UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended April 1,December 30, 2017

OR

For the transition period from            to

Commission File Number 1-6836

FLANIGAN'S ENTERPRISES, INC.

(Exact name of registrant as specified in its charter)

(954) 377-1961

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant has submitted electronically and posted on its Corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yesý   Noo

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

Emerging growth company¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes¨o   Noý

On May 16, 2017,February 13, 2018, 1,858,647 shares of Common Stock, $0.10 par value per share, were outstanding.

FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q

SIGNATURES

LIST XBRL DOCUMENTS

As used in this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our,” the “Company” and “Flanigan’s” mean Flanigan's Enterprises, Inc. and its subsidiaries (unless the context indicates a different meaning).

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

See accompanying notes to unaudited condensed consolidated financial statements.

FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

(Continued)

See accompanying notes to unaudited condensed consolidated financial statements.

FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

APRIL 1,DECEMBER 30, 2017 (UNAUDITED) AND OCTOBER 1, 2016SEPTEMBER 30, 2017

(in thousands)

ASSETS

See accompanying notes to unaudited condensed consolidated financial statements.

FLANIGAN'S ENTERPRISES, INC.INC, AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

APRIL 1,DECEMBER 30, 2017 (UNAUDITED) AND OCTOBER 1, 2016SEPTEMBER 30, 2017

(in thousands)

(Continued)

LIABILITIES AND STOCKHOLDERS’ EQUITY

See accompanying notes to unaudited condensed consolidated financial statements.

FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE TWENTY SIXTHIRTEEN WEEKS ENDED APRIL 1,DECEMBER 30, 2017 AND APRIL 2,December 31, 2016

(in thousands)

See accompanying notes to unaudited condensed consolidated financial statements.

FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE TWENTY SIXTHIRTEEN WEEKS ENDED APRIL 1,DECEMBER 30, 2017 AND APRIL 2,DECEMBER 31, 2016

(in thousands)

(Continued)

See accompanying notes to unaudited condensed consolidated financial statements

FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

APRIL 1,DECEMBER 30, 2017

(1) BASIS OF PRESENTATION:

The accompanying condensed consolidated financial information for the periodsthirteen weeks ended April 1,December 30, 2017 and April 2,December 31, 2016 are unaudited. Financial information as of October 1, 2016September 30, 2017 has been derived from the audited financial statements of the Company, but does not include all disclosures required by accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the financial information for the periods indicated have been included. For further information regarding the Company's accounting policies, refer to the Consolidated Financial Statements and related notes included in the Company's Annual Report on Form 10-K for the year ended October 1, 2016.September 30, 2017. Operating results for interim periods are not necessarily indicative of results to be expected for a full year.

The condensed consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and the accounts of the eight limited partnerships in which we act as general partner and have controlling interests. All intercompany balances and transactions have been eliminated. Non-controlling interest represents the limited partners’ proportionate share of the net assets and results of operations of the eight limited partnerships.

These condensed consolidated financial statements include estimates relating to performance based officers’ bonuses. The estimates are reviewed periodically and the effects of any revisions are reflected in the financial statements in the period they are determined to be necessary. Although these estimates are based on management’s knowledge of current events and actions it may take in the future, they may ultimately differ from actual results.

(2) EARNINGS PER SHARE:

We follow Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Section 260 - “Earnings per Share”. This section provides for the calculation of basic and diluted earnings per share. The data on Page 23 shows the amounts used in computing earnings per share and the effects on income and the weighted average number of shares of potentially dilutive common stock equivalents. As of April 1,December 30, 2017 and April 2,December 31, 2016, no stock options were outstanding.

(3) RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:

Adopted

In AprilNovember 2015, the FASB issued ASU 2015-03,2015-17, Interest—ImputationIncome Taxes (Topic 740): Balance Sheet Classification of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.Deferred Taxes. ASU 2015-03 provides authoritative guidance related to the presentation of debt issuance costs on the2015-17 requires that all deferred tax liabilities and tax assets be classified as non-current in a classified balance sheet, requiring companies to present debt issuance costsrather than separating such deferred taxes into current and non-current amounts, as a direct deduction from the carrying value of debt. The amendments in this update areis required under current guidance. ASU 2015-17 is effective for public business entities in fiscal years, and for interim periods within those years, beginning after December 15, 2015,2016 and interim periods within those fiscal years. The adoption of this new guidance did not have a material impact on our consolidated financial statements.

(3) RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:

     (Continued)

Adopted(Continued)

In February 2015, the FASB issued ASU 2015-02, “Consolidation: Amendments to the Consolidation Analysis” to modify the analysis that companies must perform in order to determine whether a legal entity should be consolidated. ASU 2015-02 simplifies current guidance by reducing the number of consolidation models; eliminating the risk that a reporting entity may have to consolidate based on a fee arrangement with another legal entity; placing more weight on the risk of loss in order to identify the party that has a controlling financial interest; reducing the number of instances that related party guidance needs to be applied when determining the party that has a controlling financial interest; and changing rules for companies in certain industries that ordinarily employ limited partnershipeither prospectively or variable interest entity structures. ASU 2015-02 is effective for public companies for fiscal years beginning after December 15, 2015 and interim periods within those fiscal periods. retrospectively.The adoption of this new guidance did not have a material impact on our consolidated financial statements.

(3)   RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:

(Continued)

Issued

In August 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-15“Classification “Classification of Certain Cash Receipts and Cash Payments”.  This ASU addresses how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230, “Statement of Cash Flows”, and other Topics. ASU 2016-15 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2017. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02,Leases (Topic 842), which supersedes all existing guidance on accounting for leases in ASC Topic 840.  ASU 2016-02 is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet.  ASU 2016-02 will continue to classify leases as either finance or operating, with classification affecting the pattern of expense recognition in the statement of income.  ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.  Early adoption is permitted.  ASU 2016-02 is required to be applied withrequires a modified retrospective approach for all leases existing at, or entered into after the date of initial adoption, with an option to each prior reporting period presented with various optional practical expedients.elect to use certain transition relief.  We are currently assessing the adoption date and the potential impact of adopting ASU 2016-02 on our financial statements and related disclosures.

In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. ASU 2015-17 requires that all deferred tax liabilities and tax assets be classified as non-current in a classified balance sheet, rather than separating such deferred taxes into current and non-current amounts, as is required under current guidance. ASU 2015-17 is effective for fiscal years, and for interim periods within those years, beginning after December 15, 2016 and may be applied either prospectively or retrospectively. We are currently assessing the adoption date and the potential impact of adopting ASU 2015-17 on our financial statements and related disclosures.

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, “Revenue“Revenue from Contracts with Customers,,” (ASU 2014-09), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. generally accepted accounting principles when it becomes effective. The new standard was originally effective for interim and annual periods in fiscal years beginning after December 15, 2016. In July 2015,

(3) RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:

     (Continued)

Issued(Continued)

the FASB affirmed its proposal for a one year deferral of the effective date. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

(4) INVESTMENT IN REAL PROPERTY

During the second quarter of our fiscal year 2017, we acquired for $2.47 million cash at closing, vacant real property (the “Property”), which is contiguous to the real property we own where our new package liquor store located at 13185 Biscayne Boulevard, North Miami, Florida, (Store #20P) and our restaurant located at 13205 Biscayne Boulevard, North Miami, Florida, (Store #20R) operate. To fund the cash at closing, we borrowed $2.0 million using our Credit Line (defined below at Note 7(c)) and used cash on hand for the remainder. The Property will provide for a larger parking lot to be used by our customers.

(5) EXECUTION OF NEW LEASE FOR EXISTING LOCATION

Weston, Florida

During the second quarter of our fiscal year 2017, we renewed our lease with an unrelated third party for the restaurant we own located at 2460 Weston Road, Weston, Florida (Store #95) for a period of five (5) years from October 1, 2017 through September 30, 2022, with two (2) five (5) year renewal options, under the same terms and conditions, except an increase in the percentage rent.

(6) INCOME TAXES:

We account for our income taxes using FASB ASC Topic 740, “Income Taxes”, which requires among other things, recognition of future tax benefits measured at enacted rates attributable to deductible temporary differences between financial statement and income tax basis of assets and liabilities and to tax net operating loss carryforwards and tax credits to the extent that realization of said tax benefits is more likely than not.

(7) DEBT:On December 22, 2017 the Tax Cuts and Jobs Act (“The Act”) was signed into law, reducing the corporate income tax rate to 21%. Our accounting for the impact of The Act is complete. Consequently, we have recorded a decrease of approximately $268,000 to our net deferred tax asset with a corresponding adjustment to deferred income tax expense for the thirteen weeks ended December 30, 2017.

(a) Re-Financing of Corporate Offices(5) DEBT:

During the first quarter of our fiscal year 2017, we re-financed the mortgage loan encumbering our corporate offices located at 5059 N.E. 18^th Avenue, Fort Lauderdale, Florida 33334, which mortgage loan was and continues to be extended and held by an unaffiliated third party lender. The refinanced mortgage loan is in the original principal amount of $840,000 and bears interest at the fixed rate of 4.65% per annum. The mortgage loan is amortizable over a fifteen (15) year period, with our current monthly payment of principal and interest totaling $6,519. The entire principal balance and all accrued but unpaid interest are due on December 28, 2031.

During the second quarter of our fiscal year 2017, we terminated the interest rate swap agreement we entered into July, 2010 which related to the re-financed mortgage loan encumbering our corporate offices located at 5059 N.E. 18^th Avenue, Fort Lauderdale, Florida 33334. The interest rate swap agreement required us to pay interest for a seven (7) year period at a fixed rate of 5.11% on an initial amortizing notional principal amount of $935,000, while receiving interest for the same period at LIBOR, Daily Floating Rate, plus 2.25%, on the same amortizing notional principal amount. We paid an $8,500 pre-payment penalty to the lender in connection with the termination of the interest rate swap agreement.

(b) Financing of Office and Warehouse Space

During the first quarter of our fiscal year 2017, we borrowed the sum of $822,500 from an unaffiliated third party lender (the “$822,500 Loan”). The proceeds of the $822,500 Loan will be used for working capital. Our repayment obligations under the $822,500 Loan are secured by a first mortgage on our office and warehourse located at 1290 East Commercial Boulevard, Oakland Park, Florida 33334 and our warehouse located at 4990 N.E. 12^th Avenue, Oakland Park, Florida 33334. The $822,500 Loan bears interest at the fixed rate of 4.65% per annum and is amortizable over a fifteen (15) year period, with our current monthly payment of principal and interest totaling $6,384. The entire principal balance and all accrued but unpaid interest are due on December 28, 2031.

(c)(a) Revolving Credit Line/Term Loan

During the first quarter of our fiscal year 2017, we closed on a secured revolving line of credit from an unaffiliated third party lender which, subject to certain conditions, entitlesentitled us to borrow, from time to time through December 28, 2017, up to $5,500,000 (the “Credit Line”). From December 28, 2016 through December 28, 2017, we arewere obligated to pay interest only on the outstanding balance under the Credit Line, at a rate of LIBOR, Daily Floating Rate, plus 2.25%, per annum (3.227% as of April 1, 2017).annum. During the second quarter of our fiscal year 2017, we entered into an interest rate swap agreement to hedge the interest rate risk when the unpaid principal balance under the

Credit Line convertsconverted to a term loan on December 28, 2017 and our repayment obligations thereunder become amortizable over a five year period, payable in equal monthly installments of principal and interest at the rate of 4.65% per annum, with any outstanding principal balance and all accrued but unpaid interest due on December 28, 2022.2022, (the “Term Loan”). We granted our lender a first priority security interest in substantially all of our personal property assets to secure our repayment obligations under this loan. During the second quarter of our fiscal year 2017, we borrowed $2.0 million on the Credit Line and used suchduring the first quarter of our fiscal year 2018, we borrowed amounts to purchase the Property (See Note 4) and accordingly incurred, but did not pay any interest amounts.balance of the Line of Credit, ($3.5 million). As of May 16,December 21, 2017, we have $3.5 million ofhad no credit available under the Credit Line.Line and on December 28, 2017 the entire principal balance under the Credit Line ($5,500,000) converted to the Term Loan.

(d)(b) Financed Insurance Premiums

During the twenty sixthirteen weeks ended April 1,December 30, 2017, we financed the premiums on the following three (3) property and general liability insurance policies, totaling approximately $1.21$1.33 million, which property and general liability insurance includes coverage for our franchises which are not included in our consolidated financial statements:

(i)       For the policy year beginning December 30, 2016,2017, our general liability insurance, excluding limited partnerships, is a one (1) year policy with our insurance carriers, including automobile and excess liability coverage. The one (1) year general liability insurance premiums, including automobile and excess liability coverage, total, in the aggregate $513,000,$581,000, of which $409,000$466,000 is financed through an unaffiliated third party lender (the “Third Party Lender”). The finance agreement obligates us to repay the amounts financed together with interest at the rate of 2.95%3.15% per annum, over 10 months, with monthly payments of principal and interest, each in the amount of $42,000.$47,000. The finance agreement is secured by a first priority security interest in all insurance policies, all unearned premium, return premium,premiums, dividend payments and loss payments thereof.

(ii) For the policy year beginning December 30, 2016,2017, our general liability insurance for our limited partnerships is a one (1) year policy with our insurance carriers, including excess liability coverage. The one (1) year general liability insurance premiums, including excess liability coverage, total, in the aggregate $498,000,$511,000, of which $398,000$409,000 is financed through the Third Party Lender. The finance agreement obligates us to repay the amounts financed, together with interest at the rate of 2.95%3.15% per annum, over 10 months, with monthly payments of principal and interest, each in the amount of $40,000.$41,000. The finance agreement is secured by a first priority security interest in all insurance policies, all unearned premium, return premium,premiums, dividend payments and loss payments thereof.

(iii)       For the policy year beginning December 30, 2016,2017, our property insurance is a one (1) year policy. The one (1) year property insurance premium is in the amount of $504,000,$564,000, of which $404,000$453,000 is financed through the Third Party Lender. The finance agreement provides that we are obligated to repay the amounts financed, together with interest at the rate of 2.95%3.15% per annum, over 10 months, with monthly payments of principal and interest, each in the amount of approximately $41,000.$46,000. The finance agreement is secured by a first priority security interest in all insurance policies, all unearned premium, return premium,premiums, dividend payments and loss payments thereof.

As of April 1,December 30, 2017, the aggregate principal balance owed from the financing of our property and general liability insurance policies is $769,000.$1,057,000.

(6) COMMITMENTS AND CONTINGENCIES:

(8) COMMITMENTS AND CONTINGENCIES:Construction Contracts

On June 14, 2017, we entered into an agreement with a third party unaffiliated general contractor to renovate our restaurant located at 13205 Biscayne Boulevard, North Miami, Florida, (Store #20) for a total contract price of $880,000. The renovations include, but are not limited to the construction of a new kitchen and the expansion of the restaurant into our former package liquor store location. During the first quarter of our fiscal year 2018, we agreed to change orders which had the effect of increasing the total contract price for the renovation to $1,080,000, of which, as of the end of our first quarter fiscal 2018, we have paid $345,000.

During the first quarter of our fiscal year 2018, we entered into two agreements with a third party unaffiliated general contractor for design and development services for a total contract price of $127,000 (the “$127,000 Contract”) and $174,000 (the “$174,000 Contract”). The $127,000 Contract provides for design and development services for the construction of a new building (the “New Building”) on a parcel of real property which we own which is adjacent to the real property where our combination package liquor store and restaurant located at 2505 N. University Drive, Hollywood, Florida, (Store #19) operates. The $174,000 Contract provides for design and development services for the renovation of the existing building which currently houses the combination package liquor store and restaurant. If we complete the construction of the New Building and the renovation of the existing building, we currently plan to re-locate our package liquor store located at the property to the New Building and to operate the restaurant located at the property in the renovated and expanded existing building.

Subsequent to the end of the first quarter of our fiscal year 2018, we entered into an agreement with a third party unaffiliated general contractor to renovate and add an outdoor patio area to the front of our restaurant located at 13205 Biscayne Boulevard, North Miami, Florida (Store #20) for a total contract price of $912,000.

Litigation

From time to time, we are a defendant in litigation arising in the ordinary course of our business, including claims resulting from “slip and fall” accidents, dram shop claims, claims under federal and state laws governing access to public accommodations, employment-related claims and claims from guests alleging illness, injury or other food quality, health or operational concerns. To date, none of this litigation, some of which is covered by insurance, has had a material effect on us.

(9)(7)   SUBSEQUENT EVENTS:

Subsequent events have been evaluated through the date these condensed consolidated financial statements were issued and no events required disclosure..

(10)Extension of Lease for Existing Location

Pinecrest, Florida

Subsequent to the end of the first quarter of our fiscal year 2018, the lease with an unrelated third party for the restaurant owned by our limited partnership located at 11415 S. Dixie Highway, Pinecrest, Florida (Store #13) was extended through July 31, 2026, an additional period of approximately five (5) years beyond its current expiration date of May 31, 2021. The extended lease will be on the same terms and conditions, except the annual rent (base and estimated percentage rent) effective February 1, 2018 will increase by approximately 20%, with annual 3% increases on the base rent thereafter commencing February 1, 2021.

(8) BUSINESS SEGMENTS:

We operate principally in two reportable segments – package stores and restaurants. The operation of package stores consists of retail liquor sales and related items. Information concerning the revenues and operating income for the thirteen weeks and twenty six weeks ended April 1,December 30, 2017 and April 2,December 31, 2016, and identifiable assets for the two reportable segments in which we operate, are shown in the following table. Operating income is total revenue less cost of merchandise sold and operating expenses relative to each segment. In computing operating income, none of the following items have been included: interest expense, other non-operating income and expenses and income taxes. Identifiable assets by segment are those assets that are used in our operations in each segment. Corporate assets are principally cash and real property, improvements, furniture, equipment and vehicles used at our corporate headquarters. We do not have any operations outside of the United States and transactions between restaurants and package liquor stores are not material.

The Company moved assets of approximately $2,936,000, consisting primarily of land, from corporate ($233,000) and restaurant ($2,703,000) to package store ($2,936,000) to correctly report assets related to each segment.

Reported financial results may not be indicative of the financial results of future periods. All non-historical information contained in the following discussion constitutes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Words such as “anticipates, appears, expects, trends, intends, hopes, plans, believes, seeks, estimates, may, will,” and variations of these words or similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and involve a number of risks and uncertainties, including but not limited to customer demand and competitive conditions. Factors that could cause actual results to differ materially are included in, but not limited to, those identified in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in the Annual Report on our Form 10-K for the fiscal year ended October 1, 2016September 30, 2017 and in this Quarterly Report on Form 10-Q. We undertake no obligation to publicly release the results of any revisions to these forward-looking statements that may reflect events or circumstances after the date of this report.

OVERVIEW

At April 1,December 30, 2017, we (i) operated 2526 units, (excluding the adult entertainment club referenced in (ii) below), consisting of restaurants, package stores and combination restaurants/package stores that we either own or have operational control over and partial ownership in; (ii) own but do not operate one adult entertainment club; and (iii) franchise an additional five units, consisting of two restaurants, (one restaurant of which we operate), and three combination restaurants/package stores. The table below provides information concerning the type (i.e. restaurant, package store or combination restaurant/package liquor store) and ownership of the units (i.e. whether (i) we own 100% of the unit; (ii) the unit is owned by a limited partnership of which we are the sole general partner and/or have invested in; or (iii) the unit is franchised by us), as of April 1,December 30, 2017 and as compared to April 2,December 31, 2016 and October 1, 2016.September 30, 2017. With the exception of “The Whale’s Rib”, a restaurant we operate but do not own, all of the restaurants operate under our service mark “Flanigan’s Seafood Bar and Grill” and all of the package liquor stores operate under our service mark “Big Daddy’s Liquors”.

Notes:

(1) During the third quarter of our fiscal year 2017, we re-located the package liquor store from our combination package liquor store and restaurant located at 13205 Biscayne Boulevard, North Miami, Florida to our newly constructed, free-standing building located at 13185 Biscayne Boulevard, North Miami, Florida.

(2)We operate a restaurant for one (1) franchisee. This unit is included in the table both as a franchised restaurant, as well as a restaurant operated by us.

Franchise Financial Arrangement: In exchange for our providing management and related services to our franchisees and granting them the right to use our service marks “Flanigan’s Seafood Bar and Grill” and “Big Daddy’s Liquors”, our franchisees (four of which are franchised to members of the family of our Chairman of the Board, officers and/or directors), are required to (i) pay to us a royalty equal to 1% of gross package store sales and 3% of gross restaurant sales; and (ii) make advertising expenditures equal to between 1.5% to 3% of all gross sales based upon our actual advertising costs allocated between stores, pro-rata, based upon gross sales.

Limited Partnership Financial Arrangement: We manage and control the operations of all restaurants owned by limited partnerships, except the Fort Lauderdale, Florida restaurant which is owned by a related franchisee. Accordingly, the results of operations of all limited partnership owned restaurants, except the Fort Lauderdale, Florida restaurant are consolidated into our operations for accounting purposes. The results of operations of the Fort Lauderdale, Florida restaurant are accounted for by us utilizing the equity method. In general, until the investors’ cash investment in a limited partnership (including any cash invested by us and our affiliates) is returned in full, the limited partnership distributes to the investors annually out of available cash from the operation of the restaurant up to 25% of the cash invested in the limited partnership, with no management fee paid to us. Any available cash in excess of the 25% of the cash invested in the limited partnership distributed to the investors annually, is paid one-half (½) to us as a management fee, with the balance distributed to the investors. Once the investors in the limited partnership have received, in full, amounts equal to their cash invested, an annual management fee is payable to us equal to one-half (½) of cash available to the limited partnership, with the other one half (½) of available cash distributed to the investors (including us and our affiliates). As of April 1,December 30, 2017, limited partnerships owning five (5)six (6) restaurants, (Surfside, Florida, Kendall, Florida, West Miami, Florida, Pinecrest, Florida, Wellington, Florida and Wellington,Miami, Florida locations), have returned all cash invested and we receive an annual management fee equal to one-half (½) of the cash available for distribution by the limited partnership. In addition to receipt of distributable amounts from the limited partnerships, we receive a fee equal to 3% of gross sales for use of the service mark “Flanigan’s Seafood Bar and Grill”.

RESULTS OF OPERATIONS

Comparison of Thirteen Weeks Ended April 1,December 30, 2017 and April 2,December 31, 2016.

Revenues.. Total revenue for the thirteen weeks ended April 1,December 30, 2017 increased $459,000$1,799,000 or 1.70%6.76% to $27,433,000$28,393,000 from $26,974,000$26,594,000 for the thirteen weeks ended April 2,December 31, 2016 due primarily to increased menu prices and to a lesser extent increased restaurant traffic. Effective February 7, 2016September 3, 2017 we increased certain menu prices for our bar offerings to target an increase to our total bar revenues byof approximately 3.0%4.9% annually and effective February 15, 2016September 16, 2017 we increased certain menu prices for our food offerings to target an increase to our total food revenues byof approximately 3.7%4.0% annually, (the “Price Increases”). Previously, in February 2016, we had increased prices targeting to increase revenue from (i) our bar offerings by 3.0%; and (ii) our food offerings by 3.7% annually.

Restaurant Food Sales.Restaurant revenue generated from the sale of food, including non-alcoholic beverages, at restaurants (food sales) totaled $17,281,000$17,272,000 for the thirteen weeks ended April 1,December 30, 2017 as compared to $16,874,000$16,224,000 for the thirteen weeks ended April 2,December 31, 2016. The increase in restaurant revenue from the sale of food at restaurants forduring the thirteen weeks ended April 1,December 30, 2017 as compared to the thirteen weeks ended April 2, 2016 is primarily due to the Price Increases and to a lesser extent increased restaurant traffic. Comparable weekly restaurant food sales (for restaurants open for all of the secondfirst quarter of our fiscal year 20172018 and the secondfirst quarter of our fiscal year 2016,2017, which consists of ten restaurants owned by us and eight restaurants owned by affiliated limited partnerships) was $1,329,000 and $1,298,000$1,248,000 for the thirteen weeks ended April 1,December 30, 2017 and April 2,December 31, 2016, respectively, an increase of 2.39%6.49%. Comparable weekly restaurant food sales for Company owned restaurants only was $713,000$700,000 and $698,000$651,000 for the secondfirst quarter of our fiscal year 2018 and the first quarter of our fiscal year 2017, and the second quarter of our fiscal year 2016, respectively, an increase of 2.15%7.53%. Comparable weekly restaurant food sales for affiliated limited partnership owned restaurants only was $616,000$629,000 and $600,000$597,000 for the secondfirst quarter of our fiscal year 2018 and the first quarter of our fiscal year 2017, and the second quarter of our fiscal year 2016, respectively, an increase of 2.67%5.36%.

Restaurant Bar Sales. Restaurant revenue generated from the sale of alcoholic beverages at restaurants (bar sales) totaled $5,302,000 for the thirteen weeks ended April 1, 2017 as compared to $5,484,000 for the thirteen weeks ended April 2, 2016.The decrease in restaurant revenue from bar sales at restaurantsDecember 30, 2017 as compared to $5,061,000 for the thirteen weeks ended April 1, 2017 as compared to the thirteen weeks ended April 2, 2016 is primarily due to new promotions toDecember 31, 2016. The increase in restaurant revenue from the sale of alcoholic beverages including but not limited toat restaurants during the significant discounting of the price of draft beer manufactured for the Company by a local brewery and sold under the trade mark “Joe’s Pale Ale”, offset partiallythirteen weeks ended December 30, 2017 is primarily due to the Price Increases and to a lesser extent increased restaurant traffic. Comparable weekly restaurant bar sales (for restaurants open for all of the secondfirst quarter of our fiscal yearsyear 2018 and the first quarter of our fiscal year 2017, and 2016, which consists of ten restaurants owned by us and eight restaurants owned by affiliated limited partnerships) was $408,000 for the thirteen weeks ended April 1, 2017 and $422,000 for the thirteen weeks ended April 2, 2016, a decreaseDecember 30, 2017 and $389,000 for the thirteen weeks ended December 30, 2017, an increase of 3.32%8.48%. Comparable weekly restaurant bar sales for Company owned restaurants only was $199,000$200,000 and $203,000$184,000 for the secondfirst quarter of our fiscal year 2018 and the first quarter of our fiscal year 2017, and the second quarterrespectively, an increase of our fiscal year 2016, respectively, a decrease of 1.97%8.79%. Comparable weekly restaurant bar sales for affiliated limited partnership owned restaurants only was $209,000$222,000 and $219,000$205,000 for the secondfirst quarter of our fiscal year 2018 and the first quarter of our fiscal year 2017, and the second quarterrespectively, an increase of our fiscal year 2016, respectively, a decrease of 4.57%8.29%.

Package Store Sales. Revenue generated from sales of liquor and related items at package liquor stores (package store sales) totaled $4,191,000$5,013,000 for the thirteen weeks ended April 1,December 30, 2017 as compared to $3,994,000$4,678,000 for the thirteen weeks ended April 2,December 31, 2016, an increase of $197,000.$335,000. This increase was primarily due to increased package liquor store traffic. The weekly average of same store package liquor store sales, (whichwhich includes all nine (9) Company owned package liquor stores, open for all of the second quarter of our fiscal years 2017 and 2016), was $322,000$386,000 for the thirteen weeks ended April 1,December 30, 2017 as compared to $307,000$360,000 for the thirteen weeks ended April 2,December 31, 2016, an increase of 4.89%7.22%. We expect package liquor store sales to remain stable throughout the balance of our fiscal year 2017.2018.

Operating Costs and Expenses. Operating costs and expenses, (consisting of cost of merchandise sold, payroll and related costs, occupancy costs and selling, general and administrative expenses), for the thirteen weeks ended April 1,December 30, 2017 increased $342,000$1,685,000 or 1.37%6.71% to $25,338,000$26,806,000 from $24,996,000$25,121,000 for the thirteen weeks ended April 2,December 31, 2016.The increase was primarily due to an expected general increase in food costs, offset by actions taken by management to reduce and/or control costs and expenses. We anticipate that our operating costs and expenses will continue to increase through our fiscal year 20172018 for the same reasons.Operating costs and expenses decreased as a percentage of total revenuesales to approximately 92.36%94.41% in the secondfirst quarter of our fiscal year 20172018 from 92.67%94.46% in the secondfirst quarter of our fiscal year 2016.2017.

Gross Profit. Gross profit is calculated by subtracting the cost of merchandise sold from sales.

Restaurant Food Sales and Bar Sales. Gross profit for food sales and bar sales for the thirteen weeks ended April 1,December 30, 2017 increased to $14,575,000$14,773,000 from $14,539,000$13,823,000 for the thirteen weeks ended April 2,December 31, 2016. Our gross profit margin for restaurant food sales and bar sales (calculated as gross profit reflected as a percentage of restaurant food sales and bar sales), was 64.54%64.92% for the thirteen weeks ended April 1,December 30, 2017 and 65.03%64.94% for the thirteen weeks ended April 2,December 31, 2016. Our gross profit margin for restaurant food and bar sales for the thirteen weeks ended April 1,December 30, 2017 as comparedwas virtually equal to that for the thirteen weeks ended April 2,December 31, 2016 decreased due to higher food costs, notwithstanding the Price Increases. We anticipate that our gross profit margin for restaurant food and bar sales will decrease throughout the balance ofincrease during our fiscal year 20172018 due to Price Increases, offset partially by higher food costs.

Package Store Sales. Gross profit for package store sales for the thirteen weeks ended April 1,December 30, 2017 increased to $1,198,000$1,392,000 from $1,157,000$1,324,000 for the thirteen weeks ended April 2,December 31, 2016. Our gross profit margin, (calculated as gross profit reflected as a percentage of package liquor store sales), for package liquor store sales was 28.58%27.77% for the thirteen weeks ended April 1,December 30, 2017 and 28.97%28.30% for the thirteen weeks ended April 2,December 31, 2016. We anticipate that the gross profit margin for package store salesmerchandise will remain stable throughout the balance ofdecrease during our fiscal year 2017.2018 due to a reduction in pricing of certain package store merchandise to be more competitive.

Payroll and Related Costs. Payroll and related costs for the thirteen weeks ended April 1,December 30, 2017 increased $91,000$401,000 or 1.09%4.92% to $8,410,000$8,546,000 from $8,319,000$8,145,000 for the thirteen weeks ended April 2,December 31, 2016. Higher payroll and related costs for the thirteen weeks ended April 1,December 30, 2017 were primarily due to higher restaurant sales, which require additional payroll and related costs for employees such as cooks, bartenders and servers and higher payroll costs.servers. Payroll and related costs as a percentage of total revenuesales was 30.63%30.10% in the secondfirst quarter of our fiscal year 20172018 and 30.84%30.63% of total revenuesales in the secondfirst quarter of our fiscal year 2016.2017.

Occupancy Costs. Occupancy costs (consisting of rent, common area maintenance, repairs, real property taxes and amortization of leasehold purchases) for the thirteen weeks ended April 1,December 30, 2017 increased $11,000$136,000 or 0.82%10.07% to $1,356,000$1,486,000 from $1,345,000$1,350,000 for the thirteen weeks ended April 2,December 31, 2016. We anticipate that our occupancy costs will remain stable throughout the balance of our fiscal year 2017.2018.

Selling, General and Administrative Expenses. Selling, general and administrative expenses (consisting of general corporate expenses, including but not limited to advertising, insurance, professional costs, clerical and administrative overhead) for the thirteen weeks ended April 1,December 30, 2017 decreased $105,000increased $360,000 or 2.25%7.48% to $4,571,000$5,170,000 from $4,676,000$4,810,000 for the thirteen weeks ended April 2,December 31, 2016. Selling, general and administrative expenses decreasedincreased as a percentage of total revenuesales in the secondfirst quarter of our fiscal year 20172018 to approximately 16.67%18.21% as compared to 17.33%18.09% in the secondfirst quarter of our fiscal year 2016.2017. We anticipate that our selling, general and administrative expenses will increase throughout the balance of our fiscal year 20172018 due primarily to increases across all categories.

Depreciation and Amortization. Depreciation and amortization expense for the thirteen weeks ended April 1,December 30, 2017 increased $10,000$24,000 or 1.53%3.63% to $686,000 from $662,000 from $652,000 fromfor the thirteen weeks ended April 2,December 31, 2016. As a percentage of total revenue, depreciation and amortization expense was 2.41%2.42% of revenue for the thirteen weeks ended December 30, 2017 and 2.49% of revenue in the thirteen weeks ended April 1, 2017 and 2.19% of revenue in the thirteen weeks ended April 2,December 31, 2016.

Interest Expense, Net. Interest expense, net, for the thirteen weeks ended April 1,December 30, 2017 increased $14,000$43,000 to $152,000$176,000 from $138,000$133,000 for the thirteen weeks ended April 2, 2016December 31, 2016. The increase in interest expense, net, for the thirteen weeks ended December 30, 2017 is due primarily to the financingre-financing of the construction of our office and warehouse property located at 1290 East Commercial Boulevard, Oakland Park, Florida 33334 and 4990 N.E. 12^th Avenue, Oakland Park, Florida 33334 at the end of$2 million borrowed on our Credit Line during the firstsecond quarter of our fiscal year 2017. We anticipate that interest expense will increase throughout the balance of our fiscal year 20172018 due primarily to our borrowing of $2.0 millionthe available balance on our Credit Line ($3.5 million for a total amount borrowed on the Credit Line of $5.5 million) during the secondfirst quarter of our fiscal year 2018.

Income Taxes. Income taxes for the thirteen weeks ended December 30, 2017 which borrowed funds were usedwas $465,000 and $280,000 for the thirteen weeks ended December 31, 2016. Income taxes increased during the thirteen weeks ended December 30, 2017 due to purchase the vacant real property which is contiguousa reduction of $268,000 to our deferred tax asset previously recorded due to the real property we own where our new package liquor store located at 13185 Biscayne Boulevard, North Miami, Florida (Store #20P) and our restaurant located at 13205 Biscayne Boulevard, North Miami, Florida (Store #20R) operate.corporate tax rate reduction, which reduction is a part of the current tax expense.

Net IncomeIncome. Net income for the thirteen weeks ended April 1,December 30, 2017 increased $90,000decreased $145,000 or 6.34%13.17% to $1,509,000$956,000 from $1,419,000$1,101,000 for the thirteen weeks ended April 2,December 31, 2016. Net income for the thirteen weeks ended April 1,December 30, 2017 increaseddecreased when compared to the thirteen weeks ended April 2,December 31, 2016 primarily due the Price Increases and to a lesser extent increased restaurant traffic offset partially byreduction of $268,000 to our deferred tax asset, higher food costs and overall expenses.expenses, offset partially by the Price Increases and higher traffic. As a percentage of revenue,sales, net income for the thirteen weeks ended April 1, 2017first quarter of our fiscal year 2018 is 5.50%3.37%, as compared to 5.26% for4.14% in the thirteen weeks ended April 2, 2016.first quarter of our fiscal year 2017.

Net Income Attributable to Stockholders. Net income attributed to stockholders for the thirteen weeks ended April 1,December 31, 2017 increased $173,000decreased $43,000 or 19.79%6.48% to $1,047,000$621,000 from $874,000$664,000 for the thirteen weeks ended April 2, 2016. Net income for the thirteen weeks ended April 1, 2017 increased when compared to the thirteen weeks ended April 2, 2016 primarily due to the Price Increases and to a lower extent increased restaurant traffic, offset partially by higher food costs and overall expenses. As a percentage of revenue, net income attributed to stockholders for the thirteen weeks ended April 1, 2017 is 3.82%, as compared to 3.24% for the thirteen weeks ended April 2, 2016.

Comparison of Twenty Six Weeks Ended April 1, 2017 and April 2, 2016.

Revenues. Total revenue for the twenty six weeks ended April 1, 2017 increased $1,775,000 or 3.40% to $54,027,000 from $52,252,000 for the twenty six weeks ended April 2, 2016 due primarily to the Price Increases and to increased restaurant traffic.

Restaurant Food Sales.Restaurant revenue generated from the sale of food including non-alcoholic beverages at restaurants (food sales) totaled $33,505,000 for the twenty six weeks ended April 1, 2017 as compared to $32,253,000 for the twenty six weeks ended April 2, 2016. The increase in restaurant revenue from the sale of food from restaurants for the twenty six weeks ended April 1, 2017 as compared to the twenty six weeks ended April 2, 2016 is primarily due to Price Increases and to a lesser extent increase restaurant traffic. Comparable weekly food sales(for restaurants open for all of the first and second quarters of our fiscal years 2017 and 2016, which consists of ten restaurants owned by us and eight restaurants owned by affiliated limited partnerships) was $1,289,000 and $1,240,000 for the twenty six weeks ended April 1, 2017 and April 2, 2016, respectively, an increase of 3.95%.Comparable weekly food sales for Company owned restaurants was $682,000 and $659,000 for the twenty six weeks ended April 1, 2017 and April 2, 2016, respectively, an increase of 3.49%. Comparable weekly food sales for affiliated limited partnership owned restaurants was $607,000 and $581,000 for the twenty six weeks ended April 1, 2017 and April 2, 2016, respectively, an increase of 4.48%.

Restaurant Bar Sales. Restaurant revenue generated from the sale of alcoholic beverages at restaurants (bar sales) totaled $10,363,000 for the twenty six weeks ended April 1, 2017 as compared to $10,387,000 for the twenty six weeks ended April 2, 2016.The decrease in restaurant revenue from bar sales from restaurants for the twenty six weeks ended April 1, 2017 as compared to the twenty six weeks ended April 2, 2016 is primarily due to new promotions to increase the sale of alcoholic beverages, including but not limited the significant discounting of the price of draft beer manufactured for the Company by a local brewery and sold under the trade mark “Joe’s Pale Ale”, offset partially due to Price Increases and to a lesser extent increased restaurant traffic. Comparable weekly bar sales (for restaurants open for all of the first and second quarters of our fiscal years 2017 and 2016, which consists of ten restaurants owned by us and eight restaurants owned by affiliated limited partnerships) was $399,000 for the twenty six weeks ended April 1, 2017 and $400,000 for the twenty six weeks ended April 2, 2016, a decrease of 0.25%. Comparable weekly bar sales for Company owned restaurants was $192,000 and $190,000 for the twenty six weeks ended April 1, 2017 and April 2, 2016, respectively, an increase of 1.05%. Comparable weekly bar sales for affiliated limited partnership owned restaurants was $207,000 and $210,000 for the twenty six weeks ended April 1, 2017 and April 2, 2016, respectively, an increase of 1.43%.

Package Store Sales. Revenue generated from sales of liquor and related items at package stores (package store sales) totaled $8,869,000 for the twenty six weeks ended April 1, 2017 as compared to $8,354,000 for the twenty six weeks ended April 2, 2016, an increase of $515,000. This increase was primarily due to increased package liquor store traffic. The weekly average of same store package store sales, (which includes all nine (9) Company owned package liquor stores open for all of the first and second quarters of our fiscal years 2017 and 2016) was $341,000 and $321,000 for the twenty six weeks ended April 1, 2017 and April 2, 2016, respectively, an increase of 6.23%. Package liquor store sales are expected to remain stable throughout the balance of our fiscal year 2017.

Operating Costs and Expenses. Operating costs and expenses, (consisting of cost of merchandise sold, payroll and related costs, occupancy costs and selling, general and administrative expenses), for the twenty six weeks ended April 1, 2017 increased $1,536,000 or 3.14% to $50,459,000 from $48,923,000 for the twenty six weeks ended April 2, 2016.The increase was primarily due to a general increase in food costs, offset by actions taken by management to reduce and/or control costs and expenses. We anticipate that our operating costs and expenses will continue to increase through our fiscal year 2017 for the same reasons.Operating costs and expenses decreased as a percentage of total revenue to approximately 93.40% for the twenty six weeks ended April 1, 2017 from 93.62% for the twenty six weeks ended April 2, 2016.

Gross Profit. Gross profit is calculated by subtracting the cost of merchandise sold from sales.

Restaurant Food Sales and Bar Sales. Gross profit for food and bar sales for the twenty six weeks ended April 1, 2017 increased to $28,398,000 from $27,700,000 for the twenty six weeks ended April 2, 2016. Our gross profit margin for food sales and bar sales (calculated as gross profit reflected as a percentage of food sales and bar sales), was 64.74% for the twenty six weeks ended April 1, 2017 and 64.96% for the twenty six weeks ended April 2, 2016. Our gross profit margin for restaurant food and bar sales for the twenty six weeks ended April 1, 2017 as compared to the twenty six weeks ended January 2, 2016 decreased due to higher food costs, notwithstanding the Price Increases. We anticipate that our gross profit margin for restaurant food and bar sales will decrease throughout the balance of our fiscal year 2017 due to higher food costs.

Package Store Sales. Gross profit for package store sales for the twenty six weeks ended April 1, 2017 increased to $2,522,000 from $2,406,000 for the twenty six weeks ended April 2, 2016. Our gross profit margin, (calculated as gross profit reflected as a percentage of package store sales), was 28.43% for the twenty six weeks ended April 1, 2017 compared to 28.80% for the twenty six weeks ended April 2, 2016. We anticipate that the gross profit margin for package store sales will remain stable throughout the balance of our fiscal year 2017.

Payroll and Related Costs. Payroll and related costs for the twenty six weeks ended April 1, 2017, increased $515,000 or 3.21% to $16,555,000 from $16,040,000 for the twenty six weeks ended April 2, 2016. Higher payroll and related costs for the twenty six weeks ended April 1, 2017 were primarily due to higher restaurant sales, which require additional payroll and related costs for employees such as cooks, bartenders and servers and higher payroll costs. Payroll and related costs as a percentage of total revenue was 30.63% for the twenty six weeks ended April 1, 2017 and 30.70% of total revenue for the twenty six weeks ended April 2, 2016.

Occupancy Costs. Occupancy costs (consisting of rent, common area maintenance, repairs, real property taxes and amortization of leasehold purchases) for the twenty six weeks ended April 1, 2017 increased $69,000 or 2.62% to $2,706,000 from $2,637,000 for the twenty six weeks ended April 2, 2016. We anticipate that our occupancy costs will remain stable throughout our fiscal year 2017.

Selling, General and Administrative Expenses. Selling, general and administrative expenses (consisting of general corporate expenses, including but not limited to advertising, insurance, professional costs, clerical and administrative overhead) for the twenty six weeks ended April 1, 2017 increased $23,000 or 0.25% to $9,381,000 from $9,358,000 for the twenty six weeks ended April 2, 2016. Selling, general and administrative expenses decreased as a percentage of total revenue for the twenty six weeks ended April 1, 2017 to 17.36% as compared to 17.90% for the twenty six weeks ended April 2, 2016. We anticipate that our selling, general and administrative expenses will increase throughout the balance of our fiscal year 2017 due primarily to increases across all categories.

Depreciation and Amortization. Depreciation and amortization expense for the twenty six weeks ended April 1, 2017 decreased $3,000 or 0.23% to $1,324,000 from $1,327,000 from the twenty six weeks ended April 2, 2016. As a percentage of total revenue, depreciation and amortization expense was 2.45% of revenue in the twenty six weeks ended April 1, 2017 and 2.29% of revenue in the twenty six weeks ended April 2, 2016.

Interest Expense, Net. Interest expense, net, for the twenty six weeks ended April 1, 2017 increased $1,000 to $285,000 from $284,000 for the twenty six weeks ended April 2, 2016 due primarily to the financing of our new construction office and warehouse property located at 1290 East Commercial Boulevard, Oakland Park, Florida 33334 and 4990 N.E. 12^th Avenue, Oakland Park, Florida 33334 at the end of the first quarter of our fiscal year 2017. We anticipate that interest expense will increase throughout the balance of our fiscal year 2017 due primarily to our borrowing of $2.00 million on our Credit Line during the second quarter of our fiscal year 2017, which borrowed funds were used to purchase the vacant real property which is contiguous to the real property we own where our new package liquor store located at 13185 Biscayne Boulevard, North Miami, Florida (Store #20P) and our restaurant located at 13205 Biscayne Boulevard, North Miami, Florida (Store #20R) operate.

Net Income. Net income for the twenty six weeks ended April 1, 2017 increased $241,000 or 10.17% to $2,611,000 from $2,370,000 for the twenty six weeks ended April 2, 2016. Net income for the twenty six weeks ended April 1, 2017 increased when compared to the twenty six weeks ended April 2, 2016 primarily due to the Price Increases and to a lesser extent increased restaurant traffic, offset partially due to higher food costs and overall expenses. As a percentage of revenue, net income for the twenty six weeks ended April 1, 2017 is 4.83%, as compared to 4.54% for the twenty six weeks ended April 2, 2016.

Net Income Attributable to Stockholders. Net income attributable to stockholders for the twenty six weeks ended April 1, 2017 increased $214,000 or 14.29% to $1,712,000 from $1,498,000 for the twenty six weeks ended April 2,December 30, 2016. Net income attributable to stockholders for the twenty sixthirteen weeks ended April 1, 2017 increasedDecember 30, 2016 decreased when compared to the twenty sixthirteen weeks ended April 2,December 31, 2016 primarily due to the Price Increases anda reduction of $268,000 to a lesser extent increased restaurant traffic, offset partially due toour deferred tax asset, higher food costs and overall expenses.expenses, offset partially by the Price Increases and higher traffic. As a percentage of revenue,sales, net income attributable to stockholders for the twenty six weeks ended April 1, 2017first quarter of our fiscal year 2018 is 3.17%2.19%, as compared to 2.87% for2.50% in the twenty six weeks ended April 2, 2016.first quarter of our fiscal year 2017.

New Limited Partnership Restaurants

As new restaurants open, our income from operations will be adversely affected if wedue to our obligation to fund pre-opening costs, including but not limited to pre-opening rent for the new locations. During the twenty sixthirteen weeks ended April 1,December 30, 2017, we did not have a new restaurant location in the development stage and did not recognize any pre-opening costs.

Menu Price Increases and Trends

Effective February 7, 2016September 3, 2017 we increased menu prices for our bar offerings to target an increase to our bar revenues byof approximately 3.0%4.9% annually and effective February 15, 2016September 16, 2017 we increased menu prices for our food offerings to target an increase to our food revenues byof approximately 3.7%4.0% annually to offset higher food costs and higher overall expenses. The last time we increased menu prices was in the thirdsecond quarter of our fiscal year 2012.2016. During the next twelve months, if demand for our restaurant and bar offerings remains substantially similar to the demand during our fiscal year 2017, of which there can be no assurance, we expect that restaurant and bar sales, as well as gross profit for food and bar operations should increase as a result of increased menu prices, but gross profit for restaurant food and bar operations will decrease due tothe Price Increases, offset partially by higher food costs. We anticipate that our package liquor store sales will remain stable and gross profit margin for package liquor store sales will remain stabledecrease during our fiscal year 2017. We also plan to continue our increased advertising to attract and retain our customers against increased competition.2018.

We do not have a new “Flanigan’s Seafood Bar and Grill” restaurant in the development stage, but continue to search for new locations to open restaurants and thereby expand our business. AlthoughAs of the end of our fiscal year 2017 we have no agreements, agreements in principle or understandings to do so, we are attemptingabandoned our attempt to expand “The Whale’s Rib” restaurant concept that we manage in Deerfield Beach, Florida through the opening of a new restaurant in Miami, Florida. We have the authorityFlorida due to open new restaurant locations using ‘The Whale’s Rib” concept, including its trademark, through a license arrangement with the owner. If we open new Whales Rib locations, we will probably use our limited partnership ownership model.inability to get all necessary governmental approvals.

We are not actively searching for locations for the operation of new package liquor stores, but if an appropriate locationwhen our attempt to expand “The Whale’s Rib” restaurant concept in Miami, Florida was abandoned, we decided that the space we had targeted for the “The Whales Rib” would be ideal for the operation of a package liquor store becomes available,and we will consider it.are currently preparing the space to operate a package liquor store.

Liquidity and Capital Resources

We fund our operations through cash from operations. As of April 1,December 30, 2017, we had cash of approximately $10,621,000,$15,422,000, an increase of $447,000$5,537,000 from our cash balance of $10,174,000$9,885,000 as of October 1, 2016.September 30, 2017. Our cash increased during the secondfirst quarter of our fiscal year 20172018, because we borrowed $2.00$3.50 million from our Credit Line. During the second quarter of our fiscal year 2017, we used $2.74 million cash at closing,Line just prior to close on the purchase of the vacant real property, which is contiguousits conversion to the real property we own where our new package liquor store located at 13185 Biscayne Boulevard, North Miami, Florida, (Store #20P) and our restaurant located at 13205 Biscayne Boulevard, North Miami, Florida (Store #20R) operate. During the second quarter of our fiscal year 2017, we also paidTerm Loan on March 31, 2017 a dividend of $.20 per share. During the second quarter of our fiscal year 2016, we paid on April 1, 2016 a dividend of $.18 per share.December 28, 2017. We believe that our current cash availability from our cash on hand, positive cash flow from operations and borrowed funds available on our term loan will be sufficient to fund our operations and planned capital expenditures for at least the next twelve months.

Cash Flows

The following table is a summary of our cash flows for the twenty sixfirst thirteen weeks ended April 1, 2017of fiscal years 2018 and April 2, 2016.2017.

During the twenty six weeks ended April 1, 2017, our Board of Directors declared and paidWe did not declare or pay a cash dividend on our capital stock in the first quarter of 20 cents per share to shareholdersour fiscal year 2018 or the first quarter of record on March 17,our fiscal year 2017. During the twenty six weeks ended April 2, 2016, our Board of Directors declared and paid a cash dividend of 18 cents per share to shareholders of record on March 18, 2016. Any future determination to pay cash dividends will be at our Board’s discretion and will depend upon our financial condition, operating results, capital requirements and such other factors as our Board deems relevant.

Capital Expenditures

In addition to using cash for our operating expenses, we use cash generated from operations and borrowings to fund the development and construction of new restaurants and to fund capitalized property improvements for our existing restaurants. We acquired property plant and equipment of $960,000, (including $46,000 of deposits recorded in other assets as of September 30, 2017), during the thirteen weeks ended December 30, 2017, including $102,000 for renovations to one (1) Company owned restaurant. We acquired property and construction in progressequipment of $5,025,000, (of which $699,000 was$819,000, (including $88,000 of deposits recorded in other assets as of October 1, 2016), during the twenty sixthirteen weeks ended April 1, 2017, which amount included $2.475 million for the purchase of real property, $969,000 for the construction and redevelopment of a new package store on the same, $478,000 for the construction of a catering kitchen, and $125,000December 31, 2016, including $65,000 for renovations to three (3) Company owned restaurants and one Company owned package liquor store. During the twenty six weeks ended April 2, 2016, we acquired property, plant and equipment of $2,407,000, (of which $211,000 was of deposits recorded in other assets as of October 3, 2015), during the twenty six weeks ended April 2, 2016, which amount included $201,000 for one (1) limited partnership and one (1) Company owned restaurants.

All of our owned units require periodic refurbishing in order to remain competitive. We anticipate the cost of this refurbishment in our fiscal year 20172018 to be approximately $900,000,$400,000, $102,000 of which $125,000 has been spent through April 1,December 30, 2017.

Long Term Debt

As of April 1,December 30, 2017, we had long term debt of $13,237,000,$16,617,000, as compared to $11,679,000$11,808,000 as of April 2,December 31, 2016, and $10,092,000$12,398,000 as of October 1, 2016.September 30, 2017. Our long term debt increased as of April 1,December 30, 2017 as compared to April 2,December 31, 2016 due to our borrowing $2.00 millionthe $3,500,000 we borrowed on our Credit Line and $1,199,000 forincreased as compared to September 30, 2017 due to the $3,500,000 we borrowed on our Credit Line and financed insurance premiums.As of April 1,December 30, 2017, we are in compliance with the covenants of all loans with our lender.

Construction Contracts

On June 14, 2017, we entered into an agreement with a third party unaffiliated general contractor to renovate our restaurant located at 13205 Biscayne Boulevard, North Miami, Florida, (Store #20) for a total contract price of $880,000. The renovations include, but are not limited to the construction of a new kitchen and the expansion of the restaurant into our former package liquor store location. During the first quarter of our fiscal year 2018, we agreed to change orders which had the effect of increasing the total contract price for the renovation to $1,080,000, of which, as of the end of our first quarter fiscal 2018, we have paid $345,000.

As of April 1, 2017,During the aggregate principal balance owed from the financingfirst quarter of our fiscal year 2018, we entered into two agreements with a third party unaffiliated general contractor for design and development services for a total contract price of $127,000 (the “$127,000 Contract”) and $174,000 (the “$174,000 Contract”). The $127,000 Contract provides for design and development services for the construction of a new building (the “New Building”) on a parcel of real property which we own which is adjacent to the real property where our combination package liquor store and restaurant located at 2505 N. University Drive, Hollywood, Florida, (Store #19) operates. The $174,000 Contract provides for design and development services for the renovation of the existing building which currently houses the combination package liquor store and restaurant. If we complete the construction of the New Building and the renovation of the existing building, we currently plan to re-locate our package liquor store located at the property to the New Building and to operate the restaurant located at the property in the renovated and expanded existing building.

Subsequent to the end of the first quarter of our fiscal year 2018, we entered into an agreement with a third party unaffiliated general liability insurance policies is $769,000.contractor to renovate and add an outdoor patio area to the front of our restaurant located at 13205 Biscayne Boulevard, North Miami, Florida (Store #20) for a total contract price of $912,000.

Purchase Commitments

In order to fix the cost and ensure adequate supply of baby back ribs for our restaurants, on November 5, 2016,7, 2017, we entered into a purchase agreement with our current rib supplier, whereby we agreed to purchase approximately $5,779,000$6,208,000 of baby back ribs during calendar year 20172018 from this vendor at a fixed cost.

While we anticipate purchasing all of our rib supply from this vendor, we believe there are several other alternative vendors available, if needed.

Purchase of Limited Partnership Interest

During the thirteen weeks ended December 30, 2017, we purchased from one limited partner (who is not an officer, director or family member of officers or directors) a limited partnership interest of 0.21% in a limited partnership which owns a restaurant, for a purchase price of $1,600. During the thirteen weeks ended December 31, 2016, we did not purchase any limited partnership interests.

Working Capital

The table below summarizes the current assets, current liabilities, and working capital for our fiscal quarters ended April 1,December 30, 2017, April 2,December 31, 2016 and our fiscal year ended October 1, 2016.September 30, 2017.

Our working capital as of April 1,increased during our fiscal quarter ended December 30, 2017 increased by 66.89% from our working capital as of April 2,for our fiscal quarter ended December 31, 2016 and increased by 13.70% from our working capital as of October 1, 2016. During the second quarter of our fiscal year ended September 30, 2017 primarily due to the $3,500,000 we used $2,475,000 ($2,000,000borrowed against our Line of which was borrowed from our Credit Line)prior to fund the purchase price on our acquisitionCredit Line converting to the Term Loan. We plan to use certain of the vacant real property which is contiguousborrowed funds to complete the real property we own where our new package liquor store located at 13185 Biscayne Boulevard, North Miami, Florida, (Store #20P) andrenovation of our restaurant located at 13205 Biscayne Boulevard, North Miami, Florida (Store #20R) operate. During the second quarterand to construct a new building on a parcel of our fiscal year 2016,real property which we used $922,500own which is adjacent to purchase the real property where our combination package liquor store and improvementsrestaurant located at 1290 East Commercial Boulevard, Oakland Park, Broward County,2505 N. University Drive, Hollywood, Florida, (Store #19) operates into which we plan to re-locate our package liquor store and to renovate and expand the vacant real property located at 4990 N.E. 12^th Avenue, Oakland Park, Broward County, Florida.restaurant into the former package liquor store space.

While there can be no assurance due to, among other things, unanticipated expenses or unanticipated decline in revenues, or both, we believe that our cash on hand, positive cash flow from operations and funds availableborrowed on our term loan will adequately fund operations, debt reductions and planned capital expenditures throughout our fiscal year 2017.2018.

Off-Balance Sheet Arrangements

We doThe Company does not have off-balance sheet arrangements.

Inflation

The primary inflationary factors affecting our operations are food, beverage and labor costs. A large number of restaurant personnel are paid at rates based upon applicable minimum wage and increases in minimum wage directly affect labor costs. To date, inflation has not had a material impact on our operating results, but this circumstance may change in the future if food and fuel costs continue to rise.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We do not ordinarily hold market risk sensitive instruments for trading purposes and as of April 1,December 30, 2017 held no equity securities.

Interest Rate Risk

As part of our ongoing operations, we are exposed to interest rate fluctuations on our borrowings. As more fully described in Note 9 “Fair Value Measurements of Financial Instruments” to the Consolidated Financial Statements included in “Item 8. Financial Statements and Supplementary Data” of our Annual Report on Form 10-K for our fiscal year ended October 1, 2016,September 30, 2017, we use interest rate swap agreements to manage these risks. These instruments are not used for speculative purposes but are used to modify variable rate obligations into fixed rate obligations.

At April 1,December 30, 2017, we had three variable rate debt instruments outstanding that are impacted by changes in interest rates. In November, 2011, we financed our purchase of the real property and two building shopping center in Miami, Florida, with a $4,500,000 mortgage loan (the “$4.5M Mortgage Loan”). In January, 2013, we refinanced the mortgage loan encumbering the property where our combination package liquor store and restaurant located at 4 N. Federal Highway, Hallandale, Florida, (Store #31) operates, which mortgage loan is held by an unaffiliated third party lender (the “$1.405M Loan”). In December, 2016, we closed on a secured revolving line of credit which entitlesentitled us to borrow, from time to time through December 28, 2017, up to $5,500,000 (the “Credit Line”), which on December 28, 2017 converted to a term loan (the “Term Loan”).

As a means of managing our interest rate risk on these debt instruments, we entered into interest rate swap agreements with our unrelated third party lender to convert these variable rate debt obligations to fixed rates. We are currently party to the following three (3) interest rate swap agreements:

(i)        The first interest rate swap agreement entered into in November, 2011 by our wholly owned subsidiary, Flanigan’s Calusa Center, LLC, relates to the $4.5 million Mortgage Loan (the “$4.5M Mortgage Loan Swap”). The $4.5M Mortgage Loan Swap requires us to pay interest for an eight (8) year period at a fixed rate of 4.51% on an initial amortizing notional principal amount of $3,750,000, while receiving interest for the same period at LIBOR – 1 Month, plus 2.25%, on the same amortizing notional principal amount. We determined that at April 1,December 30, 2017, the interest rate swap agreement is an effective hedging agreement and the fair value was not material; and

(ii)        The second interest rate swap agreement entered into in January, 2013 relates to the $1.405M Loan (the “$1.405M Term Loan Swap”). The $1.405M Term Loan Swap requires us to pay interest for a twenty (20) year period at a fixed rate of 4.35% on an initial amortizing notional principal amount of $1,405,000, while receiving interest for the same period at LIBOR -– 1 month,Month, plus 2.25%, on the same amortizing notional principal amount. We determined that at April 1,December 30, 2017, the interest rate swap agreement is an effective hedging agreement and the fair value was not material; and

(iii)        The third interest rate swap agreement entered into in December, 2016 and became effective December 28, 2017, relates to the Line of CreditTerm Loan (the “Line of Credit“Term Loan Swap”). The Line of CreditTerm Loan Swap requires us to pay interest for a five (5) year period commencing December 28, 2017 at a fixed rate of 4.65%4.61% on an initial amortizing notional principal amount of $5,500,000, while receiving interest for the same period at LIBOR – 1 Month, plus 2.25%, on the same amortizing notional principal amount. We determined that at April 1,December 30, 2017, the interest rate swap agreement is an effective hedging agreement and the fair value was not material.material

At April 1,December 30, 2017, our cash resources earn interest at variable rates. Accordingly, our return on these funds is affected by fluctuations in interest rates.

There is no assurance that interest rates will increase or decrease over our next fiscal year or that an increase will not have a material adverse effect on our operations.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed with the U.S. Securities and Exchange Commission (the “SEC”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As of April 1,December 30, 2017, an evaluation was performed under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) to the Securities Exchange Act of 1934) . Based on that evaluation, management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of April 1,December 30, 2017.

Changes in Internal Control Over Financial Reporting

During the period covered by this report, we have not made any change to our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See “Litigation” on page 11 of this Report and Item 1 and Item 3 to Part 1 of the Annual Report on Form 10-K for the fiscal year ended October 1, 2016September 30, 2017 for a discussion of other legal proceedings resolved in prior years.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Purchase of Company Common Stock

During the thirteen weeks ended April 1,December 30, 2017 and April 2,December 31, 2016, we did not purchase any shares of our common stock. As of April 1,December 30, 2017, we still have authority to purchase 65,414 shares of our common stock under the discretionary plan approved by the Board of Directors at its meeting on May 17, 2007.

ITEM 6. EXHIBITS

The following exhibits are filed with this Report: