FIESTA RESTAURANT GROUP, INC. MANAGEMENT REPORT AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS (Form 10-Q)

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The following Management's Discussion and Analysis of financial condition and
results of operations ("MD&A") is written to help the reader understand our
company. The MD&A is provided as a supplement to, and should be read in
conjunction with, our unaudited condensed consolidated financial statements and
the accompanying notes. Any reference to restaurants refers to Company-owned
restaurants unless otherwise indicated. Throughout this MD&A, we refer to Fiesta
Restaurant Group, Inc., together with its consolidated subsidiaries, as
"Fiesta," "we," "our" and "us."

We use a 52-53 week fiscal year ending on the Sunday closest to December 31. The
fiscal year ended January 2, 2022 contained 52 weeks. The three months ended
April 3, 2022 and April 4, 2021 each contained thirteen weeks. The fiscal year
ending January 1, 2023 will contain 52 weeks.

Company presentation

We own, operate and franchise the restaurant brand Pollo Tropical®, which has
over 30 years of operating history and a loyal customer base. Our Pollo Tropical
locations feature fire-grilled and crispy citrus marinated chicken and other
freshly prepared menu items. We believe the brand offers a distinct and unique
flavor with broad appeal at a compelling value, which differentiates it in the
competitive fast-casual and quick-service restaurant segments. All but one of
our restaurants offer the convenience of drive-thru windows. As of April 3,
2022, we operated 138 Pollo Tropical Company-owned restaurants, all of which are
located in Florida.

We franchise our Pollo Tropical restaurants primarily in international markets,
and as of April 3, 2022, we had 23 franchised Pollo Tropical restaurants located
in Puerto Rico, Panama, Guyana, Ecuador, the Bahamas, and the U.S. Virgin
Islands, and eight licensed Pollo Tropical restaurants located in Florida
consisting of five on college campuses and locations at a hospital and two
sports and entertainment stadiums. We have agreements for the continued
development of franchised Pollo Tropical restaurants in certain of our existing
franchised markets.

Recent Events Affecting Our Results of Operations

Covid-19 pandemic

The novel coronavirus (COVID-19) pandemic has affected and is continuing to
affect the restaurant industry and the economy. Based on current conditions, we
do not expect sales trends to significantly deteriorate further as a direct
result of COVID-19. However, labor shortages may negatively impact sales trends
and there can be no assurance that sales trends will not deteriorate further. We
have implemented measures to control costs to mitigate any negative impact from
the COVID-19 pandemic and labor shortages.

Labor challenges and inflationary factors

Hours of operations have been limited due to labor shortages which are affecting
our brand and the restaurant industry. In the first quarter of 2022, we estimate
that operating hours were reduced by approximately 4.3% as a result of labor
shortages. Additionally, we experienced increased overtime due to training and
staffing shortages. In response to these labor shortages and competition for
labor, we implemented special incentive pay in affected locations and for
particular days of the week, and we have introduced sign-on bonuses payable
after a specified term of service. In addition, we believe that approximately
$0.2 million of the labor cost increases in the first quarter of 2022 for
overtime and staffing-related incentives are short-term in nature. We have
intensified our focus on accelerating labor optimization efforts to improve
staffing efficiency, which we believe will increase both staff availability and
margins.

Inflationary factors have been experienced primarily in labor, food costs, and
other operating costs categories. Due primarily to higher wage rates, restaurant
wages and related expenses as a percentage of net sales increased to 24.8% in
the first quarter of 2022 from 23.2% in the first quarter of 2021. Commodity
costs as a percentage of net sales increased 4.9% in the first quarter of 2022
compared to the first quarter of 2021. Chicken costs, the primary protein
purchased, are not expected to increase significantly for the remainder of 2022.
Utilities costs as a percentage of net sales also increased to 3.8% in the first
quarter of 2022 from 3.3% in the first quarter of 2021.

Pricing action has been taken to offset labor, food and operating cost
increases. In order to maintain value perceptions with our customers, we
implemented a phased approach to menu price increases and took lower pricing
increases on items purchased by value-conscious customers including our "Pollo
Time" promotional items. Recent price increases include a 5.2% price increase in
mid-December 2021, and a 5.0% increase in March 2022. As a result of this phased
approach to menu price increases, margin improvement is trailing the impact of
cost increases noted above, with improved margins expected in future quarters
compared to the first quarter of 2022, barring unforeseen changes in our cost
structure and operating environment.
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Executive Summary – Consolidated Operating Performance for the Three Months Ended
April 3, 2022

Our first quarter 2022 results and highlights include the following:

•We recognized a net loss of $(1.4) million, or $(0.05) per diluted share, in
the first quarter of 2022 compared to a net loss of $(2.1) million, or $(0.08)
per diluted share, in the first quarter of 2021 due primarily to the impact of
increased comparable restaurant sales at Pollo Tropical and lower impairment and
other lease charges in the first quarter of 2022, partially offset by higher
cost of sales, labor costs, repair and maintenance costs, general and
administrative expenses, advertising costs and delivery fees in the first
quarter of 2022. The loss in the first quarter of 2021 was primarily the result
of the loss from discontinued operations.

•We recognized a loss from continuing operations of $(1.3) million, or $(0.05)
per diluted share, in the first quarter of 2022 compared to a loss from
continuing operations of $(0.7) million, or $(0.03) per diluted share, in the
first quarter of 2021 primarily as a result of the foregoing.

•Total revenues increased 8.4% in the first quarter of 2022 to $95.6 million
compared to $88.2 million in the first quarter of 2021, driven by an increase in
comparable restaurant sales at Pollo Tropical. Comparable restaurant sales
increased 8.0% for our Pollo Tropical restaurants resulting from an increase in
the net impact of product/channel mix and pricing of 15.0%, partially offset by
a decrease in comparable restaurant transactions of 7.0%.

•Consolidated Adjusted EBITDA decreased $4.4 million in the first quarter of
2022 to $5.3 million compared to $9.7 million in the first quarter of 2021,
driven primarily by higher labor costs, repair and maintenance, utilities,
insurance costs and delivery fee expense, and sales mix and commodity costs
within cost of sales, partially offset by the impact of higher restaurant sales.
Consolidated Adjusted EBITDA is a non-GAAP financial measure of performance. For
a discussion of our use of Consolidated Adjusted EBITDA and a reconciliation
from net income (loss) to Consolidated Adjusted EBITDA, see "Management's Use of
Non-GAAP Financial Measures."

Results of Operations

Unless otherwise stated, this analysis of operating results relates to our continuing operations.

The following table summarizes the changes in the number and composition of Pollo Tropical Company– owned and franchised restaurants:

                                                  Pollo Tropical
                                     Owned          Franchised          Total
                  January 2, 2022    138                31                169
                  New                  -                 1                  1
                  Closed               -                (1)                (1)
                  April 3, 2022      138                31                169

                  January 3, 2021    138                29                167
                  New                  -                 -                  -
                  Closed               -                 -                  -
                  April 4, 2021      138                29                167

Three months completed April 3, 2022 Compared to the three months ended April 4, 2021

The following table sets forth, for the three months ended April 3, 2022 and
April 4, 2021, selected operating results as a percentage of restaurant sales:

                                                    Three Months Ended
                                             April 3, 2022        April 4, 2021

Costs and expenses:
Cost of sales                                         32.3  %            31.1  %
Restaurant wages and related expenses                 24.8  %            23.2  %
Restaurant rent expense                                6.3  %             6.7  %
Other restaurant operating expenses                   17.5  %            15.1  %
Advertising expense                                    3.0  %             2.7  %


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Revenues. Revenues include restaurant sales and franchise royalty revenues and
fees. Restaurant sales consist of food and beverage sales, net of discounts, at
our restaurants. Franchise royalty revenues and fees represent ongoing royalty
payments that are determined based on a percentage of franchisee sales and the
amortization of initial franchise fees and area development fees associated with
the opening of new franchised restaurants. Restaurant sales are influenced by
new restaurant openings, closures of restaurants and changes in comparable
restaurant sales.

Total revenues increased 8.4% to $95.6 million in the first quarter of 2022 from
$88.2 million in the first quarter of 2021. Restaurant sales increased 8.4% to
$95.2 million in the first quarter of 2022 from $87.8 million in the first
quarter of 2021.

The following table presents the primary drivers of the increase in restaurant
sales for Pollo Tropical for the first quarter of 2022 compared to the first
quarter of 2021 (in millions):

Increase in comparable restaurant sales                                     $        7.0
Increase in sales related to closed restaurants, including temporary and
partial closures                                                                     0.4
Total increase                                                              $        7.4


Restaurants are included in comparable restaurant sales after they have been
open for 18 months. Restaurants are excluded from comparable restaurant sales
for any fiscal month in which the restaurant was closed for more than five days.
Comparable restaurant sales are compared to the same period in the prior year.

Comparable restaurant sales increased 8.0% for Pollo Tropical restaurants in the
first quarter of 2022 compared to the first quarter of 2021. Increases or
decreases in comparable restaurant sales result primarily from an increase or
decrease in comparable restaurant transactions and in average check. Changes in
average check are primarily driven by menu price increases net of discounts and
promotions and changes in sales channel and sales mix.

For Pollo Tropical, an increase in the net impact of product/channel mix and
pricing of 15.0% was partially offset by a decrease in comparable restaurant
transactions of 7.0% in the first quarter of 2022 compared to the first quarter
of 2021. The increase in product/channel mix and pricing was driven primarily by
increases in dine-in, delivery, and drive-thru average check, and menu price
increases of 13.8%. We believe staffing challenges had a negative impact on
sales trends driven by reduced operating hours and sales channels in the first
quarter of 2022. Comparable restaurant sales in adequately staffed markets
increased 11.1% in the first quarter of 2022 compared the first quarter of 2021.
Comparable restaurant sales in the first quarter of 2022 were negatively
impacted by remodels and refreshes that temporarily closed dine-in and counter
take-out operations. We estimate that these temporary dine-in closures
negatively impacted comparable restaurant sales by approximately 0.4% in the
first quarter of 2022.

Franchise revenues remained stable at $0.4 million in the first quarter of 2022 compared to the first quarter of 2021.

Operating Costs and Expenses. Operating costs and expenses include cost of
sales, restaurant wages and related expenses, other restaurant expenses and
advertising expenses. Cost of sales consists of food, paper and beverage costs
including packaging costs, less rebates and purchase discounts. Cost of sales is
generally influenced by changes in commodity costs, the sales mix of items sold
and the effectiveness of our restaurant-level controls to manage food and paper
costs. Key commodities, including chicken and beef, are generally purchased
under contracts for future periods of up to one year.

Restaurant salaries and related expenses include all restaurant management and hourly productive labor costs, employer payroll taxes, restaurant-level bonuses, and related benefits. Payroll taxes and related taxes and benefits are subject to inflation, including increases in the minimum wage and changes in the costs of health insurance, workers’ compensation insurance and unemployment insurance of State.

Other restaurant operating expenses include all other restaurant-level operating
costs, the major components of which are utilities, repairs and maintenance,
general liability insurance, sanitation, supplies and credit card and delivery
fees.

Advertising costs include all promotional expenses, including television, radio, billboards and other sponsorship and promotional activities and agency fees.

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The following table outlines the key drivers of changes in the components of restaurant operating margins for the first quarter of 2022 compared to the first quarter of 2021. All percentages are expressed as a percentage of restaurant sales:

Pollo Tropical:
Cost of sales:
Higher commodity cost                                                                   4.9  %
Sales mix                                                                               1.0  %
Higher promotions and discounts                                                         0.2  %
Menu price increases                                                                   (4.4) %
Operating efficiency                                                                   (0.7) %

Other                                                                                   0.2  %

Net increase in cost of sales as a percentage of restaurant sales

             1.2  %

Restaurant wages and related expenses:
Higher labor costs due to higher wage rates and overtime(1)                             2.0  %

Reduced medical benefit costs, including the impact of increased sales

           (0.3) %

Lower incentive bonus(2)                                                               (0.2) %

Other                                                                                   0.1  %

Net increase in restaurant wages and related costs as a percentage of restaurant sales

                                                                        1.6  %

Other operating expenses:
Higher repair and maintenance costs                                                     1.3  %
Higher utilities costs                                                                  0.5  %

Higher delivery costs due to increased delivery channel sales

             0.4  %
Higher insurance costs                                                                  0.4  %

Lower professional fees and services                                                   (0.2) %

Other                                                                                   0.1  %
Net increase in other restaurant operating expenses as a percentage of
restaurant sales                                                                        2.5  %

Advertising expense:
Increased advertising                                                                   0.3  %

Net increase in advertising spend as a percentage of restaurant sales

             0.3  %


(1) Increase in wage rates, overtime and social charges partly due to labor shortages in 2022. (2) Mainly due to guaranteed bonuses in 2021.

Restaurant Rent Expense. Restaurant rent expense includes base rent, contingent
rent and common area maintenance and property taxes related to our leases
characterized as operating leases. Restaurant rent expense, as a percentage of
total restaurant sales, decreased to 6.3% in the first quarter of 2022 from 6.7%
in the first quarter of 2021 due primarily to the impact of higher restaurant
sales which were partially offset by higher rental costs related to renewed
leases.

General and Administrative Expenses. General and administrative expenses are
comprised primarily of (1) salaries and expenses associated with the development
and support of our Company and brand and the management oversight of the
operation of our restaurants; and (2) legal, auditing and other professional
fees, corporate system costs, and stock-based compensation expense.

General and administrative expenses were $12.3 million for the first quarter of
2022 and $10.7 million for the first quarter of 2021, and as a percentage of
total revenues, general and administrative expenses increased to 12.9% in the
first quarter of 2022 compared to 12.1% in the first quarter of 2021, due
primarily to increased professional fees, higher employee benefits and other
support costs. General and administrative expenses for the first quarter of 2022
included $1.3 million in non-recurring expenses comprised of $0.7 million of
professional fees, $0.3 million digital platform costs, and $0.3 million of
general and administrative efficiency initiative costs. General and
administrative expenses for the first quarter of 2021 included $0.3 million
related to non-recurring digital costs.
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Consolidated Adjusted EBITDA. Consolidated Adjusted EBITDA, a non-GAAP financial
measure, is the primary measure of profit or loss used by our chief operating
decision maker for purposes of assessing performance and is defined as earnings
before interest expense, income taxes, depreciation and amortization, impairment
and other lease charges (recoveries), goodwill impairment, closed restaurant
rent expense, net of sublease income, stock-based compensation expense, other
expense (income), net, and certain significant items that management believes
are related to strategic changes and/or are not related to the ongoing operation
of our restaurants.

Consolidated Adjusted EBITDA may not necessarily be comparable to other
similarly titled captions of other companies due to differences in methods of
calculation. For a discussion of our use of Consolidated Adjusted EBITDA and a
reconciliation from net income (loss) to Consolidated Adjusted EBITDA, see the
heading titled "Management's Use of Non-GAAP Financial Measures."

Consolidated Adjusted EBITDA decreased to $5.3 million, or 5.5% of total
revenues, in the first quarter of 2022 from $9.7 million, or 11.0% of total
revenues, in the first quarter of 2021 due primarily to higher labor costs,
repair and maintenance costs, utilities costs, general and administrative costs,
and sales mix and commodity costs within cost of sales, partially offset by the
impact of higher restaurant sales.

Restaurant-level Adjusted EBITDA. We also use Restaurant-level Adjusted EBITDA,
a non-GAAP financial measure, as a supplemental measure to evaluate the
performance and profitability of our restaurants in the aggregate, which is
defined as Consolidated Adjusted EBITDA excluding franchise royalty revenues and
fees, pre-opening costs and general and administrative expenses (including
corporate-level general and administrative expenses).

Restaurant-level Adjusted EBITDA decreased to $15.3 million, or 16.1% of
restaurant sales, in the first quarter of 2022 from $18.7 million, or 21.2% of
restaurant sales, in the first quarter of 2021 primarily due to the foregoing.
For a reconciliation from Consolidated Adjusted EBITDA to Restaurant-level
Adjusted EBITDA, see the heading titled "Management's Use of Non-GAAP Financial
Measures."

Depreciation and Amortization. Depreciation and amortization expense remained
flat at $5.1 million in the first quarter of 2022 compared to the first quarter
of 2021.

Depreciation and other rental charges (recoveries). Impairment and other lease charges (recoveries) decreased to ($0.7) million in the first quarter of 2022 from ($0.1) million in the first quarter of 2021.

Depreciation and other rental charges (recoveries) for the three months ended
April 3, 2022 consist of capital gains from the termination of leases.

Depreciation and other rental charges (recoveries) for the three months ended
April 4, 2021 include impairment charges of $0.1 million primarily related to the equipping of previously impaired and closed restaurants and a gain from the termination of a lease of ($0.2) million.

Each quarter we assess the potential impairment of any long-lived assets that
have experienced a triggering event, including restaurants for which the related
trailing twelve-month cash flows are below a certain threshold. We determine if
there is impairment at the restaurant level by comparing undiscounted future
cash flows from the related long-lived assets, exclusive of operating lease
payments, to their respective carrying values, excluding operating lease
liabilities. In determining future cash flows, significant estimates are made by
us with respect to future operating results of each restaurant over its
remaining lease term, including sales trends, labor rates, commodity costs and
other operating cost assumptions. If assets are determined to be impaired, the
impairment charge is measured by calculating the amount by which the asset
group's carrying amount exceeds its fair value. This process of assessing fair
values requires the use of estimates and assumptions, including our ability to
sell or reuse the related assets and market conditions, and for right-of-use
lease assets, current market lease rent and discount rates, which are subject to
a high degree of judgment. If these assumptions change in the future, we may be
required to record impairment charges for these assets and these charges could
be material. Due to the uncertainty associated with the unprecedented nature of
the COVID-19 pandemic and the impact it may continue to have on our operations
and future cash flows, it is reasonably possible that the estimates of future
cash flows used in impairment assessments will change in the near term and the
effect of the change could be material.

For seven Pollo Tropical restaurants with combined carrying values (excluding
right-of-use lease assets) of $4.7 million, projected cash flows are not
substantially in excess of their carrying values. If the performance of these
restaurants deteriorates from current projections, an impairment charge could be
recognized in future periods, and such charge could be material.

Closed Restaurant Rent Expense, Net of Sublease Income. Closed restaurant rent
expense, net of sublease income, was $0.4 million for the first quarter of 2022
and consisted of closed restaurant rent and ancillary lease costs of $2.2
million net of
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sublease income of $(1.8) million. Closed restaurant rent expense, net of
sublease income, was $0.8 million for the first quarter of 2021 and consisted of
closed restaurant rent and ancillary lease costs of $2.3 million net of sublease
income of $(1.6) million.

Other Expense (Income), Net. Other expense (income), net, for the first quarter
of 2022 primarily consisted of closed restaurant related costs of $0.1 million.
Other expense, net, for the first quarter of 2021 was $0.1 million and primarily
consisted of costs for the removal, transfer, and storage of equipment from
closed restaurants and other closed restaurant related costs.

Interest charges. Interest expense remained stable at $0.1 million in the first quarter of 2022 compared to the first quarter of 2021.

Provision for (Benefit from) Income Taxes. The effective tax rate was 14.6% and
129.2% for the first quarter of 2022 and 2021, respectively. The benefit from
income taxes for the first quarter of 2022 was derived using an estimated annual
effective tax rate of 20.0% which includes changes in the valuation allowance as
a result of originating temporary differences during the year and excludes the
discrete impact of a tax deficiency from the vesting of restricted shares of
$0.1 million. The provision for income taxes for the first quarter of 2021 was
derived using an estimated annual effective tax rate of 57.6% which includes
changes in the valuation allowance as a result of originating temporary
differences during the year and excludes the discrete impact of a tax deficiency
from the vesting of restricted shares of $0.3 million and a $1.5 million
out-of-period adjustment that increased our income tax provision.

Loss from Discontinued Operations, Net of Tax. All revenues, costs and expenses
and income taxes attributable to Taco Cabana have been aggregated within loss
from discontinued operations, net of tax, in the condensed consolidated
statement of operations for all periods presented. During the first quarter of
2022, we recognized $0.2 million of expenses, primarily related to workers'
compensation claims, and a reduction of stock-based compensation of $(0.1
million) within loss from discontinued operations, net of tax, in the condensed
consolidated statement of operations. See Note 2-Dispositions in our unaudited
condensed consolidated financial statements.

Net Loss. As a result of the foregoing, we had a net loss of $(1.4) million in
the first quarter of 2022 compared to a net loss of $(2.1) million in the first
quarter of 2021.

Cash and capital resources

Unless otherwise stated, this discussion of liquidity and capital resources relates to our combined businesses.

We do not have significant receivables or inventory and receive trade credit
based upon negotiated terms in purchasing food products and other supplies.
Although, as a result of our substantial cash balance, we did not have a working
capital deficit at April 3, 2022, we have the ability to operate with a
substantial working capital deficit (and we have historically operated with a
working capital deficit) because:

•Catering operations are primarily conducted on a cash basis;

•Fast turnover results in limited investment in inventory; and

• Cash from sales is generally received before supplies and payroll payables become due.

Capital expenditures and payments related to our lease obligations represent
significant liquidity requirements for us. We believe our cash reserves, cash
generated from our operations, and availability of borrowings under our senior
credit facility will provide sufficient cash availability to cover our
anticipated working capital needs and capital expenditures for the next twelve
months. We used the net proceeds from the sale of Taco Cabana to repay the
outstanding term loan under our senior credit facility in the third quarter of
2021.

Operating Activities. Net cash provided by operating activities in the first
three months of 2022 and 2021 was $3.9 million and $9.5 million, respectively.
The decrease in net cash provided by operating activities in the three months
ended April 3, 2022 was primarily driven by a decrease in Consolidated Adjusted
EBITDA, including contributions from discontinued operations, the receipt of
income tax refunds in 2021, and the timing of payments.

Investing Activities. Net cash used in investing activities in the first three
months of 2022 was $3.6 million compared to offsetting sources and uses of cash
in investing activities in the same period of 2021. Capital expenditures are
generally the largest component of our investing activities and include: (1) new
restaurant development, which may include the purchase of real estate;
(2) restaurant remodeling/reimaging, which includes the renovation or rebuilding
of the interior and exterior of our existing restaurants; (3) other restaurant
capital expenditures, which include capital maintenance expenditures for the
ongoing reinvestment and enhancement of our restaurants; and (4) corporate and
restaurant information systems.
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The following table presents our capital expenditures related to continuing operations for the periods presented (in thousands of dollars):

                                                 Pollo
                                                Tropical            Other      Continuing Operations
Three Months Ended April 3, 2022:
New restaurant development                     $      -            $   -      $                   -
Restaurant remodeling                             1,480                -                      1,480
Other restaurant capital expenditures(1)          1,904                -                      1,904
Corporate and restaurant information systems        387               34                        421
Total capital expenditures                     $  3,771            $  34      $               3,805
Number of new restaurant openings                     -                                           -
Three Months Ended April 4, 2021:
New restaurant development                     $      -            $   -      $                   -
Restaurant remodeling                               162                -                        162
Other restaurant capital expenditures(1)            514                -                        514
Corporate and restaurant information systems         33              356                        389
Total capital expenditures                     $    709            $ 356      $               1,065
Number of new restaurant openings                     -                                           -


(1)  Excludes restaurant repair and maintenance expenses included in other
restaurant operating expenses in our unaudited condensed consolidated financial
statements. For the three months ended April 3, 2022 and April 4, 2021, total
restaurant repair and maintenance expenses were approximately $3.8 million and
$2.5 million, respectively.


The following table presents our capital expenditures related to discontinued operations for the period presented (in thousands of dollars):

                                                 Taco
                                                Cabana

Three Months Ended April 4, 2021:
New restaurant development                     $     -
Restaurant remodeling                              500

Other catering fixed assets(1) 1,458 Company and catering information systems 73 Total investments

                     $ 2,031
Number of new restaurant openings                    -


(1)  Excludes restaurant repair and maintenance expenses included in
discontinued operations in our unaudited condensed consolidated financial
statements. For the three months ended April 4, 2021, total restaurant repair
and maintenance expenses from discontinued operations were approximately $1.7
million.

Net cash provided by investing activities from discontinued operations in the
first three months of 2022 included proceeds from insurance recoveries of $0.2
million. Net cash used in investing activities from discontinued operations in
the first three months of 2021 included net proceeds of $3.1 million from the
sale-leaseback of two restaurant properties.

Total capital expenditure in 2022 is expected to be between $25.0 million and 30.0 million.

Financing Activities. Net cash used in financing activities in the first three
months of 2022 was $0.2 million and consisted of payments to repurchase our
common stock. Net cash used in financing activities in the first three months of
2021 included term loan borrowing repayments under our senior credit facility of
$0.2 million and $0.1 million in principal payments on finance leases.

Senior Credit Facility. On November 23, 2020, we terminated our former amended
senior secured revolving credit facility and entered into a new senior secured
credit facility, which is referred to as the "senior credit facility." The
senior credit facility was comprised of a term loan facility (the "term loan
facility") of $75.0 million and a revolving credit facility (the "revolving
credit facility") of up to $10.0 million and matures on November 23, 2025. The
senior credit facility also provides for potential incremental term loan
borrowing increases of up to $37.5 million in the aggregate, subject to, among
other items, compliance
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with a minimum Total Leverage Ratio and other terms specified in the senior
credit facility. As required by the terms of the senior credit facility, the net
proceeds from the sale of Taco Cabana were used to fully repay our outstanding
term loan borrowings on August 16, 2021. The early repayment was subject to a
103% loan prepayment premium.

The senior credit facility provides that we be in compliance with the Total
Leverage Ratio under the senior credit facility beginning January 3, 2022. We
will be permitted to exercise equity cure rights with respect to compliance with
the Total Leverage Ratio subject to certain restrictions as set forth in the
senior credit facility.

Borrowings under the Senior Credit Facility bear interest at an annual rate, at our discretion, equal to (all terms as defined in the Senior Credit Facility):

1) the base rate plus the applicable margin of 6.75% with a minimum base rate of 2.00%, or

2) the LIBOR (or benchmark replacement) rate plus the applicable margin of 7.75%, with a minimum LIBOR (or benchmark replacement) rate of 1.00%.

In addition, the senior credit facility requires us to pay a commitment fee of 0.50% per annum on the daily amount of the unused portion of the revolving credit facility.

The outstanding borrowings under the revolving credit facility are prepayable
without penalty or premium (other than customary breakage costs). The
outstanding borrowings under the term loan facility were voluntarily prepayable
by us, and the term loan facility provided that each of the following required a
mandatory prepayment of outstanding term loan borrowings by us as follows: (i)
100% of any cash Net Proceeds (as defined in the senior credit facility) in
excess of $2.0 million individually or in the aggregate over the term of the
senior credit facility in respect of any Casualty Event (as defined in the
senior credit facility) affecting collateral provided that we were permitted to
reinvest such Net Proceeds in accordance with the senior credit facility, (ii)
100% of any Net Proceeds of a Specified Equity Contribution (as defined in the
senior credit facility), (iii) 100% of any cash Net Proceeds from the issuance
of debt issued by us or our subsidiaries other than Permitted Debt (as defined
in the senior credit facility), (iv) 100% of any Net Proceeds from the
Disposition (as defined in the senior credit facility) of certain assets
individually, or in the aggregate, in excess of $2.0 million in any fiscal year
provided that we were permitted to reinvest such Net Proceeds in accordance with
the senior credit facility and (v) beginning with the fiscal year ending January
2, 2022, an amount equal to the Excess Cash Flow (as defined in the senior
credit facility) in accordance with the senior credit facility.

Our senior credit facility contains customary default provisions, including
without limitation, a cross default provision pursuant to which it is an event
of default under this facility if there is a default under any of our
indebtedness having an outstanding principal amount in excess of $5.0 million
which results in the acceleration of such indebtedness prior to its stated
maturity or is caused by a failure to pay principal when due.

The senior credit facility contains certain covenants, including, without
limitation, those limiting our ability to, among other things, incur
indebtedness, incur liens, sell or acquire assets or businesses, change the
character of our business in any material respects, engage in transactions with
related parties, make certain investments, make certain restricted payments or
pay dividends.

Our obligations under the senior credit facility are secured by all of our and
our subsidiaries' assets (including a pledge of all of the capital stock and
equity interests of our subsidiaries).

Under the senior credit facility, the lenders may terminate their obligation to
advance and may declare the unpaid balance of borrowings, or any part thereof,
immediately due and payable upon the occurrence and during the continuance of
customary defaults which include, without limitation, payment default, covenant
defaults, bankruptcy type defaults, defaults on other indebtedness, certain
judgments or upon the occurrence of a change of control (as specified in the
senior credit facility).

As of April 3, 2022, we were in compliance with the financial covenants under
our senior credit facility. At April 3, 2022, $10.0 million was available for
borrowing under the revolving credit facility.

Off-balance sheet arrangements and cash requirements

We have no off-balance sheet arrangements.

There have been no significant changes outside the ordinary course of business
to our cash requirements since January 2, 2022. Information regarding our cash
requirements is included under "Cash Requirements" in Part II, Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in our Annual Report on Form 10-K for the fiscal year ended
January 2, 2022.
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Inflation

The inflationary factors that have historically affected our results of
operations include increases in food and paper costs, labor and other operating
expenses and energy costs. Labor costs in our restaurants are impacted by a
number of factors such as labor supply and changing market conditions, as well
as changes in the federal and state hourly minimum wage rates as well as changes
in payroll related taxes, including federal and state unemployment taxes. Labor
supply across other industries also negatively impacts the costs of supplies,
commodities, logistics, and utilities. We typically attempt to offset the effect
of inflation, at least in part, through periodic menu price increases and
various cost reduction programs. However, no assurance can be given that we will
be able to fully offset such inflationary cost increases in the future.

Application of critical accounting policies

Our unaudited interim condensed consolidated financial statements and
accompanying notes are prepared in accordance with accounting principles
generally accepted in the United States of America. Preparing consolidated
financial statements requires us to make estimates and assumptions that affect
the reported amounts of assets, liabilities, revenue and expenses. These
estimates and assumptions are affected by the application of our accounting
policies. Our significant accounting policies are described in the "Basis of
Presentation" footnote in the notes to our consolidated financial statements for
the year ended January 2, 2022 included in our Annual Report on Form 10-K for
the fiscal year ended January 2, 2022. Critical accounting estimates are those
that require application of management's most difficult, subjective or complex
judgments, often as a result of matters that are inherently uncertain and may
change in subsequent periods. These estimates involve a significant level of
estimation uncertainty and are reasonably likely to have a material impact on
the financial condition or results of operations. There have been no material
changes affecting our critical accounting policies for the three months ended
April 3, 2022.

Management’s Use of Non-GAAP Financial Measures

Consolidated Adjusted EBITDA is a non-GAAP financial measure. We use
Consolidated Adjusted EBITDA in addition to net income (loss) and income (loss)
from operations to assess our performance, and we believe it is important for
investors to be able to evaluate us using the same measures used by management.
We believe this measure is an important indicator of our operational strength
and the performance of our business and it provides a view of operations absent
non-cash activity and items that are not related to the ongoing operation of our
restaurants or affect comparability period over period. Consolidated Adjusted
EBITDA as calculated by us is not necessarily comparable to similarly titled
measures reported by other companies, and should not be considered as an
alternative to net income (loss), earnings (loss) per share, cash flows from
operating activities or other financial information determined under GAAP.

We also use Restaurant-level Adjusted EBITDA as a supplemental measure to
evaluate the performance and profitability of our restaurants in the aggregate,
which is defined as Consolidated Adjusted EBITDA excluding franchise royalty
revenues and fees, pre-opening costs, and general and administrative expenses
(including corporate-level general and administrative expenses).
Restaurant-level Adjusted EBITDA margin is derived by dividing Restaurant-level
Adjusted EBITDA by restaurant sales. Restaurant-level Adjusted EBITDA is also a
non-GAAP financial measure.

Management believes that Consolidated Adjusted EBITDA and Restaurant-level
Adjusted EBITDA, when viewed with our results of operations calculated in
accordance with GAAP and our reconciliation of net income (loss) to Consolidated
Adjusted EBITDA and Restaurant-level Adjusted EBITDA (i) provide useful
information about our operating performance and period-over-period changes, (ii)
provide additional information that is useful for evaluating the operating
performance of our business and (iii) permit investors to gain an understanding
of the factors and trends affecting our ongoing earnings, from which capital
investments are made and debt is serviced. However, such measures are not
measures of financial performance or liquidity under GAAP and, accordingly,
should not be considered as alternatives to net income or cash flow from
operating activities as indicators of operating performance or liquidity. Also
these measures may not be comparable to similarly titled captions of other
companies.

All of these financial measures have significant limitations as analytical tools. These limitations include the following:

•Such financial information does not reflect our capital expenditures, future
requirements for capital expenditures or contractual commitments to purchase
capital equipment;

• This financial information does not reflect interest charges or cash requirements to service payments on our debt;

•Although depreciation and amortization are non-cash charges, the assets that we
currently depreciate and amortize will likely have to be replaced in the future,
and such financial information does not reflect the cash required to fund such
replacements; and
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•Such financial information does not reflect the effect of earnings or charges
resulting from matters that our management does not consider to be indicative of
our ongoing operations. However, some of these charges and gains (such as
impairment and other lease charges (recoveries), closed restaurant rent expense,
net of sublease income, other income and expense and stock-based compensation
expense) have recurred and may recur.

A reconciliation from consolidated net loss to Consolidated Adjusted EBITDA
follows (in thousands). All amounts are from continuing operations unless
otherwise indicated.

                                                                         Three Months Ended
                                                                                April 3, 2022          April 4, 2021

Net loss                                                                       $      (1,356)         $      (2,089)
Loss from discontinued operations, net of tax                                             55                  1,394
Provision for (benefit from) income taxes                                               (222)                 3,077
Income (loss) from continuing operations before taxes                                 (1,523)                 2,382

Add:

Non-general and administrative adjustments:
Depreciation and amortization                                                          5,114                  5,088
Impairment and other lease charges (recoveries)                                         (702)                   (52)

Interest expense                                                                          85                     61
Closed restaurant rent expense, net of sublease income                                   380                    750

Other expense (income), net                                                               51                    123
Stock-based compensation expense                                                           7                     16

Total non-general and administrative adjustments                                       4,935                  5,986
General and administrative adjustments:
Stock-based compensation expense                                                         623                    994
Non-recurring professional fees(1)                                                       705                      -
G&A efficiency initiatives(2)                                                            261                      -

Digital costs(3)                                                                         291                    316
Total general and administrative adjustments                                           1,880                  1,310
Consolidated Adjusted EBITDA                                                   $       5,292          $       9,678
Total revenues                                                             

$95,609 $88,215
Consolidated adjusted EBITDA as a percentage of total revenues

                                                                                 5.5  %                11.0  %


(1) Non-recurring professional fees include costs related to growth initiatives.

(2) G&A efficiency initiatives consist of one-time retention bonuses.

(3) Digital costs for the three months ended April 3, 2022 and April 4, 2021
include the costs of improving our customers’ digital experience.

A reconciliation between consolidated Adjusted EBITDA and Adjusted EBITDA at restaurant level follows (in thousands):

                                                                           Three Months Ended
                                                                                  April 3, 2022          April 4, 2021

Consolidated Adjusted EBITDA                                                     $       5,292          $       9,678
Restaurant-level adjustments:

Add: Other general and administrative expense(1)                                        10,462                  9,356
Less: Franchise royalty revenue and fees                                                   409                    375
Restaurant-level Adjusted EBITDA                                                 $      15,345          $      18,659
Restaurant sales                                                            

$95,200 $87,840
Restaurant-level adjusted EBITDA as a percentage of restaurant sales

                                                                                     16.1  %                21.2  %


(1) Excludes general and administrative adjustments included in consolidated adjusted EBITDA.


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Forward-looking statements

Matters discussed in this report and in our public disclosures, whether written
or oral, relating to future events or our future performance, including any
discussion, express or implied, regarding our anticipated growth, operating
results, future earnings per share, plans, objectives, the impact of our other
business initiatives, the impact of our initiatives designed to strengthen our
liquidity and cash position, including those related to working capital
efficiency initiatives and sales of real property and the impact of the COVID-19
pandemic and our initiatives designed to respond to the COVID-19 pandemic on
future sales, margins, earnings and liquidity, contain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
(the "Exchange Act"). These statements are often identified by the words
"believe," "positioned," "estimate," "project," "plan," "goal," "target,"
"assumption," "continue," "intend," "expect," "future," "anticipate," and other
similar expressions, whether in the negative or the affirmative, that are not
statements of historical fact. These forward-looking statements are not
guarantees of future performance and involve certain risks, uncertainties, and
assumptions that are difficult to predict, and you should not place undue
reliance on our forward-looking statements. Our actual results and the timing of
certain events could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including, but not
limited to, those set forth under "Risk Factors" and elsewhere in this report
and in our other public filings with the United States Securities and Exchange
Commission ("SEC"). All forward-looking statements and the internal projections
and beliefs upon which we base our expectations included in this report or other
periodic reports represent our estimates as of the date made and should not be
relied upon as representing our estimates as of any subsequent date. While we
may elect to update forward-looking statements at some point in the future, we
expressly disclaim any obligation to update any forward-looking statements,
whether as a result of new information, future events, or otherwise.
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