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Bojangles’, Inc. Reports Financial Results for its Second Fiscal Quarter 2016

CHARLOTTE, N.C., Aug. 08, 2016 (GLOBE NEWSWIRE) -- Bojangles’, Inc. (Bojangles’) (NASDAQ:BOJA) today announced financial results for the 13-week second fiscal quarter ended June 26, 2016. Bojangles’ also updated its guidance for the fiscal year 2016, which is a 52-week period ending on December 25, 2016.

Financial Highlights for Second Fiscal Quarter 2016

  • System-wide comparable restaurant sales increased 0.2% and company-operated comparable restaurant sales increased 0.9%;
  • Total revenues increased 9.2% to $131.6 million from $120.5 million;
  • 18 system-wide restaurants were opened – seven company-operated restaurants and 11 franchised restaurants;
  • Net Income increased 58.4% to $10.0 million from $6.3 million;
  • Diluted Net Income per Share increased 58.8% to $0.27 from $0.17;
  • Adjusted Net Income* increased 17.3% to $10.1 million from $8.6 million;
  • Adjusted Diluted Net Income per Share* increased 17.4% to $0.27 from $0.23; and
  • Adjusted EBITDA* increased 12.9% to $23.2 million from $20.5 million.

* Descriptions of Adjusted Net Income, Adjusted Diluted Net Income per Share, Adjusted EBITDA and other non-GAAP financial measures are provided in “Use and Definition of Non-GAAP Measures,” and reconciliations to GAAP figures are provided in the tables at the end of this release.

“Bojangles’ extended its track record of system-wide comparable restaurant sales growth to 25 consecutive quarters with a 0.2% increase during the second fiscal quarter 2016, which on a two- and three-year stacked basis, reflected growth of 4.6% and 8.8%, respectively. The performance of company-operated restaurants during the second fiscal quarter 2016 was even stronger, as we experienced a 0.9% increase in comparable restaurant sales, including 0.5% growth in comparable store transactions,” said Bojangles’ President and CEO Clifton Rutledge.

“Creating the best experience possible at all Bojangles’® restaurants goes beyond providing our customers with freshly-made food that is distinct and affordable; we must also drive toward operational excellence through strategic investments in our brand. These include our ‘Kitchen of the Future’ and ultimately ‘Bojangles’ of the Future’ projects, as well as by adding labor in the appropriate situations and locations to better differentiate ourselves in today’s competitive marketplace. Ramping up our Bo-Size and Star Service efforts by expanding table service, among other labor initiatives, will ensure our restaurant hospitality levels match the high quality of our food,” he continued.

“We are using a measured approach to develop Bojangles’ in the right way for long-term sustainable growth. This year we expect to open 60 to 65 system-wide restaurants and expand our net unit count by approximately 8%. More and more communities across the southeast from our core North and South Carolina markets to our growing adjacent states are enjoying the unique flavors and value of Bojangles’, and we look forward to reaching more consumers so that they too can enjoy our one-of-a-kind hospitality and southern-inspired favorites,” he concluded.

Second Fiscal Quarter 2016 Financial Review
System-wide comparable restaurant sales increased 0.2%, consisting of company-operated and franchised comparable restaurant sales of 0.9% and (0.2)%, respectively. Comparable restaurant sales growth at company-operated restaurants was due to increases in price and transactions.

Total revenues increased 9.2% to $131.6 million in the second fiscal quarter of 2016 from $120.5 million in the prior year fiscal quarter. The increase was primarily due to a net additional 43 system-wide restaurants at June 26, 2016 compared to June 28, 2015 and comparable restaurant sales growth at our company-operated restaurants.

Company restaurant revenues increased 9.3% to $124.7 million in the second fiscal quarter of 2016 from $114.0 million in the prior year fiscal quarter. Franchise royalty revenues increased 4.0% to $6.6 million in the second fiscal quarter of 2016 from $6.4 million in the prior year fiscal quarter.

Restaurant contribution, a non-GAAP measure, increased 12.3% to $24.5 million in the second fiscal quarter of 2016 from $21.8 million in the prior year fiscal quarter. As a percentage of company restaurant revenues, restaurant contribution margin, a non-GAAP measure, increased to 19.7% in the second fiscal quarter of 2016 from 19.1% in the prior year fiscal quarter.

General and administrative expenses decreased 19.8% to $9.4 million in the second fiscal quarter of 2016 from $11.7 million in the prior year fiscal quarter. The decline was primarily due to amounts incurred in the second fiscal quarter of 2015 related to public offering expenses, stock-based compensation for vesting of performance awards and meeting expenses tied to our bi-annual franchise convention and unit director leadership conference, partially offset by headcount added to support a growing restaurant system and additional costs as a result of operating as a public company.

Net Income increased 58.4% to $10.0 million in the second fiscal quarter of 2016 compared to $6.3 million in the prior year fiscal quarter. Diluted Net Income per Share increased 58.8% to $0.27 in the second fiscal quarter of 2016 compared to $0.17 in the prior year fiscal quarter.

Adjusted EBITDA increased 12.9% to $23.2 million in the second fiscal quarter of 2016 from $20.5 million in the prior year fiscal quarter.

Adjusted Net Income increased 17.3% to $10.1 million in the second fiscal quarter of 2016 compared to $8.6 million in the prior year fiscal quarter. Adjusted Diluted Net Income per Share increased 17.4% to $0.27 in the second fiscal quarter of 2016 compared to $0.23 in the prior year fiscal quarter.

Fiscal Year 2016 Guidance
Bojangles’ has updated certain parameters of its annual outlook for the 52-week period ending on December 25, 2016:

  • Total revenues of $530.0 million to $533.0 million (previously $535.0 million to $543.0 million);
  • System-wide comparable restaurant sales growth of flat to low-single digits (previously low single-digits);
  • The opening of 60 to 65 system-wide restaurants;
    • 28 to 29 company-operated restaurants;
    • 32 to 36 franchised restaurants;
  • Net increase of 53 to 58 system-wide restaurants;
    • 26 to 27 net increase of company-operated restaurants;
    • 27 to 31 net increase of franchised restaurants;
  • Restaurant contribution margin of 17.7% to 18.1%
  • General and administrative expenses of $39.0 million to $39.5 million (previously $40.0 million to $41.5 million);
  • Adjusted Diluted Net Income per Share of $0.88 to $0.92 (previously $0.89 to $0.93); and
  • Adjusted EBITDA of $83.5 million to $85.5 million (previously $84.5 million to $86.5 million).

We have not reconciled guidance for Adjusted Diluted Net Income per Share or Adjusted EBITDA to the corresponding GAAP financial measures because we do not provide guidance for the various reconciling items. We are unable to provide guidance for these reconciling items because we cannot determine their probable significance, as certain items are outside of our control and cannot be reasonably predicted due to the fact that these items could vary significantly from period to period. Accordingly, reconciliations to the corresponding GAAP financial measures are not available without unreasonable effort.

Conference Call and Webcast Today
Bojangles’ will host a conference call and webcast to discuss the second fiscal quarter 2016 results and fiscal year 2016 guidance today at 5:00 p.m. Eastern Daylight Time. The conference call dial-in number is 1-201-493-6725. A telephone replay will be available through Thursday, September 8, 2016 and may be accessed by dialing 1-858-384-5517. The conference ID is 13640087.

The conference call will also be webcast live and later archived on the Investors section of our website at www.bojangles.com.

About Bojangles’, Inc.
Bojangles', Inc. is a highly differentiated and growing restaurant operator and franchisor dedicated to serving customers high-quality, craveable food made from our Southern recipes. Founded in 1977 in Charlotte, N.C., Bojangles' serves menu items such as delicious, famous chicken, made-from-scratch buttermilk biscuits, flavorful fixin's and Legendary Iced Tea®. At June 26, 2016, Bojangles' had 689 system-wide restaurants, of which 295 were company-operated and 394 were franchised restaurants, primarily located in the Southeastern United States. For more information, visit www.bojangles.com or follow Bojangles' on Facebook and Twitter.

Use and Definition of Non-GAAP Measures
We utilize certain non-GAAP measures when assessing the operational strength and the performance of our business. We believe these non-GAAP measures assist our board of directors, management and investors in comparing our operating performance on a consistent basis from period to period by isolating the effects of some items that vary from period to period without any correlation to core operating performance or that vary significantly among similar companies. Bojangles’ cautions that non-GAAP measures should be considered in addition to, but not as a substitute for, reported GAAP results.

Comparable restaurant sales reflects the change in year-over-year sales for the comparable restaurant base (as applicable, system-wide, franchised or company-operated restaurants). A restaurant enters our comparable restaurant base the first full day of the month after being open for 15 months using a mid-month convention.

Restaurant contribution is defined as company restaurant revenues less food and supplies costs, restaurant labor costs and operating costs, as identified by the reconciliation table below. Restaurant contribution margin is defined as restaurant contribution as a percentage of company restaurant revenues. Restaurant contribution and restaurant contribution margin are supplemental measures of operating performance of our company-operated restaurants and our calculations thereof may not be comparable to those reported by other companies. Restaurant contribution and restaurant contribution margin have limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of our results as reported under GAAP.

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

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

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

Forward-Looking Statements
This release contains forward-looking statements. All statements other than statements of historical or current facts included in this release are forward-looking statements. Forward-looking statements discuss our current expectations, projections and guidance relating to our financial condition, results of operations, plans, objectives, future performance and business. These statements may be preceded by, followed by or include the words “aim,” “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “intend,” “outlook,” “plan,” “potential,” “project,” “projection,” “seek,” “may,” “could,” “would,” “will,” “should,” “can,” “can have,” “likely,” the negatives thereof and other words and terms of similar meaning.

Forward-looking statements are inherently subject to risks, uncertainties and assumptions; they are not guarantees of performance. Actual results may differ materially from these expectations due to risks relating to our vulnerability to changes in consumer preferences and economic conditions; our ability to open restaurants in new and existing markets and expand our franchise system; our ability to generate comparable restaurant sales growth; financial or other difficulties which could cause our restaurants and our franchisees’ restaurants to close; our ability to generate increased sales or profits from new menu items, advertising campaigns, changes in discounting strategy and restaurant designs and remodels; cancellation or delay in anticipated future restaurant openings; our reliance on, limited degree of control over and potential responsibility for, our franchisees; increases in the cost of chicken, pork, dairy, wheat, corn and other products; our ability to compete successfully with other quick-service and fast-casual restaurants; our vulnerability to conditions in the Southeastern United States; negative publicity, whether or not valid; concerns about food safety and quality and about food-borne illnesses, including adverse public perception due to the occurrence of avian flu, swine flu or other food-borne illnesses; changes in employment and labor laws; labor shortages and increases in labor costs; and our dependence upon frequent and timely deliveries of restaurant food and other supplies. For further details and discussion of these and other risks and uncertainties, see our Annual Report on Form 10-K for the fiscal year ended December 27, 2015 filed with the Securities and Exchange Commission on March 11, 2016, as updated by our Quarterly Report on Form 10-Q for the fiscal quarter ended June 26, 2016 filed with the Securities and Exchange Commission on August 8, 2016. Each of the documents referred to in the preceding sentence are available at www.sec.gov. You should not place undue reliance on these statements. We have based these forward-looking statements on our current expectations and projections about future events. Although we believe that our assumptions made in connection with the forward-looking statements are reasonable, we cannot assure you that the assumptions and expectations will prove to be correct.

All forward-looking statements are expressly qualified in their entirety by the foregoing cautionary statements. In addition, all forward-looking statements speak only as of the date of this earnings release. We undertake no obligations to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise other than as required under the federal securities laws.

BOJANGLES’, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
Assets June 26,
2016
December 27,
2015
Current assets:
Cash and cash equivalents$ 17,424 14,263
Accounts and vendor receivables, net 5,352 4,736
Accounts receivable, related parties, net 433 403
Inventories, net 3,005 3,080
Other current assets 4,026 5,639
Total current assets 30,240 28,121
Property and equipment, net 48,929 48,137
Goodwill 161,140 161,140
Brand 290,500 290,500
Franchise rights, net 24,792 25,341
Favorable leases, net 1,169 1,394
Other noncurrent assets 3,441 3,673
Total assets$ 560,211 558,306
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$ 13,702 17,893
Accrued expenses 23,052 19,086
Current maturities of long-term debt
Current maturities of capital lease obligations 6,157 5,968
Other current liabilities 2,557 2,155
Total current liabilities 45,468 45,102
Long-term debt, less current maturities and deferred debt issuance costs, net 180,434 197,735
Deferred income taxes 112,103 115,028
Capital lease obligations, less current maturities 21,759 21,483
Other noncurrent liabilities 13,341 11,834
Total liabilities 373,105 391,182
Stockholders’ equity:
Preferred stock
Common stock 363 360
Additional paid-in capital 121,959 119,084
Retained earnings 65,536 47,661
Accumulated other comprehensive (loss) income (752) 19
Total stockholders’ equity 187,106 167,124
Total liabilities and stockholders’ equity$ 560,211 558,306

BOJANGLES’, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
Thirteen Weeks Ended Twenty-Six Weeks Ended
June 26,
2016
June 28,
2015
June 26,
2016
June 28,
2015
Revenues:
Company restaurant revenues$ 124,674 114,043 246,088 222,378
Franchise royalty revenues 6,621 6,368 12,793 12,305
Other franchise revenues 300 105 370 480
Total revenues 131,595 120,516 259,251 235,163
Company restaurant operating expenses:
Food and supplies costs 39,020 36,724 77,541 73,285
Restaurant labor costs 34,525 31,178 67,861 61,647
Operating costs 26,607 24,312 55,020 48,183
Depreciation and amortization 3,124 2,714 6,207 5,388
Total Company restaurant operating expenses 103,276 94,928 206,629 188,503
Operating income before other operating expenses 28,319 25,588 52,622 46,660
Other operating expenses:
General and administrative 9,402 11,717 18,912 22,630
Depreciation and amortization 716 691 1,433 1,350
Impairment 187 389 15
Loss (gain) on disposal of property and equipment 10 14 (189) 11
Total other operating expenses 10,315 12,422 20,545 24,006
Operating income 18,004 13,166 32,077 22,654
Amortization of deferred debt issuance costs (222) (231) (369) (415)
Interest income 2 5 3 5
Interest expense (1,937) (2,171) (3,962) (4,392)
Income before income taxes 15,847 10,769 27,749 17,852
Income taxes 5,816 4,435 9,874 8,080
Net income$ 10,031 6,334 17,875 9,772
Net income per share:
Basic$ 0.28 0.31 0.49 0.95
Diluted$ 0.27 0.17 0.48 0.26
Weighted average shares used in computing net income per share:
Basic 36,207 20,540 36,115 10,270
Diluted 37,592 37,491 37,517 37,452

BOJANGLES’, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
Twenty-Six Weeks Ended
June 26,
2016
June 28,
2015
Cash flows from operating activities:
Net income $ 17,875 9,772
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income tax benefit (775) (2,237)
Depreciation and amortization 7,640 6,738
Amortization of deferred debt issuance costs 369 415
Impairment 389 15
(Gain) loss on disposal of property and equipment (189) 11
(Benefit) provision for doubtful accounts (138) 55
Provision for inventory spoilage 3 16
Benefit for closed stores (51) (50)
Stock-based compensation 549 1,402
Excess tax benefit from stock-based compensation (1,573) (421)
Changes in operating assets and liabilities 1,188 2,930
Net cash provided by operating activities 25,287 18,646
Cash flows from investing activities:
Purchases of franchisee's assets (186)
Purchases of property and equipment (3,950) (4,671)
Proceeds from disposition of property and equipment 49 28
Net cash used in investing activities (3,901) (4,829)
Cash flows from financing activities:
Principal payments on long-term debt (17,669) (12,551)
Stock option exercises 756 96
Excess tax benefit from stock-based compensation 1,573 421
Principal payments on capital lease obligations (2,885) (2,221)
Net cash used in financing activities (18,225) (14,255)
Net increase (decrease) in cash and cash equivalents 3,161 (438)
Cash and cash equivalents balance, beginning of fiscal period 14,263 13,201
Cash and cash equivalents balance, end of fiscal period$ 17,424 12,763

BOJANGLES’, INC. AND SUBSIDIARIES
Unaudited Reconciliation of Net Income to EBITDA and Adjusted EBITDA
(in thousands)
Thirteen Weeks Ended Twenty-Six Weeks Ended
June 26,
2016
June 28,
2015
June 26,
2016
June 28,
2015
Net income $10,031 6,334 17,875 9,772
Income taxes 5,816 4,435 9,874 8,080
Interest expense, net 1,935 2,166 3,959 4,387
Depreciation and amortization (a) 4,062 3,636 8,009 7,153
EBITDA 21,844 16,571 39,717 29,392
Non-cash rent (b) 394 390 771 779
Stock-based compensation (c) 272 1,063 549 1,402
Payroll taxes associated with stock option exercises (d) 51 17 71 17
Preopening expenses (e) 379 438 596 739
Sponsor and board member fees and expenses (f) 38 166
Certain professional, transaction and other costs (g) 9 2,007 42 4,880
Distributor transition costs (h) 16 81
Impairment and dispositions (i) 237 25 248 54
Adjusted EBITDA$23,202 20,549 42,075 37,429
(a)Includes amortization of deferred debt issuance costs.
(b)Includes deferred rent, which represents the extent to which our rent expense has been above or below our cash rent payments, amortization of favorable (unfavorable) leases and closed store reserves for rent net of cash payments. We expect to continue to incur similar expenses in future periods as we record rent expense in accordance with GAAP, as well as continue to amortize favorable (unfavorable) leases and record closed store reserves.
(c)Represents non-cash, stock-based compensation. We expect to incur similar expenses in future periods as we record stock-based compensation related to existing grants (and any potential future grants) in accordance with GAAP.
(d)Represents payroll taxes associated with stock option exercises related to stock options that were outstanding prior to our initial public offering. We expect to incur similar expenses in future periods when our directors or employees exercise stock options that were outstanding prior to our initial public offering.
(e)Includes expenses directly associated with the opening of company-operated restaurants and incurred prior to the opening of a company-operated restaurant. We expect to continue to incur similar expenses as we open company-operated restaurants.
(f)Includes reimbursement of expenses to our sponsor prior to our initial public offering and compensation and expense reimbursement to members of our board prior to our initial public offering.
(g)Includes costs associated with third-party consultants for one-time projects, public offering expenses and certain professional fees and transaction costs related to financing transactions. We could incur similar expenses in future periods if we commence additional public offerings, financing transactions or other one-time projects.
(h)Includes expenses incurred in connection with the transition to our new distributor.
(i)Includes loss (gain) on disposal of property and equipment, impairment and cash proceeds on disposals from disposition of property and equipment. We could continue to record impairment expense in future periods if performance of company-operated restaurants is not sufficient to recover the carrying amount of the related long-lived assets. We expect to incur future losses (gains) and to receive cash proceeds on disposal of property and equipment associated with retirement, replacement or write-off of fixed assets.

BOJANGLES’, INC. AND SUBSIDIARIES
Unaudited Reconciliation of Net Income to Adjusted Net Income
(in thousands)
Thirteen Weeks Ended Twenty-Six Weeks Ended
June 26,
2016
June 28,
2015
June 26,
2016
June 28,
2015
Net income $ 10,031 6,334 17,875 9,772
Certain professional and transaction costs (a) 9 2,007 42 4,880
Incremental public company costs (b) (194) (794)
Vesting of performance-based stock options (c) 707 707
Payroll taxes associated with stock option exercises (d) 51 17 71 17
Distributor transition costs (e) 16 81
Tax impact of adjustments (f) (29) (283) (74) (172)
Total adjustments 47 2,254 120 4,638
Adjusted Net Income$ 10,078 8,588 17,995 14,410
BOJANGLES’, INC. AND SUBSIDIARIES
Unaudited Reconciliation of Diluted Net Income Per Share to Adjusted Diluted Net Income Per Share
Thirteen Weeks Ended Twenty-Six Weeks Ended
June 26,
2016
June 28,
2015
June 26,
2016
June 28,
2015
Diluted net income per share$ 0.27 0.17 0.48 0.26
Certain professional and transaction costs (a) 0.06 0.13
Incremental public company costs (b) (0.01) (0.02)
Vesting of performance-based stock options (c) 0.02 0.02
Payroll taxes associated with stock option exercises (d)
Distributor transition costs (e)
Tax impact of adjustments (f) (0.01) (0.01)
Total adjustments 0.06 0.12
Adjusted Diluted Net Income per Share$ 0.27 0.23 0.48 0.38
(a)Includes costs associated with third-party consultants for one-time projects, public offering expenses and certain professional fees and transaction costs related to financing transactions. We could incur similar expenses in future periods if we commence additional public offerings, financing transactions or other one-time projects.
(b)Reflects an estimate of recurring incremental legal, accounting, insurance and other operating and compliance costs we expect to incur as a public company in addition to actual amounts incurred. By its nature, this adjustment involves risks and uncertainties, and the actual costs incurred could be different than this adjustment. No adjustments will be made beyond the second fiscal quarter 2016 since the one year anniversary of our initial public offering occurred during the thirteen weeks ended June 26, 2016.
(c)Includes non-cash, stock-based compensation related to the vesting of certain performance based stock option awards. We could incur similar expenses in future periods upon the achievement of the performance metrics indicated in the stock option grants.
(d)Represents payroll taxes associated with stock option exercises related to stock options that were outstanding prior to our initial public offering. We expect to incur similar expenses in future periods when our directors or employees exercise stock options that were outstanding prior to our initial public offering.
(e)Includes expenses incurred in connection with the transition to our new distributor.
(f)Represents the income tax (expense) benefit associated with the adjustments in (a) through (e) that are deductible for income tax purposes.

BOJANGLES’, INC. AND SUBSIDIARIES
Unaudited Reconciliation of Company Restaurant Revenues to Restaurant Contribution
(in thousands)
Thirteen Weeks Ended Twenty-Six Weeks Ended
June 26,
2016
June 28,
2015
June 26,
2016
June 28,
2015
Company restaurant revenues$ 124,674 114,043 246,088 222,378
Food and supplies costs (39,020) (36,724) (77,541) (73,285)
Restaurant labor costs (34,525) (31,178) (67,861) (61,647)
Operating costs (26,607) (24,312) (55,020) (48,183)
Restaurant contribution$ 24,522 21,829 45,666 39,263
Restaurant contribution margin 19.7% 19.1% 18.6% 17.7%



For Investor Relations Inquiries: Raphael Gross of ICR 203.682.8253 For Media Inquiries: Brian Little of Bojangles’ Restaurants, Inc. 704.519.2118

Source:Bojangles', Inc.