a Lender
By:	/s/ Marianne T. Meil
Name:	Marriane T. Meil
Title:	Senior Vice President

[Bojangles - Signature Page to Amendment No. 5 to Credit Agreement and

Amendment No. 1 to Security Agreement]

REGIONS BANK, N.A., as a Lender
By:	/s/ Jake Nash
Name:	Jake Nash
Title:	Managing Director

[Bojangles - Signature Page to Amendment No. 5 to Credit Agreement and

Amendment No. 1 to Security Agreement]

ROYAL BANK OF CANADA, as a Lender
By:	/s/ Anthony Pistilli
Name:	Anthony Pistilli
Title:	Authorized Signatory

[Bojangles - Signature Page to Amendment No. 5 to Credit Agreement and

Amendment No. 1 to Security Agreement]

WELLS FARGO BANK, NATIONAL ASSOCIATION, as a Lender
By:	/s/ Maureen Malphus
Name:	Maureen Malphus
Title:	Vice President

[Bojangles - Signature Page to Amendment No. 5 to Credit Agreement and

Amendment No. 1 to Security Agreement]

Accepted and Agreed:
BOJANGLES’ RESTAURANTS, INC., as Borrower and a Grantor
By:	/s/ M. John Jordan
Name:	M. John Jordan
Title:	Senior Vice President and
	Chief Financial Officer
BOJANGLES’, INC. (AS SUCCESSOR IN INTEREST TO BHI INTERMEDIATE HOLDING CORP.), as Holdings, a Guarantor and a Grantor
By:	/s/ M. John Jordan
Name:	M. John Jordan
Title:	Senior Vice President,
	Chief Financial Officer and Treasurer
BOJANGLES’ INTERNATIONAL, LLC, as a Guarantor and a Grantor
By:	/s/ M. John Jordan
Name:	M. John Jordan
Title:	Senior Vice President and
	Chief Financial Officer
BJ GEORGIA, LLC, as a Guarantor
BJ RESTAURANT DEVELOPMENT, LLC, as a Guarantor and a Grantor
By:	/s/ M. John Jordan
Name:	M. John Jordan
Title:	Manager

[Bojangles - Signature Page to Amendment No. 5 to Credit Agreement and

Amendment No. 1 to Security Agreement]

EX-10.3

Exhibit 10.3

Amendment #1 to

Amended and Restated Employment Agreement

THIS AMENDMENT #1 (this “Amendment”) is made by and between BOJANGLES’ RESTAURANTS, INC. (the “Company”) and CLIFTON RUTLEDGE (“Executive”).

WHEREAS, the Company and Executive are parties to an Amended and Restated Employment Agreement entered into on December 18, 2014 (the “Employment Agreement”); and

WHEREAS, the parties wish to amend the Employment Agreement.

NOW THEREFORE, intending to be legally bound hereby, the parties hereby amend the Employment Agreement as follows:

1.    The first sentence of Section 2 is restated as follows:

Executive shall have the title of Chief Executive Officer of both the Company and its parent corporation, Bojangles’, Inc. (the “Parent”), and shall have such duties, authorities and responsibilities as are consistent with such position and as the Board of Directors of the Parent (the “Board”) may designate from time to time.

2.    The last sentence of Section 2 is restated as follows:

If requested, Executive shall also serve as an executive officer and/or board member of the board of directors (or similar governing body) of any entity that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the Company or the Parent (an “Affiliate”) without any additional compensation.

3.    The introductory language of Section 12(a) is restated as follows:

a. Termination by the Company Without Cause, by Executive For Good Reason or Due to Non-Renewal by the Company. If Executive’s employment is terminated at any time during the Term by the Company without Cause or by Executive for Good Reason, or if Executive’s employment terminates upon expiration of the Term as a result of the issuance of a Non-Renewal Notice by the Company, then subject to Section 12(c) of this Agreement, Executive shall be entitled to:

4.    Section 12(a)(ii) is restated as follows:

(ii) an amount equal to his Base Salary as in effect immediately prior to Executive’s date of termination, which amount shall be payable during the twelve (12) months commencing on the date of termination (the “Severance Period”) in substantially equal installments in accordance with the Company’s regular payroll practices as then in effect; provided, that the first payment pursuant to this Section 12(a)(ii) shall be made on the next regularly scheduled payroll date following the sixtieth (60th) day after Executive’s termination and shall include payment of any amounts that would otherwise be due prior thereto.

5.    Section 12(b) is restated as follows:

b. Termination other than by the Company Without Cause, by Executive For Good Reason or Due to Non-Renewal by the Company. If (i) the Company terminates Executive’s employment for Cause during the Term, (ii) Executive terminates his employment without Good Reason during the Term, (iii) Executive’s employment terminates during the Term due to death or Disability, or (iv) Executive’s employment terminates at the expiration of the Term pursuant to a Non-Renewal Notice by Executive, then Executive or Executive’s legal representatives, as applicable, shall be entitled to receive the payments and benefits described under Section 12(a)(i) of this Agreement.

6.    In Section 19(a), the address for notice to the Company is replaced with:

If to the Company:

Bojangles’ Restaurants, Inc.

9432 Southern Pine Boulevard

Charlotte, NC 28273

Attention: General Counsel

With a copy to:

Steven J. Collins

Chairman of the Compensation Committee of Bojangles’, Inc.

c/o Advent International Corporation

75 State Street

Boston, MA 02109

With a copy which shall not constitute notice to:

Pepper Hamilton LLP

3000 Two Logan Square

18th & Arch Streets

Philadelphia, PA 19103

Attention: Barry M. Abelson, Esq.

7.    The first sentence of Section 19(d) is restated as follows:

No change or modification of this Agreement shall be valid unless the same shall be in writing, signed by all of the parties hereto and duly authorized by the Board or its delegate.

8.    In Section 19(h)(i), the phrase “Section 409A of the Code” is replaced with the phrase “Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).”

9.    The Employment Agreement, as modified by this Amendment #1, is hereby ratified and confirmed in all respects.

[signature page follows]

IN WITNESS WHEREOF, each Company has caused this Amendment #1 to be executed by its duly authorized officer, and Executive has executed this Amendment #1, in each case on the 1st day of November, 2016.

BOJANGLES’ RESTAURANTS, INC.
By:	/s/ M. John Jordan
Name:	M. John Jordan
Title:	Chief Financial Officer
CLIFTON RUTLEDGE
/s/ Clifton Rutledge

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT

TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Clifton Rutledge, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Bojangles’, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 4, 2016

/s/ Clifton Rutledge

Clifton Rutledge

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT

TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, M. John Jordan, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Bojangles’, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 4, 2016

/s/ M. John Jordan

M. John Jordan

Senior Vice President of Finance, Chief Financial Officer and Treasurer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Bojangles’, Inc. (“Bojangles’”) on Form 10-Q for the period ending September 25, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Clifton Rutledge, President and Chief Executive Officer of Bojangles’, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Bojangles’.

/s/ Clifton Rutledge

Clifton Rutledge

President and Chief Executive Officer

November 4, 2016

A signed original of this written statement required by Section 906 has been provided to Bojangles’, Inc. and will be retained by Bojangles’, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. This written statement shall not be deemed filed by Bojangles’, Inc. for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that section, and will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, except to the extent that Bojangles’, Inc. specifically incorporates it by reference.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Bojangles’, Inc. (“Bojangles’”) on Form 10-Q for the period ending September 25, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, M. John Jordan, Senior Vice President of Finance, Chief Financial Officer and Treasurer of Bojangles’, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Bojangles’.

/s/ M. John Jordan

M. John Jordan

Senior Vice President of Finance, Chief Financial Officer and Treasurer

November 4, 2016

A signed original of this written statement required by Section 906 has been provided to Bojangles’, Inc. and will be retained by Bojangles’, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. This written statement shall not be deemed filed by Bojangles’, Inc. for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that section, and will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, except to the extent that Bojangles’, Inc. specifically incorporates it by reference.

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 25, 2016	Oct. 31, 2016
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 25, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q3
Trading Symbol	BOJA
Entity Registrant Name	BOJANGLES', INC.
Entity Central Index Key	0001630132
Current Fiscal Year End Date	--12-25
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		36,373,721

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 25, 2016	Dec. 27, 2015
Current assets:
Cash and cash equivalents	$ 19,479	$ 14,263
Accounts and vendor receivables, net of allowance for doubtful accounts of $142 and $329	3,889	4,736
Accounts receivable, related parties, net of allowance for doubtful accounts of $22 and $22	428	403
Inventories, net	3,080	3,080
Other current assets	3,504	5,639
Total current assets	30,380	28,121
Property and equipment, net	51,907	48,137
Goodwill	161,140	161,140
Brand	290,500	290,500
Franchise rights, net	24,518	25,341
Favorable leases, net	1,073	1,394
Other noncurrent assets	3,734	3,673
Total assets	563,252	558,306
Current liabilities:
Accounts payable	14,058	17,893
Accrued expenses	23,850	19,086
Current maturities of long-term debt	0	0
Current maturities of capital lease obligations	6,568	5,968
Other current liabilities	5,795	2,155
Total current liabilities	50,271	45,102
Long-term debt, less current maturities and deferred debt issuance costs, net	168,566	197,735
Deferred income taxes	110,818	115,028
Capital lease obligations, less current maturities	21,906	21,483
Other noncurrent liabilities	13,571	11,834
Total liabilities	365,132	391,182
Commitments and contingencies (notes 2, 11 and 12)
Stockholders' equity:
Preferred stock, $0.01 par value; 25,000 shares authorized and no shares issued and outstanding as of both September 25, 2016 and December 27, 2015
Common stock, $0.01 par value; 150,000 shares authorized and 36,374 and 36,009 shares issued and outstanding as of September 25, 2016 and December 27, 2015, respectively	364	360
Additional paid-in capital	122,660	119,084
Retained earnings	75,555	47,661
Accumulated other comprehensive (loss) income	(459)	19
Total stockholders' equity	198,120	167,124
Total liabilities and stockholders' equity	$ 563,252	$ 558,306

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Sep. 25, 2016	Dec. 27, 2015
Accounts receivable, allowance for doubtful accounts	$ 142	$ 329
Accounts receivable, related parties, allowance for doubtful accounts	$ 22	$ 22
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	25,000,000	25,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	150,000,000	150,000,000
Common stock, shares issued	36,374,000	36,009,000
Common stock, shares outstanding	36,374,000	36,009,000

XML

Condensed Consolidated Statements of Operations and Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 25, 2016	Sep. 27, 2015	Sep. 25, 2016	Sep. 27, 2015
Revenues:
Company restaurant revenues	$ 126,358	$ 117,536	$ 372,446	$ 339,914
Franchise royalty revenues	6,739	6,436	19,532	18,740
Other franchise revenues	100	287	470	768
Total revenues	133,197	124,259	392,448	359,422
Company restaurant operating expenses:
Food and supplies costs	39,331	37,223	116,872	110,508
Restaurant labor costs	35,115	32,429	102,976	94,075
Operating costs	28,625	25,936	83,645	74,120
Depreciation and amortization	3,225	2,990	9,432	8,378
Total Company restaurant operating expenses	106,296	98,578	312,925	287,081
Operating income before other operating expenses	26,901	25,681	79,523	72,341
Other operating expenses:
General and administrative	9,276	10,064	28,189	32,694
Depreciation and amortization	745	725	2,178	2,075
Impairment	592	193	981	208
Loss (gain) on disposal of property and equipment	138	220	(51)	232
Total other operating expenses	10,751	11,202	31,297	35,209
Operating income	16,150	14,479	48,226	37,132
Amortization of deferred debt issuance costs	(199)	(208)	(567)	(622)
Interest income			4	6
Interest expense	(1,819)	(2,001)	(5,782)	(6,394)
Income before income taxes	14,132	12,270	41,881	30,122
Income taxes	4,113	3,360	13,987	11,440
Net income	10,019	8,910	27,894	18,682
Other comprehensive income (loss), net of tax Change in fair value on interest rate swaps, net of income tax (expense) benefit of $(184), $134, $290 and $342	293	(221)	(478)	(555)
Comprehensive income	$ 10,312	$ 8,689	$ 27,416	$ 18,127
Net income per share :
Net income per share-basic	$ 0.28	$ 0.25	$ 0.77	$ 0.99
Net income per share-diluted	$ 0.27	$ 0.24	$ 0.74	$ 0.50

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Condensed Consolidated Statements of Operations and Comprehensive Income (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 25, 2016	Sep. 27, 2015	Sep. 25, 2016	Sep. 27, 2015
Interest rate swaps, net of income tax (expense) benefit	$ (184)	$ 134	$ 290	$ 342

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Condensed Consolidated Statement of Stockholders' Equity - USD ($) $ in Thousands	Total	Common stock	Additional paid-in capital	Retained earnings	Accumulated other comprehensive income (loss)
Beginning balance at Dec. 28, 2014					$ 146
Change in fair value on interest rate swaps, net of income tax benefit of $290	$ (127)
Ending balance at Dec. 27, 2015	$ 167,124	$ 360	$ 119,084	$ 47,661	19
Ending balance (Shares) at Dec. 27, 2015	36,009,000	36,009,000
Net income	$ 27,894			27,894
Change in fair value on interest rate swaps, net of income tax benefit of $290	(478)				(478)
Stock option exercises	$ 857	$ 4	853
Stock option exercises (in shares)	356,329	357,000
Vesting of restricted stock units	$ 0	$ 0	0	0	0
Vesting of restricted stock units (in shares)		8,000
Excess tax benefits from stock-based payment arrangements	1,770		1,770
Stock-based compensation	953		953
Ending balance at Sep. 25, 2016	$ 198,120	$ 364	$ 122,660	$ 75,555	$ (459)
Ending balance (Shares) at Sep. 25, 2016	36,374,000	36,374,000

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Condensed Consolidated Statement of Stockholders' Equity (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 25, 2016	Sep. 27, 2015	Sep. 25, 2016	Sep. 27, 2015
Change in fair value on interest rate swaps, tax	$ 184	$ (134)	$ (290)	$ (342)

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Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 25, 2016	Sep. 27, 2015
Cash flows from operating activities:
Net income	$ 27,894	$ 18,682
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income tax benefit	(2,244)	(3,356)
Depreciation and amortization	11,610	10,453
Amortization of deferred debt issuance costs	567	622
Impairment	981	208
(Gain) loss on disposal of property and equipment	(51)	232
(Benefit) provision for doubtful accounts	(65)	53
Provision for inventory spoilage	7	9
Benefit for closed stores	(51)	(50)
Stock-based compensation	953	1,711
Excess tax benefit from stock-based compensation	(1,770)	(421)
Changes in operating assets and liabilities	4,950	4,945
Net cash provided by operating activities	42,781	33,088
Cash flows from investing activities:
Purchases of franchisee's assets	(100)	(186)
Purchases of property and equipment	(5,950)	(8,591)
Proceeds from disposition of property and equipment	49	36
Net cash used in investing activities	(6,001)	(8,741)
Cash flows from financing activities:
Principal payments on long-term debt	(29,736)	(19,055)
Debt issuance costs		(555)
Stock option exercises	857	96
Excess tax benefit from stock-based compensation	1,770	421
Principal payments on capital lease obligations	(4,455)	(3,405)
Net cash used in financing activities	(31,564)	(22,498)
Net increase in cash and cash equivalents	5,216	1,849
Cash and cash equivalents balance, beginning of fiscal period	14,263	13,201
Cash and cash equivalents balance, end of fiscal period	19,479	15,050
Supplemental cash flow disclosures:
Non-cash conversion of preferred stock into common stock		172,691
Cash paid for interest	5,844	6,458
Cash paid for income taxes	12,820	14,654
Assets acquired under capital leases	5,957	6,192
Net change in assets under financing obligations	4,085	5,001
Reduction of capital lease obligations upon return of assets	160	$ 117
Reduction of capital lease obligations upon early termination of lease	$ 288

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Summary of Significant Operations and Accounting Policies

9 Months Ended

Sep. 25, 2016

Summary of Significant Operations and Accounting Policies

(1) Summary of Significant Operations and Accounting Policies

(a) Operations

Bojangles’, Inc. (formerly known as BHI Holding Corp.) (together with its subsidiaries, “Bojangles’”, the “Company”, “we” or “our”) was formed on June 28, 2011 as a Delaware corporation. The Company’s principal business is the operations and development and franchising, as franchisor, of limited service restaurants. As of September 25, 2016, there were 301 Company-operated restaurants, 61 related party franchised restaurants, and 337 independent franchised restaurants operating under the Bojangles’^® name. The restaurants are located principally in the Southeastern United States. The Company’s franchising activity is regulated by the laws of the various states in which it is registered to sell franchises, as well as rules promulgated by the Federal Trade Commission. The legislation and rules, among other things, establish minimum disclosure requirements to a prospective franchisee and require periodic registration by the Company with state administrative agencies.

The following is the number of Bojangles’ franchised, Company-operated and system-wide restaurants at the beginning and end of the thirteen and thirty-nine weeks ended September 25, 2016:

	Thirteen Weeks Ended						Thirty-Nine Weeks Ended
	September 25, 2016						September 25, 2016
	Franchised		Company- Operated		System- Wide		Franchised		Company- Operated		System- Wide
Restaurants at the beginning of the period		394		295		689		381		281		662
Opened during the period		4		6		10		17		20		37
Closed during the period		—		—		—		—		—		—
Refranchised during the period		—		—		—		—		—		—
Restaurants at the end of the period		398		301		699		398		301		699

(b) Basis of Presentation and Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles and practices of the United States of America (“GAAP”) for interim financial information. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the results for interim periods have been included.

Certain information and footnote disclosures normally included in audited consolidated financial statements presented in accordance with GAAP have been condensed or omitted pursuant to rules and regulations of the SEC.

On May 13, 2015, the Company completed its initial public offering of 8,912,500 shares of common stock at a price to the public of $19.00 per share (the “IPO”), including 1,162,500 shares sold to the underwriters pursuant to their option to purchase additional shares. All of the shares of the Company’s common stock offered as part of the IPO were sold by selling stockholders. Accordingly, the Company did not receive any proceeds from the sale of the shares. Prior to the consummation of the IPO (i) a 359.03843-for-1 stock split of the Company’s common stock was effected (subject to rounding to eliminate any fractional shares), (ii) the conversion ratio of the Company’s Series A Preferred Stock was automatically adjusted as a result of the stock split in accordance with certain anti-dilution provisions in the Company’s certificate of incorporation and (iii) each share of the Company’s Series A Preferred Stock converted into 359.03843 shares of the Company’s common stock (subject to rounding to eliminate any fractional shares). All share and per-share data herein have been adjusted to reflect the stock split as though it had occurred prior to the earliest data presented.

These condensed consolidated financial statements should be read in conjunction with the Company’s results of operations, financial positions and cash flows in the Company’s financial statements as of and for the fiscal year ended December 27, 2015. Certain prior period balances have been reclassified to conform to current period presentation, including the reclassification of the December 27, 2015 balance of $2.5 million of debt issuance costs from Deferred debt issuance costs, net to Long-term debt, less current maturities and deferred debt issuance costs, net on the condensed consolidated balance sheets.

The results of operations and cash flows reported in these condensed consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire fiscal year.

The Company consolidates entities in which we have a controlling financial interest, the usual condition of which is ownership of a majority voting interest. All significant intercompany accounts and transactions are eliminated in consolidation.

(c) Fiscal Year

The Company operates on a 52- or 53-week fiscal year ending on the last Sunday of December. Fiscal year 2016 will end on December 25, 2016 and will consist of 52 weeks. Fiscal year 2015 ended on December 27, 2015 and consisted of 52 weeks. Fiscal quarters within both fiscal years 2016 and 2015 are comprised of thirteen weeks.

(d) Use of Accounting Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Accordingly, the actual amounts could differ from those estimates. Any adjustments applied to estimated amounts are recognized in the fiscal year in which such adjustments are determined.

(e) New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). This update was issued to replace the current revenue recognition guidance, creating a more comprehensive revenue model. This update was originally to be effective in fiscal periods beginning after December 15, 2016 and early application was not permitted. In July 2015, the FASB affirmed its proposal to defer the effective date by one year to annual reporting periods beginning after December 15, 2017. The FASB also affirmed its proposal to permit early adoption of the standard, but not before the original effective date of December 15, 2016. The Company is currently evaluating the impact of the adoption of ASU 2014-09 on its consolidated financial statements.

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330) (“ASU 2015-11”). The pronouncement was issued to simplify the measurement of inventory and changes the measurement from lower of cost or market to lower of cost and net realizable value. This pronouncement is effective for reporting periods beginning after December 15, 2016. The adoption of ASU 2015-11 is not expected to have a significant impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 is a comprehensive new standard that amends various aspects of existing guidance for leases and requires additional disclosures about leasing arrangements. ASU 2016-02 will require companies to recognize lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. ASU 2016-02 retains a distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous guidance relating to leases. ASU 2016-02 is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of this guidance on its consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which simplifies several aspects of the accounting for employee share-based payment transactions. ASU 2016-09 addresses several aspects of the accounting for share-based payment award transactions, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of this guidance on its consolidated financial statements.

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Long-Term Debt

9 Months Ended

Sep. 25, 2016

Long-Term Debt

(2) Long-Term Debt

Long-term debt consist of the following (in thousands):

	September 25, 2016			December 27, 2015
Term Loan, due October 9, 2020	$	170,458			200,194
Revolving line of credit, due October 9, 2020		—			—
Total long-term debt		170,458			200,194
Less: Current maturities of long term debt		—			—
Less: Deferred debt issuance costs, net		(1,892	)		(2,459	)
Long-term debt, less current maturities and deferred debt issuance costs, net	$	168,566			197,735
	September 25, 2016			December 27, 2015
Deferred debt issuance costs	$	4,809			4,809
Less accumulated amortization		(2,917	)		(2,350	)
Deferred debt issuance costs, net	$	1,892			2,459

(a) Term Loan and Revolving Line of Credit

On October 9, 2012, the Company entered into a credit agreement (“Credit Agreement”) with several financial institutions, collateralized by all of the assets of the Company. The Credit Agreement contains both a term loan component and a revolving line of credit. The Credit Agreement was subsequently amended on May 15, 2013, April 11, 2014, July 23, 2015 and September 25, 2015. The Credit Agreement was further amended on October 19, 2016 to, among other things, increase allowable indebtedness associated with capital lease obligations, synthetic lease obligations and purchase money obligations, as well as to increase allowable cash capital expenditures during each fiscal year.

As of September 25, 2016, there were outstanding balances under the term loan in one-month Eurodollar loans of $170.5 million, all of which were accruing interest at a rate of approximately 2.77%. As of December 27, 2015, there were outstanding balances under the term loan in one-month Eurodollar loans of $200.2 million, all of which were accruing interest at a rate of approximately 2.48%.

As of September 25, 2016 and December 27, 2015, there were no outstanding balances under the revolving line of credit.

Pursuant to the Credit Agreement, certain covenants restrict the Company from exceeding a maximum consolidated total lease adjusted leverage ratio, require the Company to maintain a minimum consolidated fixed charge coverage ratio, and place certain limitations on cash capital expenditures. The Company was not in violation of any covenants under the Credit Agreement as of September 25, 2016.

Debt issuance costs are capitalized and amortized using the effective interest method over the initial term of the related loan.

(b) Interest Rate Swap Agreements

The Company enters into interest-rate-related derivative instruments to manage its exposure related to changes in interest rates on its variable-rate debt instruments. The Company does not enter into derivative instruments for any purpose other than cash flow hedging. The Company does not speculate using derivative instruments.

By using derivative financial instruments to hedge exposures to changes in interest rates, the Company exposes itself to credit risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the Company, which creates credit risk for the Company. When the fair value of a derivative contract is negative, the Company owes the counterparty and, therefore, the Company is not exposed to the counterparty’s credit risk in those circumstances. The Company minimizes counterparty credit risk in derivative instruments by entering into transactions with high-quality counterparties. The derivative instruments entered into by the Company do not contain credit-risk-related contingent features.

The Company assesses interest rate risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities. The Company maintains risk management control systems to monitor interest rate risk attributable to both the Company’s outstanding or forecasted debt obligations as well as the Company’s offsetting hedge positions.

The Company enters into variable-rate LIBOR debt under the term loan portion of the Credit Agreement. The debt obligations expose the Company to variability in interest payments due to changes in interest rates. Management believes that it is prudent to limit the variability of a portion of its interest payments. To meet this objective, management entered into LIBOR-based interest rate swap agreements to manage fluctuations in cash flows resulting from changes in the benchmark interest rate of LIBOR. These swaps change the variable-rate cash flow exposure on part of the debt obligations to fixed cash flows. Under the terms of the interest rate swaps, the Company receives LIBOR-based variable interest rate payments and makes fixed interest rate payments, thereby creating the equivalent of fixed-rate debt for the notional amount of its debt hedged.

The activity in accumulated other comprehensive (loss) income is as follows (in thousands):

	Thirty-Nine Weeks Ended September 25, 2016			Fiscal Year Ended December 27, 2015
Opening balance, accumulated other comprehensive income	$	19			146
Unrealized loss from effective interest rate swap, net of tax		(478	)		(127	)
Ending balance, accumulated other comprehensive (loss) income	$	(459	)		19

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Fair Value Measurements

9 Months Ended

Sep. 25, 2016

Fair Value Measurements

(3) Fair Value Measurements

The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

• Cash and cash equivalents, accounts and vendor receivables, other assets (nonderivatives), notes payable to financial institutions, trade accounts payable, and accrued expenses (nonderivatives): The carrying amounts, at face value or cost plus accrued interest, approximate fair value because of the short maturity of these instruments.

• Interest rate swaps: The fair value of interest rate swaps is determined using an income approach using the following significant inputs: the term of the swaps, the notional amount of the swaps, the rate on the fixed leg of the swaps and counterparty credit worthiness. There were three interest rate swaps outstanding as of September 25, 2016.

The following table presents financial assets and liabilities measured at fair value on a recurring basis, which include derivatives designated as cash flow hedging instruments, and other investments, which consists of money market accounts and mutual funds held in a rabbi trust established by the Company to fund a portion of the Company’s current and future obligations under its deferred compensation plan (in thousands):

	Carrying value			Quoted Prices in active markets for identical instruments (Level 1)		Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)
Fair value measurement as of September 25, 2016:
Investments for nonqualified deferred compensation plan (included with other noncurrent assets on the consolidated balance sheets)	$	3,033			3,033		—			—
Interest rate swap (included with other current liabilities and other non current liabilities on the consolidated balance sheets)		(737	)		—		(737	)		—
Fair value measurement as of December 27, 2015:
Investments for nonqualified deferred compensation plan (included with other noncurrent assets on the consolidated balance sheets)	$	2,628			2,628		—			—
Interest rate swap (included with other noncurrent assets on the consolidated balance sheets)		437			—		437			—
Interest rate swap (included with other noncurrent liabilities on the consolidated balance sheets)		(405	)		—		(405	)		—

There were no transfers into or out of Level 1 and Level 2 fair value measurements during the thirty-nine weeks ended September 25, 2016.

Our investments for the nonqualified deferred compensation plan are comprised of investments held in a rabbi trust. These investments consist of money market funds and mutual funds and the fair value measurements are derived using quoted prices in active markets for the specific funds which are based on Level 1 inputs of the fair value hierarchy.

Our interest rate swaps are valued using a discounted cash flow analysis that incorporates observable market parameters, such as interest rate yield curves and currency rates, classified as Level 2 within the valuation hierarchy. Derivative valuations incorporate credit risk adjustments that are necessary to reflect the probability of default by us or the counterparty.

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Other Current Assets

9 Months Ended

Sep. 25, 2016

Other Current Assets

(4) Other Current Assets

Other current assets consist of the following (in thousands):

	September 25, 2016		December 27, 2015
Income taxes refundable	$	1,247		2,887
Prepaid expenses		2,257		1,076
Deferred income taxes		—		1,676
Other current assets	$	3,504		5,639

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Property and Equipment, Net

9 Months Ended

Sep. 25, 2016

Property and Equipment, Net

(5) Property and Equipment, Net

Property and equipment, net consist of the following (in thousands):

	Useful lives	September 25, 2016			December 27, 2015
Land	—	$	1,509			1,509
Buildings	Up to 40 years		1,330			1,330
Furniture, fixtures and equipment	Up to 5 years		18,009			16,798
Computer hardware and software	Up to 5 years		9,653			8,780
Leasehold improvements	Up to 20 years		25,646			22,987
Capital leases, buildings	Lesser of lease term or 40 years		8,286			8,553
Capital leases, equipment	Lesser of lease term or 5 years		25,193			22,956
Capital leases, automobiles	Lesser of lease term or 5 years		3,434			3,297
Construction-in-progress	—		8,926			3,408
Total			101,986			89,618
Less:
Accumulated depreciation			(32,361	)		(26,830	)
Accumulated amortization			(17,718	)		(14,651	)
Property and equipment, net		$	51,907			48,137

Depreciation and amortization expense related to property and equipment was $3.7 million and $3.4 million for the thirteen weeks ended September 25, 2016 and September 27, 2015, respectively, and $10.8 million and $9.6 million for the thirty-nine weeks ended September 25, 2016 and September 27, 2015, respectively.

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Franchise Rights, Net

9 Months Ended

Sep. 25, 2016

Franchise Rights, Net

(6) Franchise Rights, Net

Franchise rights, net are as follows (in thousands):

	September 25, 2016			December 27, 2015
Franchise rights, including reacquired franchise rights	$	29,623			29,623
Less accumulated amortization		(5,105	)		(4,282	)
Franchise rights, net	$	24,518			25,341

Amortization expense related to franchise rights was $0.3 million during each of the thirteen weeks ended September 25, 2016 and September 27, 2015 and $0.8 million during each of the thirty-nine weeks ended September 25, 2016 and September 27, 2015.

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Other Noncurrent Assets

9 Months Ended

Sep. 25, 2016

Other Noncurrent Assets

(7) Other Noncurrent Assets

Other noncurrent assets consist of the following (in thousands):

	September 25, 2016		December 27, 2015
Investments for nonqualified deferred compensation plan	$	3,033		2,628
Interest rate swap asset		—		437
Other noncurrent assets		701		608
Other noncurrent assets	$	3,734		3,673

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Accrued Expenses

9 Months Ended

Sep. 25, 2016

Accrued Expenses

(8) Accrued Expenses

Accrued expenses consist of the following (in thousands):

	September 25, 2016		December 27, 2015
Payroll & related	$	11,323		12,316
Sales and property taxes		5,915		2,472
Gift cards		683		974
Utilities		1,307		1,092
Occupancy		395		481
Interest		653		715
Other		3,574		1,036
Accrued expenses	$	23,850		19,086

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Other Current Liabilities

9 Months Ended

Sep. 25, 2016

Other Current Liabilities

(9) Other Current Liabilities

Other current liabilities consist of the following (in thousands):

	September 25, 2016		December 27, 2015
Financing obligations under build-to-suit transactions	$	5,679		1,594
Closed store obligation		106		184
Interest rate swap liability		10		—
Other		—		377
Other current liabilities	$	5,795		2,155

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Other Noncurrent Liabilities

9 Months Ended

Sep. 25, 2016

Other Noncurrent Liabilities

(10) Other Noncurrent Liabilities

Other noncurrent liabilities consist of the following (in thousands):

	September 25, 2016		December 27, 2015
Deferred rents	$	7,067		5,875
Unfavorable lease liability, net		1,596		1,817
Deferred compensation		3,033		2,628
Deferred revenue		785		717
Closed store obligation		275		356
Interest rate swap liability		727		405
Other noncurrent liabilities		88		36
Other noncurrent liabilities	$	13,571		11,834

Deferred revenue includes initial franchise license fees that have been received, but for which the Company has not completed its obligations under these franchise agreements; therefore, revenue has not been recognized.

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Commitments and Contingencies

9 Months Ended

Sep. 25, 2016

Commitments and Contingencies

(11) Commitments and Contingencies

(a) Litigation

The Company is subject to various claims and litigation that arise in the normal course of business. Management is of the opinion that, although the outcome of the litigation cannot be predicted with any certainty, the ultimate liability, if any, will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

(b) Concentration of Credit Risk

Certain financial instruments potentially subject the Company to a concentration of credit risk. These financial instruments consist primarily of cash and cash equivalents and accounts and vendor receivables. The Company places its cash and cash equivalents with high-credit, quality financial institutions. At times, the balances in the accounts exceed the amounts insured by the Federal Deposit Insurance Corporation.

Concentration of credit risk with respect to receivables is primarily limited to franchisees, which are primarily located in the Southeastern United States, and certain vendors. Royalty revenues from three franchisees, one of which is a related party, accounted for approximately 44% of the Company’s total franchise royalty revenues for each of the thirteen weeks ended September 25, 2016 and September 27, 2015 and approximately 44% of the Company’s total franchise royalty revenues for each of the thirty-nine weeks ended September 25, 2016 and September 27, 2015. Royalty and franchise fee accounts receivable from three franchisees, one of which is a related party, accounted for approximately 42% and 44% of the Company’s gross royalty and franchise fee accounts receivable as of September 25, 2016 and December 27, 2015, respectively. The Company continually evaluates and monitors the credit history of its franchisees and believes it has an adequate allowance for bad debts.

(c) Debt Guarantees

Prior to July 25, 2011, a franchisee of the Company assumed a portion of the Company’s then outstanding term debt, which the Company guarantees through 2018. The Company may be required to perform under this guarantee in the event of default or nonperformance by this franchisee. The Company has determined that default by the franchisee is unlikely due to its timely and consistent payments; therefore, the Company has not recorded a liability for this note on its condensed consolidated balance sheets. The carrying value of debt covered by this additional guarantee of the Company was $0.1 million as of both September 25, 2016 and December 27, 2015.

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Leases

9 Months Ended

Sep. 25, 2016

Leases

(12) Leases

The Company’s agreement with a financial institution providing up to $3.5 million for leasing of equipment that was originally scheduled to expire on March 1, 2016 was initially extended to September 30, 2016. As the Company had utilized all capacity under this agreement, on June 27, 2016, the financial institution increased the capacity under this agreement by an additional $8.1 million and further extended the expiration of the agreement to June 1, 2017. Under this leasing arrangement, each of the scheduled leases has a 60-month term, a fixed interest rate equal to the interest rate swap for a 2.61 year weighted average life as published by the Bloomberg Swap report on the lease commencement date for the specific equipment project plus 300 basis points, and a bargain purchase option at the end of the lease of $1. As a result of the bargain purchase option, the Company has classified the leases under this leasing arrangement as capital leases.

The Company’s agreement with another financial institution providing up to $1.4 million for leasing of equipment expired on April 30, 2016. Under this leasing arrangement, each of the scheduled leases had a 60-month term, a fixed interest rate equal to the 32-month interpolated interest rate swap on the lease commencement date for the specific equipment project plus 391 basis points, and a bargain purchase option at the end of the lease of $1. On April 22, 2016, the Company entered into a new agreement with the financial institution providing up to $2.0 million for leasing of equipment, which is scheduled to expire on April 30, 2017. Under this leasing arrangement, each of the scheduled leases has a 60-month term, a fixed interest rate equal to the 3-year interest rate swap on the lease commencement date for the specific equipment project plus 290 basis points, and a bargain purchase option at the end of the lease of $1. On October 11, 2016, the Company entered into a new agreement with the financial institution providing up to $2.1 million for leasing of equipment, which is scheduled to expire on September 30, 2017. Under this leasing arrangement, each of the scheduled leases has a 60-month term, a fixed interest rate equal to the 3-year interest rate swap on the lease commencement date for the specific equipment project plus 290 basis points, and a bargain purchase option at the end of the lease of $1. As a result of the bargain purchase option, the Company has classified the leases under these leasing arrangements as capital leases.

On August 15, 2016, the Company entered into an agreement with a third financial institution providing up to $3.0 million for leasing of equipment, which is scheduled to expire on June 30, 2017. Under this leasing arrangement, each of the scheduled leases has a 60-month term, a fixed interest rate equal to the average of two- and three-year interest rate swap rates as published by the Bloomberg Swap report on the lease commencement date for the specific equipment project plus 300 basis points, and a bargain purchase option at the end of the lease of $1. As a result of the bargain purchase option, the Company has classified the leases under this leasing arrangement as capital leases.

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Net Income per Share

9 Months Ended

Sep. 25, 2016

Net Income per Share

(13) Net Income per Share

Basic net income per share is calculated using the weighted-average number of shares of common stock outstanding during the thirteen and thirty-nine weeks ended September 25, 2016 and September 27, 2015.

Diluted net income per share is calculated using the weighted-average number of shares of common stock outstanding and potentially dilutive during the period, using the treasury stock method, and assumes the conversion of the outstanding preferred stock into common stock.

The computations of basic and diluted net income per share for the thirteen and thirty-nine weeks ended September 25, 2016 and September 27, 2015 are as follows (in thousands, except per share amounts):

	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	September 25, 2016		September 27, 2015		September 25, 2016		September 27, 2015
Net income	$	10,019		8,910		27,894		18,682
Weighted average number of common shares outstanding-basic		36,355		35,951		36,195		18,830
Weighted average number of common shares assumed from the conversion of Series A Preferred Stock		—		—		—		17,097
Weighted average dilutive effect of stock-based compensation		1,295		1,575		1,366		1,544
Weighted average number of common shares outstanding-diluted		37,650		37,526		37,561		37,471
Net income per share-basic	$	0.28		0.25		0.77		0.99
Net income per share-diluted	$	0.27		0.24		0.74		0.50

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Income Taxes

9 Months Ended

Sep. 25, 2016

Income Taxes

(14) Income Taxes

The Company’s effective income tax rates were 29.1% and 27.4% for the thirteen weeks ended September 25, 2016 and September 27, 2015, respectively, and 33.4% and 38.0% for the thirty-nine weeks ended September 25, 2016 and September 27, 2015, respectively. The effective income tax rate for both of the thirteen and thirty-nine weeks ended September 25, 2016 and September 27, 2015 was impacted by a deferred income tax benefit due to a reduction in the North Carolina corporate income tax rate and the recognition of certain tax credits. The effective income tax rate for the thirteen and thirty-nine weeks ended September 27, 2015 was also impacted by costs related to the IPO that were not deductible for income tax purposes.

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Stock Compensation Plan

9 Months Ended

Sep. 25, 2016

Stock Compensation Plan

(15) Stock Compensation Plan

Effective immediately prior to the IPO, the Company’s board of directors and stockholders approved the amendment and restatement of the 2011 Equity Incentive Plan. Under the Amended and Restated 2011 Equity Incentive Plan (the “Amended 2011 Plan”), the Company’s board of directors may grant awards representing up to 8.5 million shares of the Company’s common stock in the form of stock options, restricted stock awards, restricted stock units and performance awards to officers, directors, employees, and consultants of the Company and its subsidiaries. At September 25, 2016, there were 4.0 million shares remaining and available for future grants under the Amended 2011 Plan.

Stock Options

Stock options are granted at a price determined by the board of directors or a committee designated by the board at not less than the fair market value of a share on the date of grant. The term of each option shall be determined by the board of directors or a committee designated by the board at the time of grant and shall be no greater than ten years.

Stock option activity during the period indicated is as follows:

	Number of shares			Weighted average exercise price		Weighted average remaining contractual term		Aggregate intrinsic value (in thousands)
Balance as of December 27, 2015		4,347,024		$	3.78		6.8	$	51,198
Granted		151,000			18.05
Exercised		(356,329	)		2.41				5,317
Repurchased		—			—
Forfeited		(200,709	)		3.23
Expired		—			—
Balance as of September 25, 2016		3,940,986		$	4.48		6.1	$	47,651
Exercisable as of September 25, 2016		2,285,488		$	4.03		5.9	$	28,552

On June 8, 2016, the Company granted a total of 151,000 stock options to certain employees of the Company to purchase shares of its common stock at a price of $18.05 per share. The fair value of the stock options on the date of the grant was $5.48 per share. The stock options will vest in equal annual installments over four years, subject to continued service to the Company.

As of September 25, 2016, there was $2.2 million of total unrecognized compensation cost related to time based stock options, which is expected to be recognized over a weighted average period of approximately 2.5 years. As of September 25, 2016, there was approximately $3.0 million of total unrecognized compensation cost related to 1.1 million unvested performance based stock options. These performance based stock options will vest and become exercisable upon the achievement of certain performance metrics indicated in the stock option grant.

Restricted Stock Units

Restricted stock unit activity during the period indicated is as follows:

	Number of shares			Weighted average fair value at grant date
Nonvested as of December 27, 2015		7,893		$	19.00
Granted		92,120			18.05
Forfeited		(7,500	)		18.05
Vested		(7,893	)		19.00
Nonvested as of September 25, 2016		84,620		$	18.05

On June 8, 2016, the Company granted a total of 75,500 restricted stock units to certain employees of the Company. The restricted stock units will vest in equal annual installments over four years, subject to continued service to the Company. Vested shares will be delivered within ten days of the vesting date of such restricted stock unit.

On June 8, 2016, the Company granted 2,770 restricted stock units to each of its six non-employee directors who are not affiliated with Advent International Corporation (“Advent”). The restricted stock units will vest on the date of the Company’s next annual meeting, subject to continued service to the Company. Vested shares will be delivered within ten days of the vesting date of such restricted stock unit.

On May 13, 2015, the Company granted 2,631 restricted stock units to each of its then three non-employee directors who were not affiliated with Advent. All of these restricted stock units vested on June 8, 2016.

As of September 25, 2016, there was $1.3 million of total unrecognized compensation cost related to restricted stock units, which is expected to be recognized over a weighted average period of approximately 3.2 years.

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Related Party Transactions

9 Months Ended

Sep. 25, 2016

Related Party Transactions

(16) Related Party Transactions

Advent is related to the Company through members of the board of directors and ownership of the Company. The Company reimburses Advent for certain expenses. There were no amounts included in accounts payable due to Advent as of both September 25, 2016 and December 27, 2015.

Panthers Football, LLC (“The Panthers”) is owned by family members of certain indirect stockholders of the Company. The Company has a marketing and sponsorship agreement with The Panthers.

Cajun Jack’s, LLC (“Cajun”) is owned by family members of certain indirect stockholders and a member of the board of directors of the Company. Cajun is a franchisee of the Company. Cajun remits payments to the Company for royalties, marketing, and franchise license fees.

New Generation Foods, LLC (“New Generation”) is owned by family members of certain indirect stockholders and a member of the board of directors of the Company. New Generation is a franchisee of the Company. New Generation remits payments to the Company for royalties, marketing, and franchise license fees. From January 29, 2014 through July 31, 2015, the Company matched New Generation’s advertising expenditures in an amount up to 1% of New Generation’s sales.

Tri-Arc Food Systems, Inc. (“Tri-Arc”) owns an interest in the Company. In addition, an owner of Tri-Arc is a member of the board of directors of the Company. Tri-Arc is a franchisee of the Company. Tri-Arc remits payments to the Company for royalties, marketing, and franchise license fees. In addition, the Company reimburses Tri-Arc for shared marketing costs.

JZF Properties, LLC (“JZF”) is owned by family members of certain indirect stockholders and a member of the board of directors of the Company. JZF leases a building and land to the Company for use as a restaurant operated by the Company.

MAR Real Estate, LLC (“MRE”) is owned by a certain indirect stockholder of the Company. MRE leases land and buildings to the Company for use as restaurants operated by the Company.

Palmetto Lowcountry Properties, LLC (“PLP”) is owned by a certain indirect stockholder of the Company. PLP leases land and buildings to the Company for use as restaurants operated by the Company.

Catco Bo Memorial, LLC (“CBM”) is owned by a certain indirect stockholder of the Company. CBM leases land, equipment and a building to the Company for use as a restaurant operated by the Company.

MRMJ Holdings, LLC (“MRMJ”) is owned by a certain indirect stockholder of the Company. MRMJ leases land, equipment and a building to the Company for use as a restaurant operated by the Company.

The following table presents expenses incurred and payments made in transactions with the Company’s related parties (in thousands):

		Thirteen Weeks Ended				Thirty-Nine Weeks Ended
		September 25,		September 27,		September 25,		September 27,
Related Party	Description	2016		2015		2016		2015
Advent	Out-of-pocket expense reimbursement	$	8		15		12		28
The Panthers	Marketing/sponsorship expense		270		260		370		310
New Generation	Advertising expense		—		11		—		74
Tri-Arc	Marketing expense		18		18		54		54
JZF	Rent payments		48		47		169		149
MRE	Rent payments		35		72		105		156
PLP	Rent payments		—		40		57		91
CBM	Rent payments		25		—		75		—
MRMJ	Rent payments		16		—		16		—

The following tables present franchise royalty revenues and other franchise revenues from transactions with the Company’s related parties (in thousands):

	Franchise Royalty Revenues
	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	September 25,		September 27,		September 25,		September 27,
Related Party	2016		2015		2016		2015
Cajun	$	26		25		73		73
New Generation		143		127		419		383
Tri-Arc		1,276		1,221		3,777		3,678
	Other Franchise Revenues
	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	September 25,		September 27,		September 25,		September 27,
Related Party	2016		2015		2016		2015
Cajun	$	—		—		—		—
New Generation		—		—		—		35
Tri-Arc		—		—		13		13

The following table presents accounts receivable from transactions with the Company’s related parties (in thousands):

	Gross Accounts Receivable
	September 25,		December 27,
Related Party	2016		2015
Cajun	$	9		9
New Generation		51		52
Tri-Arc		382		387

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Summary of Significant Operations and Accounting Policies (Policies)

9 Months Ended

Sep. 25, 2016

Operations

(a) Operations

Bojangles’, Inc. (formerly known as BHI Holding Corp.) (together with its subsidiaries, “Bojangles’”, the “Company”, “we” or “our”) was formed on June 28, 2011 as a Delaware corporation. The Company’s principal business is the operations and development and franchising, as franchisor, of limited service restaurants. As of September 25, 2016, there were 301 Company-operated restaurants, 61 related party franchised restaurants, and 337 independent franchised restaurants operating under the Bojangles’^® name. The restaurants are located principally in the Southeastern United States. The Company’s franchising activity is regulated by the laws of the various states in which it is registered to sell franchises, as well as rules promulgated by the Federal Trade Commission. The legislation and rules, among other things, establish minimum disclosure requirements to a prospective franchisee and require periodic registration by the Company with state administrative agencies.

The following is the number of Bojangles’ franchised, Company-operated and system-wide restaurants at the beginning and end of the thirteen and thirty-nine weeks ended September 25, 2016:

	Thirteen Weeks Ended						Thirty-Nine Weeks Ended
	September 25, 2016						September 25, 2016
	Franchised		Company- Operated		System- Wide		Franchised		Company- Operated		System- Wide
Restaurants at the beginning of the period		394		295		689		381		281		662
Opened during the period		4		6		10		17		20		37
Closed during the period		—		—		—		—		—		—
Refranchised during the period		—		—		—		—		—		—
Restaurants at the end of the period		398		301		699		398		301		699

Basis of Presentation and Consolidation

(b) Basis of Presentation and Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles and practices of the United States of America (“GAAP”) for interim financial information. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the results for interim periods have been included.

Certain information and footnote disclosures normally included in audited consolidated financial statements presented in accordance with GAAP have been condensed or omitted pursuant to rules and regulations of the SEC.

On May 13, 2015, the Company completed its initial public offering of 8,912,500 shares of common stock at a price to the public of $19.00 per share (the “IPO”), including 1,162,500 shares sold to the underwriters pursuant to their option to purchase additional shares. All of the shares of the Company’s common stock offered as part of the IPO were sold by selling stockholders. Accordingly, the Company did not receive any proceeds from the sale of the shares. Prior to the consummation of the IPO (i) a 359.03843-for-1 stock split of the Company’s common stock was effected (subject to rounding to eliminate any fractional shares), (ii) the conversion ratio of the Company’s Series A Preferred Stock was automatically adjusted as a result of the stock split in accordance with certain anti-dilution provisions in the Company’s certificate of incorporation and (iii) each share of the Company’s Series A Preferred Stock converted into 359.03843 shares of the Company’s common stock (subject to rounding to eliminate any fractional shares). All share and per-share data herein have been adjusted to reflect the stock split as though it had occurred prior to the earliest data presented.

These condensed consolidated financial statements should be read in conjunction with the Company’s results of operations, financial positions and cash flows in the Company’s financial statements as of and for the fiscal year ended December 27, 2015. Certain prior period balances have been reclassified to conform to current period presentation, including the reclassification of the December 27, 2015 balance of $2.5 million of debt issuance costs from Deferred debt issuance costs, net to Long-term debt, less current maturities and deferred debt issuance costs, net on the condensed consolidated balance sheets.

The results of operations and cash flows reported in these condensed consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire fiscal year.

The Company consolidates entities in which we have a controlling financial interest, the usual condition of which is ownership of a majority voting interest. All significant intercompany accounts and transactions are eliminated in consolidation.

Fiscal Year

(c) Fiscal Year

The Company operates on a 52- or 53-week fiscal year ending on the last Sunday of December. Fiscal year 2016 will end on December 25, 2016 and will consist of 52 weeks. Fiscal year 2015 ended on December 27, 2015 and consisted of 52 weeks. Fiscal quarters within both fiscal years 2016 and 2015 are comprised of thirteen weeks.

Use of Accounting Estimates

(d) Use of Accounting Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Accordingly, the actual amounts could differ from those estimates. Any adjustments applied to estimated amounts are recognized in the fiscal year in which such adjustments are determined.

New Accounting Pronouncements

(e) New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). This update was issued to replace the current revenue recognition guidance, creating a more comprehensive revenue model. This update was originally to be effective in fiscal periods beginning after December 15, 2016 and early application was not permitted. In July 2015, the FASB affirmed its proposal to defer the effective date by one year to annual reporting periods beginning after December 15, 2017. The FASB also affirmed its proposal to permit early adoption of the standard, but not before the original effective date of December 15, 2016. The Company is currently evaluating the impact of the adoption of ASU 2014-09 on its consolidated financial statements.

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330) (“ASU 2015-11”). The pronouncement was issued to simplify the measurement of inventory and changes the measurement from lower of cost or market to lower of cost and net realizable value. This pronouncement is effective for reporting periods beginning after December 15, 2016. The adoption of ASU 2015-11 is not expected to have a significant impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 is a comprehensive new standard that amends various aspects of existing guidance for leases and requires additional disclosures about leasing arrangements. ASU 2016-02 will require companies to recognize lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. ASU 2016-02 retains a distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous guidance relating to leases. ASU 2016-02 is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of this guidance on its consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which simplifies several aspects of the accounting for employee share-based payment transactions. ASU 2016-09 addresses several aspects of the accounting for share-based payment award transactions, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of this guidance on its consolidated financial statements.

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Summary of Significant Operations and Accounting Policies (Tables)

9 Months Ended

Sep. 25, 2016

Number of Franchised, Company-Operated and System-Wide Restaurants

The following is the number of Bojangles’ franchised, Company-operated and system-wide restaurants at the beginning and end of the thirteen and thirty-nine weeks ended September 25, 2016:

	Thirteen Weeks Ended						Thirty-Nine Weeks Ended
	September 25, 2016						September 25, 2016
	Franchised		Company- Operated		System- Wide		Franchised		Company- Operated		System- Wide
Restaurants at the beginning of the period		394		295		689		381		281		662
Opened during the period		4		6		10		17		20		37
Closed during the period		—		—		—		—		—		—
Refranchised during the period		—		—		—		—		—		—
Restaurants at the end of the period		398		301		699		398		301		699

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Long-Term Debt (Tables)

9 Months Ended

Sep. 25, 2016

Long-Term Debt

Long-term debt consist of the following (in thousands):

	September 25, 2016			December 27, 2015
Term Loan, due October 9, 2020	$	170,458			200,194
Revolving line of credit, due October 9, 2020		—			—
Total long-term debt		170,458			200,194
Less: Current maturities of long term debt		—			—
Less: Deferred debt issuance costs, net		(1,892	)		(2,459	)
Long-term debt, less current maturities and deferred debt issuance costs, net	$	168,566			197,735
	September 25, 2016			December 27, 2015
Deferred debt issuance costs	$	4,809			4,809
Less accumulated amortization		(2,917	)		(2,350	)
Deferred debt issuance costs, net	$	1,892			2,459

Activity in Accumulated Other Comprehensive (loss) Income

The activity in accumulated other comprehensive (loss) income is as follows (in thousands):

	Thirty-Nine Weeks Ended September 25, 2016			Fiscal Year Ended December 27, 2015
Opening balance, accumulated other comprehensive income	$	19			146
Unrealized loss from effective interest rate swap, net of tax		(478	)		(127	)
Ending balance, accumulated other comprehensive (loss) income	$	(459	)		19

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 25, 2016

Financial Assets and Liabilities Measured at Fair Value on Recurring Basis

The following table presents financial assets and liabilities measured at fair value on a recurring basis, which include derivatives designated as cash flow hedging instruments, and other investments, which consists of money market accounts and mutual funds held in a rabbi trust established by the Company to fund a portion of the Company’s current and future obligations under its deferred compensation plan (in thousands):

	Carrying value			Quoted Prices in active markets for identical instruments (Level 1)		Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)
Fair value measurement as of September 25, 2016:
Investments for nonqualified deferred compensation plan (included with other noncurrent assets on the consolidated balance sheets)	$	3,033			3,033		—			—
Interest rate swap (included with other current liabilities and other non current liabilities on the consolidated balance sheets)		(737	)		—		(737	)		—
Fair value measurement as of December 27, 2015:
Investments for nonqualified deferred compensation plan (included with other noncurrent assets on the consolidated balance sheets)	$	2,628			2,628		—			—
Interest rate swap (included with other noncurrent assets on the consolidated balance sheets)		437			—		437			—
Interest rate swap (included with other noncurrent liabilities on the consolidated balance sheets)		(405	)		—		(405	)		—

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Other Current Assets (Tables)

9 Months Ended

Sep. 25, 2016

Other Current Assets

Other current assets consist of the following (in thousands):

	September 25, 2016		December 27, 2015
Income taxes refundable	$	1,247		2,887
Prepaid expenses		2,257		1,076
Deferred income taxes		—		1,676
Other current assets	$	3,504		5,639

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Property and Equipment, Net (Tables)

9 Months Ended

Sep. 25, 2016

Property and Equipment, Net

Property and equipment, net consist of the following (in thousands):

	Useful lives	September 25, 2016			December 27, 2015
Land	—	$	1,509			1,509
Buildings	Up to 40 years		1,330			1,330
Furniture, fixtures and equipment	Up to 5 years		18,009			16,798
Computer hardware and software	Up to 5 years		9,653			8,780
Leasehold improvements	Up to 20 years		25,646			22,987
Capital leases, buildings	Lesser of lease term or 40 years		8,286			8,553
Capital leases, equipment	Lesser of lease term or 5 years		25,193			22,956
Capital leases, automobiles	Lesser of lease term or 5 years		3,434			3,297
Construction-in-progress	—		8,926			3,408
Total			101,986			89,618
Less:
Accumulated depreciation			(32,361	)		(26,830	)
Accumulated amortization			(17,718	)		(14,651	)
Property and equipment, net		$	51,907			48,137

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Franchise Rights, Net (Tables)

9 Months Ended

Sep. 25, 2016

Franchise Rights, Net

Franchise rights, net are as follows (in thousands):

	September 25, 2016			December 27, 2015
Franchise rights, including reacquired franchise rights	$	29,623			29,623
Less accumulated amortization		(5,105	)		(4,282	)
Franchise rights, net	$	24,518			25,341

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Other Noncurrent Assets (Tables)

9 Months Ended

Sep. 25, 2016

Components of Other Noncurrent Assets

Other noncurrent assets consist of the following (in thousands):

	September 25, 2016		December 27, 2015
Investments for nonqualified deferred compensation plan	$	3,033		2,628
Interest rate swap asset		—		437
Other noncurrent assets		701		608
Other noncurrent assets	$	3,734		3,673

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Accrued Expenses (Tables)

9 Months Ended

Sep. 25, 2016

Accrued Expenses

Accrued expenses consist of the following (in thousands):

	September 25, 2016		December 27, 2015
Payroll & related	$	11,323		12,316
Sales and property taxes		5,915		2,472
Gift cards		683		974
Utilities		1,307		1,092
Occupancy		395		481
Interest		653		715
Other		3,574		1,036
Accrued expenses	$	23,850		19,086

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Other Current Liabilities (Tables)

9 Months Ended

Sep. 25, 2016

Other Current Liabilities

Other current liabilities consist of the following (in thousands):

	September 25, 2016		December 27, 2015
Financing obligations under build-to-suit transactions	$	5,679		1,594
Closed store obligation		106		184
Interest rate swap liability		10		—
Other		—		377
Other current liabilities	$	5,795		2,155

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Other Noncurrent Liabilities (Tables)

9 Months Ended

Sep. 25, 2016

Other Noncurrent Liabilities

Other noncurrent liabilities consist of the following (in thousands):

	September 25, 2016		December 27, 2015
Deferred rents	$	7,067		5,875
Unfavorable lease liability, net		1,596		1,817
Deferred compensation		3,033		2,628
Deferred revenue		785		717
Closed store obligation		275		356
Interest rate swap liability		727		405
Other noncurrent liabilities		88		36
Other noncurrent liabilities	$	13,571		11,834

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Net Income per Share (Tables)

9 Months Ended

Sep. 25, 2016

Computations of Basic and Diluted Net Income Per Share

The computations of basic and diluted net income per share for the thirteen and thirty-nine weeks ended September 25, 2016 and September 27, 2015 are as follows (in thousands, except per share amounts):

	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	September 25, 2016		September 27, 2015		September 25, 2016		September 27, 2015
Net income	$	10,019		8,910		27,894		18,682
Weighted average number of common shares outstanding-basic		36,355		35,951		36,195		18,830
Weighted average number of common shares assumed from the conversion of Series A Preferred Stock		—		—		—		17,097
Weighted average dilutive effect of stock-based compensation		1,295		1,575		1,366		1,544
Weighted average number of common shares outstanding-diluted		37,650		37,526		37,561		37,471
Net income per share-basic	$	0.28		0.25		0.77		0.99
Net income per share-diluted	$	0.27		0.24		0.74		0.50

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Stock Compensation Plan (Tables)

9 Months Ended

Sep. 25, 2016

Stock Option Activity

Stock option activity during the period indicated is as follows:

	Number of shares			Weighted average exercise price		Weighted average remaining contractual term		Aggregate intrinsic value (in thousands)
Balance as of December 27, 2015		4,347,024		$	3.78		6.8	$	51,198
Granted		151,000			18.05
Exercised		(356,329	)		2.41				5,317
Repurchased		—			—
Forfeited		(200,709	)		3.23
Expired		—			—
Balance as of September 25, 2016		3,940,986		$	4.48		6.1	$	47,651
Exercisable as of September 25, 2016		2,285,488		$	4.03		5.9	$	28,552

Summary of Restricted Stock Unit Activity

Restricted stock unit activity during the period indicated is as follows:

	Number of shares			Weighted average fair value at grant date
Nonvested as of December 27, 2015		7,893		$	19.00
Granted		92,120			18.05
Forfeited		(7,500	)		18.05
Vested		(7,893	)		19.00
Nonvested as of September 25, 2016		84,620		$	18.05

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Related Party Transactions (Tables)

9 Months Ended

Sep. 25, 2016

Information with Respect to Related Parties

The following table presents expenses incurred and payments made in transactions with the Company’s related parties (in thousands):

		Thirteen Weeks Ended				Thirty-Nine Weeks Ended
		September 25,		September 27,		September 25,		September 27,
Related Party	Description	2016		2015		2016		2015
Advent	Out-of-pocket expense reimbursement	$	8		15		12		28
The Panthers	Marketing/sponsorship expense		270		260		370		310
New Generation	Advertising expense		—		11		—		74
Tri-Arc	Marketing expense		18		18		54		54
JZF	Rent payments		48		47		169		149
MRE	Rent payments		35		72		105		156
PLP	Rent payments		—		40		57		91
CBM	Rent payments		25		—		75		—
MRMJ	Rent payments		16		—		16		—

The following tables present franchise royalty revenues and other franchise revenues from transactions with the Company’s related parties (in thousands):

	Franchise Royalty Revenues
	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	September 25,		September 27,		September 25,		September 27,
Related Party	2016		2015		2016		2015
Cajun	$	26		25		73		73
New Generation		143		127		419		383
Tri-Arc		1,276		1,221		3,777		3,678
	Other Franchise Revenues
	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	September 25,		September 27,		September 25,		September 27,
Related Party	2016		2015		2016		2015
Cajun	$	—		—		—		—
New Generation		—		—		—		35
Tri-Arc		—		—		13		13

The following table presents accounts receivable from transactions with the Company’s related parties (in thousands):

	Gross Accounts Receivable
	September 25,		December 27,
Related Party	2016		2015
Cajun	$	9		9
New Generation		51		52
Tri-Arc		382		387

XML

Summary of Significant Operations and Accounting Policies - Additional Information (Detail) $ / shares in Units, $ in Thousands	May 13, 2015 $ / shares shares	Sep. 25, 2016 USD ($) Restaurant	Jun. 27, 2016 Restaurant	Dec. 27, 2015 USD ($) Restaurant
Organization And Summary Of Significant Accounting Policies [Line Items]
Stock issued during period, shares | shares	8,912,500
Shares issued, price per share | $ / shares	$ 19.00
Stock split of common stock	359.03843
Deferred debt issuance costs, net | $		$ 1,892		$ 2,459
Underwriter
Organization And Summary Of Significant Accounting Policies [Line Items]
Stock issued during period, shares | shares	1,162,500
Company-Operated
Organization And Summary Of Significant Accounting Policies [Line Items]
Number of restaurants		301	295	281
Related party franchised
Organization And Summary Of Significant Accounting Policies [Line Items]
Number of restaurants		61
Independent franchised
Organization And Summary Of Significant Accounting Policies [Line Items]
Number of restaurants		337

XML

Number of Franchised, Company-Operated and System- Wide Restaurants (Detail) - Restaurant	3 Months Ended	9 Months Ended
	Sep. 25, 2016	Sep. 25, 2016
Franchised
Franchisor Disclosure [Line Items]
Restaurants at the beginning of the period	394	381
Opened during the period	4	17
Closed during the period	0	0
Refranchised during the period	0	0
Restaurants at the end of the period	398	398
Company-Operated
Franchisor Disclosure [Line Items]
Restaurants at the beginning of the period	295	281
Opened during the period	6	20
Closed during the period	0	0
Refranchised during the period	0	0
Restaurants at the end of the period	301	301
System-Wide
Franchisor Disclosure [Line Items]
Restaurants at the beginning of the period	689	662
Opened during the period	10	37
Closed during the period	0	0
Refranchised during the period	0	0
Restaurants at the end of the period	699	699

XML

Long-Term Debt (Detail) - USD ($) $ in Thousands	Sep. 25, 2016	Dec. 27, 2015
Debt Instrument [Line Items]
Long Term Debt	$ 170,458	$ 200,194
Less: Current maturities of long term debt	0	0
Deferred debt issuance costs, net	(1,892)	(2,459)
Long-term debt, less current maturities and deferred debt issuance costs, net	168,566	197,735
Deferred debt issuance costs	4,809	4,809
Less accumulated amortization	(2,917)	(2,350)
Deferred debt issuance costs, net	1,892	2,459
Term Loan
Debt Instrument [Line Items]
Long Term Debt	$ 170,458	$ 200,194

XML

Long-Term Debt (Parenthetical) (Detail)	9 Months Ended	12 Months Ended
	Sep. 25, 2016	Dec. 27, 2015
Term Loan
Debt Instrument [Line Items]
Maturity date	Oct. 09, 2020	Oct. 09, 2020
Revolving line of credit
Debt Instrument [Line Items]
Maturity date	Oct. 09, 2020	Oct. 09, 2020

XML

Long-Term Debt - Additional Information (Detail) - USD ($) $ in Thousands	Sep. 25, 2016	Dec. 27, 2015
Debt Instrument [Line Items]
Long Term Debt	$ 170,458	$ 200,194
Revolving line of credit
Debt Instrument [Line Items]
Long Term Debt	$ 0	$ 0
Term Loan | One Month Eurodollar
Debt Instrument [Line Items]
Interest rate	2.77%	2.48%
Long Term Debt	$ 170,500	$ 200,200

XML

Activity in Accumulated Other Comprehensive (loss) Income (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 25, 2016	Sep. 27, 2015	Sep. 25, 2016	Sep. 27, 2015	Dec. 27, 2015
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance			$ 167,124
Unrealized loss from effective interest rate swap, net of tax	$ 293	$ (221)	(478)	$ (555)	$ (127)
Ending balance	198,120		198,120		167,124
Accumulated other comprehensive income (loss)
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance			19	$ 146	146
Unrealized loss from effective interest rate swap, net of tax			(478)
Ending balance	$ (459)		$ (459)		$ 19

XML

Financial Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail) - USD ($) $ in Thousands	Sep. 25, 2016	Dec. 27, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments for nonqualified deferred compensation plan (included with other noncurrent assets on the consolidated balance sheets)	$ 3,033	$ 2,628
Interest rate swap (included with other noncurrent assets on the consolidated balance sheets)		437
Interest rate swap (included with other noncurrent liabilities on the consolidated balance sheets)	(727)	(405)
Quoted Prices in active market for identical instruments (Level 1) | Other Noncurrent Assets
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments for nonqualified deferred compensation plan	3,033	2,628
Significant other observable inputs (Level 2) | Other Noncurrent Assets
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate swap		437
Significant other observable inputs (Level 2) | Other Noncurrent Liabilities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate swap		(405)
Significant other observable inputs (Level 2) | Other Current Liabilities and Other Non Current Liabilities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments for nonqualified deferred compensation plan	737
Carrying value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments for nonqualified deferred compensation plan (included with other noncurrent assets on the consolidated balance sheets)	3,033	2,628
Interest rate swap (included with other noncurrent assets on the consolidated balance sheets)		437
Interest rate swap (included with other current liabilities and other non current liabilities on the consolidated balance sheets)	$ (737)
Interest rate swap (included with other noncurrent liabilities on the consolidated balance sheets)		$ (405)

XML

Fair Value Measurements - Additional Information (Detail)	Sep. 25, 2016 USD ($)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value, assets, Level 1 to Level 2 transfers, amount	$ 0

XML

Other Current Assets (Detail) - USD ($) $ in Thousands	Sep. 25, 2016	Dec. 27, 2015
Other Current Assets [Line Items]
Income taxes refundable	$ 1,247	$ 2,887
Prepaid expenses	2,257	1,076
Deferred income taxes		1,676
Other current assets	$ 3,504	$ 5,639

XML

Property and Equipment, Net (Detail) - USD ($) $ in Thousands	9 Months Ended
	Sep. 25, 2016	Dec. 27, 2015
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 101,986	$ 89,618
Accumulated depreciation	(32,361)	(26,830)
Accumulated amortization	(17,718)	(14,651)
Property and equipment, net	51,907	48,137
Buildings
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 1,330	1,330
Buildings | Maximum
Property, Plant and Equipment [Line Items]
Property and equipment, useful life	40 years
Furniture, fixtures and equipment
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 18,009	16,798
Furniture, fixtures and equipment | Maximum
Property, Plant and Equipment [Line Items]
Property and equipment, useful life	5 years
Leasehold Improvements
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 25,646	22,987
Leasehold Improvements | Maximum
Property, Plant and Equipment [Line Items]
Property and equipment, useful life	20 years
Capital leases | Capital leases, buildings
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 8,286	8,553
Capital leases | Capital leases, buildings | Maximum
Property, Plant and Equipment [Line Items]
Property and equipment, useful life	40 years
Capital leases | Capital leases, equipment
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 25,193	22,956
Capital leases | Capital leases, equipment | Maximum
Property, Plant and Equipment [Line Items]
Property and equipment, useful life	5 years
Capital leases | Capital leases, automobiles
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 3,434	3,297
Capital leases | Capital leases, automobiles | Maximum
Property, Plant and Equipment [Line Items]
Property and equipment, useful life	5 years
Land
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 1,509	1,509
Construction in Progress
Property, Plant and Equipment [Line Items]
Property and equipment, gross	8,926	3,408
Computer hardware and software
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 9,653	$ 8,780
Computer hardware and software | Maximum
Property, Plant and Equipment [Line Items]
Property and equipment, useful life	5 years

XML

Property and Equipment, Net - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 25, 2016	Sep. 27, 2015	Sep. 25, 2016	Sep. 27, 2015
Property, Plant and Equipment [Line Items]
Depreciation and amortization	$ 745	$ 725	$ 2,178	$ 2,075
Property and Equipment
Property, Plant and Equipment [Line Items]
Depreciation and amortization	$ 3,700	$ 3,400	$ 10,800	$ 9,600

XML

Franchise Rights, Net (Detail) - USD ($) $ in Thousands	Sep. 25, 2016	Dec. 27, 2015
Finite-Lived Intangible Assets [Line Items]
Franchise rights, net	$ 24,518	$ 25,341
Franchise Rights
Finite-Lived Intangible Assets [Line Items]
Franchise rights, including reacquired franchise rights	29,623	29,623
Less accumulated amortization	(5,105)	(4,282)
Franchise rights, net	$ 24,518	$ 25,341

XML

Franchise Rights, Net - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 25, 2016	Sep. 27, 2015	Sep. 25, 2016	Sep. 27, 2015
Franchise Rights
Finite-Lived Intangible Assets [Line Items]
Amortization expense	$ 0.3	$ 0.3	$ 0.8	$ 0.8

XML

Components of Other Noncurrent Assets (Detail) - USD ($) $ in Thousands	Sep. 25, 2016	Dec. 27, 2015
Other Noncurrent Assets [Line Items]
Investments for nonqualified deferred compensation plan	$ 3,033	$ 2,628
Interest rate swap asset		437
Other noncurrent assets	701	608
Other noncurrent assets	$ 3,734	$ 3,673

XML

Accrued Expenses (Detail) - USD ($) $ in Thousands	Sep. 25, 2016	Dec. 27, 2015
Accrued Liabilities [Line Items]
Payroll & related	$ 11,323	$ 12,316
Sales and property taxes	5,915	2,472
Gift cards	683	974
Utilities	1,307	1,092
Occupancy	395	481
Interest	653	715
Other	3,574	1,036
Accrued expenses	$ 23,850	$ 19,086

XML

Other Current Liabilities (Detail) - USD ($) $ in Thousands	Sep. 25, 2016	Dec. 27, 2015
Other Current Liabilities [Line Items]
Financing obligations under build-to-suit transactions	$ 5,679	$ 1,594
Closed store obligation	106	184
Interest rate swap liability	10
Other		377
Other current liabilities	$ 5,795	$ 2,155

XML

Other Noncurrent Liabilities (Detail) - USD ($) $ in Thousands	Sep. 25, 2016	Dec. 27, 2015
Other Non Current Liabilities [Line Items]
Deferred rents	$ 7,067	$ 5,875
Unfavorable lease liability, net	1,596	1,817
Deferred compensation	3,033	2,628
Deferred revenue	785	717
Closed store obligation	275	356
Interest rate swap liability	727	405
Other noncurrent liabilities	88	36
Other noncurrent liabilities	$ 13,571	$ 11,834

XML

Commitments and Contingencies - Additional Information (Detail) $ in Millions	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 25, 2016 USD ($) Franchisee	Sep. 27, 2015 Franchisee	Sep. 25, 2016 USD ($) Franchisee	Sep. 27, 2015 Franchisee	Dec. 27, 2015 USD ($)
Commitment And Contingencies [Line Items]
Number of franchisees	3	3	3	3
Guarantees expiration year			2018
Carrying value of debt covered by additional guarantee | $	$ 0.1		$ 0.1		$ 0.1
Related Party
Commitment And Contingencies [Line Items]
Number of franchisees	1	1	1	1
Royalty Revenue | Franchisee
Commitment And Contingencies [Line Items]
Concentration percentage	44.00%	44.00%	44.00%	44.00%
Accounts Receivable | Franchisee
Commitment And Contingencies [Line Items]
Concentration percentage			0.42%		44.00%

XML

Leases - Additional Information (Detail) - USD ($)					1 Months Ended	9 Months Ended
	Oct. 11, 2016	Aug. 15, 2016	Jun. 27, 2016	Apr. 22, 2016	Mar. 31, 2015	Sep. 25, 2016
Financing Agreement Four | Equipment Lease Arrangement
Operating Leased Assets [Line Items]
Maximum borrowing		$ 3,000,000
Expiration date		Jun. 30, 2017
Lease term		60 months
Percentage added to interest rate		3.00%
Bargain purchase option at the end of the lease		$ 1
Financing Agreement Four | Interest Rate Swap Agreements | Equipment Lease Arrangement | Minimum
Operating Leased Assets [Line Items]
Interest rate swap, weighted average life		2 years
Financing Agreement Four | Interest Rate Swap Agreements | Equipment Lease Arrangement | Maximum
Operating Leased Assets [Line Items]
Interest rate swap, weighted average life		3 years
Financing Agreement One | Equipment Lease Arrangement
Operating Leased Assets [Line Items]
Maximum borrowing						$ 3,500,000
Additional maximum borrowing			$ 8,100,000
Expiration date			Jun. 01, 2017			Mar. 01, 2016
Expiration extended Date						Sep. 30, 2016
Lease term					60 months
Percentage added to interest rate					3.00%
Bargain purchase option at the end of the lease					$ 1
Financing Agreement One | Interest Rate Swap Agreements | Equipment Lease Arrangement
Operating Leased Assets [Line Items]
Interest rate swap, weighted average life					2 years 7 months 10 days
Financing Agreement Two
Operating Leased Assets [Line Items]
Maximum borrowing						$ 1,400,000
Expiration date						Apr. 30, 2016
Lease term					60 months
Percentage added to interest rate					3.91%
Bargain purchase option at the end of the lease					$ 1
Financing Agreement Two | Interest Rate Swap Agreements
Operating Leased Assets [Line Items]
Interest rate swap, weighted average life					32 months
Financing Agreement Three
Operating Leased Assets [Line Items]
Maximum borrowing				$ 2,000,000
Lease term				60 months
Percentage added to interest rate				2.90%
Bargain purchase option at the end of the lease				$ 1
Financing Agreement Three | Interest Rate Swap Agreements
Operating Leased Assets [Line Items]
Interest rate swap, weighted average life				3 years
Financing Agreement Five | Subsequent Event
Operating Leased Assets [Line Items]
Maximum borrowing	$ 2,100,000
Expiration date	Sep. 30, 2017
Lease term	60 months
Percentage added to interest rate	2.90%
Bargain purchase option at the end of the lease	$ 1
Financing Agreement Five | Interest Rate Swap Agreements | Subsequent Event
Operating Leased Assets [Line Items]
Interest rate swap, weighted average life	3 years

XML

Computations of Basic and Diluted Net Income Per Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 25, 2016	Sep. 27, 2015	Sep. 25, 2016	Sep. 27, 2015
Earnings Per Share Note [Line Items]
Net income	$ 10,019	$ 8,910	$ 27,894	$ 18,682
Weighted average number of common shares outstanding-basic	36,355	35,951	36,195	18,830
Weighted average number of common shares assumed from the conversion of Series A Preferred Stock				17,097
Weighted average number of common shares outstanding-diluted	37,650	37,526	37,561	37,471
Net income per share-basic	$ 0.28	$ 0.25	$ 0.77	$ 0.99
Net income per share-diluted	$ 0.27	$ 0.24	$ 0.74	$ 0.50
Equity Option
Earnings Per Share Note [Line Items]
Weighted average dilutive effect of stock-based compensation	1,295	1,575	1,366	1,544

XML

Income Taxes - Additional Information (Detail)	3 Months Ended		9 Months Ended
	Sep. 25, 2016	Sep. 27, 2015	Sep. 25, 2016	Sep. 27, 2015
Income Taxes [Line Items]
Effective income tax rates	29.10%	27.40%	33.40%	38.00%

XML

Stock Compensation Plan - Additional Information (Detail) $ / shares in Units, $ in Millions			9 Months Ended
	Jun. 08, 2016 Director $ / shares shares	May 13, 2015 Director shares	Sep. 25, 2016 USD ($) $ / shares shares	Dec. 27, 2015 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of stock units granted			151,000
Common stock price per share | $ / shares			$ 18.05
Outstanding stock options			3,940,986	4,347,024
Stock Option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of stock units granted	151,000
Common stock price per share | $ / shares	$ 18.05
Fair value of stock options granted (per share) | $ / shares	$ 5.48
Stock option vesting period	4 years
Time Based Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation costs | $			$ 2.2
Period of recognition			2 years 6 months
Unvested Performance Based Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation costs | $			$ 3.0
Outstanding stock options			1,100,000
Restricted Stock Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock option vesting period	4 years
Unrecognized compensation costs | $			$ 1.3
Period of recognition			3 years 2 months 12 days
Number of stock units granted	75,500
Director | Restricted Stock Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of stock units granted	2,770	2,631
Number of non employee directors | Director	6	3
Restricted Stock Units Vesting Date			Jun. 08, 2016
2011 Equity Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares available for issuance			8,500,000
Number of additional shares available for grant			4,000,000
2011 Equity Incentive Plan | Maximum | Stock Option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Term of option			10 years

XML

Stock Option Activity (Detail) - USD ($) $ / shares in Units, $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 25, 2016	Dec. 27, 2015
Number of shares
Balance as of December 27, 2015	4,347,024
Granted	151,000
Exercised	(356,329)
Repurchased	0
Forfeited	(200,709)
Expired	0
Balance as of September 25, 2016	3,940,986	4,347,024
Exercisable as of September 25, 2016	2,285,488
Weighted average exercise price
Balance as of December 27, 2015	$ 3.78
Granted	18.05
Exercised	2.41
Repurchased	0
Forfeited	3.23
Expired	0
Balance as of September 25, 2016	4.48	$ 3.78
Exercisable as of September 25, 2016	$ 4.03
Weighted average remaining contractual term
Option Outstanding Weighted Average Remaining Term	6 years 1 month 6 days	6 years 9 months 18 days
Options Exercisable Weighted Average Remaining Term	5 years 10 months 24 days
Aggregate intrinsic value
Balance as of December 27, 2015	$ 51,198
Exercised	5,317
Balance as of September 25, 2016	47,651	$ 51,198
Exercisable as of September 25, 2016	$ 28,552

XML

Summary of Restricted Stock Unit Activity (Detail) - Restricted Stock and Restricted Stock Units	9 Months Ended
	Sep. 25, 2016 $ / shares shares
Number of Restricted shares
Beginning Balance | shares	7,893
Granted | shares	92,120
Forfeited | shares	(7,500)
Vested | shares	(7,893)
Ending Balance | shares	84,620
Restricted shares weighted average fair value at grant date
Beginning Balance | $ / shares	$ 19.00
Granted | $ / shares	18.05
Forfeited | $ / shares	18.05
Vested | $ / shares	19.00
Ending Balance | $ / shares	$ 18.05

XML

Related Party Transactions - Additional Information (Detail)	9 Months Ended
	Sep. 25, 2016
New Generation Foods, LLC | Maximum | From January 29, 2014 through July 31, 2015
Related Party Transaction [Line Items]
Advertising expenditures percentage on sales	1.00%

XML

Information with Respect to Related Parties (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 25, 2016	Sep. 27, 2015	Sep. 25, 2016	Sep. 27, 2015	Dec. 27, 2015
Related Party Transaction [Line Items]
Franchise royalty revenues	$ 6,739	$ 6,436	$ 19,532	$ 18,740
Other franchise revenues	100	287	470	768
Cajun Jack's, LLC
Related Party Transaction [Line Items]
Franchise royalty revenues	26	25	73	73
Gross accounts receivable	9		9		$ 9
New Generation Foods, LLC
Related Party Transaction [Line Items]
Advertising expense		11		74
Franchise royalty revenues	143	127	419	383
Other franchise revenues				35
Gross accounts receivable	51		51		52
Tri Arc Food Systems, Inc.
Related Party Transaction [Line Items]
Marketing/sponsorship expense	18	18	54	54
Franchise royalty revenues	1,276	1,221	3,777	3,678
Other franchise revenues			13	13
Gross accounts receivable	382		382		$ 387
Advent International Corporation
Related Party Transaction [Line Items]
Out-of-pocket expense reimbursement	8	15	12	28
Panthers Football, LLC
Related Party Transaction [Line Items]
Marketing/sponsorship expense	270	260	370	310
JZF Properties, LLC
Related Party Transaction [Line Items]
Rent payments	48	47	169	149
MAR Real Estate, LLC
Related Party Transaction [Line Items]
Rent payments	35	72	105	156
Palmetto Lowcountry Properties, LLC
Related Party Transaction [Line Items]
Rent payments		$ 40	57	$ 91
Catco Bo Memorial, LLC
Related Party Transaction [Line Items]
Rent payments	25		75
MRMJ Holdings, LLC
Related Party Transaction [Line Items]
Rent payments	$ 16		$ 16