RAVE · Read the filing

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-K

(Mark One)

For the transition period from _____ to _____.

Commission File Number 0-12919

RAVE RESTAURANT GROUP, INC.

(Exact name of registrant as specified in its charter)

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (469) 384-5000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol(s) Name of each exchange on which registered

Common Stock, $0.01 par value RAVE Nasdaq Capital Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the

Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section

13 or Section 15(d) of the Act. Yes ☐ No ☒

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 every Interactive Data File

required to be submitted 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 such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended

transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check

mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered

public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to

Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are

restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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 December 24, 2023, the last business day of the registrant’s most recently completed second fiscal

quarter, the aggregate market value of the voting and non-voting common equity held by non-affiliates was approximately $23.7 million

computed by reference to the price at which the common equity was last sold on the NASDAQ Capital Market.

As of September 19, 2024, there were 14,586,566 shares of the

registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement, to be filed pursuant to Section 14(a) of the

Securities Exchange Act in connection with the registrant’s annual meeting of shareholders scheduled for December 10, 2024, have been incorporated by reference in Part III of this report.

Index

Forward-Looking Statements

This Form 10-K contains certain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, which are intended to be covered by the

safe harbors created thereby. Forward-looking statements include statements which are predictive in nature, which depend upon or refer to future events or conditions, or which include words such as “expect,” “anticipate,” “intend,” “plan,”

“believe,” “estimate” or similar expressions. These statements include the plans and objectives of management for future operations, including plans and objectives relating to future growth of our business activities and availability of

funds. Statements that address business and growth strategies, performance goals, projected financial condition and operating results, our understanding of our competition, industry and market trends, and any other statements or assumptions

that are not historical facts are forward-looking statements.

The forward-looking statements included in this Form 10-K are based on current expectations that involve numerous risks and uncertainties. Assumptions relating to these

forward-looking statements involve judgments with respect to, among other things, future economic, competitive and market conditions, regulatory framework and future business decisions, all of which are difficult or impossible to predict

accurately and many of which are beyond our control. Although we believe that the assumptions underlying these forward-looking statements are reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance

that the forward-looking statements included in this Form 10-K will prove to be accurate. In light of the significant uncertainties inherent in these forward-looking statements, the inclusion of such information should not be regarded as a

representation that our objectives and plans will be achieved.

PART I

ITEM 1. BUSINESS.

General

Rave Restaurant Group, Inc., through its subsidiaries (collectively, the “Company” or “we,” “us” or “our”), franchises pizza buffet (“Buffet Units”), delivery/carry-out

(“Delco Units”), express (“Express Units”) restaurants and ghost kitchens (“Pizza Inn Ghost Kitchen Units”) under the trademark “Pizza Inn” and franchises fast casual pizza restaurants (“Pie Five Units”) and ghost kitchens (“Pie Five Ghost

Kitchen Units”) under the trademarks “Pie Five Pizza Company” or “Pie Five”. The Company also licenses Pizza Inn Express, or PIE, kiosks (“PIE Units”) under the trademark “Pizza Inn”. We facilitate food, equipment, and supply distribution to

our domestic and international system of restaurants through agreements with third party distributors.

As of June 30, 2024, we had 126 franchised Pizza Inn restaurants, 20 franchised Pie Five Units, and three licensed PIE Units. The 102 domestic franchised Pizza Inn restaurants

were comprised of 78 Buffet Units, six Delco Units, 17 Express Units and one Pizza Inn Ghost Kitchen Unit. As of June 30, 2024, there were 24 international franchised Pizza Inn restaurants. Domestic Pizza Inn restaurants and kiosks were

located predominantly in the southern half of the United States, with Texas, North Carolina, Arkansas and Mississippi accounting for approximately 23%, 16%, 14% and 10%, respectively, of the total number of domestic units.

Our History

The Company has offered consumers affordable, high quality pizza since 1958, when the first Pizza Inn restaurant opened in Dallas, Texas. We awarded our first franchise in

1963 and opened our first buffet restaurant in 1969. We began franchising the Pizza Inn brand internationally in the late 1970s. In 1993, our stock began trading on the NASDAQ Stock Market and presently trades on the NASDAQ Capital Market

under the ticker symbol “RAVE.” In June 2011, we opened the first Pie Five restaurant in Ft. Worth, Texas. In November 2012, we signed our first franchise development agreement for Pie Five. In 2019, we launched the PIE kiosk and convenience

store solution to meet the consumer demand for tasty and high-quality pizzas within a grab-and-go delivery model.

Our Concepts

We operate and franchise restaurant concepts under two distinct brands: Pizza Inn and Pie Five.

Pizza Inn

We franchise Buffet Units, Delco Units, Express Units and Pizza Inn Ghost Kitchen Units under the Pizza Inn brand. Additionally, we license PIE Units under the Pizza Inn

brand. Buffet Units and Delco Units feature crusts that are hand-made from dough made fresh in the restaurant each day. Our pizzas are made with a proprietary all-in-one flour mixture, real mozzarella cheese, and a proprietary mix of classic

pizza spices. In international markets, the menu mix of toppings and side items is occasionally adapted to local tastes.

Index

Buffet Units offer dine-in, carryout, and catering service and, in many cases, also offer delivery service. Buffet Units offer a variety of pizza crusts with standard toppings

and special combinations of toppings in addition to pasta, salad, sandwiches, appetizers, desserts and beverages, including beer and wine in some locations, in an informal, family-oriented atmosphere. We occasionally offer other items on a

limited promotional basis. Buffet Units are generally located in free standing buildings or strip center locations in retail developments near offices, shopping centers and residential areas. The current standard Buffet Units are between

2,100 and 4,500 square feet in size and seat 120 to 185 customers. The interior decor is designed to promote a casual, lively, contemporary, family-style atmosphere. Some Buffet Units feature game rooms that offer a range of electronic game

entertainment for the entire family.

Delco Units offer delivery and carryout service only and are typically located in shopping centers or other in-line retail developments. Delco Units typically offer a variety

of crusts and some combination of side items. Delco Units occupy approximately 1,200 square feet, are primarily production facilities and, in most instances, do not offer seating. The decor of the Delco Unit is designed to be bright and

highly visible and feature neon lighted displays and awnings. We have attempted to locate Delco Units strategically to facilitate timely delivery service and to provide easy access for carryout service.

Express Units serve our customers through a variety of non-traditional points of sale. Express Units are typically located in a convenience store, food court, college campus,

airport terminal, travel plaza, athletic facility, or other commercial facility. They have limited or no seating and solely offer quick carryout service of a limited menu of pizza and other foods and beverages. An Express Unit typically

occupies approximately 200 to 400 square feet and is commonly operated by the operator or food service licensee of the commercial host facility. We have developed a high-quality, pre-prepared crust that is topped and cooked on-site, allowing

this concept to offer a lower initial investment and reduced labor and operating costs while maintaining product quality and consistency. Like Delco Units, Express Units are primarily production-oriented facilities and, therefore, do not

require all of the equipment, labor or square footage of the Buffet Unit.

PIE Units serve customers through a non-traditional, licensed, pizza-only model called Pizza Inn Express. Like Delco Units and Express Units, the PIE Units are primarily

production-oriented facilities and, therefore, do not require all of the equipment, labor or square footage of the Buffet Unit. The Company does not intend to open additional PIE Units in the foreseeable future.

Pizza Inn Ghost Kitchen Units primarily serves customers online through third-party delivery companies and are located in a Pie Five restaurant. Dine-in, carryout, or catering services are not

offered. We have attempted to strategically locate Pizza Inn Ghost Kitchen Units in areas where Pie Five restaurants are presently located, but Pizza Inn is not.

Pie Five

Pie Five is a fast-casual pizza concept that creates individualized pizzas which are baked in our specially designed oven. Pizzas are created at the direction of our customers

who choose from a variety of freshly prepared and displayed proprietary and non-proprietary toppings, cheeses, sauces and doughs. Customers can also get freshly prepared side salads, also made to order from our recipes or at the customer’s

direction. A variety of soft beverages are available, as well as beer and wine in some locations.

Traditional Pie Five restaurants typically occupy leased, in-line or end-cap space of between 1,800 and 2,400 square feet in retail strip or multi-unit retail space. With

seating for 65 to 85 customers in most units, and patio seating where available, Pie Five restaurants primarily serve lunch and dinner to families, adults and kids of all ages. Pie Five restaurants typically are in high traffic, high

visibility urban or suburban sites in mid to large-size metropolitan areas. Sales are predominantly on-premise though carry out and delivery are offered as well. Due to the relatively compact footprint of the restaurants, and other operating

advantages, we believe Pie Five is also well suited for non-traditional locations such as airports.

Site Selection

We consider the restaurant site selection process critical to a restaurant’s long-term success and devote resources to the investigation and evaluation of potential sites. The

site selection process includes a review of trade area demographics and an evaluation process. We may also rely on a franchisee’s knowledge of the trade area and market characteristics when selecting a location for a franchised restaurant. A

member of our development team visits each potential domestic restaurant location.

Development and Operations

New Unit Development

We intend to expand the Pizza Inn system domestically and internationally in markets with significant long-term growth potential and where we believe we can use our

competitive strengths to establish brand recognition and gain local market share. We plan to expand our Pizza Inn branded domestic restaurant base primarily through opening new franchised restaurants with new and existing franchisees. We

expect to evaluate the continued development of new Pizza Inn Buffet and Delco Units in international markets in fiscal 2025.

Index

The Company previously granted area developer rights for Pizza Inn restaurants in existing domestic markets. However, the Company is no longer pursuing such agreements. A

Pizza Inn area developer typically paid a negotiated fee to purchase the right to operate or develop restaurants within a defined territory and agreed to a multi-restaurant development schedule. The area developer assisted us in local

franchise service and quality control in exchange for half of the franchise fees and royalties from all restaurants within the territory during the term of the agreement.

We will opportunistically evaluate developing franchised Pie Five Units domestically. The rate at which we will be able to continue to expand the Pie Five concept through

franchise development is determined in part by our success at selecting qualified franchisees, by our ability to identify satisfactory sites in appropriate markets, and by our ability to continue training and monitoring our franchisees. We

intend to continue to focus on franchise development opportunities with experienced, well-capitalized restaurant operators. We believe that Pie Five units will decrease modestly in future periods.

Domestic Franchise Operations

Franchise and development agreements. Since the Pizza Inn concept was first franchised in 1963, industry franchising concepts and

development strategies have evolved, and our present franchise relationships are evidenced by a variety of contractual forms. Common to those forms are provisions that: (i) require the franchisee to follow the Pizza Inn system of restaurant

operation and management, (ii) require the franchisee to pay a franchise fee, contribute a specified percentage of sales to a marketing fund managed by the Company, and pay continuing royalties, and (iii) except for Express Units, prohibit

the development of one restaurant within a specified distance from another.

We launched the franchise program for Pie Five in fiscal 2013. Our Pie Five franchise agreement requires that the franchisees: (i) follow the Pie Five system of restaurant

operation and management, (ii) pay a franchise fee and continuing royalties, (iii) contribute a specified percentage of sales to a marketing fund managed by the Company, and (iv) only open restaurants that comply with site and design

standards determined by the Company.

Training. We offer numerous training programs for the benefit of franchisees and their restaurant crew managers. The training

programs, taught by experienced Company employees, focus on food preparation, service, cost control, sanitation, safety, local store marketing, personnel management, and other aspects of restaurant operation. The training programs include

group classes, supervised work in restaurants, and special field seminars. Initial and certain supplemental training programs are offered free of charge to franchisees, who pay their own travel and lodging expenses. New franchisees also

receive on-site training from Company employees to assist with their first two restaurant openings under their development agreements. Restaurant managers train their staff through on-the-job training using video and printed materials

produced by us.

Standards. We require franchisee adherence to a variety of standards designed to ensure proper operations and to protect and enhance

the Pizza Inn and Pie Five brands. All franchisees are required to operate their restaurants in compliance with these written policies, standards, and specifications, which include matters such as menu items, ingredients, materials, supplies,

services, furnishings, decor, and signs. Our efforts to maintain consistent operations may result, from time to time, in the closing of certain restaurants that have not maintained a consistent standard of quality or operations. We also

maintain adherence to our standards through ongoing support and education of our franchisees by our franchise business consultants, who are deployed locally in markets where our franchisees are located.

Domestic Kiosk License Operations

Kiosk license agreements. Our PIE Units are typically offered for five-year initial license periods with options for additional five

year renewals. PIE Unit licensees are not charged development fees, license fees, royalties, or advertising assessments. PIE Unit license agreements require that the licensee comply with standards of the Pizza Inn brand, including marketing,

kiosk system configuration, and sales and sourcing of authorized products and services. The mandated products and sourcing provisions within the PIE Unit licensing agreement result in supplier rebates for the Company.

Training. New licensees and their PIE Unit employees must attend and successfully complete our training program, which consists of a

single day of training at the licensed location. PIE Unit managers train their staff through on-the-job training, using video and printed materials produced by us.

Standards. We require licensee adherence to a variety of standards designed to ensure proper operations and to protect and enhance

the Pizza Inn brand. All licensees are required to operate their kiosks in compliance with these written policies, standards, and specifications, which include matters such as menu items, ingredients, materials, supplies, services,

furnishings, decor, and signs. Our efforts to maintain consistent operations may result, from time to time, in the closing of certain kiosks that have not maintained a consistent standard of quality or operations. We also maintain adherence

to our standards through ongoing support and education of our licensees by our franchise business consultants, who are deployed locally in markets where our licensees are located.

Index

International Franchise Operations

We also offer master license rights to develop Pizza Inn and Pie Five restaurants in certain foreign countries, with negotiated fees, development schedules, and ongoing

royalties. A master licensee for a foreign country pays a negotiated fee to purchase the right to develop and operate restaurants within a defined territory, typically for a term of 20 years, plus a ten-year renewal option. The master

licensee agrees to a multi-restaurant development schedule, and we train the master licensee to monitor and assist franchisees in their territory with local service and quality control with support from us. In return, the master licensee

typically retains half the franchise fees and half the royalties on all restaurants within the territory during the term of the agreement. Master licensees may open restaurants that they own and operate, or they may open sub-franchised

restaurants owned and operated by third parties through agreements with the master licensee subject to our approval.

Our first franchised Pizza Inn restaurant outside of the United States opened in the late 1970s. As of June 30, 2024, there were 24 Pizza Inn restaurants operating

internationally. Except for three restaurants in Honduras and one restaurant in New Zealand, all of the Pizza Inn restaurants operated or sub-licensed by our international master licensees are in the United Arab Emirates, Saudi Arabia and

adjoining countries. Our ability to continue to develop select international markets is affected by a number of factors, including our ability to locate experienced, well-capitalized developers who can commit to an aggressive multi-restaurant

development schedule and achieve maximum initial market penetration with minimal supervision by us.

Food and Supply Distribution

Our franchisees and licensees purchase food and supplies directly from authorized, reputable, and experienced supply and distribution companies. The Company provides sourcing,

quality assurance, and research and development for both the Pizza Inn and Pie Five systems. The authorized distributors make deliveries to all domestic units from several distribution centers, with delivery territories and responsibilities

for each determined according to geographical region. As a franchisor, the Company is able to leverage the advantages of direct vendor negotiations and volume purchasing of food, equipment, and supplies for the franchisees’ and licensees’

benefit in the form of a concentrated, one-truck delivery system, competitive pricing, and product consistency. Franchisees and licensees are able to source all products and ingredients from authorized distributors. In order to assure product

quality and consistency, our franchisees and licensees are required to purchase from authorized distributors certain food products that are proprietary to the Pizza Inn and Pie Five systems, including cheese, pizza sauce, flour mixture,

certain meats, and spice blend. Franchisees and licensees may purchase other non-proprietary food products and supplies either from authorized distributors or from other suppliers who meet our requirements for quality and reliability.

Non-proprietary food and ingredients, equipment and other supplies are generally available from several qualified sources. With the exception of several proprietary food

products, such as cheese and dough flour, we are not dependent upon any one supplier or a limited group of suppliers. We contract with established food processors for the production of our proprietary products according to our specifications.

We have not experienced any significant shortages of supplies or any delays in receiving our food or beverage inventories, restaurant supplies, or products, but disruption of

supply chains or other factors could cause difficulty in obtaining inventories or supplies in the future. Prices charged by our suppliers are subject to fluctuation, and franchisees and licensees bear increased costs or benefit from savings

through changes in product pricing. We do not engage in commodity hedging but enter into pricing arrangements for up to a year in advance for certain high-volume products.

Marketing and Advertising

By communicating a common brand message at the regional, local market, and restaurant levels, we believe we can create and reinforce a strong, consistent marketing message to

consumers and increase our market share. We offer or facilitate several ways for the brand image and message to be promoted at the local and regional levels.

Pizza Inn and Pie Five franchisees contribute a specified percentage of their sales to the Company to fund the creation and production of various marketing and advertising

programs and materials, which may include print and digital advertisements, direct mail materials, customer satisfaction systems, social media and e-mail marketing, television and radio commercials, in-store promotional materials, marketing

and public relations services, and consumer research. We anticipate continuing to optimize Pizza Inn and Pie Five marketing activities commensurate with the contributions of the marketing funds.

Pizza Inn and Pie Five franchisees are required to conduct independent marketing efforts in addition to their participation in the national marketing programs for each brand.

We provide franchised restaurants with access to an assortment of local store marketing materials, including pre-approved print, radio, and digital media marketing materials. We also provide local store marketing materials and programs

specifically to support new restaurant openings.

Index

Trademarks and Quality Control

We own various trademarks, including the names “Pizza Inn” and “Pie Five,” that are used in connection with the restaurants and have been registered with the United States

Patent and Trademark Office. The duration of our trademarks is unlimited, subject to periodic renewal and continued use. In addition, we have obtained trademark registrations for our marks in several foreign countries and have periodically

re-filed and applied for registration in others. We believe that we hold the necessary rights for protection of the trademarks essential to our business.

Government Regulation

We and our franchisees are subject to various federal, state and local laws affecting the operation of our restaurants. Each restaurant is subject to licensing and regulation

by several governmental authorities, which include health, safety, sanitation, wage and hour, alcoholic beverage, building and fire agencies in the state and municipality in which the restaurant is located. Difficulties in obtaining, or the

failure to obtain, required licenses or approvals could delay or prevent the opening of a new restaurant or require the temporary or permanent closing of an existing restaurant in a particular area.

We are subject to Federal Trade Commission (“FTC”) regulations and to various state laws regulating the offer and sale of franchises. The FTC requires us to furnish to

prospective franchisees a franchise disclosure document containing prescribed information. Substantive state laws that regulate the franchisor-franchisee relationship presently exist in a number of states, and bills have been introduced in

Congress from time to time that would provide for further federal regulation of the franchisor-franchisee relationship in certain respects. Some foreign countries also have disclosure requirements and other laws regulating franchising and the

franchisor-franchisee relationship.

Employees

As of June 30, 2024, we had 21 full-time employees. None of our employees are currently covered by collective bargaining agreements.

Industry and Competition

The restaurant industry is intensely competitive with respect to price, service, location, and food quality, and there are many well-established competitors with substantially

greater brand recognition and financial and other resources than the Company. Competitors include a number of international, national, and regional restaurant and pizza chains, as well as local restaurants and pizza operators. Some of our

competitors may be better established in the markets where our restaurants are or may be located. Within the pizza segment of the restaurant industry, we believe that our primary competitors are national pizza chains and several regional

chains. We also compete against the frozen pizza products available at grocery stores and large superstore retailers. In recent years, several competitors have developed fast-casual pizza concepts that compete with Pie Five in certain

metropolitan areas. A change in the pricing or other market strategies of one or more of our competitors could have an adverse impact on our sales and earnings.

With respect to the sale of franchises and licenses, we compete with many franchisors of restaurants and other business concepts. We believe that the principal competitive

factors affecting the sale of franchises are product quality, price, value, consumer acceptance, franchisor experience and support, and the quality of the relationship maintained between the franchisor and its franchisees. In general, there

is active competition for management personnel and attractive commercial real estate sites suitable for our restaurants.

ITEM 1A. RISK FACTORS.

Not required for a smaller reporting company.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

Not applicable.

ITEM 1C. CYBERSECURITY.

The Company recognizes the critical importance of maintaining the safety and security of our systems and data and has a holistic process for overseeing and

managing cybersecurity and related risks. The Company believes that cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected and are not

reasonably likely to materially affect our business strategy, results of operations or financial condition.

Index

Cybersecurity Risk Management and Strategy

Personnel

The Company has an information security program and procedures in place to protect, identify, detect, respond to and manage reasonably foreseeable cybersecurity risks and

threats. The Company uses various security tools that help prevent, identify, investigate, resolve and recover from identified vulnerabilities and security incidents to protect our information systems and data from cybersecurity threats. This

framework is implemented and overseen by management’s information security department which is led by the Information Technology (“IT”) Support Associate Director and overseen by the Company’s IT Steering Committee. The IT Support Associate

Director has over twenty years of experience in technology management and cybersecurity. The IT Steering Committee is comprised of the Company’s two Associate IT Directors, the CEO, and CFO and convenes quarterly to review IT control policies

and procedures are properly followed and any new employees were properly onboarded in compliance with security procedures.

Third Party Engagement

The Company employs third party risk security vendors to identify, mitigate, and remediate cybersecurity risks; however, we rely on the third parties we use to implement

security programs commensurate with their risks, and we cannot ensure in all circumstances that their efforts will be successful. An annual penetration test is performed in April, which is a security test that simulates a real-world threat to

the Company’s IT network and includes comprehensive “Dark Web” searches of all domain user emails. The test performed by Connection (Data Partner) revealed no current cybersecurity breaches. Scans of the Company’s firewall are conducted

during the first week of each quarter by third party vendor Contego. Any necessary remediation would also be provided by Contego after the scan, but none has been required. The Company uses SolarWinds with Sentinel One software from Contego

to continually monitor technology systems for viruses, malicious software, executable harmful files, and other cybersecurity risks. The Company requires the annual submission of SOC 1 security certificates from our third-party vendors which

have access to our financial and sales data. The Company also maintains cybersecurity insurance providing coverage for certain costs related to security failures and specified cybersecurity related incidents.

The Company recognizes that threat actors frequently target employees to gain unauthorized access to information systems. Therefore, each employee is required to complete

information security and data privacy training to build awareness of cybersecurity risks to the organization. The Company has engaged third party vendor Knowbe4 to send each employee an email that mimics a potentially harmful phishing attempt

each month and to report to management the results of the phishing security test.

Governance

The Board of Directors are acutely aware of the critical nature of managing risks associated with cybersecurity threats. Each quarterly meeting, management presents a

cybersecurity update which includes results of testing by third-party vendors and any suspected cybersecurity incidents to the entire Board of Directors. Management would report any material cybersecurity breach immediately to the full Board

of Directors. The Company has a written policy for the employee reporting of any cybersecurity suspected incidents.

The Audit Committee of the Board has the primary responsibility to oversee effective governance in managing risks associated with cybersecurity threats. Our Audit Committee is

composed of members with diverse expertise, including risk management, technology, and finance, equipping them to oversee cybersecurity risks effectively.

ITEM 2. PROPERTIES.

The Company leases its 19,576 square foot corporate office facility with average annual lease payments of approximately $18.00 per square foot. This lease began on January 2,

2017 and has a ten-year term. The Company amended its lease agreement in June 2020 and elected to defer one-half of the monthly base rent for the period from June 2020 through May 2021.

As of June 30, 2024, the Company had contingent and direct lease obligations for four additional restaurant locations. One of the lease obligations have been subleased and

three of the lease obligations have been assigned to franchisees. These leased properties range in size from 2,193 to 2,428 square feet, have annual rental rates ranging from approximately $35.00 to $42.00 per square foot and expire between

2025 and 2028.

ITEM 3. LEGAL PROCEEDINGS.

The Company is subject to various claims and contingencies related to employment agreements, franchise disputes, lawsuits, taxes, food product purchase contracts and other

matters arising out of the normal course of business. Management believes that any such claims and actions currently pending are either covered by insurance or would not have a material adverse effect on the Company’s annual results of

operations or financial condition if decided in a manner that is unfavorable to the Company.

Index

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

Index

PART II

The Company’s common stock is listed on the Capital Market of the NASDAQ Stock Market, LLC (“NASDAQ”) under the symbol “RAVE”. As of September 19,

2024, there were approximately 1,887 stockholders of record of the Company’s common stock.

The Company had no sales of unregistered securities during fiscal 2024 or 2023.

The Company has not paid dividends historically, and currently there is no intention to pay any dividends on our common stock, but dividends may be considered in the future.

Equity Compensation Plan Information

The following table furnishes information with respect to the Company’s stock option equity compensation plans as of June 30, 2024:

Stock option compensation plans not approved by security holders — — —

RSU compensation plans approved by security holders 403,595 1.59 —

ITEM 6. RESERVED.

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Results of Operations

The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes appearing elsewhere in this Annual

Report on Form 10-K and may contain certain forward-looking statements. See “Forward-Looking Statements.”

Overview

The Company franchises pizza buffet (“Buffet Units”), delivery/carry-out (“Delco Units”), express (“Express Units”) restaurants and ghost kitchens (“Pizza Inn Ghost Kitchen

Units”) under the trademark “Pizza Inn” and franchises fast casual pizza restaurants (“Pie Five Units”) and ghost kitchens (“Pie Five Ghost Kitchen Units”) under the trademarks “Pie Five Pizza Company” or “Pie Five”. The Company also licenses

Pizza Inn Express, or PIE, kiosks (“PIE Units”) under the trademark “Pizza Inn”. We facilitate food, equipment and supply distribution to our domestic and international system of restaurants through agreements with third party distributors.

At June 30, 2024, franchised and licensed restaurants consisted of the following:

Fiscal Year Ended June 30, 2024

(in thousands, except unit data)

Pizza Inn Pie Five All Concepts

Ending Units Retail Sales Ending Units Retail Sales Ending Units Retail Sales

The domestic units were located in 15 states predominately situated in the southern half of the United States. The international restaurants were located in eight foreign

countries predominantly in the Middle East.

Fiscal years 2024 and 2023 included 53 weeks and 52 weeks, respectively. In order to reflect comparable 53 week periods, the first week of fiscal 2024 has been included in

both periods in the presentation of retail sales, average units open and comparable store retail sales.

The following table summarizes domestic comparable store retail sales for the Company.

53 Weeks Ended

(in thousands)

Pizza Inn Domestic Comparable Store Retail Sales $ 100,875 $ 98,610

Pie Five Domestic Comparable Store Retail Sales 16,801 17,450

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Pizza Inn Brand Summary

The following tables summarize certain key indicators for the Pizza Inn franchised and licensed domestic units that management believes are useful in evaluating performance:

53 Weeks Ended

Pizza Inn Retail Sales - Total Domestic Units (in thousands, except unit data)

Delco/Express Units - Franchised 3,846 5,418

PIE Units - Licensed 70 208

Pizza Inn Ghost Kitchen Units - Franchised 4 —

Pizza Inn Comparable Store Retail Sales - Total Domestic $ 100,875 $ 98,610

Pizza Inn Average Units Open in Period

Buffet Units - Franchised 76 73

Delco/Express Units - Franchised 29 44

PIE Units - Licensed 4 8

Pizza Inn Ghost Kitchen Units - Franchised — —

Pizza Inn total domestic retail sales increased by $3.9 million, or 3.8%, for fiscal 2024 when compared to the prior 53 weeks. Compared to the prior year, average Buffet Units

open in the period increased from 73 to 76. Comparable store retail sales increased by $2.3 million to $100.9 million for fiscal 2024 as compared to the prior 53 weeks. For fiscal 2024, the increase in domestic retail sales were primarily the

result of the increase in Buffet Units, supplemented by an increase in comparable domestic store retail sales.

The following chart summarizes Pizza Inn restaurant activity for the fiscal year ended June 30, 2024:

Fiscal Year Ended June 30, 2024

Beginning Units Opened Concept Change Transfer Closed Ending Units

Delco/Express Units - Franchised 41 1 — — 19 23

PIE Units - Licensed 5 — — — 2 3

Pizza Inn Ghost Kitchen Units - Franchised — 1 — — — 1

International Units (all types) 34 6 — — 16 24

There was a net decrease of 18 units in the total domestic Pizza Inn unit count during fiscal 2024. There were four transfers in the total domestic Pizza Inn unit count during

fiscal 2024. For fiscal 2024, the number of international Pizza Inn units decreased by 10 units. Twelve units were terminated in Saudi Arabia for failure to pay royalties and subsequently a 50-unit development agreement was signed with a

new franchise partner who opened five Pizza Inn units in Saudi Arabia in fiscal year 2024. There were zero transfers in the total international Pizza Inn unit count during fiscal 2024. The Company believes the number of both

domestic and international Pizza Inn units will increase modestly in future periods.

Pie Five Brand Summary

The following tables summarize certain key indicators for the Pie Five franchised restaurants that management believes are useful in evaluating performance:

53 Weeks Ended

Pie Five Retail Sales - Total Units (in thousands, except unit data)

Pie Five Ghost Kitchen Units - Franchised 11 —

Pie Five Comparable Store Retail Sales - Total $ 16,801 $ 17,450

Pie Five Average Units Open in Period

Pie Five Units - Franchised 24 30

Pie Five Ghost Kitchen Units - Franchised 1 —

Total Domestic Units 25 30

Index

Pie Five total domestic retail sales decreased by $3.5 million, or 17.2%, for fiscal 2024 when compared to the prior year. Compared to the prior year, average units open in

the period decreased from 30 to 25. Comparable store retail sales decreased by $0.6 million to $16.8 million for fiscal 2024 as compared to the prior year. For fiscal 2024, the decrease in domestic retail sales were primarily the result of

the decrease in store count, supplemented by a decrease in comparable store retail sales.

The following chart summarizes Pie Five restaurant activity for the fiscal year ended June 30, 2024:

Fiscal Year Ended June 30, 2024

Beginning Units Opened Concept Change Transfer Closed Ending Units

Pie Five Units - Franchised 27 — (2 ) 6 7 18

Pie Five Ghost Kitchen Units - Franchised — 2 — 1 — 2

The was a net decrease of seven units in the total domestic Pie Five unit count during fiscal 2024. There was a net increase of one Pie Five Ghost Kitchen Units during fiscal

2024. Two Pie Five units converted to become Pizza Inn Buffet units. Of the seven Pie Five closures, two were due to lease expirations, one was closed by mutual decision of the franchise owner and Rave management, and four were unilaterally

closed by franchise owner decision. We believe that Pie Five units will decrease modestly in future periods.

Non-GAAP Financial Measures and Other Terms

The Company’s financial statements are prepared in accordance with United States generally accepted accounting principles (“GAAP”). However, the Company also presents and

discusses certain non-GAAP financial measures that it believes are useful to investors as measures of operating performance. Management may also use such non-GAAP financial measures in evaluating the effectiveness of business strategies and

for planning and budgeting purposes. However, these non-GAAP financial measures should not be viewed as an alternative or substitute for the results reflected in the Company’s GAAP financial statements.

We consider EBITDA and Adjusted EBITDA to be important supplemental measures of operating performance that are commonly used by securities analysts, investors and other

parties interested in our industry. We believe that EBITDA is helpful to investors in evaluating our results of operations without the impact of expenses affected by financing methods, accounting methods and the tax environment. We believe

that Adjusted EBITDA provides additional useful information to investors by excluding non-operational or non-recurring expenses to provide a measure of operating performance that is more comparable from period to period. Management also uses

these non-GAAP financial measures for evaluating operating performance, assessing the effectiveness of business strategies, projecting future capital needs, budgeting and other planning purposes.

The following key performance indicators presented herein, some of which represent non-GAAP financial measures, have these meanings and are calculated as follows:

Index

Financial Results

The Company defines its operating segments as Pizza Inn Franchising and Pie Five Franchising. The following is additional business segment information for the Fiscal Years

ended June 30, 2024 and June 25, 2023 (in thousands):

Pizza Inn Franchising Pie Five Franchising Corporate Total

Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended

REVENUES:

COSTS AND EXPENSES:

Impairment of long-lived assets and other lease charges — — — — — 5 — 5

Provision for credit losses — — — — 69 73 69 73

Interest (income) expense — — — — (153 ) 1 (153 ) 1

Depreciation and amortization expense — — — — 219 214 219 214

Revenues:

Revenues are derived from franchise royalties, supplier and distributer incentives, franchise license fees, area development exclusivity fees and foreign master license fees,

advertising funds, supplier convention funds, sublease rental income, and other income. The volume of supplier incentive revenues is dependent on the level of chain-wide retail sales, which are impacted by changes in comparable store sales

and restaurant count, as well as the products sold to franchisees through third-party food distributors.

Total revenues for fiscal 2024 and fiscal 2023 were $12.2 million and $11.9 million, respectively.

Pizza Inn Franchise and License

Pizza Inn franchise revenues increased by $0.5 million to $10.3 million for fiscal 2024 as compared to $9.8 million for fiscal 2023. The 4.9% increase was driven by increases

in supplier and distributor incentives.

Pie Five Franchise and License

Pie Five franchise revenues decreased by $0.2 million to $1.7 million for fiscal 2024 as compared to $1.9 million for fiscal 2023. The 8.7% decrease was driven by decreases in

domestic royalties and advertising fund revenues, offset by increases in default and closed store revenues.

Costs and Expenses:

General and Administrative Expenses

Total general and administrative expenses decreased by $0.2 million to $5.3 million for fiscal 2024 as compared to $5.5 million for fiscal 2023. The 4.1%

decrease was driven by decreased salary and stock-based compensation expense.

Index

Franchise Expenses

Franchise expenses include general and administrative expenses directly related to the sale and continuing service of domestic and international franchises. Total franchise

expenses decreased by $0.3 million to $3.7 million in fiscal 2024 as compared to $4.0 million for fiscal 2023. Pizza Inn franchise expenses decreased $0.1 million to $3.0 million for fiscal 2024 compared to $3.1 million for fiscal 2023. The

2.4% decrease was driven by decreases in advertising fees. Pie Five franchise expenses decreased $0.2 million to $0.7 million for fiscal 2024 compared to $0.9 million for fiscal 2023. The 25.2% decrease was driven by decreases in advertising

fees and salaries.

Impairment of Long-lived Assets and Other Lease Charges

Impairment of long-lived assets and other lease charges was zero for fiscal 2024 compared to $5 thousand for fiscal 2023. The decrease was primarily due to impaired beverage

equipment in the prior period.

Provision for Credit Losses

The Company monitors franchisee receivable balances and adjusts credit terms when necessary to minimize the Company’s exposure to high risk accounts receivable. Provision for

credit losses decreased by $4 thousand to $69 thousand for fiscal 2024 as compared to $73 thousand for fiscal 2023. The 4.7% decrease was driven by the write-off of bad debt, partially offset by the increase in accounts over 90 days.

Interest Expense and Income

Interest expense decreased $1 thousand for fiscal 2024 to zero compared to $1 thousand in the prior year. Interest income increased $153 thousand for fiscal 2024 to $153

thousand compared to zero in the prior year. The increase was primarily driven by interest received on U.S. Treasury bills.

Amortization and Depreciation Expense

Amortization and depreciation expense increased slightly for fiscal 2024, compared to fiscal 2023. The increase was primarily the result of higher amortization of intangible

assets from an increase in expenditures for developing a new prototype.

Provision for Income Taxes

Total income tax expense consists of the following (in thousands):

Fiscal Year Ended

Federal tax expense $ 530 $ 394

Total income tax expense $ 619 $ 537

For the year ended June 30, 2024, the Company recorded an income tax expense of $619 thousand. The federal and state tax expense was $530 thousand and $89

thousand, respectively. The change in both federal and state tax expense was primarily driven by the increase in net income, utilization of jurisdictional operating losses and a current year tax deduction for stock-based compensation. The

Company utilized net operating losses to offset federal taxes. At the end of tax year ended June 30, 2024, the Company had federal net operating loss carryforwards totaling $18.9 million that are available to reduce future taxable income

and will begin to expire in 2035. Under the Tax Cuts and Jobs Act, approximately $1.3 million of the loss carryforwards are limited to 80% and do not expire. Tax years that remain subject to examination by the IRS are the years ended

June 28, 2021 through June 25, 2023. Tax years that remain subject to examination by state authorities are the years ended June 30, 2020 through June 25, 2023.

The Company continually reviews the realizability of its deferred tax assets, including an analysis of factors such as future taxable income, reversal of existing taxable

temporary differences, and tax planning strategies. In assessing the need for a valuation allowance, the Company considers both positive and negative evidence related to the likelihood of realization of deferred tax assets. Future sources of

taxable income are also considered in determining the amount of any required valuation allowance.

There are no material uncertain tax positions. Management’s position is that all relevant requirements are met and necessary returns have been filed, and therefore the tax positions taken on

the tax returns would be sustained upon examination.

Index

Basic net income per common share increased $0.06 to net income of $0.17 per share for fiscal 2024 compared to a net income of $0.11 per share in the prior fiscal year. Diluted net income per

common share increased $0.07 to net income of $0.17 per share for fiscal 2024 compared to a net income of $0.10 per share in the prior fiscal year. Net income increased $0.9 million to net income of $2.5 million for fiscal 2024 compared to a

net income of $1.6 million for the prior fiscal year on revenues of $12.2 million for fiscal 2024 as compared to $11.9 million in fiscal 2023.

Adjusted EBITDA for the fiscal year ended June 30, 2024, increased to $3.2 million compared to $2.7 million for the prior fiscal year. The following table sets forth a

reconciliation of net income to EBITDA and Adjusted EBITDA for the periods shown (in thousands):

Fiscal Year Ended

Interest (income) expense (153 ) 1

Depreciation and amortization 219 214

Stock-based compensation expense 149 345

Severance 5 —

Impairment of long-lived assets and other lease charges — 5

Franchisee default and closed store revenue (156 ) (13 )

Results of operations for the fiscal years 2024 and 2023 included 53 weeks and 52 weeks, respectively.

Liquidity and Capital Resources

Sources and Uses of Funds

During fiscal 2024, the Company’s primary source of liquidity was proceeds from operating activities.

Cash flows from operating activities generally reflect net income adjusted for certain non-cash items including depreciation and amortization, changes in deferred taxes,

stock-based compensation, and changes in working capital. Cash provided by operating activities was $2.7 million in fiscal 2024 compared to cash provided by operating activities of $2.6 million in fiscal 2023. The primary driver of increased

operating cash flow during fiscal 2024 was increased net income due to lower employee related expenses.

Cash flows from investing activities reflect purchases and maturities of short term investments as well as net proceeds from the sale of assets and capital expenditures for

the purchase of Company assets. Cash used in investing activities during fiscal 2024 was $4.9 million compared to cash used in investing activities of $15 thousand in fiscal 2023.

Cash flows used in financing activities generally reflect changes in the Company’s stock and debt activity during the period. Net cash used in financing

activities was $0.3 million for fiscal 2024 compared to net cash used in financing activities of $5.0 million for fiscal 2023. Net cash used by financing activities in fiscal 2024 was primarily attributable to taxes paid on vested

Restricted Stock Units (“RSUs”). Net cash used by financing activities in fiscal 2023 was primarily attributable to repurchases of the Company’s stock.

Liquidity

We expect to fund continuing operations and planned capital expenditures for the next fiscal year primarily from cash on hand and operating cash flow. Based on budgeted and

year-to-date cash flow information, we believe that we have sufficient liquidity to satisfy our cash requirements for the 2025 fiscal year and beyond.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect our reported amounts of assets,

liabilities, revenues, expenses and related disclosure of contingent liabilities. The Company bases its estimates on historical experience and various other assumptions that it believes are reasonable under the circumstances. Estimates and

assumptions are reviewed periodically. Actual results could differ materially from estimates.

The Company believes the following critical accounting policies require estimates about the effect of matters that are inherently uncertain, are susceptible to change, and

therefore require subjective judgments. Changes in the estimates and judgments could significantly impact the Company’s results of operations and financial condition in future periods.

Index

Accounts receivable consist primarily of receivables generated from franchise royalties and supplier concessions. The Company records an allowance for credit losses to allow

for any amounts which may be unrecoverable based upon an analysis of the Company’s prior collection experience, customer creditworthiness and current economic trends. Actual realization of accounts receivable could differ materially from the

Company’s estimates.

The Company reviews long-lived assets for impairment when events or circumstances indicate that the carrying value of such assets may not be fully recoverable. Impairment is

evaluated based on the sum of undiscounted estimated future cash flows expected to result from use and eventual disposition of the assets compared to their carrying value. If impairment is indicated, the carrying value of an impaired asset is

reduced to its fair value, based on discounted estimated future cash flows. The Company recognized pre-tax, non-cash impairment charges of zero and $5 thousand during fiscal 2024 and 2023, respectively. The Company had $0.1 million and $0.2

million in sublease income during fiscal 2024 and 2023, respectively.

Franchise revenue consists of income from license fees, royalties, area development and foreign master license agreements, advertising fund revenues, supplier incentive and

convention contribution revenues. Franchise fees, area development and foreign master license agreement fees are amortized into revenue on a straight-line basis over the term of the related contract agreement. In the event of a closed

franchise or defaulted development agreement, the remaining balance of unamortized license fees will be recognized in entirety as of the date of the closure or default. Royalties and advertising fund revenues, which are based on a percentage

of franchise retail sales, are recognized as income as retail sales occur. Supplier incentive revenues are recognized as earned, typically as the underlying commodities are shipped.

The Company continually reviews the realizability of its deferred tax assets, including an analysis of factors such as future taxable income, reversal of existing taxable

temporary differences, and tax planning strategies. The Company assess whether a valuation allowance should be established against its deferred tax assets based on consideration of all available evidence, using a “more likely than not”

standard. In assessing the need for the valuation allowance, the Company considers both positive and negative evidence related to the likelihood of realization of deferred tax assets. In making such assessment, more weight is given to

evidence that can be objectively verified, including recent operating performance. Future sources of taxable income are also considered in determining the amount of the recorded valuation allowance.

The Company accounts for uncertain tax positions in accordance with ASC 740-10, which prescribes a comprehensive model for how a company should recognize, measure, present,

and disclose in its financial statements uncertain tax positions that it has taken or expects to take on a tax return. ASC 740-10 requires that a company recognize in its financial statements the impact of tax positions that meet a “more

likely than not” threshold, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent

likelihood of being realized upon ultimate settlement. As of June 30, 2024 and June 25, 2023, the Company had no uncertain tax positions.

The Company assesses its exposures to loss contingencies from legal matters based upon factors such as the current status of the cases and consultations with external counsel

and provides for the exposure by accruing an amount if it is judged to be probable and can be reasonably estimated. If the actual loss from a contingency differs from management’s estimate, operating results could be adversely impacted.

The Company determines if an arrangement is a lease at inception of the arrangement. To the extent that it can be determined that an arrangement represents a lease, it is classified as either

an operating lease or a finance lease. The Company does not currently have any finance leases. The Company capitalizes operating leases on the Consolidated Balance Sheets through a right of use asset and a corresponding lease liability. Right

of use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Short-term leases that have an initial term of

one year or less are not capitalized. The Company does not presently have any short-term leases.

Operating lease right of use assets and liabilities are recognized at the commencement date of an arrangement based on the present value of lease payments over the lease term. In addition to

the present value of lease payments, the operating lease right of use asset also includes any lease payments made to the lessor prior to lease commencement less any lease incentives and initial direct costs incurred. Lease expense for

operating lease payments is recognized on a straight-line basis over the lease term.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not required for a smaller reporting company.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

See information set forth on Index to Consolidated Financial Statements and Supplementary Data appearing on page F-1 of this report on Form 10-K.

Index

None.

ITEM 9A. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s principal executive officer and principal financial officer, evaluated the effectiveness of the Company’s

disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures,

as of the end of the period covered by this report, were effective in assuring that the information required to be disclosed by the Company in reports filed under the Securities Exchange Act of 1934 is (i) accumulated and communicated to

management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding disclosure, and (ii) recorded, processed, summarized and reported within the time periods specified in

the SEC’s rules and forms.

Management’s Annual Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate “internal control over financial reporting” (as defined in Rule 13a-15(f) under the

Securities Exchange Act of 1934). Under the supervision and with the participation of management, including our principal executive officer and principal financial officer, the Company has conducted an evaluation of the effectiveness of its

internal control over financial reporting. The Company’s management based its evaluation on criteria set forth in the framework in Internal Control-Integrated Framework issued by the Committee of

Sponsoring Organizations of the Treadway Commission. Based upon that evaluation, management has concluded that our internal control over financial reporting was effective as of June 30, 2024.

ITEM 9B. OTHER INFORMATION.

During the quarter ended June 30, 2024, no director or officer adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as each term is defined in Item 408(a) of Regulation

S-K.

PART III