SEC Info - Driven Brands Holdings Inc. - ‘10-K’ for 12/31/22

DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Year Ended

(in thousands, except per share amounts)

Net revenue:

Franchise royalties and fees

i 171,734

i 144,413

i 117,126

Company-operated store sales

i 1,324,408

i 843,646

i 489,267

Independently-operated store sales

i 195,157

i 204,246

i 67,193

Advertising contributions

i 87,750

i 75,599

i 59,672

Supply and other revenue

i 254,145

i 199,376

i 170,942

Total net revenue

i 2,033,194

i 1,467,280

i 904,200

Operating expenses:

Company-operated store expenses

i 812,262

i 515,837

i 305,908

Independently-operated store expenses

i 107,940

i 114,115

i 41,051

Advertising expenses

i 87,986

i 74,765

i 61,989

Supply and other expenses

i 145,481

i 112,318

i 93,380

Selling, general and administrative expenses

i 383,478

i 292,263

i 218,277

Acquisition costs

i 15,304

i 62,386

i 15,682

Store opening costs

i 2,878

i 2,497

i 2,928

Depreciation and amortization

i 147,156

i 112,777

i 62,114

Tradename impairment

i 125,450

i —

Asset impairment charges and lease terminations

i 5,655

i 3,257

i 8,142

Total operating expenses

i 1,833,590

i 1,290,215

i 809,471

Operating income

i 199,604

i 177,065

i 94,729

Other (income) expense, net

Interest expense, net

i 114,096

i 75,914

i 95,646

Loss on debt extinguishment

i —

i 45,576

i 5,490

Loss (gain) on foreign currency transactions, net

i 17,168

i 20,683

( i 13,563)

Total other expenses, net

i 131,264

i 142,173

i 87,573

Income before taxes

i 68,340

i 34,892

i 7,156

Income tax expense

i 25,167

i 25,356

i 11,372

Net income (loss)

i 43,173

i 9,536

( i 4,216)

Net loss attributable to non-controlling interests

( i 15)

( i 96)

( i 17)

Net income (loss) attributable to Driven Brands Holdings Inc.

i 43,188

i 9,632

( i 4,199)

Earnings per share(1)

Basic

i 0.26

i 0.06

( i 0.04)

Diluted

i 0.25

i 0.06

( i 0.04)

Weighted average shares outstanding(1)

Basic

i 162,762

i 160,684

i 104,318

Diluted

i 166,743

i 164,644

i 104,318

(1) Share and per share amounts have been adjusted to reflect an implied i 88,990-for-one stock split that became effective on January 14, 2021. See Note 16 for additional information.

The accompanying notes are an integral part of these consolidated financial statements.

DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Year Ended

(in thousands)

Net income (loss)

i 43,173

i 9,536

( i 4,216)

Other comprehensive income (loss):

Foreign currency translation adjustment

( i 64,418)

( i 20,994)

i 13,227

Unrealized gain (loss) from cash flow hedges, net of tax expense (benefit) of $ i 1,849, ($ i 157), and ($ i 86), respectively

i 5,941

( i 671)

( i 87)

Actuarial gain (loss) of defined benefit pension plan, net of tax expense of $ i 591, $ i 0, and $ i 0, respectively

i 1,049

i 132

( i 219)

Other comprehensive income (loss), net

( i 57,428)

( i 21,533)

i 12,921

Total comprehensive income (loss)

( i 14,255)

( i 11,997)

i 8,705

Comprehensive income (loss) attributable to non-controlling interests

( i 36)

( i 73)

i 2

Comprehensive income (loss) attributable to Driven Brands Holdings Inc.

( i 14,219)

( i 11,924)

i 8,703

The accompanying notes are an integral part of these consolidated financial statements.

DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


(in thousands)	December 31, 2022		December 25, 2021
Assets
Current assets:
Cash and cash equivalents	$	i 227,110	$	i 523,414
Restricted cash	i 792		i 792
Accounts and notes receivable, net	i 179,888		i 117,903
Inventory	i 72,040		i 46,990
Prepaid and other assets	i 40,084		i 24,326
Income tax receivable	i 15,075		i 6,867
Assets held for sale	i —		i 3,275
Advertising fund assets, restricted	i 36,421		i 45,360
Total current assets	i 571,410		i 768,927
Property and equipment, net	i 1,545,738		i 1,350,984
Operating lease right-of-use assets	i 1,299,189		i 995,625
Deferred commissions	i 7,121		i 10,567
Intangibles, net	i 765,903		i 816,183
Goodwill	i 2,277,065		i 1,910,392
Other assets	i 30,561		i 3,182
Deferred tax asset	i 2,911		i 1,509
Total assets	$	i 6,499,898	$	i 5,857,369
Liabilities and shareholders'/members’ equity
Current liabilities:
Accounts payable	$	i 60,606	$	i 83,033
Income taxes payable	i 4,454		i 11,054
Accrued expenses and other liabilities	i 317,318		i 306,956
Current portion of long-term debt	i 32,986		i 26,044
Tax receivable agreement liability	i 53,328		i 24,255
Advertising fund liabilities	i 36,726		i 26,441
Total current liabilities	i 505,418		i 477,783
Long-term debt, net	i 2,705,281		i 2,356,320
Operating lease liabilities	i 1,177,501		i 931,604
Deferred tax liabilities	i 276,749		i 257,067
Deferred revenue	i 30,046		i 28,240
Tax receivable agreement liability	i 117,915		i 131,715
Long-term accrued expenses and other liabilities	i 33,419		i 29,398
Total liabilities	i 4,846,329		i 4,212,127
Preferred Stock $ i i 0.01 / par value; i i 100,000,000 / shares authorized; i i i i none / / / issued or outstanding	i —		i —
Common stock: $ i i 0.01 / par value; i i 900,000,000 / shares authorized; i 167,404,047 and i 167,380,450 shares outstanding, respectively	i 1,674		i 1,674
Additional paid-in capital	i 1,628,904		i 1,605,890
Retained earnings	i 84,795		i 41,607
Accumulated other comprehensive loss	( i 62,435)		( i 5,028)
Total shareholders' equity attributable to Driven Brands Holdings Inc.	i 1,652,938		i 1,644,143
Non-controlling interests	i 631		i 1,099
Total shareholders' equity	i 1,653,569		i 1,645,242
Total liabilities and shareholders' equity	$	i 6,499,898	$	i 5,857,369

The accompanying notes are an integral part of these consolidated financial statements.

DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ / MEMBERS’ EQUITY

in thousands, except share amounts

Amount

Preferred stock, $ i i i 0.01 / / par value per share

i —

Common stock, $ i i i 0.01 / / par value per share

Balance at beginning of period

i 167,380,450

i 1,674

i 56,500,000

i 565

i 56,500,000

i 565

Stock issued relating to Employee Stock Purchase Plan

i 143,707

i 1

—

Shares issued for exercise/vesting of share-based compensation awards

i 35,788

—

i 26,084

—

Forfeiture of restricted stock awards

( i 155,898)

( i 1)

( i 55,887)

—

Issuance of common stock upon initial public offering, net of underwriting discounts and commissions

—

i 108,204,698

i 1,082

—

Common stock issued upon underwriter’s exercise of over-allotment

—

i 4,772,727

i 48

—

Repurchase of common stock

—

( i 2,067,172)

( i 21)

—

Balance at end of period

i 167,404,047

i 1,674

i 167,380,450

i 1,674

i 56,500,000

i 565

Additional paid-in capital

Balance at beginning of period

i 1,605,890

i 1,055,172

i 242,240

Equity-based compensation expense

i 20,583

i 4,301

i 1,323

Exercise of stock options

i 354

i 505

—

Stock issued relating to Employee Stock Purchase Plan

i 2,091

—

Tax withholding on stock option exercises

( i 14)

—

Issuance of common stock upon initial public offering, net of underwriting discounts and commissions

—

i 645,661

—

Common stock issued upon underwriter’s exercise of over-allotment

—

i 99,177

—

Repurchase of common stock

—

( i 42,956)

—

Establishment of tax receivable agreement liability

—

( i 155,970)

—

Common stock issued

—

i 811,609

Balance at end of period

i 1,628,904

i 1,605,890

i 1,055,172

Retained earnings

Balance at beginning of period

i 41,607

i 31,975

i 41,983

Net income (loss)

i 43,188

i 9,632

( i 4,199)

Cumulative effect of ASU 2016-02

—

( i 4,012)

Cumulative effect of ASU 2016-13

—

( i 1,797)

Balance at end of period

i 84,795

i 41,607

i 31,975

Accumulated other comprehensive income (loss)

Balance at beginning of period

( i 5,028)

i 16,528

i 3,626

Other comprehensive income (loss)

( i 57,407)

( i 21,556)

i 12,902

Balance at end of period

( i 62,435)

( i 5,028)

i 16,528

DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ / MEMBERS’ EQUITY

in thousands, except share amounts

Amount

Non-controlling interests

Balance at beginning of period

i 1,099

i 2,120

i 1,464

Net loss

( i 15)

( i 96)

( i 17)

Other comprehensive income

( i 21)

i 23

i 19

Acquisition of non-controlling interest

—

i 400

Capital contribution to non-controlling interest

—

i 254

Divestiture of Denmark car wash operations

( i 432)

—

At-Pac divestiture

—

( i 948)

—

Balance at end of period

i 631

i 1,099

i 2,120

Total shareholders’ equity

i 1,653,569

i 1,645,242

i 1,106,360

The accompanying notes are an integral part of these consolidated financial statements.

DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended

(in thousands)

Net income (loss)

i 43,173

i 9,536

( i 4,216)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization

i 147,156

i 112,777

i 62,114

Equity-based compensation expense

i 20,583

i 4,301

i 1,323

Trade name impairment

i 125,450

i —

Loss (gain) on foreign denominated transactions

i 17,147

i 25,324

( i 23,245)

Loss (gain) on foreign currency derivative

i 21

( i 4,642)

i 10,033

Gain on sale of businesses, fixed assets, and sale-leaseback transactions

( i 34,854)

( i 11,353)

( i 558)

Bad debt expense

i 5,777

i 1,854

i 7,059

Asset impairment costs

i 5,655

i 3,257

i 8,142

Amortization of deferred financing costs and bond discounts

i 8,450

i 7,002

i 10,890

Amortization of interest rate hedge

( i 542)

i —

Provision for deferred income taxes

i 20,567

i 9,866

i 3,936

Loss on extinguishment of debt

i —

i 45,576

i 5,490

Other, net

( i 21)

( i 2,183)

i 643

Changes in assets and liabilities, net of acquisitions:

Accounts and notes receivable, net

( i 58,837)

( i 36,395)

( i 15,274)

Inventory

( i 22,712)

( i 5,723)

( i 2,904)

Prepaid and other current assets

( i 30,418)

( i 30,260)

( i 5,658)

Advertising fund assets and liabilities, restricted

i 12,698

i 9,386

( i 369)

Other assets

( i 23,378)

i 483

i 3,492

Deferred commissions

i 3,407

( i 1,899)

( i 1,927)

Deferred revenue

i 1,925

i 6,678

i 6,278

Accounts payable

( i 34,634)

i 6,905

( i 4,454)

Accrued expenses and other liabilities

i 2,898

i 128,871

i 19,457

Income tax payable, net

( i 12,335)

i 4,466

i 3,734

Cash provided by operating activities

i 197,176

i 283,827

i 83,986

Cash flows from investing activities:

Capital expenditures

( i 436,205)

( i 160,760)

( i 52,459)

Cash used in business acquisitions, net of cash acquired

( i 763,061)

( i 800,829)

( i 105,031)

Proceeds from sale-leaseback transactions

i 333,798

i 144,134

i 100,174

Proceeds from sale or disposal of businesses and fixed assets

i 25,188

i 2,519

i —

Cash used in investing activities

( i 840,280)

( i 814,936)

( i 57,316)

Cash flows from financing activities:

Payment of contingent consideration related to acquisitions

i —

( i 2,783)

Payment of debt issuance cost

( i 7,172)

( i 19,756)

( i 22,932)

Proceeds from the termination of interest rate swap

i 10,870

i —

Proceeds from the issuance of long-term debt

i 365,000

i 950,000

i 625,000

Repayment of long-term debt

( i 23,912)

( i 721,500)

( i 448,213)

Repayments of revolving lines of credit and short-term debt

( i 435,000)

( i 544,800)

( i 432,800)

Proceeds from revolving lines of credit and short-term debt

i 435,000

i 526,800

i 391,301

Repayment of principal portion of finance lease liability

( i 3,369)

( i 2,199)

( i 595)

Proceeds from failed sale-leaseback transactions

i —

i 538

i 5,633

DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended

(in thousands)

Proceeds from initial public offering, net of underwriting discounts

i —

i 661,500

i —

Net proceeds from follow-on public offering

i —

i 99,225

i —

Repurchases of common stock

i —

( i 43,040)

i —

Proceeds from stock option exercises, net of taxes

i 340

i 505

i —

Payments for termination of interest rate swaps

i —

( i 21,826)

i —

Proceeds from issuance of equity shares

i —

i 2,609

Other, net

i 1,611

i 89

i 1,423

Cash provided by financing activities

i 343,368

i 885,536

i 118,643

Effect of exchange rate changes on cash

( i 2,283)

i 558

i 4,468

Net change in cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted

( i 302,019)

i 354,985

i 149,781

Cash and cash equivalents, beginning of period

i 523,414

i 172,611

i 34,935

Cash included in advertising fund assets, restricted, beginning of period

i 38,586

i 19,369

i 23,091

Restricted cash, beginning of period

i 792

i 15,827

i —

Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, beginning of period

i 562,792

i 207,807

i 58,026

Cash and cash equivalents, end of period

i 227,110

i 523,414

i 172,611

Cash included in advertising fund assets, restricted, end of period

i 32,871

i 38,586

i 19,369

Restricted cash, end of period

i 792

i 15,827

Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, end of period

i 260,773

i 562,792

i 207,807

Supplemental cash flow disclosures - non-cash items:

Capital expenditures included in accrued expenses and other liabilities

i 18,857

i 4,753

i 5,726

Deferred consideration included in accrued expenses and other liabilities

i 35,007

i 16,000

i 4,660

Contingent consideration

i —

i 56,000

i 4,309

Supplemental cash flow disclosures - cash paid for:

Interest

i 113,226

i 75,807

i 88,772

Income taxes

i 17,220

i 12,764

i 6,238

The accompanying notes are an integral part of these consolidated financial statements.

DRIVEN BRANDS HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

e Note 1— i Description of Business

Description of Business

Driven Brands Holdings Inc. together with its subsidiaries (collectively, the “Company”) is a Delaware corporation and is the parent holding company of Driven Brands, Inc. and Shine Holdco (UK) Limited (collectively, “Driven Brands”). Driven Brands is the largest automotive services company in North America with a growing and highly-franchised base of more than i 4,800 franchised, independently-operated, and company-operated locations across i 49 U.S. states and i 13 other countries. The Company has a portfolio of highly recognized brands, including Take 5 Oil Change®, Take 5 Car Wash®, Meineke Car Care Centers®, MAACO®, CARSTAR®, Auto Glass Now®, and 1-800-Radiator & A/C® that compete in the automotive services industry. Approximately i 75% of the Company’s locations are franchised or independently-operated.

Initial Public Offering and Secondary Offering

On January 14, 2021, the Company completed an initial public offering (the “IPO”) of approximately i 32 million shares of common stock at $ i 22 per share. On February 10, 2021, the Company’s underwriters exercised their over-allotment option to purchase approximately i 5 million additional shares of common stock. The Company received total proceeds of $ i 761 million from these transactions, net of the underwriting discounts and commissions.

The Company used the proceeds from the IPO, along with cash on hand, to fully repay the First Lien Term Loan, Second Lien Term Loan, and revolving credit facility assumed as part of the acquisition of International Car Wash Group (“ICWG”) in 2020 (collectively, the “Car Wash Senior Credit Facilities”), which totaled $ i 725 million with interest and fees. The Company recognized a $ i 46 million loss on debt extinguishment related to this settlement, primarily related to the write-off of unamortized discount. The Company cancelled the interest rate and cross currency swaps associated with these debt agreements as part of the settlement. The Company also used $ i 43 million in proceeds to purchase approximately i 2 million shares of common stock from certain of our existing shareholders.

On August 2, 2021, the Company filed a Registration Statement on Form S-1 for a secondary offering of approximately i 12 million shares of common stock at $ i 29.50 per share by certain of the Company’s stockholders, Driven Equity LLC and RC IV Cayman ICW Holdings LLC, each of which is a related party of Roark Capital Management, LLC. The Company did not sell any common stock in the offering and did not receive any proceeds from the offering. On September 8, 2021, the underwriters for the secondary offering exercised a portion of their over-allotment option and purchased i 881,393 additional shares of common stock. The Company did not receive any proceeds from the exercise of the over-allotment option.

On September 12, 2022, the Company filed a Registration Statement on Form 424B7 for an underwritten secondary offering of i 7 million shares of common stock at $ i 32.19 per share by certain of the Company’s stockholders, Driven Equity LLC and RC IV Cayman ICW Holdings LLC, each of which is a related party of Roark Capital Management, LLC. The Company did not sell any common stock in the offering and did not receive any proceeds from the offering. After the secondary offering, related parties to Roark Capital Management, LLC held approximately i 61% of our outstanding common stock.

Tax Receivable Agreement

The Company expects to be able to utilize certain tax benefits, which are related to periods prior to the effective date of the Company’s IPO and are attributed to current and former shareholders. The Company previously entered into an Tax Receivable Agreement, which provides our pre-IPO shareholders with the right to receive payment of i 85% of the amount of cash savings, if any, in U.S. and Canadian federal, state, local, and provincial income tax that the Company will actually realize. The Tax Receivable Agreement is effective as of the date of the Company’s IPO. The Company has recorded a total liability of $ i 171 million as of December 31, 2022 of which $ i 53 million and $ i 118 million are recorded under current and non-current tax receivable agreement liabilities on our consolidated balance sheets, respectively. As of December 25, 2021, the company recorded a total liability of $ i 156 million of which $ i 24 million and $ i 132 million were recorded under current and non-current tax receivable agreement liabilities on our consolidated balance sheet, respectively. The change from prior year relates to changes in the estimated liability based on tax returns filed by the Company in the current year.

Stock Split and Equity Structure

On January 14, 2021, the Company’s shareholders approved an amendment to the Company’s certificate of incorporation (the "Amendment") to effect an implied i 88,990-for-one stock split of shares of the Company’s outstanding common stock. In addition, the Amendment increased the number of authorized shares of the Company's stock from i 10,000 shares to i 1 billion shares ( i 900 million shares of common stock and i 100 million shares of preferred stock). All share and per-share data in the consolidated financial statements and footnotes has been retroactively adjusted to reflect the stock split and change in equity structure for all periods presented. The Company does not have any shares of preferred stock outstanding.

Note 2— i Summary of Significant Accounting Policies

Fiscal year

The Company operates and reports financial information on a 52 or 53 week year with the fiscal year ending on the last Saturday in December and fiscal quarters ending on the 13th Saturday of each quarter (or 14th Saturday when applicable with respect to the fourth fiscal quarter), except for the Car Wash segment, which is currently consolidated based on a calendar month end. Our 2022 fiscal year ending December 31, 2022 consisted of 53 weeks and our 2021 and 2020 fiscal years ending December 25, 2021 and December 26, 2020, respectively, consisted of 52 weeks.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the U.S. Securities Exchange Commission (“SEC”). The consolidated financial statements include the accounts of Driven Brands Holdings Inc. and its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.

The three months and year ended December 31, 2022 includes approximately $ i 7.5 million and $ i 3.7 million of pre-tax income adjustments, respectively, for items that originated in previous quarters during fiscal year 2022, as well as prior years. The Company evaluated the materiality of the adjustments on prior period financial statements and recording the adjustments in the current period and concluded the effect of the adjustments were immaterial to both the current and prior period financial statements.

Certain prior year amounts have been reclassified to conform to current year presentation.

/ i

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and the related notes to the consolidated financial statements. Significant items that are subject to estimates and assumptions include, but not limited to, valuation of intangible assets and goodwill; income taxes; allowance for credit losses; valuation of derivatives; self-insurance claims; and stock-based compensation. Management evaluates its estimates on an ongoing basis and may employ outside experts to assist in its evaluations. Changes in such estimates, based on historical experience, current conditions, and various other additional information, may affect amounts reported in future periods. Actual results could differ due to the uncertainty inherent in the natures of these estimates.

Cash and Cash Equivalents

Cash equivalents consist of demand deposits and short-term, highly liquid investments with original maturities of three months or less. These investments are carried at cost, which approximates fair value.

Restricted Cash

The Company had total restricted cash of $ i 34 million and $ i 39 million at December 31, 2022 and December 25, 2021, respectively, which primarily consisted of funds from franchisees pursuant to franchise agreements, the usage of which was restricted to advertising activities, and letters of credit collateral. Advertising funds are presented within advertising fund assets, restricted, on the consolidated balance sheet.

Accounts and Notes Receivable

The Company’s accounts receivable consists principally of amounts due related to product sales, centrally billed commercial fleet work, centrally billed insurance claims, advertising and franchise fees, rent due from franchisees, and training services.

These receivables are generally due within 30 days of the period in which the corresponding sales occur and are classified as accounts and notes receivable, net on the consolidated balance sheet. Accounts receivable are reported at their estimated net realizable value.

Notes receivable are primarily from franchisees and relate to financing arrangements for certain past due balances or to partially finance the acquisition of company-operated stores or re-franchising locations. The notes are typically collateralized by the assets of the store being purchased. Interest income recognized on these notes is included in supply and other revenue on the accompanying consolidated statements of operations. The Company places notes receivable on a non-accrual status based on management’s determination if it is probable that the principal balance is not expected to be repaid per the contractual terms. When the Company places a note receivable on a non-accrual status, interest income recorded on the note is reversed through supply and other revenue. The Company recorded an immaterial amount of interest income related to its notes receivables during the years ended December 31, 2022, December 25, 2021, and December 26, 2020.

Allowance for Credit Losses

The Company adopted ASU 2016-13, Financial Instruments - Credit Losses, on December 26, 2020, which was retroactively applied as of the first day of fiscal year 2020 using the modified retrospective adoption method. This accounting standard requires companies to measure expected credit losses on financial instruments based on the total estimated amount to be collected over the lifetime of the instrument. Prior to the adoption of this accounting standard, the Company recorded incurred credit losses against receivable balances based on current and historical information. Upon adoption of this guidance, the Company recognized an increase to its allowance for credit losses of $ i i 2 / million and a corresponding adjustment to retained earnings, net of tax, as a cumulative effect of an accounting change.

Expected credit losses for uncollectible receivable balances consider both current conditions and reasonable and supportable forecasts of future conditions. Current conditions considered include pre-defined aging criteria, as well as specified events that indicate the balance due is not collectible. Reasonable and supportable forecasts used in determining the probability of future collection consider publicly available macroeconomic data and whether future credit losses are expected to differ from historical losses.

/ i

Inventory

Inventory is stated at the lower of cost or net realizable value. The Company primarily purchases its oil, lubricants, soap and auto glass in bulk quantities to take advantage of volume discounts and to ensure inventory availability to complete services. Inventories are presented net of volume rebates.

i Property and Equipment, net

Property and equipment are stated at cost less accumulated depreciation. Depreciation is provided using the straight-line method over the estimated useful lives of the respective assets. Leasehold improvements are depreciated over the shorter of the estimated useful life or the remaining lease term of the related asset. Repairs and maintenance are expensed as incurred.

The following table presents the estimated useful lives for each asset category:


Buildings and improvements			i 5 to i 40 years
Furniture and fixtures			i 5 to i 7 years
Store equipment			i 5 to i 15 years

Leasehold improvements			i 5 to i 15 years
Vehicles			i 3 to i 5 years
Computer equipment and software			i 3 to i 5 years

Cloud computing arrangements

The Company capitalizes qualified cloud computing implementation costs associated with the application development stage and subsequently amortize these costs over the term of the hosting arrangement and stated renewal period, if it is reasonably certain we will renew. Capitalized costs are included in other assets on the consolidated balance sheet. As of December 31, 2022, no cloud computing arrangements were in service.

Leases

The Company adopted ASU 2016-02 Leases and the subsequent ASUs that modified ASU 2016-02 (collectively, the amendments) during the twelve months ended December 26, 2020 and retroactively adopted the amendments as of the first day of fiscal year 2019.

The adoption of the standard resulted in a right-of-use (“ROU”) asset of approximately $ i 324 million primarily from operating leases for our company-operated stores, a $ i 4 million reduction to retained earnings, net of taxes, as a cumulative effect of an accounting change, and a lease liability of approximately $ i 330 million as of December 28, 2019. The remaining $ i i 1 / million related to the derecognition of certain liabilities and assets that had been recorded in accordance with GAAP that had been applied prior to the adoption of the amendments.

The lease standard requires the lessee in an operating lease to record a balance sheet gross-up upon lease commencement by recognizing an ROU asset and lease liability equal to the present value of the lease payments over the expected lease term. The ROU asset and lease liability are derecognized in a manner that effectively yields a straight-line lease expense over the lease term. In addition to the changes to the lessee operating lease accounting requirements, the amendments also change the types of costs that can be capitalized related to a lease agreement for both lessees and lessors.

Finance lease ROU assets are depreciated on a straight-line basis over the lesser of the useful life of the leased asset or lease term. Finance lease liabilities are recognized using the effective interest method, with interest determined as the amount that results in a constant periodic discount rate on the remaining balance of the liability. Interest associated with finance lease liabilities is recognized in interest expense, net, on the consolidated statements of operations and is included in changes in accrued expenses and other liabilities in the consolidated statements of cash flows.

At contract inception, we determine whether the contract is or contains a lease based on the terms and conditions of the contract. Lease contracts are recognized on our consolidated balance sheet as ROU assets and lease liabilities; however, we have elected not to recognize ROU assets and lease liabilities on leases with terms of one year or less. Variable lease payments that are dependent on usage, output, or may vary for other reasons are excluded from lease payments in the measurement of the ROU assets and lease liabilities and are recognized as lease expense in the period the obligation is incurred. For lease agreements entered into or reassessed after the adoption of Topic 842, we combine lease and non-lease components. The Company’s vehicle and equipment leases are comprised of a single lease component.

Certain leases include renewal and termination options and the option to renew is under our sole discretion. These leases are included in the lease term in determining the ROU assets and liabilities when we are reasonably certain we will exercise the option.

The ROU asset also includes initial direct costs paid less lease incentives received from the lessor. The Company also records lease income for subleases of franchise stores to certain franchisees. Lease income from sublease rentals is recognized on a straight-line basis over the lease term.

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Impairment of Long-Lived Assets

Long-lived assets that are used in operations are tested for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable through undiscounted future cash flows. Recognition and measurement of a potential impairment is performed on assets grouped with other assets and liabilities at the lowest level where identifiable cash flows are largely independent of the cash flows of other assets and liabilities. An impairment loss is the amount by which the carrying amount of a long-lived asset or asset group exceeds its estimated fair value. Fair value is generally estimated by internal specialists based on the present value of anticipated future cash flows or, if required, with the assistance of independent third-party valuation specialists, depending on the nature of the assets or asset group.

Goodwill and Indefinite-Lived Intangible Assets

Goodwill is recorded when the aggregate purchase price of an acquisition exceeds the estimated fair value of the net identified tangible and intangible assets acquired. The Company's indefinite-lived intangibles are comprised of trademarks and tradenames.

In performing a quantitative test for impairment of goodwill, we primarily use the income approach method of valuation that includes the discounted cash flow method and the market approach that includes the guideline public company method to determine the fair value of goodwill and indefinite-lived intangible assets. Significant assumptions are made by management in estimating fair value under the discounted cash flow model including future trends in sales and terminal growth rates, operating expenses, overhead expenses, tax depreciation, capital expenditures, and changes in working capital, along with an appropriate discount rate based on our estimated cost of equity capital and after-tax cost of debt. Significant assumptions used to determine fair value under the guideline public company method include the selection of guideline companies and the valuation multiples applied.

In the process of a quantitative test of our tradename intangible assets, we primarily use the relief-from-royalty method under the income approach method of valuation. Significant assumptions used to determine fair value under the relief of royalty method include future trends in sales, a royalty rate, and a discount rate to be applied to the forecast revenue stream.

There is an inherent degree of uncertainty in preparing any forecast of future results. Future trends in system-wide sales are dependent to a significant extent on national, regional, and local economic conditions. Any decreases in customer traffic or average repair order due to these or other reasons could reduce gross sales at franchise locations, resulting in lower royalty and other payments from franchisees, as well as lower sales at company-operated locations. This could reduce the profitability of franchise locations, potentially impacting the ability of franchisees to make royalty payments owed to us when due (which could adversely impact our current cash flow from franchise operations), and company-operated sites.

The determination of indefinite life is subject to reassessment if changes in facts and circumstances indicate the period of benefit has become finite.

During the second quarter of 2022, management impaired the life of one indefinite-lived tradename. Refer to Note 6 for additional information.

We have completed our annual test of goodwill and indefinite-lived intangibles for impairment and have determined there was no impairment.

Definite Lived Intangible Assets

The Company's definite lived intangible assets are comprised primarily of trademarks, franchise agreements, license agreements, membership agreements, customer relationships, and developed technology.

Intangible assets with definite lives are being amortized on a straight-line basis over the estimated useful life of each asset as follows:


			Estimated Useful Life
Tradenames			i 1 to i 3 years
Franchise agreements			i 13 to i 30 years
License agreements			i 7 to i 19 years
Membership agreements			i 7 to i 9 years
Customer relationships			i 13 to i 16 years
Developed technology			i 5 to i 8 years

The lives of definite lived intangibles are reviewed and reduced if changes in their planned use occurs. If changes in the assets planned use is identified, management reviews the useful life and carrying value of the asset to assess the recoverability of the assets if facts and circumstances indicate the carrying value may not be recoverable. The recoverability test requires management to compare the undiscounted cash flows expected to be generated by the intangible asset or asset group to the carrying value. If the carrying amounts of the intangible asset is not recoverable on an undiscounted cash flow basis, an impairment charge is recognized to the extent the carrying value exceeds its fair value.

Management reviews business combinations to identify intangible assets, which are typically tradenames and customer relationships, and value the assets based on information and assumptions available to us at the date of purchase utilizing income and market approaches to determine fair value.

Assets Held for Sale

Assets currently available for sale and expected to be sold within one year are classified as assets held for sale. There were i no assets designated as held for sale as of December 31, 2022. The Company had i one car wash site which was part of one of the 2021 acquisitions with a total carrying value of $ i 3 million that was designated as held-for-sale as of December 25, 2021.

Accrued Liabilities

Included within accrued expenses and other liabilities on the consolidated balance sheet were $ i 58 million and $ i 65 million of accrued payroll, bonus, and benefits at December 31, 2022 and December 25, 2021, respectively.

i Derivative instruments

We utilize derivative financial instruments to manage our interest rate and foreign exchange exposure. For derivatives instruments where we have not elected hedge accounting, the change in fair value is recognized in earnings. For derivative instruments where we have elected hedge accounting, the changes in the derivative and the hedged item attributable to the hedged risks are recognized in the same line within our consolidated statement of operations. For derivatives designated as cash flow hedges, changes in the fair value of the derivative is initially recorded in accumulated other comprehensive income (loss) and subsequently recorded to the statement of operations when the hedged item impacts earnings. Derivatives designated as hedge accounting are assessed at inception and on an ongoing basis whether the instrument is, and will continue to be, highly effective in offsetting cash flow or fair value of the hedged item and whether it remains probable the forecasted transaction will occur. Changes in the fair value for derivative instruments that do not qualify as hedge accounting are recognized in the consolidated statement of operations. Refer to Note 11 for additional information regarding our derivative assets and liabilities.

Revenue Recognition

Franchise royalties and fees

Franchisees are required to pay an upfront license fee prior to the opening of a location. The initial license payment received is recognized ratably over the life of the franchise agreement. Franchisees will also pay continuing royalty fees, at least monthly, based on a percentage of the store level retail sales or a flat amount, depending on the brand. The royalty income is recognized as the underlying sales occur. In addition to the initial fees and royalties, the Company also recognizes revenue associated with development fees charged to franchisees, which are recognized as income over the life of the associated franchise agreement. Development fees relate to the right of a franchisee to open additional locations in an agreed upon territory.

Company-operated store sales

Company-operated store sales are recognized, net of sales discounts, upon delivery of services and the service-related product. Customers also have the ability to purchase car wash club memberships that allow a customer unlimited washes for the duration of the membership. The Company recognizes revenue from these membership programs on a straight-line basis over the membership term. Sales proceeds for gift cards are recognized as a contract liability; the liability is reduced and revenue is recognized when the gift card is subsequently redeemed for services. Breakage on unredeemed gift card balances is estimated and recognized as revenue using the proportional method based on historical redemption patterns.

The states and municipalities in which the Company operates impose sales tax on all of the Company’s nonexempt revenue. The Company collects the sales tax from its customers and remits the entire amount to the appropriate taxing authority. The Company’s policy is to exclude the tax collected and remitted from net revenue and direct costs. The Company accrues sales tax liabilities as it records sales, maintaining the amount owed to the taxing authorities in accrued expenses and other liabilities on the consolidated balance sheet.

Independently-operated store sales and expenses

Independently-operated store sales and expenses consist of our car wash sites outside North America. The Company is primarily responsible for fulfilling its performance obligation of providing car wash and other vehicle cleaning services but engages a third-party to provide site labor and operate these stores on its behalf. The Company pays a commission to these third-parties to perform this service. Revenue from car washes at these locations is recorded in independently-operated store sales at the time the service is performed, while the commissions paid to the third-parties are recorded in independently-operated store expenses.

Advertising contributions

Franchised and company-operated stores are generally required to contribute advertising dollars according to the terms of their respective contract (typically based on a percentage of sales) that are used for, among other activities, advertising the brand on a national and local basis, as determined by the brand’s franchisor. The Company’s franchisees make their contributions to a marketing fund which in turn administers and distributes their advertising contributions directly to the franchisor. This advertising fee revenue is recognized as the underlying sales occur. Advertising expenses are recorded as incurred. Revenues and expenses related to these advertising collections and expenditures are reported on a gross basis in the consolidated statements of operations. The assets related to the advertising fund are considered restricted and disclosed as such on the Company’s consolidated balance sheets.

Any excess or deficiency of advertising fee revenue compared to advertising expenditures is recognized in the fourth quarter of the Company's fiscal year. Any excess of revenue over expenditures is recognized only to the extent of previously recognized deficits. When advertising revenues exceed the related advertising expenses and there is no recovery of a previously recognized deficit of advertising revenues, advertising costs are accrued up to the amount of revenues.

Supply and other revenue

Supply and other revenue includes revenue related to product sales, vendor incentive revenue, insurance licensing fees, store leases, software maintenance fees, and automotive training services revenue. Supply and other revenue is recognized once title of goods is transferred to franchisees or other independent parties, as the sales of the related products occur, or ratably. Vendor incentive revenue is recognized as sales of the related product occur. Insurance licensing fee revenue is generated when the Company is acting as an agent on behalf of its franchisees and is recognized once title of goods is transferred to franchisees. The insurance license revenue is presented net of any related expense with any residual revenue reflecting the management fee the Company charges for the program. Store lease revenue is recognized ratably over the underlying property lease term. Software maintenance fee revenue is recognized monthly in connection with providing and servicing software. Automotive training services are provided to third party shop owner/operators in accordance with agreed upon contract terms. These contracts may be for one-time shop visits or agreements to receive access to education and training programs for multiple years. For one-time shop visits, revenue is recognized at the time the service is rendered. For the multi-year education and training contracts, revenue is recognized ratably over the contract term.

Assets Recognized from the Costs to Obtain a Contract with a Customer:

The Company has elected a practical expedient to expense costs as incurred for costs to obtain a contract when the amortization period would have been one year or less. The Company records contract assets, included in deferred commissions on the accompanying consolidated balance sheet, for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year and if such costs are material. Commission expenses, a primary cost associated with the sale of franchise licenses, are amortized to selling, general and administrative expenses in the consolidated statements of operations ratably over the life of the associated franchise agreement.

Contract Balances

The Company generally records a contract liability when cash is provided for a contract with a customer before the Company has completed its contractual performance obligation. This includes cash payments for initial franchise fees as well as upfront payments on store owner consulting and education contracts. Franchise fees and shop owner consulting contract payments are recognized over the life of the agreement, which range from five to i 20 and three to i four year terms, respectively.

Company-Operated Store Expenses

Company-operated store expenses consist of payroll and benefit costs for employees at company-operated

locations, as well as rent, costs associated with procuring materials from suppliers, and other store-level operating costs. The Company receives volume rebates based on a variety of factors which are included in accounts receivable on the accompanying consolidated balance sheet and accounted for as a reduction of company-operated store expenses as they are earned. Sales discounts received from suppliers are recorded as a reduction of the cost of inventory. Advanced rebates are included in accrued expenses and other liabilities on the accompanying consolidated balance sheet and are accounted for as a reduction of company-operated store expenses as they are earned over the term of the supply agreement. In addition, the Company includes subleasing expense associated with the subleasing of store buildings to franchisees within supply and other expenses

in the consolidated statements of operations.

Store Opening Costs

Store opening costs consist of employee, facility, and grand opening marketing costs that company-operated stores incur prior to opening. The Company typically incurs store opening costs when opening new company-operated stores and when converting independently branded, acquired company-operated stores to one of its brands. These expenses are charged to expense as incurred.

Equity-based Compensation

The Company recognizes expense related to equity-based compensation awards over the service period (generally the vesting period) in the consolidated financial statements based on the estimated fair value of the award on the grant-date. Forfeitures are accounted for as they occur.

Fair Value of Financial Instruments

Financial assets and liabilities are categorized, based on the inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to the quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable inputs. Observable market data, when available, is required to be used in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.

The Company classifies and discloses assets and liabilities carried at fair value in one of the following three categories.

Level 1: Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date,

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; or

Level 3: Inputs are unobservable inputs for the asset or liability. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

The Company estimates the fair value of financial instruments using available market information and appropriate valuation methodologies. The carrying amount for cash and cash equivalents, restricted cash, accounts receivable, inventory, other current assets, accounts payable and accrued expenses approximate fair value because of their short maturities. The notes receivable carrying value also approximates fair value due to interest rates that approximate market rates for agreements with similar maturities and credit quality. The fair value of long-term debt is estimated based on Level 2 inputs using discounted cash flows and market-based expectations for interest rates, credit risk and contractual terms of the debt agreements.

Financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2022 are summarized as follows:

(in thousands)

Level 1

Level 2

Total

Mutual fund investments held in rabbi trust

i 758

i —

i 758

Derivative assets, recorded in prepaid and other assets

i —

i 158

Derivative assets, recorded in other assets

i —

i 2,148

Derivative liabilities, recorded in accrued expenses and other liabilities

i —

i 5,005

Financial assets and liabilities measured at fair value on a recurring basis as of December 25, 2021 are summarized as follows:

(in thousands)

Level 1

Level 2

Total

Mutual fund investments held in rabbi trust

i 976

i —

i 976

Derivative liabilities, recorded in accrued expenses and other liabilities

i —

i 336

Derivative liabilities, recorded in long-term accrued expenses and other liabilities

i —

i 200

The fair value of the Company’s derivative instruments are derived from valuation models, which use observable inputs such as quoted market prices, interest rates, and forward yield curves.

The carrying value and estimated fair value of total long-term debt were as follows:

(in thousands)

Carrying value

Estimated fair value

Carrying value

Estimated fair value

Long-term debt

i 2,784,175

i 2,477,456

i 2,382,364

i 2,411,987

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i Income Taxes

The Company accounts for income taxes under the liability method whereby deferred tax assets and liabilities are measured using enacted tax laws and rates expected to apply to taxable income in the years in which the assets and liabilities are expected to be recovered or settled. The effects on deferred tax assets and liabilities of subsequent changes in the tax laws and rates are recognized in income during the year the changes are enacted.

In assessing the realizability of deferred tax assets, management considers whether it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.

The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized on the consolidated financial statements from such positions are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon settlement with tax authorities. The Company records any interest and penalties associated as additional income tax expense in the consolidated statements of operations.

Deferred Financing Costs

The costs related to the issuance of debt are presented in the balance sheet as a direct deduction from the carrying amount of that debt and amortized over the terms of the related debt agreements as interest expense using the effective interest method.

i Insurance Reserves

The Company is partially self-insured for employee medical coverage. The Company records a liability for the ultimate settlement of claims incurred as of the balance sheet date based upon estimates provided by the third-party that administers the claims on the Company’s behalf. The Company also reviews historical payment trends and knowledge of specific claims in determining the reasonableness of the reserve. Adjustments to the reserve are made when the facts and circumstances of the underlying claims change. If the actual settlements of the medical claims are greater than the estimated amount, additional expense will be recognized.

Foreign Currency Translation

We translate assets and liabilities of non-U.S. operations into U.S. dollars at rates of exchange in effect at the balance sheet date, and revenues and expenses at the average exchange rates prevailing during the period. Resulting translation adjustments are recorded as a separate component of Other Comprehensive Income (Loss). Transactions resulting in foreign exchange gains and losses are included in the Consolidated Statements of Operations.

Recently Adopted Accounting Standards

In December 2019, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, as part of its initiative to reduce complexity in accounting standards. The Company adopted the ASU in the first quarter of 2021, and the adoption did not have a material impact on our consolidated financial statements.

Recently Issued Accounting Standards

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides optional expedients and exceptions for applying generally accepted

accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. In response to the concerns about structural risks of interbank offered rates and, particularly, the risk of cessation of LIBOR, regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction based and less susceptible to manipulation. The ASU provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. This guidance is effective immediately and the amendments may be applied prospectively through December 31, 2024. The Company is evaluating the impact of adopting this new accounting guidance and does not believe it will have a material impact on the Company’s consolidated financial statements.

Note 3— i Business Acquisitions

The Company strategically acquires companies in order to increase its footprint and offer products and services that diversify its existing offerings, primarily through asset purchase agreements. These acquisitions are accounted for as business combinations using the acquisition method, whereby the purchase price is allocated to the assets acquired and liabilities assumed, based on their estimated fair values at the date of the acquisition with the remaining amount recorded in goodwill.

2022 Acquisitions

The Company completed i 22 acquisitions in the Car Wash segment during the year ended December 31, 2022, representing i 35 sites, which were deemed to be business combinations. The aggregate cash consideration for these acquisitions, net of cash acquired, was approximately $ i 350 million. On June 14, 2022, the Car Wash segment acquired Jimmy Clean Car Wash, which was comprised of i 3 sites for a total consideration of $ i 32 million. On July 6, 2022, the Car Wash segment acquired Speedy Shine Express Car Wash, which was comprised of i 2 sites for a total consideration of $ i 34 million. On October 5, 2022, the Car Wash segment acquired Quick & Clean Car Wash, which was comprised of i 4 sites for a total consideration of $ i 38 million.

The Company completed i 6 acquisitions in the Maintenance segment during the year ended December 31, 2022, representing i 14 sites, each individually immaterial, which were deemed to be business combinations. The aggregate cash consideration for these acquisitions, net of cash acquired and liabilities assumed, was $ i 25 million.

The Company completed i 10 acquisitions in the Paint, Collision & Glass segment during the year ended December 31, 2022 representing i 174 sites, which were deemed to be business combinations. The aggregate cash consideration for these acquisitions, net of cash acquired, was $ i 406 million. On December 30, 2021 the Company acquired AGN, which was comprised of i 79 sites at the time of the Company’s acquisition, for a total consideration of $ i 171 million. The purchase price allocation resulted in the recognition of $ i 49 million of intangible assets, $ i 37 million of which was a trade name intangible asset. The fair value of the acquired trade name was estimated using an income approach, specifically, the relief-from-royalty method. The Company utilized assumptions with respect to forecasted sales, the discount rate, and the royalty rate in determining the fair value of the acquired trade name. The purchase price allocation was considered complete for AGN as of December 31, 2022. On April 28, 2022, the Company acquired All Star Glass (“ASG”), which was comprised of i 31 sites at the time of the acquisition for a total consideration of $ i 36 million. On July 6, 2022, the Company acquired K&K Glass, which was comprised of i 8 sites for a total consideration of $ i 40 million. On July 27, 2022, the Company acquired Jack Morris Auto Glass, which was comprised of i 9 sites for a total consideration of $ i 54 million. On September 8, 2022, the Company acquired Auto Glass Fitters Inc., which was comprised of i 24 sites for a total consideration of $ i 72 million. The Company will amortize the acquired lease right of use assets, customer list intangibles, and definite lived trade name over their estimated remaining lives of i 4 years, i 13 years, and i 1 year, respectively.

The Company estimated the fair value of acquired assets and liabilities as of the date of acquisition based on information currently available. As the Company finalizes the fair value of assets acquired and liabilities assumed, additional purchase price adjustments may be recorded during the measurement period.

2022 Car Wash Segment

The provisional amounts for assets acquired and liabilities assumed for the 2022 Car Wash acquisitions are as follows:

(in thousands)

Quick & Clean Car Wash

Speedy Shine Express Car Wash

Jimmy Clean Car Wash

All Other Car Wash

Total Car Wash

Assets:

Property and equipment, net

i 28,220

i 16,200

i 21,740

i 172,178

i 238,338

Goodwill

i 9,445

i 17,296

i 10,196

i 72,039

i 108,976

Deferred tax assets

i 335

i 12

i 64

i 2,831

i 3,242

Total assets acquired

i 38,000

i 33,508

i 32,000

i 247,048

i 350,556

Liabilities:

Accrued expenses and other liabilities

i 9

i 8

i 110

i 444

i 571

Total liabilities assumed

i 9

i 8

i 110

i 444

i 571

Cash Consideration, net of cash acquired

i 36,851

i 32,495

i 31,890

i 239,758

i 340,994

Deferred Consideration

i 1,140

i 1,005

i —

i 6,846

i 8,991

Total Consideration, net of cash acquired

i 37,991

i 33,500

i 31,890

i 246,604

i 349,985

2022 Paint, Collision & Glass Segment

The provisional amounts for assets acquired and liabilities assumed for the 2022 Paint, Collision & Glass acquisitions are as follows:

(in thousands)

Auto Glass Fitters Inc.

Jack Morris Auto Glass

K&K Glass

All Star Glass

Auto Glass Now

All Other Paint, Collision & Glass

Total PC&G

Assets:

Accounts and notes receivable, net

i 5,264

i 1,162

i —

i 2,349

i —

i 832

i 9,607

Inventory

i 134

i 1,150

i 1,067

i 546

i —

i 1,518

i 4,415

Prepaid and other assets

i 64

i 70

i —

i 119

i —

i 14

i 267

Property and equipment, net

i 417

i 418

i 1,553

i 568

i 1,064

i 1,628

i 5,648

Operating lease right-of-use assets

i 1,016

i 1,558

i 587

i 5,943

i 11,177

i 2,865

i 23,146

Intangibles, net

i 20,600

i 16,100

i 16,600

i 8,500

i 49,100

i —

i 110,900

Goodwill

i 48,038

i 35,651

i 20,836

i 26,548

i 119,569

i 29,689

i 280,331

Deferred tax assets

i —

i 84

Total assets acquired

i 75,533

i 56,109

i 40,643

i 44,573

i 180,910

i 36,630

i 434,398

Liabilities:

Accounts payable

i 2,010

i 630

i —

i 1,825

i —

i 229

i 4,694

Accrued expenses and other liabilities

i 817

i 644

i 195

i 2,152

i 1,932

i 768

i 6,508

Current portion of long term debt

i —

i 10

i 31

i —

i 41

Long-term debt

i —

i 21

i 89

i —

i 110

Operating lease liabilities

i 262

i 1,030

i 392

i 4,223

i 8,229

i 2,024

i 16,160

Deferred tax liabilities

i 375

i 19

i —

i 394

Total liabilities assumed

i 3,464

i 2,323

i 587

i 8,231

i 10,281

i 3,021

i 27,907

Cash Consideration, net of cash acquired

i 56,044

i 48,386

i 40,056

i 36,342

i 170,629

i 30,209

i 381,666

Deferred Consideration

i 16,025

i 5,400

i —

i 3,400

i 24,825

Total Consideration, net of cash acquired

i 72,069

i 53,786

i 40,056

i 36,342

i 170,629

i 33,609

i 406,491

2022 Maintenance Segment

The provisional amounts for assets acquired and liabilities assumed for the 2022 Maintenance acquisitions are as follows:


(in thousands)	Maintenance
Assets:

Inventory	$	i 362

Property and equipment, net	i 5,040
Operating lease right-of-use assets	i 10,323

Goodwill	i 18,542
Deferred tax assets	i 844
Total assets acquired	i 35,111
Liabilities:

Accrued expenses and other liabilities	i 792


Operating lease liabilities	i 9,402

Total liabilities assumed	i 10,194
Cash Consideration, net of cash acquired	i 22,849
Deferred Consideration	i 2,068
Total Consideration, net of cash acquired	$	i 24,917

Goodwill represents the excess of the consideration paid over the fair value of net assets acquired and includes the expected benefit of synergies within the existing segments and intangible assets that do not qualify for separate recognition. Goodwill, which was allocated to the Car Wash, Maintenance, and Paint, Collision & Glass segments, is substantially all deductible for income tax purposes.

The following table presents financial information regarding the 2022 Car Wash segment and Paint, Collision & Glass segment acquisitions included in our consolidated statements of operations from the date of acquisition through December 31, 2022 under the column “Actual from acquisition date.” The following tables also present supplemental pro-forma information as if the acquisitions had occurred at the beginning of fiscal year 2021. i The pro-forma information does not necessarily reflect the results of operations that would have occurred had the acquisitions occurred at the beginning of 2021. Cost savings are also not reflected in the pro-forma amounts for the years ended December 31, 2022 and December 25, 2021.

Year Ended December 31, 2022

Year Ended December 25, 2021

Actual from acquisition date

(in thousands)

Car Wash Acquisitions

Glass Acquisitions

Car Wash & Glass Acquisitions

Driven Brands Holdings Consolidated
Pro-forma

Revenue

i 21,526

i 157,498

i 179,024

i 2,172,185

i 1,764,435

Net income attributable to Driven Brands Holdings Inc.

i 5,598

i 22,885

i 28,483

i 66,249

i 61,539

2021 Acquisitions

2021 Car Wash Segment

The Company completed i 38 acquisitions in the Car Wash segment, representing i 110 car wash sites, which were deemed to be business combinations, during the year ended December 25, 2021. The aggregate cash consideration for these acquisitions, net of cash acquired, was $ i 732 million.

On October 27, 2021, the Car Wash segment acquired Magic Tunnel Car Wash, which was comprised of i 16 sites for total consideration of $ i 88 million. On July 14, 2021, the Car Wash segment acquired Frank’s Car Wash, which was comprised of i 18

sites for total consideration of $ i 107 million. On May 20, 2021, the Car Wash segment acquired Racer Classic Car Wash, which was comprised of i 10 sites for total consideration of $ i 65 million.

The amounts for assets acquired and liabilities assumed for the 2021 Car Wash Acquisitions are as follows:

(in thousands)

Magic Tunnel Car Wash

Franks Car Wash

Racer Classic Car Wash & AutoClean Car Wash

Other

Total Car Wash

Assets:

Inventory

i —

i 311

i —

i 311

Property and equipment, net

i 75,200

i 66,737

i 44,108

i 375,188

i 561,233

Operating lease right-of-use assets

i —

i 2,587

i 12,277

i 14,864

Intangibles, net

i 700

i 800

i 550

i —

i 2,050

Goodwill

i 12,100

i 38,939

i 20,869

i 95,080

i 166,988

Assets held for sale

i —

i 996

Deferred tax assets

i —

i 94

i —

i 1,596

i 1,690

Total assets acquired

i 88,000

i 106,570

i 68,425

i 485,137

i 748,132

Liabilities:

Accrued expenses and other liabilities

i —

i 50

i 155

i 304

i 509

Operating lease liabilities

i —

i 2,687

i 12,277

i 14,964

Deferred tax liabilities

i —

i 758

i —

i 758

Total liabilities assumed

i —

i 50

i 3,600

i 12,581

i 16,231

Cash Consideration, net of cash acquired

i 85,800

i 106,520

i 62,874

i 453,454

i 708,648

Deferred Consideration

i 2,200

i —

i 1,951

i 19,102

i 23,253

Total Consideration, net of cash acquired

i 88,000

i 106,520

i 64,825

i 472,556

i 731,901

Goodwill which was allocated to the Car Wash segment is substantially all deductible for income tax purposes.

The following table presents financial information regarding the 2021 Cash Wash segment acquisitions included in the consolidated statements of operations from the date of acquisition through December 25, 2021 under the column “Actual from acquisition date in 2021.” The following table presents supplemental pro-forma information as if the acquisitions had occurred at the beginning of fiscal year 2020. The pro-forma information does not necessarily reflect the results of operations that would have occurred had the acquisitions occurred at the beginning of 2020. Cost savings are also not reflected in the pro-forma amounts for the year ended December 25, 2021 and December 26, 2020, respectively.

Actual from
Acquisition
Date in 2021

Pro-Forma for Year Ended

(in thousands)

Revenue

i 48,648

i 1,613,479

i 1,026,012

Net income attributable to Driven Brands Holdings Inc.

i 11,693

i 47,272

i 20,558

2021 Paint, Collision & Glass Segment

In addition, the Company completed i 2 acquisitions representing i 12 collision sites, each individually immaterial, which are included within the Company’s Paint, Collision & Glass segment during the year ended December 25, 2021, which were deemed to be business combinations. The aggregate cash consideration for these acquisitions, net of cash acquired, was $ i 33 million.

The amounts for assets acquired and liabilities assumed for the 2021 PC&G Acquisitions are as follows:


(in thousands)	Paint, Collision & Glass
Assets:

Inventory	$	i 107

Property and equipment, net	i 1,512
Operating lease right-of-use assets	i 7,672
Intangibles, net	i 6,707
Goodwill	i 24,742


Total assets acquired	i 40,740
Liabilities:
Accounts payable
Accrued expenses and other liabilities	i 5


Operating lease liabilities	i 7,763

Total liabilities assumed	i 7,768
Cash Consideration, net of cash acquired	i 32,972
Deferred Consideration	i —
Total Consideration, net of cash acquired	$	i 32,972

2021 Maintenance Segment

The Company also completed i 8 acquisitions in the Maintenance segment representing i 13 maintenance sites, each individually immaterial, during the year ended December 25, 2021, which were deemed to be business combinations. The aggregate cash consideration for these acquisitions, net of cash acquired, was $ i 37 million.

The amounts for assets acquired and liabilities assumed for the 2021 Maintenance Acquisitions are as follows:


(in thousands)	Maintenance
Assets:

Inventory	$	i 200

Property and equipment, net	i 19,095


Goodwill	i 14,661
Assets held for sale	i 3,275
Deferred tax assets	i 90
Total assets acquired	i 37,321
Liabilities:

Accrued expenses and other liabilities	i 52




Total liabilities assumed	i 52
Cash Consideration, net of cash acquired	i 36,874
Deferred Consideration	i 395
Total Consideration, net of cash acquired	$	i 37,269

Purchase accounting allocations are complete for all 2021 acquisitions as of December 31, 2022

2020 Acquisitions

Acquisition of International Car Wash Group (Car Wash Segment)

On August 3, 2020, the Company completed the acquisition of Shine Holdco (UK) Limited, the holding company of ICWG, to expand on its service offerings by entering into the car wash business (the “ICWG Acquisition”). Under the merger agreement, RC IV ICW Merger Sub LLC, a subsidiary of RC IV Cayman ICW Holdings LLC and the direct parent of RC IV Cayman ICW LLC, merged with and into the Parent. ICWG’s shareholders received i 217,980 of the Parent’s Class A common units. The

Parent then contributed ICWG to the Company in exchange for i 38.3 million shares of the Company’s common stock (after giving effect to the Company’s stock split, which is discussed further in Note 1).

The ICWG Acquisition resulted in the Company acquiring i 741 independently-operated and i 199 company-operated car wash centers in i 14 countries across Europe, the U. S., and Australia. The operating results from ICWG are included in the Car Wash segment. Approximately $ i 249 million of the goodwill associated with this acquisition is deductible for income tax purposes. All goodwill related to this acquisition was allocated to the Car Wash segment.

Acquisition of Fix Auto (Paint, Collision & Glass Segment)

On April 20, 2020, the Company acquired i 100% of the outstanding equity of Fix Auto USA, a franchisor and operator of collision repair centers, for $ i 29 million, net of cash received of approximately $ i 2 million. This acquisition resulted in the Company acquiring i 150 franchised locations and i 10 company-operated locations and increases the Company’s collision services footprint. All goodwill related to this acquisition was allocated to the Paint, Collision & Glass segment. None of the goodwill associated with this acquisition is deductible for income tax purposes.

Other Acquisitions

During 2020, the Company completed the acquisition of i 17 car wash sites, each individually immaterial, which are included within the Company’s Car Wash segment. The aggregate cash consideration paid for these acquisitions, net of cash acquired, was approximately $ i 109 million.

Deferred Consideration and Transaction Costs

Deferred consideration is typically paid i six months to i one year after the acquisition closing date once all conditions under the purchase agreement have been satisfied. Included in the total consideration amounts above for the acquisitions in 2022 was $ i 36 million of consideration not paid on the closing date. The Company had $ i 35 million and $ i 16 million of deferred consideration related to acquisitions at December 31, 2022 and December 25, 2021, respectively. The Company paid $ i 16 million and $ i 6 million of deferred consideration related to prior acquisitions during the years ended December 31, 2022 and December 25, 2021, respectively. Deferred consideration is recorded within investing activities at the time of payment.

The Company incurred approximately $ i 4 million, $ i 3 million, and $ i 7 million of transaction costs during the years ended December 31, 2022, December 25, 2021, and December 26, 2020, respectively. In addition, during the year ended December 25, 2021 the Company recorded a $ i 4 million benefit to acquisition costs in the consolidated statements of operations related to the reversal of a liability previously recorded for a 2020 acquisition related to contingent consideration that was deemed to be remote.

Dispositions

On September 12, 2022, the Company disposed of CARSTAR franchise sites from within the Paint, Collision & Glass segment for consideration of $ i 17 million. As a result of the sale, a $ i 12 million gain was recognized within selling, general, and administrative expenses during the year ended December 31, 2022. The Company allocated $ i 3 million of goodwill as part of the sale.

On March 16, 2022, the Company disposed of its i 75% owned subsidiary, IMO Denmark ApS, for consideration of $ i 2 million. As a result of the sale, a $ i 1 million loss was recognized within selling, general, and administrative expenses during the year ended December 31, 2022. Also, a noncontrolling interest of less than $ i 1 million was derecognized. The Company allocated less than $ i 1 million of goodwill as part of the sale.

On April 27, 2021, the Company disposed of its i 70% owned subsidiary, At-Pac Auto Parts Inc., for consideration of $ i 2 million. As a result of the sale, a loss of less than $ i 1 million was recognized within selling, general, and administrative expenses during the year ended December 31, 2022. Also, a noncontrolling interest of $ i 1 million was derecognized.

Note 4— i Accounts and Notes Receivable, Net

The balance on the consolidated balance sheets are amounts primarily related to customers, vendors and franchisees. As of December 31, 2022 and December 25, 2021, the gross amount of current accounts and notes receivable were $ i 198 million and $ i 134 million, respectively. The current allowance for credit losses for these periods were $ i 18 million and $ i 16 million, respectively. As of December 31, 2022 and December 25, 2021, the gross amount of non-current notes receivable was $ i 4 million and $ i 6 million, respectively. The non-current allowance for credit losses for these periods was $ i 1 million and $ i 2 million, respectively.

i i

The changes in the allowance for accounts and notes receivable for the year ended December 31, 2022 and December 25, 2021 were as follows:


(in thousands)
Balance as of December 26, 2020	$	i 19,024
Bad debt expense	i 1,854
Write-off of uncollectible receivables	( i 2,493)
Balance at December 25, 2021	$	i 18,385
Bad debt expense, net of recoveries	i 5,777
Write-off of uncollectible receivables	( i 4,556)
Balance at December 31, 2022	$	i 19,606

/ /

Note 5 — i Property and Equipment

Property and equipment at December 31, 2022 and December 25, 2021 consisted of the following:


(in thousands)	December 31, 2022		December 25, 2021
Buildings	$	i 641,520	$	i 671,523
Land	i 127,613		i 152,841
Furniture and fixtures	i 23,464		i 17,855
Computer equipment and software	i 41,304		i 31,773
Store equipment	i 375,595		i 304,100
Leasehold improvements	i 228,006		i 172,737
Finance lease ROU assets	i 42,984		i 29,766
Vehicles	i 8,217		i 3,282
Construction in progress	i 313,821		i 133,724
Total property and equipment	i 1,802,524		i 1,517,601
Less: accumulated depreciation	( i 256,786)		( i 166,617)
Total property and equipment, net	$	i 1,545,738	$	i 1,350,984

Depreciation expense was $ i 120 million, $ i 91 million and $ i 44 million for the years ended December 31, 2022, December 25, 2021, and December 26, 2020, respectively.

Note 6 — i Goodwill and Other Intangible Assets

Changes in the carrying amount of goodwill for the years ended December 31, 2022 and December 25, 2021 are as follows:

(in thousands)

Maintenance

Car Wash

Paint, Collision & Glass

Platform Services

Total

Balance at December 26, 2020

i 444,959

i 828,813

i 297,930

i 155,649

i 1,727,351

Acquisitions

i 14,661

i 166,988

i 24,742

i —

i 206,391

Purchase price adjustments

( i 637)

i 6,642

( i 44)

i —

i 5,961

Foreign exchange

i 13

( i 30,188)

i 624

i 240

( i 29,311)

Balance at December 25, 2021

i 458,996

i 972,255

i 323,252

i 155,889

i 1,910,392

Acquisitions

i 18,542

i 108,976

i 280,331

i —

i 407,849

Sale of business unit

i —

( i 685)

( i 3,495)

i —

( i 4,180)

Purchase price adjustments

i —

i 3,860

( i 34)

i —

i 3,826

Foreign exchange

( i 130)

( i 32,800)

( i 5,542)

( i 2,350)

( i 40,822)

Balance at December 31, 2022

i 477,408

i 1,051,606

i 594,512

i 153,539

i 2,277,065

Intangible assets for the years ended December 31, 2022 and December 25, 2021 are as follows:

(in thousands)

Balance at December 31, 2022

Gross Carrying Value

Impairment

Accumulated Amortization

Net Carrying Value

Definite Lived Amortizable

Franchise agreements

i 222,617

—

( i 59,466)

i 163,151

License agreements

i 11,968

—

( i 4,354)

i 7,614

Membership agreements

i 11,600

—

( i 5,480)

i 6,120

Customer relationships

i 128,127

—

( i 13,689)

i 114,438

Developed technology

i 25,717

—

( i 19,788)

i 5,929

Trademarks & other

i 26,256

—

( i 19,749)

i 6,507

Total definite lived amortizable

i 426,285

—

( i 122,526)

i 303,759

Indefinite-Lived

Trademarks

i 587,594

( i 125,450)

—

i 462,144

Total

i 1,013,879

( i 125,450)

( i 122,526)

i 765,903

Balance at December 25, 2021

Gross Carrying Value

Impairment

Accumulated Amortization

Net Carrying Value

Definite Lived Amortizable

Franchise agreements

i 223,625

—

( i 49,529)

i 174,096

License agreements

i 12,044

—

( i 3,091)

i 8,953

Membership agreements

i 11,600

—

( i 3,270)

i 8,330

Customer relationships

i 59,585

—

( i 8,797)

i 50,788

Developed technology

i 25,882

—

( i 18,959)

i 6,923

Trademarks & other

i 17,364

—

( i 13,055)

i 4,309

Total definite lived amortizable

i 350,100

—

( i 96,701)

i 253,399

Indefinite-Lived

Trademarks

i 562,784

i —

—

i 562,784

Total

i 912,884

i —

( i 96,701)

i 816,183

The Company acquired a number of car wash businesses over the past two years. As part of those acquisitions, the Company determined a fair value for each of the associated intangible assets including trade names and customer relationships. During the second quarter of 2022, the Company made the strategic decision to rebrand the majority of its U.S. car wash locations to operate under the name “Take 5 Car Wash”, and therefore will be discontinuing the use of certain car wash trade names that were previously determined to have indefinite lives. Using a projected discounted cash flow analysis based on the relief from royalty method, the fair value of the trade names was determined to be $ i 6 million while their carrying value was $ i 132 million. As a result, the Company recognized a $ i 125 million impairment charge, which is reported as trade name impairment in the consolidated statement of operations. The transition will take approximately two and a half years to complete, and therefore the remaining carrying value will be amortized over this period.

During the year ended December 26, 2020, the Company elected to discontinue the use of a trade name and, as a result, recognized a $ i 3 million impairment charge, which is included as a component of asset impairment charges in the consolidated statement of operations.

Amortization expense was $ i 27 million, $ i 19 million, and $ i 18 million for the years ended December 31, 2022, December 25, 2021, and December 26, 2020, respectively.

Amortization expense related to definite lived intangible assets for the next five years and thereafter are as follows:


(in thousands)	Amount
2023	$	i 28,616
2024	i 26,317
2025	i 21,951
2026	i 20,605
2027	i 19,737
Thereafter	i 186,533
Total	$	i 303,759

Note 7— i Revenue from Contracts with Customers

The Company records contract assets for the incremental costs of obtaining a contract with a customer if it expects the benefit of those costs to be longer than one year and if such costs are material. Commission expenses, a primary cost associated with the sale of franchise licenses, are amortized to selling, general and administrative expenses in the consolidated statements of operations ratably over the life of the associated franchise agreement.

Capitalized costs to obtain a contract as of December 31, 2022 and December 25, 2021 were $ i 7 million and $ i 11 million, respectively, and are presented within deferred commissions on the consolidated balance sheets. The Company recognized an immaterial amount of costs during the years ended December 31, 2022 and December 25, 2021, respectively, that were recorded as a contract asset at the beginning of the year.

Contract liabilities consist primarily of deferred franchise fees and deferred development fees. The Company had contract liabilities of $ i 29 million and $ i 27 million as of December 31, 2022 and December 25, 2021, respectively, which are presented within deferred revenue on the consolidated balance sheets. The Company recognized $ i 4 million and $ i 3 million in revenue relating to contract liabilities during the year ended December 31, 2022 and December 25, 2021, respectively.

Note 8— i Long-term Debt

Our long-term debt obligations consist of the following:


(in thousands)	December 31, 2022		December 25, 2021
Series 2018-1 Securitization Senior Notes, Class A-2	$	i 261,938	$	i 264,688
Series 2019-1 Securitization Senior Notes, Class A-2	i 288,000		i 291,000
Series 2019-2 Securitization Senior Notes, Class A-2	i 266,063		i 268,813

Series 2020-1 Securitization Senior Notes, Class A-2	i 170,625		i 172,375
Series 2020-2 Securitization Senior Notes, Class A-2	i 441,000		i 445,500
Series 2021-1 Securitization Senior Notes, Class A-2	i 444,375		i 448,875

Series 2022-1 Securitization Senior Notes, Class A-2	i 364,088		i —
Term Loan Facility	i 496,250		i 500,000
Other debt (a)	i 51,836		i 39,082
Total debt	i 2,784,175		i 2,430,333

Less: debt issuance costs	( i 45,908)		( i 47,969)
Less: current portion of long-term debt	( i 32,986)		( i 26,044)
Total long-term debt, net	$	i 2,705,281	$	i 2,356,320

(a)Amount primarily consists of finance lease obligations. See Note 10.

Scheduled debt repayments for the next five fiscal years and thereafter are as follows:


(in thousands)
2023	$	i 32,986
2024	i 32,228
2025	i 286,140
2026	i 559,548
2027	i 530,717
Thereafter	i 1,342,556
Total future repayments	$	i 2,784,175

2015-1 Securitization Senior Notes

In July 2015, Driven Brands Funding, LLC (the “Issuer”) issued $ i 410 million 2015-1 Securitization Senior Notes (the “2015-1 Senior Notes”) bearing a fixed interest rate of i 5.216% per annum. The 2015-1 Senior Notes had a final legal maturity date in July 2045. The Company capitalized $ i 9 million of debt issuance costs related to the 2015 Senior Notes. In December 2020, the 2015-1 Senior Notes were paid in full and approximately $ i 2 million of debt issuance costs were written off to loss on debt extinguishment.

2016-1 Securitization Senior Notes

In May 2016, the Issuer issued $ i 45 million 2016-1 Securitization Senior Notes (the “2016-1 Senior Notes”) bearing a fixed interest rate of i 6.125% per annum. The 2016-1 Senior Notes had a final legal maturity date in July 2046. The Company capitalized $ i 2 million of debt issuance costs related to the 2016-1 Senior Notes. On December 14, 2020, the 2016-1 Senior Notes were paid in full and approximately $ i 1 million of debt issuance costs were written off to loss on debt extinguishment.

2018-1 Securitization Senior Notes

In April 2018, the Issuer issued $ i 275 million Series 2018-1 Securitization Senior Secured Notes (the “2018-1 Senior Notes”) bearing a fixed interest rate of i 4.739% per annum. The 2018-1 Senior Notes have a final legal maturity date in April 2048 and an anticipated repayment date in April 2025. The 2018-1 Senior Notes are secured by substantially all assets of the Issuer and are guaranteed by the Securitization Entities. The Company capitalized $ i 7 million of debt issuance costs related to the 2018-1 Senior Notes.

2019-1 Securitization Senior Notes

In March 2019, the Issuer issued $ i 300 million of Series 2019-1 Securitization Senior Notes (the “2019-1 Senior Notes”) bearing a fixed interest rate of i 4.641% per annum. The 2019-1 Senior Notes have a final legal maturity date in April 2049 and an anticipated repayment date in April 2026. The 2019-1 Senior Notes are secured by substantially all assets of the Issuer and are guaranteed by the Securitization Entities. The Company capitalized $ i 6 million of debt issuance costs related to the 2019-1 Senior Notes.

2019-2 Securitization Senior Notes

In September 2019, the Issuer issued $ i 275 million Series 2019-2 Securitization Senior Secured Notes (the “2019-2 Senior Notes”) bearing a fixed interest rate of i 3.981% per annum. The 2019-2 Senior Notes have a final legal maturity date in October 2049 and an anticipated repayment date in October 2026. The 2019-2 Senior Notes are secured by substantially all assets of the Issuer and are guaranteed by the Securitization Entities. The Company capitalized $ i 6 million of debt issuance costs related to the 2019-2 Senior Notes.

Series 2019-3 Variable Funding Securitization Senior Notes

In December 2019, the Issuer issued Series 2019-3 Variable Funding Senior Notes (the “2019 VFN”) in the revolving amount of $ i 115 million. The 2019 VFN have a final legal maturity date in January 2050. The commitment under the 2019 VFN was set to expire in July 2022, with the option of i three i one-year extensions. In July 2022, the Company exercised the option to extend an additional year. The 2019 VFN are secured by substantially all assets of the Issuer and are guaranteed by the Securitization Entities. The Issuer may elect interest at the Base Rate plus an applicable margin or London Interbank Offered Rate (“LIBOR”) plus an applicable margin (the LIBOR rate as the applicable interest rate). The Company capitalized $ i 1 million of debt issuance

costs related to the 2019-3 VFN. i i No / amounts were outstanding under the 2019 VFN as of December 31, 2022 and December 25, 2021. As of December 31, 2022, there were $ i 24.5 million of outstanding letters of credit that reduced the borrowing availability under the 2019 VFN.

2020-1 Securitization Senior Notes

In July 2020, Driven Brands Funding, LLC and Driven Brands Canada Funding Corporation (together, the “Co-Issuers”), each wholly owned indirect subsidiaries of the Company, issued $ i 175 million 2020-1 Securitization Senior Notes (the “2020-1 Senior Notes”) bearing a fixed interest rate of i 3.786% per annum. The 2020-1 Senior Notes have a final legal maturity date in July 2050 and an anticipated repayment date in July 2027. The 2020-1 Senior Notes are secured by substantially all assets of the Co-Issuers and are guaranteed by the Canadian Co-Issuer and various subsidiaries of the Canadian Co-Issuer. The Company capitalized $ i 11 million of debt issuance costs related to the 2020-1 Senior Notes.

2020-2 Securitization Senior Notes

In December 2020, the Co-Issuers issued $ i 450 million 2020-2 Securitization Senior Notes (the “2020-2 Senior Notes”) bearing a fixed interest rate of i 3.237% per annum. The 2020-2 Senior Notes have a final legal maturity date in January 2051; and an anticipated repayment date in January 2028. The 2020-2 Senior Notes are secured by substantially all assets of the Co-Issuers and are guaranteed by the Securitization Entities. The Company capitalized $ i 8 million of debt issuance costs related to the 2020-2 Senior Notes. The Company used the proceeds of these notes to fully repay the 2015-1 Senior Notes and 2016-1 Senior Notes detailed above.

2021-1 Securitization Senior Notes

In September 2021, the Co-Issuers issued $ i 450 million of 2021-1 Securitization Senior Notes (the “2021-1 Senior Notes”) bearing a fixed interest rate of i 2.791% per annum. The 2021-1 Senior Notes have a final legal maturity date in October 2051 and an anticipated repayment date in October 2028. The 2021-1 Senior Notes are secured by substantially all assets of the Co-issuers and are guaranteed by the Securitization Entities. A portion of the proceeds from the issuance of the 2021-1 Senior Notes were used to pay off the outstanding balance on the Revolving Credit Facility with the remainder to be used for general corporate purposes, including future acquisitions. The Company capitalized $ i 10 million of debt issuance costs related to the 2021-1 Senior Notes.

2022-1 Securitization Senior Notes

In October 2022, the Co-Issuers issued $ i 365 million of 2022-1 Securitization Senior Notes (the “2022-1 Senior Notes”), bearing a fixed interest rate of i 7.393% per annum. The 2022-1 Senior Notes have a final legal maturity date in October 2052, and an anticipated repayment date in October 2027. The 2022-1 Senior Notes are secured by substantially all assets of the Co-issuers and are guaranteed by the Securitization Entities. The proceeds from the issuance of the 2022-1 Senior Notes were used for general corporate purposes, including the repayment of the Revolving Credit Facility creating capacity to invest in continued growth. In conjunction with the issuance of the 2022-1 Senior Notes, the Co-Issuers also issued Series 2022-1 Class A-1 Notes in the amount of $ i 135 million, which can be accessed at the Issuer’s option if certain conditions are met. The Company capitalized $ i 7 million of debt issuance costs related to the 2022-1 Senior Notes.

Credit Agreement

Revolving Credit Facility

In May 2021, Driven Holdings, LLC, (“the Borrower”) a Delaware limited liability company and indirect wholly-owned subsidiary of Driven Brands Holdings Inc., entered into a credit agreement to secure a revolving line of credit with a group of financial institutions (“Revolving Credit Facility”), which provides for an aggregate amount of up to $ i 300 million, and has a maturity date in May 2026 (“Credit Agreement”). Adjusted Base Rate (“ABR”) borrowings incur interest at the highest of (i) the federal funds rate plus i 0.50% per annum, (ii) the U.S. prime rate, and (iii) the one-month adjusted LIBOR plus i 1.00% per annum, in each case, plus an applicable margin of i 0.50%, which may increase to i 0.75% base on the Net First Lien Leverage Ratio under the Revolving Credit Facility. Eurocurrency borrowings incur interest at an adjusted LIBOR plus an applicable margin of i 1.50%, which may increase to i 1.75% based on the Net First Lien Leverage Ratio under the Revolving Credit Facility. The Revolving Credit Facility also includes periodic commitment fees based on the available unused balance and a quarterly administrative fee.

As of December 31, 2022, there was no outstanding balance on the Revolving Credit Facility.

Term Loan Facility

In December 2021, the Borrower amended the Credit Agreement to provide for a new term loan credit facility (the “Term Loan Facility”), which has an initial aggregate commitment of $ i 500 million, with loans and other extensions of credit thereunder maturing in December 2028. The Company capitalized $ i 9 million of debt issuance costs related to the Term Loan Facility.

Proceeds of borrowings of the Term Loan Facility are typically used for general corporate purposes. Borrowings bear interest at a rate equal to, at the Borrower’s option, either (a) a Eurocurrency rate determined by reference to adjusted LIBOR for the interest period (with a i 0.50% floor), plus an applicable margin of i 3.00% or (b) an ABR determined by reference to the highest of (i) the federal funds rate plus i 0.50% per annum, (ii) the U.S. prime rate, and (iii) the one-month adjusted LIBOR plus i 1.00% per annum, in each case, plus an applicable margin of i 2.00%. Starting with the second full calendar quarter after the funding of the Term Loan Facility, the Term Loan Facility requires scheduled quarterly payments in amounts equal to i 0.25% of the original aggregate principal amount of the Term Loan Facility, with the balance due at maturity.

Car Wash Senior Credit Facilities

As part of the ICWG acquisition, the Company assumed $ i 532 million of First Lien Term Loan debt. The First Lien Term Loan debt was set to mature in October 2024 and interest was charged at i 3.25% plus one-month LIBOR and was payable at either one-, two-, three- or six-monthly intervals. The loan was subject to quarterly repayments of i 0.25% of the original principal. As of December 26, 2020, the interest rate on this loan was i 4.25%. The Company recorded this loan at fair value upon the acquisition of ICWG. As of December 26, 2020, there was $ i 29 million of unamortized discount related to this loan. The loan was paid off in January 2021, and as a result the remaining unamortized discount was written-off and included loss on debt extinguishment in the consolidated statement of operations in the first quarter of 2021.

As part of the ICWG acquisition, the Company also assumed $ i 175 million of Second Lien Term Loan debt. The Second Lien Term Loan debt was set to mature in October 2025 and interest was charged at i 7.50% plus one-month LIBOR and was payable at either one-, two-, three- or six-monthly intervals. As of December 26, 2020, the interest rate on this loan was i 8.50%. The Company recorded this loan at fair value upon the acquisition of ICWG. As of December 26, 2020, there was $ i 17 million of unamortized discount related to this loan. The loan was paid off in January 2021, and as result the remaining unamortized discount was written-off and included loss on debt extinguishment in the consolidated statement of operations in the first quarter of 2021.

The Company also assumed a first lien revolving credit facility from ICWG with an aggregate principal amount of up to $ i 75 million, and was set to mature in October 2022, including a letter of credit sub-facility, a swingline loan sub-facility and an ancillary sub-facility. As of December 26, 2020 there was $ i 18 million outstanding on this credit facility and the interest rate was i 3.65%. The first lien revolving credit facility was terminated and paid off in January 2021.

Other Debt

In April 2020, the Company entered into a bridge loan with a financial institution in the amount of $ i 40 million, which was used to help finance 2020 acquisitions. The interest rate was based on LIBOR plus an applicable margin. The Company capitalized $ i 1 million of debt issuance costs related to the bridge loan. The bridge loan was subsequently paid in full in 2020 and approximately $ i 1 million of debt issuance costs were written off to loss on debt extinguishment.

Guarantees and Covenants of the Notes

Substantially all of the assets of the Company, including most of the domestic and certain of the foreign revenue-generating assets, which principally consist of franchise-related agreements, certain company-operated stores, certain product distribution agreements, intellectual property and license agreements for the use of intellectual property, are owned by subsidiaries of the Borrower and the Issuer, and are pledged to secure the Notes and indebtedness under the Credit Agreement (together the "Indebtedness"). The restrictions placed on the Issuer and its subsidiaries require that interest and principal (if any) on the Securitization Notes be paid prior to any residual distributions to the Company, and amounts are segregated weekly to ensure appropriate funds are reserved to pay the quarterly interest and principal (if any) amounts due. The amount of weekly cash flow that exceeds all expenses and obligations of the Issuer and its subsidiaries (including required reserve amounts) is generally remitted to the Company in the form of a dividend.

The Company’s Indebtedness is subject to certain quantitative covenants related to debt service coverage and leverage ratios. In addition, the agreements related to the Indebtedness also contain various affirmative and negative operating and financial reporting covenants, which are customary for such debt instruments. These covenants, among other things, limit the ability of the Issuer and its subsidiaries to sell assets; engage in mergers, acquisitions, and other business combinations; declare dividends

or redeem or repurchase capital stock; incur, assume, or permit to exist additional indebtedness or guarantees; make loans and investments; incur liens; and enter into transactions with affiliates. In the event that certain covenants are not met, the Indebtedness may become fully due and payable on an accelerated schedule. In addition, the Borrower and the Issuer may voluntarily prepay, in part or in full subject to certain pre-payment premiums or make-whole obligations.

As of December 31, 2022, the Issuer was in compliance with all covenants under the agreements discussed above.

Driven Brands Holdings Inc. has no material separate cash flows or assets or liabilities as of December 31, 2022. All business operations are conducted through its operating subsidiaries and it has no material independent operations. Driven Brands Holdings Inc. has no other material commitments or guarantees. As a result of the restrictions described above, certain of the subsidiaries’ net assets are effectively restricted in their ability to be transferred to Driven Brands Holdings Inc. as of December 31, 2022.

Note 9— i Segment Information

The Company’s worldwide operations are comprised of the following reportable segments: Maintenance, Car Wash, Paint, Collision & Glass and Platform Services.

The Maintenance segment is primarily composed of the Take 5 Oil and Meineke brands, and revenue is primarily derived from the performance of maintenance services, including oil changes and regularly scheduled and as-needed automotive maintenance services and vehicle component repair and replacement. Maintenance segment revenue also includes franchise royalties and fees and supply and other product sales.

The Paint, Collision & Glass segment is primarily composed of the ABRA, CARSTAR, Fix Auto, Maaco, AGN, and Uniban brands and services both retail and commercial customers such as commercial fleet operators and insurance carriers. Paint, Collision & Glass franchise includes revenue derived from license and royalty fees paid by franchisees, glass replacement and calibration and service revenue derived from company-operated locations, and supply and other product sales.

The Platform Services segment is primarily composed of the 1-800 Radiator & A/C, PH, Spire Supply, and ATI brands. Platform Services revenue is primarily derived from the sale of supplies and other products, as well as automotive training services and franchise license and royalty fees paid by franchisees.

Upon the acquisition of ICWG in August 2020, the Company determined an additional reportable segment (Car Wash) was necessary for the newly acquired business. Our Car Wash segment primarily operates under the IMO brand across Europe and Australia and a variety of regional brands in the U. S., which are currently being rebranded to Take 5 Car Wash, providing express-style conveyor car wash services to both retail and commercial customers.

In addition to the reportable segments, the Company’s consolidated financial results include “Corporate and Other” activity. Corporate and Other incurs costs related to the advertising revenues and expenses and shared service costs, which are related to finance, IT, human resources, legal, supply chain and other support services. Corporate and Other activity includes the adjustments necessary to eliminate certain inter-company transactions, namely sales by the Platform Services segment to the Paint, Collision & Glass and Maintenance segments.

The accounting policies applicable to each segment are generally consistent with those used in the consolidated financial statements. The Company’s Chief Operating Decision Maker evaluates the performance of its segments and allocates resources to them based on Segment Adjusted EBITDA, which is defined as earnings before interest expense, net, income tax expense, and depreciation and amortization, with further adjustments for acquisition-related costs, straight-line rent, equity compensation, store opening costs, loss on debt extinguishment and certain non-recurring, non-core, infrequent or unusual charges. Segment Adjusted EBITDA is a supplemental measure of the operating performance of our segments and may not be comparable to similar measures reported by other companies. No asset information has been provided for these reportable segments as the Chief Operating Decision Maker does not regularly review asset information by reportable segment.

Segment results for the years ended December 31, 2022, December 25, 2021 and December 26, 2020 are as follows:

Year Ended December 31, 2022

(in thousands)

Maintenance

Car Wash

Paint,
Collision &
Glass

Platform
Services

Corporate
and Other

Total

Franchise fees and royalties

i 45,046

i —

i 93,026

i 33,662

i —

i 171,734

Company-operated store sales

i 692,947

i 390,502

i 235,924

i 5,035

i —

i 1,324,408

Independently-operated store sales

i —

i 195,157

i —

i 195,157

Advertising

i —

i 87,750

Supply and other

i 61,869

i 7,061

i 81,714

i 157,676

( i 54,175)

i 254,145

Total revenue

i 799,862

i 592,720

i 410,664

i 196,373

i 33,575

i 2,033,194

Segment Adjusted EBITDA

i 262,608

i 184,717

i 135,447

i 72,538

( i 138,661)

i 516,649

Year Ended December 25, 2021

(in thousands)

Maintenance

Car Wash

Paint,
Collision &
Glass

Platform
Services

Corporate
and Other

Total

Franchise fees and royalties

i 35,932

i —

i 79,125

i 29,356

i —

i 144,413

Company-operated store sales

i 503,719

i 277,118

i 57,804

i 5,005

i —

i 843,646

Independently-operated store sales

i —

i 204,246

i —

i 204,246

Advertising

i —

i 75,599

Supply and other

i 37,425

i 6,071

i 67,272

i 127,413

( i 38,805)

i 199,376

Total revenue

i 577,076

i 487,435

i 204,201

i 161,774

i 36,794

i 1,467,280

Segment Adjusted EBITDA

i 179,073

i 153,065

i 82,731

i 56,954

( i 107,640)

i 364,183

Year Ended December 26, 2020

(in thousands)

Maintenance

Car Wash

Paint,
Collision &
Glass

Platform
Services

Corporate
and Other

Total

Franchise fees and royalties

i 28,466

i —

i 66,020

i 23,102

( i 462)

i 117,126

Company-operated store sales

i 366,194

i 79,969

i 37,401

i 5,955

( i 252)

i 489,267

Independently-operated store sales

i —

i 67,193

i —

i 67,193

Advertising

i —

i 59,672

Supply and other

i 22,197

i 2,517

i 62,072

i 110,331

( i 26,175)

i 170,942

Total revenue

i 416,857

i 149,679

i 165,493

i 139,388

i 32,783

i 904,200

Segment Adjusted EBITDA

i 114,764

i 43,137

i 66,276

i 49,408

( i 65,211)

i 208,374

The reconciliations of income before taxes to Segment Adjusted EBITDA for the years ended December 31, 2022, December 25, 2021, and December 26, 2020 are as follows:

Year Ended

(in thousands)

Income before taxes

i 68,340

i 34,892

i 7,156

Acquisition related costs(a)

i 15,304

i 62,386

i 15,682

Non-core items and project costs, net(b)

i 20,241

i 5,656

i 6,036

Store opening costs

i 2,878

i 2,497

i 2,928

Sponsor management fees(c)

i —

i 5,900

Straight-line rent adjustment(d)

i 14,965

i 11,619

i 7,150

Equity-based compensation expense(e)

i 20,583

i 4,301

i 1,323

Foreign currency transaction loss (gain)(f)

i 17,168

i 20,683

( i 13,563)

Bad debt expense (recovery)(g)

( i 449)

( i 3,183)

i 3,201

i Trade name impairment(h)

i 125,450

i —

Asset sale leaseback (gain) loss, impairment and closed store expenses(i)

( i 29,083)

( i 8,935)

i 9,311

Loss on debt extinguishment(j)

i —

i 45,576

i 5,490

Depreciation and amortization

i 147,156

i 112,777

i 62,114

Interest expense, net

i 114,096

i 75,914

i 95,646

Segment Adjusted EBITDA

i 516,649

i 364,183

i 208,374

a.Consists of acquisition costs as reflected within the consolidated statement of operations, including legal, consulting and other fees and expenses incurred in connection with acquisitions completed during the applicable period, as well as inventory rationalization expenses incurred in connection with acquisitions. We expect to incur similar costs in connection with other acquisitions in the future and, under U.S. GAAP, such costs relating to acquisitions are expensed as incurred and not capitalized.

b. Consists of discrete items and project costs, including (i) third party consulting and professional fees associated with strategic transformation initiatives, (ii) wage subsidies received directly applicable to the COVID-19 pandemic, (iii) $ i 15 million relating to the change in estimate relating to the Tax Receivable Agreement in 2022, and (iv) other miscellaneous expenses, including non-capitalizable expenses relating to the Company’s initial public offering and other strategic transactions.

c. Includes management fees paid to Roark Capital Management, LLC.

d. Consists of the non-cash portion of rent expense, which reflects the extent to which our straight-line rent expense recognized under U.S. GAAP exceeds or is less than our cash rent payments.

e. Represents non-cash equity-based compensation expense.

f. Represents foreign currency transaction gains/losses, net that primarily related to the remeasurement of our intercompany loans. These losses are partially offset by unrealized gains/losses on remeasurement of cross currency swaps and forward contracts.

g. Represents the expense (recovery) of previously uncollectible receivables outside of normal operations.

h. Relates to an impairment of certain Car Wash trade names as the Company elected to discontinue their use.

i. Relates to net (gain) loss on sale leasebacks, the discontinuation of the use of a trade name, as well as impairment of certain fixed assets and operating lease right-of-use assets related to closed locations. Also represents lease exit costs and other costs associated with stores that were closed prior to the respective lease termination dates.

j. Represents charges incurred related to the Company’s repayment of the Car Wash Senior Credit Facilities in 2021 and a bridge loan which was used to help finance the 2020 acquisitions as well as charges related to the early settlement of the Company’s 2015-1 and 2016-1 securitized notes.

There were no customers that accounted for 10% or more of the Company’s total revenue or accounts receivable across all segments in 2022, 2021, or 2020.

The following table shows information relating to the geographic regions in which the Company operates:

Total Revenue for Year Ended

Total Long-Lived Assets

(in thousands)

United States

i 1,690,128

i 1,137,226

i 721,448

i 2,402,866

i 1,843,952

i 1,147,235

Canada

i 140,972

i 122,179

i 115,559

i 23,605

i 24,503

i 27,616

Rest of world

i 202,094

i 207,875

i 67,193

i 418,456

i 478,154

i 537,468

Total

i 2,033,194

i 1,467,280

i 904,200

i 2,844,927

i 2,346,609

i 1,712,319

The following table shows the Company’s capital expenditures by reportable segment:

(in thousands)

Maintenance

Car Wash

Paint,
Collision &
Glass

Platform
Services

Corporate
and Other

Total

Capital expenditures

2022

i 81,363

i 332,966

i 6,985

i 669

i 14,222

i 436,205

2021

i 49,454

i 105,057

i 920

i 231

i 5,098

i 160,760

2020

i 38,250

i 9,580

i 1,504

i 268

i 2,857

i 52,459

Note 10— i i Leases /

The Company’s lease and sublease portfolio primarily consists of the real property leases related to franchisee service centers and company-operated service center locations, as well as office space and various vehicle and equipment leases. Leases for real property generally have terms ranging from i 10 to i 25 years, with most having one or more renewal options ranging from one to i 10 years. The Company does not include option periods in its determination of the lease term unless renewals are deemed reasonably certain to be exercised. Equipment and vehicle leases generally have terms ranging from one to i i five years / . The Company’s portfolio of leases does not contain any material residual value guarantees or restrictive covenants.

The following table details our total investment in operating and finance leases where the Company is the lessee:

(in thousands)

Balance Sheet Location

Right-of-use assets

Finance leases

Property and equipment, net

i 42,984

i 29,766

Operating leases

Operating lease right-of-use assets

i 1,299,189

i 995,625

Total right-of-use assets

i 1,342,173

i 1,025,391

Current lease liabilities

Finance leases

Current portion of long-term debt

i 4,736

i 3,101

Operating leases

Accrued expenses and other liabilities

i 76,767

i 57,588

Total current lease liabilities

i 81,503

i 60,689

Long-term lease liabilities

Finance leases

Long-term debt

i 40,719

i 27,957

Operating leases

Operating lease liabilities

i 1,177,501

i 931,604

Total long-term lease liabilities

i 1,218,220

i 959,561

The lease cost for operating and finance leases recognized in the consolidated statement of operations were as follows:

(in thousands)

Finance lease expense:

Amortization of right-of-use assets

i 5,207

i 2,792

Interest on lease liabilities

i 1,943

i 1,141

Operating lease expense

i 130,333

i 116,362

Short-term lease expense

i 1,859

i 1,935

Variable lease expense

i 1,541

i 963

Total lease expense, net

i 140,883

i 123,193

The Company recorded a $ i 5 million and $ i 3 million impairment loss during the years ended December 31, 2022 and December 26, 2020, respectively, related to Company’s decision to exit certain leased locations. There were no lease impairments recorded for the year ended December 25, 2021.

The Company also subleases certain facilities to franchisees and others, which generated $ i 5 million, $ i 7 million, and $ i 7 million in sublease revenue during each of the years ended December 31, 2022, December 25, 2021 and December 26, 2020, respectively, and is included as a component of supply and other revenue on the consolidated statement of operations.

For the year ended December 31, 2022, the Company sold i 78 car wash and i 11 maintenance properties in various locations throughout the U. S. for a total of $ i 334 million, resulting in a i net gain of $ i 25 million. Concurrently with the closing of these sales, the Company entered into various operating lease agreements pursuant to which the Company leased back the properties. These lease agreements have terms ranging from i 15 to i 20 years and provide the Company with the option of extending the lease for up to i 20 additional years. The Company does not include option periods in its determination of the lease term unless renewals are deemed reasonably certain to be exercised. The Company recorded an operating lease right-of-use asset and operating lease liability of approximately $ i 264 million and $ i 263 million, respectively, related to these lease arrangements.

For the year ended December 25, 2021, the Company sold i 38 car wash and i 5 maintenance properties in various locations throughout the U. S. for a total of $ i 144 million, resulting in a i net gain of $ i 12 million. Concurrently with the closing of these sales, the Company entered into various operating lease agreements pursuant to which the Company leased back the properties. These lease agreements have terms ranging from i 15 to i 20 years and provide the Company with the option of extending the lease for up to i 20 additional years. The Company does not include option periods in its determination of the lease term unless renewals are deemed reasonably certain to be exercised. The Company recorded an operating lease right-of-use asset and operating lease liability of approximately $ i 125 million and $ i 124 million, respectively, related to these lease arrangements.

During the year ended December 26, 2020, the Company received concessions from certain landlords in the form of rent deferrals of approximately $ i 2 million and an immaterial amount of rent abatement and elected to account for these rent concessions as though enforceable rights and obligations for those concessions existed in the original lease agreements and, as a result, the lease concessions were not considered modifications of the existing lease contract.

Weighted average remaining lease terms (years)

Operating

i 15.4

i 15.0

Financing

i 12.0

i 11.7

Weighted average remaining lease terms (years)

Operating

i 5.18

i 4.78

Financing

i 5.01

i 5.06

Supplemental cash flow information related to the Company’s lease arrangements were as follows:


	Year Ended
(in thousands)	December 31, 2022		December 25, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used in operating leases	$	i 118,474	$	i 106,519
Operating cash flows used in finance leases	i 1,716		i 1,061
Financing cash flows used in finance leases	i 1,659		i 1,286
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	i 300,034	$	i 200,499
Finance leases	i 11,020		i 12,951

i i i

As of December 31, 2022, future minimum lease payments under noncancellable leases were as follows:

(in thousands)

Finance

Operating

Income from subleases

2023

i 7,195

i 146,548

i 6,486

2024

i 6,135

i 142,207

i 4,703

2025

i 5,443

i 136,980

i 4,211

2026

i 4,854

i 129,696

i 3,846

2027

i 4,663

i 120,151

i 3,507

Thereafter

i 31,711

i 1,266,868

i 9,567

Total undiscounted cash flows

i 60,001

i 1,942,450

i 32,320

Less: Present value discount

i 14,546

i 688,182

Less: Current lease liabilities

i 4,736

i 76,767

Long-term lease liabilities

i 40,719

i 1,177,501

/ / /

Note 11— i Derivatives

The Company utilizes derivative financial instruments primarily to hedge its exposure to changes in interest rates and movements in foreign currency exchange rates. All derivative financial instruments are recorded on the balance sheet at their respective fair values. The Company does not use financial instruments or derivatives for any trading or other speculative purposes.

Derivatives Designated as Cash Flow Hedges of Interest Rate Risk

In July 2022, the Company entered into an interest rate swap, which was designated as a hedge against adverse fluctuations in interest rates by reducing the exposure to variability in cash flows relating to either interest payments or total proceeds on a forecasted issuance of long-term debt. The notional amount of this hedge was $ i 275 million. In October 2022, upon issuance of the 2022-1 Senior Notes, the Company terminated the interest rate swap and recorded the related gain of $ i 11 million in accumulated other comprehensive income and reclassified less than $ i 1 million into interest expense, net in the fourth quarter of 2022. This gain will be recognized ratably over the i 5 year life of the contract.

Historically, the Company entered into interest rate swap transactions to hedge against the changes in cash flows associated with changes in the one-month LIBOR, the benchmark interest rate being hedged, associated with interest payments on the first $ i 300 million of the Company's First and Second Lien Term Loans, respectively. See Note 8 for additional details on the Company’s debt agreements. In January 2021, the company officially terminated the interest rate swaps associated with the debt agreements and recorded an immaterial amount of expense related to the cancellation of this instrument.

Derivatives Designated as Fair Value Hedge of Exchange Rate Risk

In December 2021, the Company entered into a cross currency swap as an economic hedge against exposure to changes in the Canadian dollar in connection with its Canadian securitization transaction, which is discussed in greater detail in Note 8. The

cross currency swap has an $ i 88 million notional and a settlement date in July 2027. Throughout the term of the swap agreements, the Company pays interest at a fixed rate in Canadian dollars and receives interest at a fixed rate in U.S. dollars.

The Company recorded a gain of $ i 7 million and a loss of $ i 1 million relating to foreign currency derivative contracts in other comprehensive income and as a component of accumulated other comprehensive income as of December 31, 2022 and December 25, 2021, respectively. The Company expects an immaterial amount to be reclassified from other comprehensive income to loss (gain) on foreign currency transactions, net in the consolidated statement of operations during the next 12 months. The Company will continue to assess the effectiveness of the hedge on a quarterly basis.

Derivatives Not Designated as Hedges of Exchange Rate Risk

To manage exposure to changes with our foreign currency intercompany transactions, the Company enters into short term foreign currency forward contracts. We have foreign currency derivative contracts with a notional value of $ i 87 million. The settlements can be rolled into the next periods trade if desired.

As part of the acquisition of ICWG, the Company assumed three cross-currency interest rate swap agreements to mitigate the interest rate risk and exchange rate risk associated with the variable interest, USD-denominated senior loans raised by ICWG. The cross-currency interest rate swaps had a total notional amount of $ i 235 million and were scheduled to terminate in October 2021. In January 2021, the company officially terminated the cross currency swaps associated with the debt agreements and recorded an immaterial amount of expense related to the cancellation of this instrument. Throughout the term of the swap agreements, the Company paid interest at a fixed rate and received interest at the three-month LIBOR rate.

The Company recorded a less than $ i 1 million loss, a $ i 5 million gain, and a $ i 10 million loss during the years ended December 31, 2022, December 25, 2021, and December 26, 2020, respectively, related to the change in fair value of derivatives in loss (gain) on foreign currency transactions, net in the consolidated statement of operations.

The fair value of our derivative instruments held were as follows:

(in thousands)

Balance Sheet Location

Fair Value

Derivative liabilities

Derivatives designated as hedging instruments:

Cross currency swap

Other assets

i 2,148

Cross currency swap

Accrued expenses and other liabilities

i 165

Derivatives not designated as hedging instruments:

Foreign exchange forward contract

Prepaid and other assets

i 158

Foreign exchange forward contract

Accrued expenses and other liabilities

i 4,840

(in thousands)

Balance Sheet Location

Fair Value

Derivative liabilities:

Derivatives designated as hedging instruments:

Cross currency swap

Accrued expenses and other liabilities

i 336

Cross currency swap

Long-term accrued expenses and other liabilities

i 200

Counterparty Credit Risk

By entering into derivative instrument contracts, the Company exposes itself, from time to time, to counterparty credit risk. Counterparty credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is in an asset position, the counterparty has a liability to the Company, which creates credit risk for the Company. The Company attempts to minimize this risk by selecting counterparties with investment grade credit ratings, limiting its exposure to any single counterparty and regularly monitoring its market position with each counterparty.

Note 12— i Income Taxes

The provision for income taxes was computed based on the following amounts of income (loss) before income taxes:

Year Ended

(in thousands)

Domestic

i 63,297

i 86,257

i i 996 /

Foreign

i 5,043

( i 51,365)

i i 6,160 /

Income before income taxes

i 68,340

i 34,892

i i 7,156 /

The components of our income tax expense (benefit) were as follows:

Year Ended

(in thousands)

Current:

Federal

( i 4,964)

i 6,969

( i 908)

State

i 5,192

i 3,990

i 3,420

Foreign

i 1,548

i 3,414

i 4,924

Deferred:

Federal

i 21,723

i 22,324

i 2,071

State

( i 6,169)

( i 787)

i 2,316

Foreign

i 7,837

( i 10,554)

( i 451)

Total income tax expense

i 25,167

i 25,356

i 11,372

/ i

A reconciliation between the U.S. federal statutory tax rate and the effective tax rate reflected in the accompanying financial statements is as follows:

Year Ended

(in thousands)

Federal income tax at statutory rate

i 14,351

i 21.0

i 7,327

i 21.0

i 1,503

i 21.0

State income taxes, net of federal tax benefits

( i 459)

( i 0.7)

i 4,971

i 14.2

i 1,605

i 22.4

State deferred tax rate change

( i 2,358)

( i 3.5)

( i 2,118)

( i 6.1)

i 1,689

i 23.6

Foreign deferred tax rate change

i 1,190

i 1.7

i 2,375

i 6.8

i —

Foreign tax rate differential

( i 188)

( i 0.3)

( i 2,135)

( i 6.1)

( i 869)

( i 12.1)

Non-deductible advertising fund loss

i 694

i 1.0

( i 32)

( i 0.1)

i 486

i 6.8

Non-deductible transaction costs

i —

i 10,525

i 30.2

i 1,006

i 14.1

Non-deductible stock compensation

i 1,224

i 1.8

i 598

i 1.7

i 278

i 3.9

Taxable foreign source income

i 5,174

i 7.6

i —

Other permanent differences

( i 517)

( i 0.8)

i 809

i 2.3

( i 176)

( i 2.5)

Deferred tax adjustments

i 1,617

i 2.5

( i 147)

( i 0.4)

i 818

i 11.4

Current tax adjustments

i 356

i 0.5

( i 956)

( i 2.7)

( i 647)

( i 9.0)

Reserve for uncertain tax positions

( i 76)

( i 0.1)

( i 313)

( i 0.9)

i 2,232

i 31.2

Valuation allowance on deferred tax asset

i 4,158

i 6.1

i 4,452

i 12.8

i 3,447

i 48.2

Effective tax rate

i 25,167

i 36.8

i 25,356

i 72.7

i 11,372

i 159.0

Deferred tax assets (liabilities) are comprised of the following:


(in thousands)	December 31, 2022		December 25, 2021
Deferred tax asset
Accrued liabilities	$	i 7,592	$	i 11,165
Accounts receivable allowance	i 5,046		i 4,590
Net operating loss carryforwards	i 63,128		i 31,024

Lease liabilities	i 316,212		i 250,401
Interest expense limitation	i 35,154		i 24,622
Deferred revenue	i 6,693		i 6,447
Other deferred assets	i 8,952		i 2,171
Total deferred tax asset	i 442,777		i 330,420
Less valuation allowance	( i 27,422)		( i 24,371)
Net deferred tax asset	i 415,355		i 306,049
Deferred tax liabilities
Goodwill and intangible assets	i 164,004		i 188,627
Right-of-use assets	i 320,006		i 246,726
Fixed asset basis differences	i 188,761		i 116,902
Unrealized foreign exchange differences	i 5,542		i 2,970
Other deferred liabilities	i 10,880		i 6,382
Total deferred liabilities	i 689,193		i 561,607
Net deferred liabilities	$	i 273,838	$	i 255,558

/ i

The following table presents the activity included in the deferred tax valuation allowance as follows:


(in thousands)	December 31, 2022		December 25, 2021
Balance at beginning of period	$	i 24,371	$	i 21,284


Additions	i 4,158		i 4,452
Translation	( i 1,107)		( i 1,365)
Balance at end of period	$	i 27,422	$	i 24,371

During the year ended December 31, 2022, the valuation allowance increased by $ i 3 million principally related to a valuation allowance connected to a deferral on interest in Germany and the application of anti-hybrid loss limitation rules in the U.K.

As of December 31, 2022, the Company had pre-tax federal operating loss carry forwards of $ i 225 million, of which $ i 34 million are subject to expiration by 2040 and the remainder is not subject to expiration. State tax effected net operating loss carryforwards were $ i 8 million for which portions begin to expire in fiscal year 2023. Some of the federal net operating losses are subject to certain limitations under IRC Sect. 382, however, the Company believes that these losses are more likely than not to be utilized. As of December 31, 2022, the Company had pre-tax foreign operating loss carryforwards of $ i 31 million for which portions of the operating loss carryforwards begin to expire in fiscal year 2023, while others are indefinite lived and not subject to expiration. As of December 31, 2022, the Company had $ i 1.1 billion of goodwill that was deductible for tax purposes.

The Company has designated the undistributed earnings of its foreign operations as indefinitely reinvested and as a result the Company does not provide for deferred income taxes on the unremitted earnings of these subsidiaries. As of December 31, 2022, the determination of the amount of such unrecognized deferred tax liability is not practicable.

At December 31, 2022, the Company had $ i 2 million of unrecognized tax benefits. i A reconciliation of the change in the accrual for unrecognized income tax benefits is as follows:


(in thousands)	December 31, 2022		December 25, 2021
Balance at beginning of period	$	i 1,909	$	i 2,232

Increases (reductions) for prior year tax positions	( i 76)		( i 313)
Translation adjustments	( i 105)		$	( i 10)
Balance at end of period	$	i 1,728	$	i 1,909

The unrecognized income tax benefits could affect the Company's effective tax rate, if recognized. However, it is not expected that any material portion of the unrecognized tax benefit will reverse over the next twelve months. The Company had $ i i 0.6 / million of aggregate accrued interest and penalties at both December 31, 2022 and December 25, 2021.

As of December 31, 2022 the U.S. consolidated group of companies had the following tax credit carryforwards available:


(in thousands)	Tax Credits ($)		Year of Expiration
Work Opportunity Tax Credit: 2022	$	i 533	2043

The Company files income tax returns in the U.S., Canada, and various state and foreign jurisdictions. Examinations by various taxing authorities covering years 2018 to 2020 are on-going. The Company is generally subject to income tax examinations for years 2016 through 2021 and believes appropriate provisions for all outstanding matters have been made for all jurisdictions and open years.

Tax Cuts and Jobs Act

The Tax Cuts and Jobs Act (“TCJA”) was enacted on December 22, 2017 and brought about additional tax provision to consider by multinational companies. The Company's policy is to account for global intangible low-taxed income ("GILTI") as a period cost in the year the tax is incurred and, therefore, does not record any taxes related to GILTI. For fiscal year 2022, the Company estimated net GILTI income of $ i 25 million and a IRC Sec. 163(j) interest limitation of $ i 53 million. Other provisions, such as Base Erosion and Anti-abuse Tax (“BEAT”) and Foreign Derived Intangible Income (“FDII”) are relevant to the Company but had insignificant income tax impact for 2022.

Note 13— i Related-Party Transactions

The Company had management advisory services agreements with Roark Capital Management, LLC (“Roark”), an affiliated entity, which provided that the Company pay an annual advisory services fee to Roark. The Company and Roark terminated all advisory services agreements in January 2021 in connection with the Company’s initial public offering. The Company paid $ i 6 million during the year ended December 26, 2020.

As further described in Note 1, in August 2020, pursuant to the acquisition of ICWG, RC IV ICW Merger Sub LLC, a subsidiary of RC IV Cayman ICW Holdings LLC and the direct parent of RC IV Cayman ICW LLC, merged with and into Driven Investor LLC, our former parent company. Both Driven Equity LLC and RC IV Cayman ICW Holdings LLC were related entities of Roark Capital Management, LLC.

In June 2015, the Company provided a loan of $ i 1 million secured by a Promissory Note, which was scheduled to mature in July 2020 to an Executive of the Company in connection with that Executive’s purchase of i 1,500 units of Driven Investor LLC. Those units were pledged to Driven Brands, Inc. as security for repayment of the loan. In February 2020, the loan was settled and extinguished.

The Company made payments for facilities maintenance services in the aggregate amount of approximately $ i 6 million and $ i 1.5 million during the years ended December 31, 2022 and December 25, 2021, respectively, to Divisions Maintenance Group, an entity owned by affiliates of Roark Capital Management, LLC, which is related to the company’s principal stockholders (Driven Equity Sub LLC, Driven Equity LLC, RC IV Cayman ICW Holdings Sub LLC and RC IV Cayman ICW Holdings LLC). The transactions were reviewed, ratified, and approved by the Audit Committee of the Company’s Board of Directors in accordance with the Company’s Related Person Transactions Policy.

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Note 14— i Employee Benefit Plans

The Company has a 401(k) plan that covers eligible employees as defined by the plan agreement. Employer contributions to the plan were $ i 2 million, $ i 1 million, and less than $ i 1 million in 2022, 2021, and 2020, respectively.

The Company has a rabbi trust to fund the obligations of its non-qualified deferred compensation plan for its executive level employees, which became effective as of January 2018. The rabbi trust comprises various mutual fund investments selected by plan participants. The Company records the mutual fund investment assets at fair value with any subsequent changes in fair value recorded in the consolidated statements of operations. As such, offsetting changes in the asset values and defined contribution plan obligations would be recorded in the statements of operations in the same period. The trust asset balances and the deferred compensation plan liability balances were $ i i 1 / million as of December 31, 2022, and December 25, 2021. The trust assets and liabilities are recorded within prepaid and other assets and accrued expenses and other liabilities, respectively, within the consolidated balance sheets.

The Company has an unfunded pension plan covering employees within the Car Wash segment in Germany which was assumed as part of the ICWG acquisition in 2020. The plan’s Accumulated benefit obligation and Projected Benefit Obligation were both $ i i 6 / million and $ i i 8 / million as of December 31, 2022 and December 25, 2021, respectively. Pension expense was less than $ i i i 1 / / million for the years ended December 31, 2022, December 25, 2021, and December 26, 2020. The pension liability was recorded within long-term accrued expenses and other liabilities within the consolidated balance sheet. The discount rate used to determine benefit obligation for the pension plan was i 4.15% and i 1.23% for the years ended December 31, 2022 and December 25, 2021. The compensation increase used to determine benefit obligation for the pension plan was i i 0 / % for the years ended December 31, 2022 and December 25, 2021. There are no required contributions for 2023. Pension benefit payments under the plan are expected to be $ i 2 million spread ratably over the next 5 years.

Note 15— i Equity Agreements and Incentive Equity Plan

On April 17, 2015, Driven Investor LLC established the Driven Investor LLC Incentive Equity Plan (the “Equity Plan”). The Equity Plan, among other things, established the ownership of certain membership units in Driven Investor LLC and defined the distribution rights and allocations of profits and losses associated with those membership units. Additionally, the Equity Plan calls for certain restrictions regarding transfers of units, corporate governance and board of director representation. In April 2015, Driven Investor LLC established certain profits interest units as part of the award agreements (the “Award Agreements”) granted pursuant to the Equity Plan. The Award Agreements provide for grants of certain profits interest units to employees, directors or consultants of Driven Investor LLC and Subsidiaries. For both the Profits Interest Time Units and Profits Interest Performance Units, if the grantee’s continuous service terminated for any reason, the grantee forfeits all right, title, and interest in and to any unvested units as of the date of such termination, unless the grantee’s continuous service period is terminated by the Company without cause within the six-month period prior to the date of consummation of the change in control. In addition, the grantee forfeits all right, title, and interest in and to any vested units if the grantee was terminated for cause, breaches any post-termination covenants, or fail to execute any general release required to be executed. The Profits Interest Performance Units were also subject to certain performance criteria which may cause the units not to vest.

On January 6, 2021, the Company’s board of directors approved the 2021 Omnibus Incentive Plan (the “Plan”) and, effective January 14, 2021, the Company’s shareholders adopted and approved the Plan. The Plan provides for the granting of stock options, stock appreciation rights, restricted stock awards, restricted stock units, other stock-based awards, other cash-based awards, or any combination of the foregoing to current and prospective employees and directors of, and consultants and advisors to, the Company and its affiliates. The maximum number of shares of common stock available for issuance under the Plan is i 12,533,984 shares. In conjunction with the closing of the IPO, our Board granted awards under the Plan to certain of our employees, representing an aggregate of i 5,582,522 shares of common stock.

Profits Interest Units

Prior to IPO, the Parent’s equity awards included Profits Interest Units as noted above. There were two forms of Profits Interest - Time Units and Performance Units. Time Units generally vested in i five installments of i 20% on each of the first five anniversaries of the grant date or vesting date, provided that the employee remained in continuous service on each vesting date. All outstanding Time Units were to vest immediately prior to the effective date of a consummated sale transaction. The Time Units were exchanged for time-based restricted stock awards in connection with the IPO. In addition, the Company granted time-based and performance-based options in connection with the IPO to most employees with Profit Interests (each an “IPO Option”). The exchange of Profits Interest - Time Units for time based time-based restricted stock awards did not require modification accounting.

101

The Performance Units were to vest immediately prior to the effective date of a consummated sale transaction or qualified public offering, including the IPO (a “Liquidity Event”). The percentage of vesting was based on achieving certain performance criteria. No vesting occurred as a result of the IPO as the minimum performance criteria threshold was not achieved. In connection with the IPO, the Performance Units were exchanged for performance-based restricted stock awards. The vesting conditions of the performance-based restricted stock awards were modified to vest subject to an additional performance condition. Employees who received IPO Options have the same vesting conditions for the performance-based portion of the IPO Options as the performance-based restricted stock awards.

The Company calculated the fair value of these performance-based restricted stock awards on the modification date and determined the fair value of these awards increased to $ i 66 million as a result of modification. In addition, the grant date fair value of the performance-based IPO Options was $ i 26 million. The fair value of the performance-based restricted stock awards and performance-based IPO Options was determined by using a Monte Carlo simulation, using the following assumptions: (i) an expected term of i 4.96 years, (ii) an expected volatility of i 40.6%, (iii) a risk-free interest rate of i 0.48%, and (iv) no expected dividends.

For the awards, if the grantee’s continuous service terminates for any reason, the grantee forfeits all right, title, and interest in and to any unvested units as of the date of such termination, unless the grantee’s continuous service period is terminated by the Company without cause within the i six-month period prior to the date of consummation of a Liquidity Event. In addition, the grantee forfeits all right, title, and interest in and to any vested units if the grantee resigns, is terminated for cause, breaches any post-termination covenants, or fail to execute any general release required to be executed.

There was approximately $ i 3 million of unrecognized compensation expense related to the time-based restricted stock awards and time-based IPO Options at December 31, 2022, which is expected to be recognized over a weighted-average vesting period of i 2.3 years.

There was approximately $ i 87 million of unrecognized compensation expense related to the performance-based restricted stock awards and performance-based IPO Options at December 31, 2022. For the years ended December 31, 2022, December 25, 2021 and December 26, 2020, i i i no / / compensation cost was recognized for the performance-based restricted stock awards and performance-based IPO Options given that the performance criteria was not met or probable. Once the performance conditions are deemed probable, the Company will recognize compensation cost equal to the portion of the requisite service period that has elapsed. Certain former employees continued to hold performance-based awards after the IPO.

The following is a summary of the Profits Interest - Time Units and Performance Units for 2020:

Profits Interest - Time Units

Weighted Average Grant Date Fair Value, per unit

Profits Interest -Performance Units

Weighted Average Grant Date Fair Value, per unit

Outstanding as of December 28, 2019

i 13,581

i 492

i 24,636

i 351

Granted

i 13,055

i 696

i 25,597

i 693

Forfeited/Cancelled

( i 2,668)

i 976

( i 8,387)

i 894

Repurchases

( i 6,677)

i 288

i —

Outstanding as of December 26, 2020

i 17,291

i 652

i 41,846

i 554

There were i i i no / / stock grants, forfeitures or repurchases for the period from December 26, 2020 through January 14, 2021. The existing Profits Interest - Time and Performance units were converted into new time and performance awards on January 14, 2021.

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Unvested Time Awards

Weighted Average Grant Date Fair Value, per unit

Unvested Performance Awards

Weighted Average Grant Date Fair Value, per unit

Outstanding as of January 14, 2021

i 610,477

i 12.65

i 4,178,246

i 15.79

Forfeited/Cancelled

( i 17,304)

i 21.27

( i 84,737)

i 13.55

Vested

( i 164,868)

i 10.04

i —

Outstanding as of December 25, 2021

i 428,305

i 13.31

i 4,093,509

i 15.84

Forfeited/Cancelled

( i 30,869)

i 10.34

( i 77,760)

i 15.34

Vested

( i 107,767)

i 12.95

i —

Outstanding as of December 31, 2022

i 289,669

i 13.76

i 4,015,749

i 15.84

Restricted Stock Units and Performance Stock Units

The Company established other new awards in connection with and subsequent to the IPO, including restricted stock units (“RSUs”) and performance stock units (“PSUs”). Awards are eligible to vest provided that the employee remains in continuous service on each vesting date. The RSUs vest ratably in i three installments on each of the first three anniversaries of the grant date. The PSUs vest after a i three-year performance period. The number of PSUs that vest is contingent on the Company achieving certain performance goals, one being a performance condition and the other being a market condition. The number of PSU shares that vest may range from i 0% to i 200% of the original grant, based upon the level of performance. The awards are considered probable of meeting vesting requirements, and therefore, the Company has started recognizing expense. For both RSUs and PSUs, if the grantee’s continuous service terminates for any reason, the grantee shall forfeit all right, title, and interest in any unvested units as of the termination date.

For RSUs and PSUs with a performance condition the grant date fair value is based upon the market price of the Company’s common stock on the date of the grant. For PSUs with a market condition, the Company estimates the grant date fair value using the Monte Carlo valuation model. For all PSUs, the Company reassesses the probability of the achievement of the performance condition at each reporting period.

The range of assumptions used for issued PSUs with a market condition valued using the Monte Carlo model were as follows:


	For the Year Ended
	December 31, 2022	December 25, 2021
Annual dividend yield	i —%	i —%
Expected term (years)	i 2.7- i 3.0	i 3.0
Risk-free interest rate	i 2.32- i 3.05%	i 0.2%
Expected volatility	i 40.9- i 43.9%	i 41.2%
Correlation to the index peer group	i 50.7- i 59.5%	i 65.9%

There was approximately $ i 7 million of total unrecognized compensation cost related to the unvested RSUs at December 31, 2022, which is expected to be recognized over a weighted-average vesting period of i 2.3 years. In addition, there was approximately $ i 18 million of total unrecognized compensation cost related to the unvested PSUs, which are expected to be recognized over a weighted-average vesting period of i 2.2 years.

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The following are the restricted stock units and performance stock units granted in conjunction with or after the IPO:

Unvested Time Units

Weighted Average Grant Date Fair Value, per unit

Unvested Performance Units

Weighted Average Grant Date Fair Value, per unit

Outstanding as of January 14, 2021 (pre-IPO)

i —

Granted post-IPO

i 81,160

i 23.11

i 144,735

i 24.52

Forfeited/Cancelled

( i 18,735)

i 22.18

( i 37,439)

i 24.36

Outstanding as of December 25, 2021

i 62,425

i 23.38

i 107,296

i 24.58

Granted

i 300,067

i 27.96

i 488,488

i 32.39

Forfeited/Cancelled

( i 20,424)

i 26.18

( i 46,024)

i 29.22

Vested

( i 20,465)

i 23.41

i —

Outstanding as of December 31, 2022

i 321,603

i 27.49

i 549,760

i 31.13

Restricted Stock Options

The Company also established and granted restricted stock options (“RSOs”) which vest provided that the employee remains in continuous service on the vesting date. The RSOs were granted at the stock price of the Company on the grant date and permit the holder to exercise them for i 10 years from the grant date. The options generally vest on each of the fourth anniversaries of the grant date, but such vesting could accelerate for certain options based on certain conditions under the award.

There was approximately $ i 20 million of total unrecognized compensation cost related to the unvested RSOs at December 31, 2022, which is expected to be recognized over a weighted-average vesting period of i 3 years.

The following are the restricted stock options granted in conjunction with or after the IPO:

Time Based Restricted Stock Options Outstanding

Weighted Average Exercise Price

Performance Based Restricted Stock Options Outstanding

Weighted Average Exercise Price

Outstanding as of January 14, 2021

i 198,984

i 22.00

i —

Granted post-IPO

i 3,587,575

i 26.75

i 3,621,719

i 22.00

Forfeited/Cancelled

( i 77,294)

i 22.00

( i 152,239)

i 22.00

Exercised

( i 23,705)

i 21.30

i —

Outstanding as of December 25, 2021

i 3,685,560

i 26.63

i 3,469,480

i 22.00

Forfeited/Cancelled

( i 68,510)

i 19.50

( i 190,544)

i 22.00

Exercised

( i 23,721)

i 21.70

i —

Outstanding as of December 31, 2022

i 3,593,329

i 26.79

i 3,278,936

i 22.00

Exercisable as of December 31, 2022

i 676,987

i 21.94

i —

The fair value of all time based units granted was estimated using a Black-Scholes option pricing model using the following weighted-average assumptions for each of fiscal 2021 and 2020:

For the Year Ended

Annual dividend yield

i —%

Weighted-average expected life (years)

i 7.0

i 1.8

Risk-free interest rate

i 1.3%

i 0.9%

Expected volatility

i 40.1%

i 46.7%

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life at the grant date. Volatility is based on the historical volatility of guideline public entities that are similar to the Company, as the Company does not have sufficient historical transactions of its own shares to calculate expected volatility. As of December 31, 2022, the Company does not intend to pay dividends or distributions in the future.

Employee Stock Purchase Plan

On January 6, 2021, the Company’s Board of Directors approved the Employee Stock Purchase Plan (the “ESPP”) and effective January 14, 2021, the Company’s shareholders adopted and approved the ESPP. On March 22, 2021, the Company's Board of Directors approved the International Employee Stock Purchase Plan (the "International ESPP"). The ESPP and International ESPP provide employees of certain designated subsidiaries of the Company with an opportunity to purchase the Company’s common stock at a discount, subject to certain limitations set forth in the ESPP and International ESSP. The ESPP and International ESSP plans authorized the issuance of i 1,790,569 shares of the Company’s common stock. Total contributions to the ESPP were $ i 1 million for the year ended December 31, 2022. i 143,707 shares of common stock were purchased under the ESPP as of December 31, 2022. i 111,924 of the shares of common stock were purchased on December 28, 2021 related to employee contributions during the year ended December 25, 2021.

The Company recognized equity-based compensation expense of $ i 21 million, $ i 4 million, and $ i 1 million in 2022, 2021, and 2020, respectively.

Note 16— i Earnings Per Share

The Company calculates basic and diluted earnings per share using the two-class method. The following table sets forth the computation of basic and diluted earnings per share attributable to common shareholders:

Year Ended

(in thousands, except per share amounts)

Basic earnings per share:

Net income (loss) attributable to Driven Brands Holdings Inc.

i 43,188

i 9,632

( i 4,199)

Less: Net income attributable to participating securities, basic

i 914

i 207

i —

Net income (loss) after participating securities, basic

i 42,274

i 9,425

( i 4,199)

Weighted-average common shares outstanding (a)

i 162,762

i 160,684

i 104,318

Basic earnings per share

i 0.26

i 0.06

( i 0.04)

Diluted earnings per share:

Net income (loss) attributable to Driven Brands Holdings Inc.

i 43,188

i 9,632

( i 4,199)

Less: Net income attributable to participating securities, diluted

i 816

i 185

i —

Net income (loss) after participating securities, diluted

i 42,372

i 9,447

( i 4,199)

Weighted-average common shares outstanding (a)

i 162,762

i 160,684

i 104,318

Dilutive effect of share-based awards

i 3,981

i 3,960

i —

Weighted-average common shares outstanding, as adjusted (a)

i 166,743

i 164,644

i 104,318

Diluted earnings per share

i 0.25

i 0.06

( i 0.04)

(a) Weighted average common shares for 2020 have been adjusted to reflect an implied i 88,990-for-one stock split that became effective on January 14, 2021. See Note 1 for additional information.

Basic earnings (loss) per share is computed by dividing the net income (loss) attributable to Driven Brands Holdings Inc. after participating securities by the weighted-average number of common shares outstanding for the period. In addition, the Company’s participating securities are related to certain restricted stock awards issued to Section 16 officers which include non-forfeitable dividend rights. The Company has excluded i 4,661,504 shares for the year ended December 31, 2022 and i i 4,007,164 / shares for the years ended December 25, 2021 and December 26, 2020 from the computation of weighted average shares for performance awards that are contingent on performance conditions. The Company reported a net loss for the year ended December 25, 2020, therefore the number of shares used to calculate diluted loss per share is the same as the number of shares used to calculate basic loss per share because the potentially dilutive shares, if any, would have been antidilutive if included.

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The following securities were not included in the computation of diluted shares outstanding because the effect would be antidilutive:

Year Ended

Number of securities (in thousands)

Amended and Restated Certificate of Incorporation of Driven Brands Holdings Inc.

Restricted stock units

i 51

i —

Stock options

i 2,003

i 2,036

i —

Total

i 2,054

i 2,036

i —

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our CEO and CFO, has evaluated the design and operating effectiveness of our disclosure controls and procedures (as defined in Rules 13a- 15(e) and 15d- 15(e) under the Exchange Act) as of December 31, 2022. The term “disclosure controls and procedures,” means controls and other procedures of a company that are designed to provide reasonable assurance that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on evaluation of the design and operating effectiveness of our disclosure controls and procedures as of December 31, 2022, our CEO and CFO have concluded that as of such date, our disclosure controls and procedures were designed and operating effectively to provide a reasonable level of assurance.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined under Exchange Act Rules 13a-15(f) and 15d-15(f)). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Our management performed an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2022 based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations (“COSO”). Based on our evaluation and those criteria, management determined that our internal control over financial reporting was effective as of December 31, 2022.

Management has excluded 38 businesses from its assessment of the Company’s internal control over financial reporting as of December 31, 2022 because they were purchased by the Company in purchase business combinations during 2022. These businesses, each of which is wholly-owned, comprised, in the aggregate, total assets and total net revenue excluded from management’s assessment of internal control over financial reporting of approximately 5% and 9%, respectively, as of and for the year ended December 31, 2022. The most significant of these businesses, representing 4% and 1% of consolidated total net revenue and less than 1% individually of consolidated total assets, were Auto Glass Now and Auto Glass Fitters, Inc., respectively.

The effectiveness of our internal control over financial reporting as of December 31, 2022 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report appearing under Item 8 - Financial statements and Supplementary Data.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

107

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not Applicable.

108

Part III

Item 10. Directors, Executive Officers and Corporate Governance

Information about our Executive Officers

The following individuals are our executive officers as of March 1, 2023:

Name

Position

Age

Jonathan Fitzpatrick

President, Chief Executive Officer and Director

Tiffany Mason

Executive Vice President and Chief Financial Officer

Scott O’Melia

Executive Vice President, General Counsel and Secretary

Daniel Rivera

Executive Vice President and Chief Operating Officer

John Teddy

Executive Vice President and President, Car Wash North America

Tracy Gehlan

President, Car Wash International

Michael Macaluso

Executive Vice President and President, Paint, Collision & Glass

Kyle Marshall

Executive Vice President and President, Platform Services

Mo Khalid

Executive Vice President and President, Maintenance

Jonathan Fitzpatrick serves as our President, Chief Executive Officer and Director. Mr. Fitzpatrick has served as our President and Chief Executive Officer since July 2012, has served as a member of our board of directors since April 2018 and previously served as a member of the board of managers of Driven Investor LLC. Prior to joining the Company, Mr. Fitzpatrick served in various capacities with Burger King Corporation (a fast food restaurant company) both prior to and after its acquisition by 3G Capital. Between February 2011 and June 2012, he was Executive Vice President, Chief Brand and Operations Officer for Burger King. From October 2010 to February 2011, he was Executive Vice President of Global Operations and between August 2009 and October 2010, Senior Vice President of Operations, Europe Middle East and Africa. Prior to this role, he was Senior Vice President, Development and Franchising from July 2007 through August 2009.

Tiffany Mason serves as our Executive Vice President and Chief Financial Officer, positions she has held since March 2020. Prior to joining the Company, she served as interim Chief Financial Officer at Lowe’s Companies, Inc. (a home improvement retailer) in 2018. Ms. Mason also served as Senior Vice President, Corporate Finance and Treasurer of Lowe’s Companies, Inc., from 2015 through 2019, Vice President, Finance and Treasurer from 2013 until 2015, Vice President, Investor Relations from 2010 until 2013 and Director, External Reporting and Accounting Policy from 2006 until 2010. Before joining Lowe’s Companies, Inc., Ms. Mason was Vice President of SEC Reporting at Bank of America (a financial services company) from 2004 to 2006.

Scott O’Melia serves as our Executive Vice President, General Counsel and Secretary, positions he has held since May 2020. Prior to joining Driven Brands, Mr. O’Melia served as General Counsel and Vice President of Corporate Development for Caraustar Industries (a manufacturer of recycled materials and paper products) from 2012 to 2019. From 2009 to 2012, Mr. O’Melia was Vice President, Corporate Counsel at Wendy’s/Arby’s Group (a fast food restaurant company). From 2005 to 2009, Mr. O’Melia was a partner at Alston & Bird (an international law firm) where he focused on mergers and acquisitions and other transactions, securities, private equity and general corporate matters.

Daniel Rivera serves as our Executive Vice President and Chief Operating Officer. Mr. Rivera joined Driven Brands as Chief Information Officer in 2012 and has served as Group President of Maintenance, President of Meineke, and President of Take 5 Oil. Prior to joining Driven Brands, Mr. Rivera served as Senior Director of Application Development, Business Intelligence, Infrastructure, and Security at AutoNation (an automotive retailer) from 2011 to 2012. Prior to his role with AutoNation, he worked in various capacities at General Electric (an industrial company), Motorola (a telecommunications company), and Burger King Corporate.

John Teddy serves as our Executive Vice President and President of Car Wash, North America. Mr. Teddy joined Driven Brands in September 2019 and served as the Senior Vice President and Chief Commercial Officer from September 2019 to February 2020. He also served as the Head of Strategy and Corporate Development, as a Vice President at Lowe’s Companies Inc. from February 2020 to October 2021.

Tracy Gehlan serves as our President of Car Wash, International. Ms. Gehlan joined Driven Brands in 2020 upon the completion of the acquisition of ICWG. Ms. Gehlan is responsible for all Car Wash segment regions outside the United States and is based in the United Kingdom. Prior to joining Driven Brands, Ms. Gehlan was Senior Vice President & Chief Operating

109

Officer of Hertz International (an international vehicle rental company) overseeing franchise and company-operated locations across 89 markets spanning the Hertz, Dollar Thrifty, and Firefly brands. She was responsible for the overall performance of the region and was a member of the global senior management team. Ms. Gehlan began her career at the Restaurant Group, the largest independent U.K.-based restaurant company, and has also held numerous roles across the Burger King organization, where she ultimately served as Chief Operating Officer of Burger King EMEA.

Michael Macaluso serves as our Executive Vice President and President of Paint, Collision & Glass. Mr. Macaluso joined Driven Brands as part of the CARSTAR Canada acquisition in 2015 and has served as President of CARSTAR North America. Prior to joining Driven Brands, Mr. Macaluso served in variety of roles with CARSTAR Canada for nearly a decade, beginning as Insurance Relations Manager and progressing to Director of Operations, Chief Operating Officer and President prior to Driven acquiring CARSTAR Canada to form CARSTAR North America.

Kyle Marshall serves as our Executive Vice President and President of Platform Services. Mr. Marshall joined Driven Brands as part of the 1-800-Radiator acquisition in June 2015. He had been with 1-800-Radiator since 2002, serving in numerous management roles including Vice President of Sales and Marketing and most recently as President.

Mo Khalid serves as our Executive Vice President and President of Maintenance. Mr. Khalid rejoined Driven brands in February 2023 after serving as Senior Vice President, Field Operations, at Great Wolf Resorts from November 2017 to February 2023. Mr. Khalid previously served as Vice President and Chief Operating Officer of Meineke from March 2016 to November 2017.

We have adopted a Code of Ethics that applies to all of our directors, officers and employees, including our principal executive, principal financial and principal accounting officers, or persons performing similar functions. Our Code of Ethics is posted on our website located at https://investors.drivenbrands.com. We intend to disclose future amendments to certain provisions of the Code of Ethics, and waivers of the Code of Ethics granted to executive officers and directors, on the website within four business days following the date of the amendment or waiver.

The remaining information required by this item will be contained in our definitive Proxy Statement for our 2023 Annual Meeting of Stockholders, which will be filed not later than 120 days after the close of our fiscal year ended December 31, 2022 (the “Definitive Proxy Statement”) and is incorporated herein by reference.

Item 11. Executive Compensation

The information required by this item will be contained in the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this item will be contained in the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this item will be contained in the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders and is incorporated herein by reference.

Item 14. Principal Accounting Services and Fees

The Company’s independent registered public accounting firm is PricewaterhouseCoopers LLP. The information required by this item will be contained in the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders and is incorporated herein by reference.

110

Part IV

Item 15. Exhibits, Financial Statement Schedules

(a)List of Documents Filed as part of this Form 10‑K:

1.Consolidated Financial Statements

See Index to Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K.

2.Financial Statement Schedules

All schedules have been omitted because they are not required or the required information is shown in the consolidated financial statements or notes thereto.

3.Exhibits

The following is a list of exhibits filed, furnished or incorporated by reference as a part of this Annual Report on Form 10‑K.

Exhibit Number

Exhibit Description

Form

Exhibit

Filing Date

3.1

10-K

3.1

Amended and Restated Bylaws of Driven Brands Holdings Inc.

3.2

10-K

3.2

Amendment No. 9 to the Amended and Restated Base Indenture, dated as of October 5, 2022, among Driven Brands Funding, LLC, as issuer, Driven Brands Canada Funding Corporation, as Canadian co-issuer, and Citibank, N.A., as trustee

4.1

8-K

4.2

First Supplement to Series 2018-1 Supplement, dated as of July 6, 2020, by and between Driven Brands Funding, LLC, as issuer, Driven Brands Canada Funding Corporation, as co-issuer and Citibank, N.A., as trustee and Series 2018-1 securities intermediary

4.2

S-1

4.8

First Supplement to Series 2019-1 Supplement, dated as of July 6, 2020, by and between Driven Brands Funding, LLC, as issuer, Driven Brands Canada Funding Corporation, as co-issuer and Citibank, N.A., as trustee and Series 2019-1 securities intermediary

4.3

S-1

4.10

First Supplement to Series 2019-2 Supplement, dated as of July 6, 2020, by and between Driven Brands Funding, LLC, as issuer, Driven Brands Canada Funding Corporation, as co-issuer and Citibank, N.A., as trustee and Series 2019-2 securities intermediary

4.4

S-1

4.12

Second Supplement to Series 2019-3 Supplement, dated as of April 30, 2021, by and between Driven Brands Funding, LLC, as issuer, Driven Brands Canada Funding Corporation, as co-issuer and Citibank, N.A., as trustee and Series 2019-3 securities intermediary

4.5

8-K

4.1

April 30, 2021

4.6

Series 2020-1 Supplement, dated as of July 6, 2020, by and among Driven Brands Funding, LLC, as issuer, Driven Brands Canada Funding Corporation, as Canadian co-issuer, and Citibank, N.A., as trustee and Series 2020-1 securities intermediary

S-1

4.15

Series 2020-2 Supplement, dated as of December 14, 2020, by and among Driven Brands Funding, LLC, as issuer, Driven Brands Canada Funding Corporation, as Canadian co-issuer, and Citibank, N.A., as trustee and Series 2020-2 securities intermediary

4.7

S-1

4.16

Series 2021-1 Supplement, dated as of September 29, 2021, by and among Driven Brands Funding, LLC, as issuer, Driven Brands Canada Funding Corporation, as Canadian co-issuer, and Citibank, N.A., as trustee and Series 2020-2 securities intermediary

111

4.8

8-K

4.1

September 29, 2021

4.9

Series 2022-1 Supplement, dated as of October 5, 2022, by and among Driven Brands Funding, LLC, as issuer, Driven Brands Canada Funding Corporation, as Canadian co-issuer, and Citibank, N.A., as trustee and Series 2022-1 securities intermediary

8-K

4.1

Description of Securities

4.10

10-K

4.17

Class A-1 Note Purchase Agreement (Series 2019-3 Class A-1 Notes), dated as of December 11, 2019, by and among Driven Brands Funding, LLC, Driven Funding Holdco, LLC, certain subsidiaries of Driven Brands Funding, LLC party thereto, Driven Brands, Inc., the conduit investors party thereto, the financial institutions party thereto, the funding agents party thereto, Barclays Bank PLC, New York Branch, as L/C provider, and Barclays Bank PLC, as swingline lender and administrative agent

10.1

S-1

10.1

Joinder and Amendment No. 1 to Class A-1 Note Purchase Agreement and Joinder to Class A-1 Notes Fee Letter, dated as of July 6, 2020, by and among Driven Brands Funding, LLC, Driven Brands, Inc., Driven Funding Holdco, LLC, certain subsidiaries of Driven Brands Funding, LLC party thereto, Driven Canada Funding HoldCo Corporation, Driven Brands Canada Funding Corporation, Driven Brands Canada Shared Services Inc., certain subsidiaries of Driven Brands Canada Funding Corporation party thereto, the conduit investors party thereto, the financial institutions party thereto, the funding agents party thereto, Barclays Bank PLC, New York Branch, as L/C provider, and Barclays Bank PLC, as swingline lender and administrative agent

10.2

S-1

10.2

Amended and Restated Guarantee and Collateral Agreement, dated as of April 24, 2018, by and among Driven Funding Holdco, LLC and certain subsidiaries of Driven Funding Holdco, LLC party thereto in favor of Citibank, N.A., as trustee

10.3

S-1

10.3

Assumption Agreement to Amended and Restated Guarantee and Collateral Agreement, dated as of October 4, 2019, by and among ABRA Franchisor SPV LLC and Citibank, N.A., as trustee

10.4

S-1

10.4

Assumption and Amendment Agreement to Amended and Restated Guarantee and Collateral Agreement dated as of July 6, 2020, by and among Driven Funding Holdco, LLC, certain subsidiaries of Driven Funding Holdco, LLC party thereto, Driven Canada Funding HoldCo Corporation and certain subsidiaries of Driven Canada Funding HoldCo Corporation party thereto, in favor of Citibank, N.A., as trustee

10.5

S-1

10.5

Deed of Movable Hypothec, dated as of July 6, 2020, by and among Driven Brands Canada Funding Corporation, Driven Canada Funding HoldCo Corporation and certain subsidiaries of Driven Brands Canada Funding Corporation party thereto, in favor of Citibank, N.A., as trustee

10.6

S-1

10.6

Amendment No. 5 to the Amended and Restated Management Agreement and dated as of October 5, 2022 by and among Driven Brands Funding, LLC, Driven Funding Holdco, LLC, certain subsidiaries of Driven Brands Funding, LLC, party thereto, Take 5 LLC, Take 5 Oil Change, LLC, Driven Brands, Inc., as manager, and Citibank, N.A., as trustee

10.7†

8-K

10.1

Amendment No. 3 to Canadian Management Agreement, dated as of October 5, 2022, among Driven Brands Canada Funding Corporation, Driven Canada Funding HoldCo Corporation, certain subsidiaries of Driven Brands Canada Funding Corporation party thereto, Driven Brands Canada Shared Services Inc., as manager, and Citibank, N.A., as trustee

10.8†

8-K

10.2

Stockholders Agreement, dated as of January 15, 2021, by and among Driven Brands Holdings Inc. and the stockholders party thereto

10.9

10-K

10.11

Registration Rights Agreement, dated as of January 20, 2021, by and among Driven Brands Holdings Inc. and the stockholders party thereto

112

10.10

10-K

10.12

Joinder to Registration Rights Agreement, dated as of December 29, 2021, by and among Driven Brands Holdings Inc., Driven Equity Sub LLC and the stockholders party thereto

10.11

10-K

10.17

Joinder to Registration Rights Agreement, dated as of December 29, 2021, by and among Driven Brands Holdings Inc., RC IV Cayman ICW Holdings Sub LLC and the stockholders party thereto

10.12

10-K

10.18

Form of Indemnification Agreement by and among Driven Brands Holdings Inc. and each of its directors and executive officers

10.13†

S-1

10.13

Tax Receivable Agreement , dated January 16, 2021, by and among Driven Brands Holdings Inc. and the stockholders party thereto

10.14

8-K

10.1

January 21, 2021

10.15†

Amended and Restated Employment Agreement by and between Jonathan Fitzpatrick and Driven Brands, Inc., dated as of April 17, 2015

S-1

10.15

Amendment to the Amended and Restated Employment Agreement, dated as of December 31, 2020, by and between Jonathan Fitzpatrick and Driven Brands Shared Services LLC

10.16†

S-1/A

10.16

Employment Agreement by and between Tiffany Mason and Driven Brands Shared Services LLC, dated as of February 17, 2020

10.17†

S-1/A

10.17

Amendment to Employment Agreement between Tiffany Mason and Driven Brands Shared Services LLC dated as of November 3, 2022

10.18†*

10.19†

Letter of Employment by and between Daniel R. Rivera and Driven Brands, Inc., dated as of November 7, 2012

S-1/A

10.18

Employment Agreement by and between Scott O’Melia and Driven Brands Shared Services LLC, dated as of April 23, 2020

10.20†

10-K

10.19

Amendment to the Employment Agreement, dated as of November 1, 2020, by and between Scott O’Melia and Driven Brands Shared Services LLC

10.21†

10-K

10.20

Employment Agreement by and between Michael Macaluso and Carstar Canada Partnership, LP, dated as of December 1, 2015

10.22†

10-K

10.21

Amended and Restated Driven Brands, Inc. Non-Qualified Deferred Compensation Plan, effective as of January 1, 2020

10.23†

S-1/A

10.19

First Amendment to the Driven Brands, Inc. Amended and Restated Non-Qualified Deferred Compensation Plan

10.24†

S-1/A

10.20

Driven Brands Holdings Inc. 2021 Omnibus Incentive Plan

10.25†

8-K

10.2

January 21, 2021

10.26†

Form of Nonqualified Option Award Agreement under the 2021 Omnibus Incentive Plan (Top-Up Options)

S-1/A

10.25

Form of Nonqualified Option Award Agreement under the 2021 Omnibus Incentive Plan (Non-Employee Director Time-Vesting Options)

10.27†

S-1/A

10.26

Form of Restricted Stock Award Agreement under the 2021 Omnibus Incentive Plan

10.28†

8-K

10.1

March 22, 2022

10.29†

Form of Performance Stock Award Agreement under the 2021 Omnibus Incentive Plan

8-K

10.2

March 22, 2022

10.30†

Driven Investor LLC Equity Incentive Plan

S-1/A

10.27

Form of Restricted Stock Award Agreement for use under the Driven Investor LLC Equity Incentive Plan (Relating to Reorganization Exchange)

10.31†

S-1/A

10.28

Credit Agreement, dated May 27, 2021, by and among Driven Holdings, LLC, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent

10.32

10-K

10.37

Incremental Assumption and Amendment Agreement, dated December 17, 2021 by and among Driven Holdings, LLC, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent

113

10.33

10-K

10.38

Subsidiaries of the Registrant

21.1*

23.1*

Consent of Grant Thornton LLP

23.2*

Consent of PricewaterhouseCoopers LLP

24.1*

Powers of Attorney (included in signature page)

31.1*

Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes Oxley Act of 2002

31.2*

Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes Oxley Act of 2002

32.1**

Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes Oxley Act of 2002

32.2**

Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes Oxley Act of 2002

__________________________________________________________________


*			Filed herewith
**			Furnished herewith
†			Indicates management contract or compensatory plan.

Item 16. Form 10-K Summary

None.

114

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: March 1, 2023

DRIVEN BRANDS HOLDINGS INC.

By:

/s/ Jonathan Fitzpatrick

Name:

Jonathan Fitzpatrick

Title:

President and Chief Executive Officer

115

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Each of the directors of the registrant whose signature appears below hereby appoints Tiffany Mason and Scott O’Melia, and each of them severally, as his or her attorney-in-fact to sign in his or her name and behalf, in any and all capacities stated below, and to file with the Securities and Exchange Commission any and all amendments to this report, making such changes in this report as appropriate, and generally to do all such things on their behalf in their capacities as directors and/or officers to enable the registrant to comply with the provisions of the Securities Exchange Act of 1934, and all requirements of the Securities and Exchange Commission.

Signature

Title

Date

/s/ Jonathan Fitzpatrick

Chief Executive Officer

Jonathan Fitzpatrick

(Principal Executive Officer)

/s/ Tiffany Mason

Chief Financial Officer

Tiffany Mason

(Principal Financial Officer)

/s/ Michael Beland

Chief Accounting Officer

Michael Beland

(Principal Accounting Officer)

/s/ Neal Aronson

Non-Executive Chairman and Director

Neal Aronson

/s/ Jose Tomas

Director

Jose Tomas

/s/ Michael Thompson

Director

Michael Thompson

/s/ Chadwick Hume

Director

Chadwick Hume

/s/ Cathy Halligan

Director

Cathy Halligan

/s/ Rick Puckett

Director

Rick Puckett

/s/ Karen Stroup

Director

Karen Stroup

/s/ Peter Swinburn

Director