UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549

FORM 10-Q

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 2, 2022April 1, 2023

OR

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to

Commission File Number 1-6836

FLANIGAN'S ENTERPRISES, INCINC.

(Exact name of registrant as specified in its charter)

Florida

59-0877638

(State or other jurisdiction of

(I.R.S. Employer


incorporation or organization)

(I.R.S. Employer
Identification Number)

5059 N.E. 18th Avenue,, Fort Lauderdale,, Florida

33334

(Address of principal executive offices)

(Zip CodeCode)

(954) 377-1961

(Registrant's telephone number, including area code)

(954) 377-1961

(Registrant's telephone number, including area code)

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

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, $.10 par value

BDL

NYSE AMERICAN AMERICAN

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

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

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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):

Large accelerated filer ☐

Accelerated filer ☐

Non-accelerated filer ☐ ☒

Smaller reporting company ☒

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 ☐ No ☒

On AugustMay 16, 2022, 2023, 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

PART I. FINANCIAL INFORMATION

ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

1

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

3

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

5

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

6

7

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

8

9
ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION  AND RESULTS OF OPERATIONS1718
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK31
ITEM 4.  CONTROLS AND PROCEDURES32
  
PART II. OTHER INFORMATION3233
  
ITEM 1.  LEGAL PROCEEDINGS3233
ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS3233
ITEM 6. EXHIBITS3233
SIGNATURES3334

 

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).

IndexTable of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

 

Table of Contents

Index

FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except share and earnings per share amounts)

 

Thirteen Weeks Ended

Thirty-Nine Weeks Ended

 Thirteen Weeks Ended Twenty-six Weeks Ended 

July

2, 2022

July

3, 2021

July

2, 2022

July

3, 2021

 April 1, 2023  April 2, 2022  April 1, 2023  April 2, 2022 

     

REVENUES:

                

Restaurant food sales

$

25,574

$

23,484

$

72,554

$

62,501

 $27,113  $24,775  $51,880  $46,980 

Restaurant bar sales

6,755

5,617

19,431

15,110

  7,281   6,669   14,269   12,676 

Package store sales

7,626

8,082

24,285

23,923

  8,659   8,148   18,062   16,659 

Franchise related revenues

460

444

1,384

1,252

  484   478   943   924 

Rental income

213

250

611

663

  218   199   431   398 

Other operating income

47

58

143

223

  48   61   79   96 

40,675

37,935

118,408

103,672

  43,803   40,330   85,664   77,733 

                

COSTS AND EXPENSES:

                

Cost of merchandise sold:

                

Restaurant and lounges

11,870

9,964

33,577

25,948

  11,210   11,374   22,016   21,707 

Package goods

5,630

5,911

17,839

17,430

  6,212   5,869   13,196   12,209 

Payroll and related costs

12,798

12,548

37,065

32,475

  14,174   12,031   27,810   24,267 

Occupancy costs

1,777

1,651

5,190

5,059

  1,878   1,715   3,726   3,413 

Selling, general and administrative expenses

6,517

5,252

20,039

16,088

  7,618   7,491   15,008   13,522 

38,592

35,326

113,710

97,000

  41,092   38,480   81,756   75,118 

Income from Operations

2,083

2,609

4,698

6,672

  2,711   1,850   3,908   2,615 

                

OTHER INCOME (EXPENSE):

                

Interest expense

(177

)

(210

)

(547

)

(737

)

  (262)  (177)  (537)  (370)

Interest and other income

80

14

117

45

  19   23   34   37 

Gain on forgiveness of debt

0—

6,483

3,488

10,136

Gain on forgiveness of PPP loans  —   —   —   3,488 

Gain on sale of property and equipment

0—

0—

11

33

  —   —   —   11 

(97

)

6,287

3,069

9,477

  (243)  (154)  (503)  3,166 

                

Income before Provision for Income Taxes

1,986

8,896

7,767

16,149

  2,468   1,696   3,405   5,781 

                

Provision for Income Taxes

(22

)

(475

)

(522

)

(1,004

)

  (290)  (353)  (353)  (500)

                

Net Income

1,964

8,421

7,245

15,145

  2,178   1,343   3,052   5,281 

                

Less: Net income attributable to noncontrolling interests

(129

)

(1,222

)

(2,186

)

(4,715

)

Less: Net loss (income) attributable to noncontrolling interests  (281)  317   (531)  (2,057)

                

Net Income attributable to Flanigan’s Enterprises, Inc. stockholders

$

1,835

$

7,199

$

5,059

$

10,430

Net Income attributable to, Flanigan’s Enterprises, Inc. stockholders $1,897  $1,660  $2,521  $3,224 

See accompanying notes to unaudited condensed consolidated financial statements.

1 

1Table of Contents

Index

FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except share and per share amounts)

(Continued)

 

Thirteen Weeks Ended

Thirty-Nine Weeks Ended

 Thirteen Weeks Ended Twenty-six Weeks Ended 

July

2, 2022

July

3, 2021

July

2, 2022

July

3, 2021

 April 1, 2023 April 2, 2022 April 1, 2023 April 2, 2022 

   

Net Income Per Common Share:

                

Basic and Diluted

$

0.99

$

3.87

$

2.72

$

5.61

 $1.02  $0.89  $1.36  $1.73 

                

Weighted Average Shares and Equivalent Shares Outstanding

Weighted Average Shares and Equivalent Shares Outstanding:                

Basic and Diluted

1,858,647

1,858,647

1,858,647

1,858,647

  1,858,647   1,858,647   1,858,647   1,858,647 

See accompanying notes to unaudited condensed consolidated financial statements.

2 

2Table of Contents

Index

FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

JULY 2, 2022APRIL 1, 2023 (UNAUDITED) AND OCTOBER 2, 20211, 2022

(in thousands, except share and per share amounts)

 

ASSETS

July 2, 2022

October 2, 2021

 

CURRENT ASSETS:

 

Cash and cash equivalents

$

35,659

$

32,676

Prepaid income taxes

170

139

Other receivables

432

450

Inventories

5,525

4,283

Prepaid expenses

3,534

2,242

 

Total Current Assets

45,320

39,790

 

Property and Equipment, Net

55,859

51,441

Construction in Progress

5,797

5,445

61,656

56,886

 

Right-of-use assets, operating leases

30,122

28,559

 

Investment in Limited Partnerships

310

1,122

 

OTHER ASSETS:

 

Liquor licenses

822

822

Leasehold interests, net

91

118

Other

1,088

705

 

Total Other Assets

2,001

1,645

 

Total Assets

$

139,409

$

128,002

ASSETS

  April 1, 2023  October 1, 2022 
    
CURRENT ASSETS:        
         
Cash and cash equivalents $37,764  $42,138 
Prepaid income taxes  87   235 
Other receivables  710   456 
Inventories  6,555   6,489 
Prepaid expenses  2,804   1,575 
         
Total Current Assets  47,920   50,893 
         
Property and equipment, net  59,441   55,747 
Construction in Progress  6,355   7,517 
   65,796   63,264 
         
Right-of-use assets, operating leases  28,290   29,517 
         
Investment in Limited Partnership  283   294 
         
OTHER ASSETS:        
         
Liquor licenses  1,268   1,268 
Deposits on property and equipment  2,938   1,860 
Leasehold interests, net  75   86 
Other  298   310 
         
Total Other Assets  4,579   3,524 
         
Total Assets $146,868  $147,492 

See accompanying notes to unaudited condensed consolidated financial statements.

3 

Table of Contents

3

Index

FLANIGAN'S ENTERPRISES, INC.INC, AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

JULY 2, 2022APRIL 1, 2023 (UNAUDITED) AND OCTOBER 2, 20211, 2022

(in thousands, except share and per share amounts)

(Continued)

LIABILITIES AND STOCKHOLDERS’ EQUITY

  April 1, 2023  October 1, 2022 
    
CURRENT LIABILITIES:        
         
Accounts payable and accrued expenses $8,174  $8,111 
Accrued compensation  2,133   2,104 
Due to franchisees  4,954   4,780 
Current portion of long-term debt  1,236   2,299 
Operating lease liabilities, current  2,323   2,253 
Deferred revenue  3,067   2,629 
Total Current Liabilities  21,887   22,176 
         
Long Term Debt, Net of Current Portion  22,496   23,090 
         
Operating lease liabilities, non-current  27,106   28,281 
Deferred tax liabilities  605   605 
         
Total Liabilities  72,094   74,152 
         
COMMITMENTS AND CONTINGENCIES  
 
   
 
 
Equity:        
Flanigan’s Enterprises, Inc. Stockholders’ Equity        
Common stock, $.10 par value, 5,000,000 shares authorized; 4,197,642 shares issued  420   420 
Capital in excess of par value  6,240   6,240 
Retained earnings  57,607   55,086 
Treasury stock, at cost, 2,338,995 shares  (6,077)  (6,077)
Total Flanigan’s Enterprises, Inc. stockholders’ equity  58,190   55,669 
Noncontrolling interests  16,584   17,671 
Total stockholders’ equity  74,774   73,340 
         
Total liabilities and stockholders’ equity $146,868  $147,492 

July 2, 2022

October 2, 2021

 

CURRENT LIABILITIES:

 

Accounts payable and accrued expenses

$

10,867

$

9,770

Due to franchisees

5,295

4,478

Current portion of long-term debt

2,995

2,555

Operating lease liability, current

2,219

2,009

Deferred revenue

1,556

1,411

 

Total Current Liabilities

22,932

20,223

 

Long-Term Debt, Net of Current Portion

14,778

19,560

 

Operating lease liabilities, non-current

28,854

27,183

Deferred tax liabilities

493

406

Total Liabilities

67,057

67,372

 

COMMITMENTS AND CONTINGENCIES

Equity:

Flanigan’s Enterprises, Inc. Stockholders’ Equity

Common stock, $.10 par value, 5,000,000

shares authorized; 4,197,642 shares issued

420

420

Capital in excess of par value

6,240

6,240

Retained earnings

53,833

50,632

Treasury stock, at cost, 2,338,995 shares

(6,077

)

(6,077

)

Total Flanigan’s Enterprises, Inc.

stockholders’ equity

54,416

51,215

Noncontrolling interests

17,936

9,415

Total stockholders’ equity

72,352

60,630

 

Total liabilities and stockholders’ equity

$

139,409

$

128,002

See accompanying notes to unaudited condensed consolidated financial statements.

4 

4Table of Contents

Index

FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS

OF STOCKHOLDERS'STOCKHOLDERS’ EQUITY

FOR THE THIRTY-NINETWENTY-SIX WEEKS ENDED JULYAPRIL 1, 2023 AND APRIL 2, 2022 AND JULY 3, 2021

Capital in

Common Stock

Excess of

Retained

Treasury Stock

Noncontrolling

Shares

Amount

Par Value

Earnings

Shares

Amount

Interests

Total

 

Balance, October, 2020

4,197,642

$

420

$

6,240

$

38,848

2,338,995

$

(6,077

)

$

6,125

$

45,556

 

Net income

—

—

—

780

—

—

252

1,032

Distributions to noncontrolling interests

—

—

—

—

—

—

(242)

(242

)

 

Balance, January 2, 2021

4,197,642

$

420

$

6,240

$

39,628

2,338,995

$

(6,077

)

$

6,135

$

46,346

 

Net income

—

—

—

2,451

—

—

3,241

5,692

Distributions to noncontrolling interests

—

—

—

—

—

—

(483)

(483

)

 

Balance, April 3, 2021

4,197,642

$

420

$

6,240

$

42,079

2,338,995

$

(6,077

)

$

8,893

$

51,555

 

Net income (Loss)

—

—

—

7,199

—

—

1,222

8,421

Distributions to noncontrolling interests

—

—

—

—

—

—

(483)

(483

)

 

Balance, July 3, 2021

4,197,642

$

420

$

6,240

$

49,278

2,338,995

$

(6,077

)

$

9,632

$

59,493

Capital in

Common Stock

Excess of

Retained

Treasury Stock

Noncontrolling

Shares

Amount

Par Value

Earnings

Shares

Amount

Interests

Total

 

Balance, October 2, 2021

4,197,642

$

420

$

6,240

$

50,632

2,338,995

$

(6,077

)

$

9,415

$

60,630

 

Net income

—

—

—

1,564

—

—

2,374

3,938

Distributions to noncontrolling interests

—

—

—

—

—

—

(757

)

(757

)

 

Balance, January 1, 2022

4,197,642

$

420

$

6,240

$

52,196

2,338,995

$

(6,077

)

$

11,032

$

63,811

 

Net income

—

—

—

1,660

—

—

(317

)

1,343

Distributions to noncontrolling interests

—

—

—

—

—

—

(757

)

(757

)

Sale of minority interest

—

—

—

—

—

—

8,630

8,630

Balance, April 2, 2022

4,197,642

$

420

$

6,240

$

53,856

2,338,995

$

(6,077

)

$

18,588

$

73,027

 

Net income

—

—

—

1,835

—

—

129

1,964

Distributions to noncontrolling interests

—

—

—

—

—

—

(781

)

(781

)

Dividends paid

—

—

—

(1,858

)

—

—

—

(1,858

)

 

Balance, July 2, 2022

4,197,642

$

420

$

6,240

$

53,833

2,338,995

$

(6,077

)

$

17,936

$

72,352

5

Index

FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THIRTY-NINE WEEKS ENDED JULY 2, 2022 AND JULY 3, 2021

(in thousands)

thousands, except share amounts)

July 2, 2022

July 3, 2021

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

Net income

$

7,245

$

15,145

Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities:

Depreciation and amortization

2,182

2,241

Amortization of leasehold interests

27

65

Amortization of finance lease right-of-use asset

0—

198

Amortization of operating lease right-of-use asset

1,772

1,785

Gain on forgiveness of PPP loans

(3,488

)

(10,036

)

Finance lease interest expense

0—

109

Gain on sale of property and equipment

(11

)

(33

)

Loss on abandonment of property and equipment

13

23

Amortization of deferred loan costs

26

66

Deferred income taxes

87

708

Organizational costs

35

0—

Income from unconsolidated limited partnership

(24

)

(127

)

Deferred revenue

145

0—

Changes in operating assets and liabilities:

(Increase) decrease in:

Other receivables

18

297

Prepaid income taxes

(31

)

(75

)

Inventories

(1,242

)

(785

)

Prepaid expenses

738

893

Other assets

(217

)

(5

)

Increase (decrease) in:

Accounts payable and accrued expenses

1,187

2,146

Operating lease liabilities

(1,454

)

(2,564

)

Due to franchisees

817

1,572

Net cash and cash equivalents provided by operating activities

7,825

11,523

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

Purchases of property and equipment

(3,292

)

(4,759

)

Purchase of construction in progress

(2,521

)

(2,634

)

Deposits on property and equipment

(698

)

(509

)

Purchase of liquor license

0—

(192

)

Proceeds from sale of property and equipment

43

75

Distributions from unconsolidated limited partnership

24

20

Business acquisition

(75

)

0—

Investment in limited partnership

0—

(375

)

Net cash and cash equivalents used in investing activities

(6,519

)

(8,374

)

  Common Stock  Capital in
Excess of		  Retained  Treasury Stock  Noncontrolling    
  Shares  Amount  Par Value  Earnings  Shares  Amount  Interests  Total 
                         
Balance, October 2, 2021  4,197,642  $420  $6,240  $50,632   2,338,995  $(6,077) $9,415  $60,630 
                                 
Net income  —   —   —   1,564   —   —   2,374   3,938 
Distributions to noncontrolling interests  —   —   —   —   —   —   (757)  (757)
                                 
Balance, January 1, 2022  4,197,642  $420  $6,240  $52,196   2,338,995  $(6,077) $11,032  $63,811 
                                 
Net income (loss)  —   —   —   1,660   —   —   (317)  1,343 
Distributions to noncontrolling interests  —   —   —   —   —   —   (757)  (757)
Sale of noncontrolling interests  —   —   —   —   —   —   8,630   8,630 
Dividends payable  —   —   —   (1,861)  —   —   —   (1,861)
                                 
Balance, April 2, 2022  4,197,642  $420  $6,240  $51,995   2,338,995  $(6,077) $18,588  $71,166 

See accompanying notes to unaudited condensed consolidated financial statements.

5 

6Table of Contents

Index

FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS

OF CASH FLOWSSTOCKHOLDERS’ EQUITY

FOR THE THIRTY-NINETWENTY-SIX WEEKS ENDED JULYAPRIL 1, 2023 AND APRIL 2, 2022 AND JULY 3, 2021

(in thousands)thousands, except share amounts)

(Continued)

(Continued)

July 2, 2022

July 3, 2021

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

Payment of long-term debt

(2,765

)

(3,237

)

Deferred loan costs

0—

(56

)

Proceeds from PPP loans

0—

3,464

Proceeds from noncontrolling interest offering

8,595

0—

Principal payments on finance leases

0—

(81

)

Distributions to limited partnerships noncontrolling interests

(2,295

)

(1,208

)

Dividends paid

(1,858

)

0—

 

Net cash and cash equivalents provided by (used in) financing activities

1,677

(1,118

)

 

Net Increase in Cash and Cash Equivalents

2,983

2,031

 

Beginning of Period

32,676

29,922

 

End of Period

$

35,659

$

31,953

 

Supplemental Disclosure of Cash Flow Information:

Cash paid during period for:

Interest

$

547

$

737

Income taxes

$

466

$

371

 

Supplemental Disclosure of Non-Cash Investing and Financing Activities:

Financing of insurance contracts

$

1,858

$

1,429

Purchase deposits transferred to property, plant and equipment

$

50

$

14

Purchase deposits transferred to CIP

$

512

$

18

CIP capitalized to property, plant and equipment

$

3,258

$

0—

CIP in accounts payable

$

577

$

0—

Operating lease liabilities arising from right-of-use asset

$

3,335

$

6,166

Purchase of vehicle in exchange for debt

$

0—

$

58

Purchase of property in exchange for debt

$

0—

$

2,200

  Common Stock  Capital in
Excess of		  Retained  Treasury Stock  Noncontrolling    
  Shares  Amount  Par Value  Earnings  Shares  Amount  Interests  Total 
                         
Balance, October 1, 2022  4,197,642  $420  $6,240  $55,086   2,338,995  $(6,077) $17,671  $73,340 
                                 
Net income  —   —   —   624   —   —   250   874 
Distributions to noncontrolling interests  —   —   —   —   —   —   (829)  (829)
                                 
Balance, December 31, 2022  4,197,642  $420  $6,240  $55,710   2,338,995  $(6,077) $17,092  $73,385 
                                 
Net income  —   —   —   1,897   —   —   281   2,178 
Distributions to noncontrolling interests  —   —   —   —   —   —   (789)  (789)
                                 
Balance, April 1, 2023  4,197,642  $420  $6,240  $57,607   2,338,995  $(6,077) $16,584  $74,774 

See accompanying notes to unaudited condensed consolidated financial statements.

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FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

7UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

IndexFOR THE TWENTY-SIX WEEKS ENDED APRIL 1, 2023 AND APRIL 2, 2022

(in thousands)

  April 1, 2023  April 2, 2022 
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net income $3,052  $5,281 
Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities:        
Depreciation and amortization  1,668   1,400 
Amortization of leasehold interests  11   21 
Amortization of operating lease right-of-use asset  1,227   1,177 
Gain on forgiveness of PPP Loans  —   (3,488)
Gain on sale of property and equipment  —   (11)
Loss on abandonment of property and equipment  14   13 
Amortization of deferred loan costs  20   17 
Deferred income taxes  —   87 
Income from unconsolidated limited partnership  (8)  (15)
Changes in operating assets and liabilities: (increase) decrease in        
Other receivables  (254)  (114)
Prepaid income taxes  148   139 
Inventories  (66)  (645)
Prepaid expenses  (1,229)  854 
Other assets  12   (59)
Increase (decrease) in:        
Accounts payable and accrued expenses  92   1,987 
Operating lease liabilities  (1,105)  (918)
Income taxes payable  —   211 
Due to franchisees  174   920 
Deferred revenue  438   333 
Net cash and cash equivalents provided by operating activities  4,194   7,190 
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Purchases of property and equipment  (1,949)  (2,230)
Purchase of construction in progress  (1,740)  (1,881)
Deposits on property and equipment  (1,631)  (509)
Proceeds from sale of property and equipment  28   30 
Distributions from unconsolidated limited partnership  19   16 
Net cash and cash equivalents used in investing activities  (5,273)  (4,574)

See accompanying notes to unaudited condensed consolidated financial statements.

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FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE TWENTY-SIX WEEKS ENDED APRIL 1, 2023 AND APRIL 2, 2022

(in thousands)

(Continued)

  April 1, 2023  April 2, 2022 
       
CASH FLOWS FROM FINANCING ACTIVITIES:        
Payments on long term debt  (1,677)  (1,742)
Proceeds from noncontrolling interest offering  —   8,630 
Distributions to limited partnerships’ noncontrolling interests  (1,618)  (1,514)
Net cash and cash equivalents used in financing activities  (3,295)  5,374 
         
Net (Decrease) Increase in Cash and Cash Equivalents  (4,374)  7,990 
         
Cash and Cash Equivalents - Beginning of Period  42,138   32,676 
         
Cash and Cash Equivalents - End of Period $37,764  $40,666 
         
Supplemental Disclosure for Cash Flow Information:        
Cash paid during period for:        
Interest $537  $370 
Income taxes $206  $63 
         
Supplemental Disclosure of Non-Cash Investing and Financing Activities:        
Financing of insurance contracts $—  $1,861 
Purchase deposits capitalized to property and equipment $114  $44 
Purchase deposits transferred to CIP $439  $309 
CIP transferred to property and equipment $3,341  $3,258 
CIP in accounts payable $177  $331 
Dividends declared and unpaid $—  $1,861 
Operating lease liabilities arising from ROU asset $—  $1,518 

See accompanying notes to unaudited condensed consolidated financial statements.

8 

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FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THIRTEEN WEEKS AND THIRTY-NINETWENTY-SIX WEEKS ENDED

JULY APRIL 1, 2023 AND APRIL 2, 2022 AND JULY 3, 2021

(1) BASIS OF PRESENTATION:

The accompanying condensed consolidated financial information for the periodstwenty-six weeks ended JulyApril 1, 2023 and April 2, 2022 and July 3, 2021 areis unaudited. Financial information as of October 2, 20211, 2022 has been derived from the audited financial statements of Flanigan’s Enterprises, Inc., a Florida corporation, together with its subsidiaries, (the “Company”, “we”, “our”, “ours” and “us” as the context requires), 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 2, 2021. The accompanying condensed consolidated balance sheet as of October 2, 2021 has been derived from those Consolidated Financial Statements.1, 2022. 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 ten 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 ten limited partnerships.

These condensed

The consolidated financial statements includeand related disclosures for condensed interim reporting are prepared in conformity with accounting principles generally accepted in the United States. We are required to make estimates relating to loyalty reward programs. The estimates are reviewed periodically and assumptions that affect the effectsreported amounts of any revisions are reflected inassets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, inand revenue and expenses during the period they are deemed to be necessary.

The condensed consolidated financial statementsreported.  These estimates include assessing the estimated useful lives of tangible assets, the recognition of deferred tax assets and liabilities and estimates relating to the calculation of incremental borrowing rates and length of leases associated with right-of-use assets and corresponding liabilities.

liabilities and estimates relating to loyalty reward programs.  Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in our consolidated financial statements in the period they are determined to be necessary. Although these estimates are based on management’sour knowledge of current events and actions itwe may takeundertake in the future, they may ultimately differ from actual results.

Certain amounts presented in the financial statements previously issued for the twenty-six weeks ended April 2, 2022 have been reclassified to conform to the presentation for the twenty-six weeks ended April 1, 2023.

(2) EARNINGS PER SHARE:

We follow Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) TopicSection 260 - “Earnings per Share”. This guidancesection provides for the calculation of basic and diluted earnings per share. The data on Page 2 shows the amounts used in computing earnings per share and the effects on income. As of JulyApril 1, 2023 and April 2, 2022, and July 3, 2021, no stock options or other potentially dilutive securities were outstanding.

(3) RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:

Adopted

There are no accounting pronouncements that we have recently adopted.

8

9 

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Index

(3) RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS: (Continued)

Recently Issued

The FASB issued guidance, ASU 2022-06 Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedient and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. In response to the concerns about structural risks of interbank offered rates (“IBORs”) and, particularly, the risk of cessation of the LIBOR,London interbank offered rate (“LIBOR”), regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction based and less susceptible to manipulation. This accounting standards update provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. LIBOR rates will be published until June 30, 2023 and all principal and interest of the $1.405M Loan will be due in full on January 23, 2023 and all2023. All principal and interest of the Term Loan will be fully amortized and is anticipated to bewas paid in full asduring the first quarter of December 28, 2022our fiscal year 2023, so the discontinuance of LIBOR rates in notwill have no impact on us.

The FASB issued guidance, ASU 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which provides a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. This guidance will be effective for us in the first quarter of our fiscal year 2024. We will continue to assess the impact of this guidance throughout our fiscal year 2023 to ensure the proper accounting treatment of our financial assets that meet this criteria.

There are no other recently issued accounting pronouncements that we have any impactnot yet adopted that we believe may have a material effect on us. our financial statements.

(4) 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. The Company’s income tax expense computed at the statutory federal rate of 21% differs from its effective tax rate primarily due to state income taxes and income tax credits.

(5) PRIVATE OFFERINGS:

CIC Investors #85, Ltd. (Flanigan’s, Sunrise, Florida)

On February 15, 2022, a Florida limited partnership (CIC Investor #85, Ltd.) in which the Company serves as general partner, completed a private placement of 1,000 Units of limited partnership interests at $5,000 per Unit for proceeds of $5,000,000, 74 Units of which ($370,000) were purchased by the Company upon the same terms and conditions as all other investors. The proceeds of the private placement are intended to be used to satisfy (including reimbursement to us for advances we have made), build-out and renovation expenses and the purchase of such furniture, fixtures and equipment necessary for operation of our Sunrise, Florida restaurant under the service mark "Flanigan's", which commenced operations on March 22, 2022. Capital raised from private investors is credited to sale of noncontrolling interests in our Statements of Stockholders' Equity.

Under ASC 810, Consolidation, the Company, which is the entity issuing financial statements, is required to consolidate CIC Investors #85, Ltd. as we have a controlling interest in CIC Investors #85, Ltd. as general partner, although the Company only has a 7.40% ownership.

9

Index

CIC Investor #25, Ltd. (Flanigan’s, Miramar, Florida)(5) DEBT:

On February 15, 2022, a Florida limited partnership (CIC Investors #25, Ltd.) in which the Company serves as general partner, completed a private placement

Payoff of 800 Units of limited partnership interests at $5,000 per Unit for gross proceeds of $4,000,000. No units of limited partnership interest were purchased by the Company. The proceeds of the private placement are intended to be used to satisfy (including reimbursement to us for advances we have made), build-out and renovation expenses and the purchase of such furniture, fixtures and equipment necessary for operation of our Miramar, Florida restaurant under the service mark "Flanigan's", which we believe will commence operations in January, 2023. Capital raised from private investors is credited to sale of noncontrolling interests in our Statements of Stockholders' Equity.Term Loan

Under ASC 810, Consolidation, the Company, which is the entity issuing financial statements, is required to consolidate CIC Investors #25, Ltd. as we have a controlling interest in CIC Investors #25, Ltd. as general partner, although the Company has no direct ownership.

(6) EXECUTION OF LEASE FOR NEW LOCATION; BUSINESS ACQUISITION OF “BRENDAN’S SPORTS PUB”:

Lease

Pompano Beach, Florida (Brendan’s Sports Pub)

During the thirdfirst quarter of our fiscal year 2023, we satisfied the principal balance and all accrued interest due on our $5.5 million term loan to our unrelated lender. The outstanding principal balance ($367,000) and accrued interest ($-0-) were paid in full on December 28, 2022.

10 

Table of Contents

In February 2023, we determined that as of December 31, 2022, we entered into a Leasedid not meet the required Post-Distribution Basic Fixed Charge Coverage Ratio (the “Lease”“Post-Distribution/Fixed Charge Covenant”) contained in each of our six (6) loans (the “Institutional Loans”) with a non-affiliatedour unrelated third party institutional lender (the “Institutional Lender’). On February 23, 2023, we received from whom we rented approximately 3,556 square feet of commercial space located at 868 South Federal Highway, Pompano Beach, Florida, from where we will begin to operate the existing “Brendan’s Sports Pub” business (Store #30), the assets of which we simultaneously purchased. The termInstitutional Lender, a written waiver of the leasenon-compliance with the Post-Distribution/Fixed Charge Covenant (the “Covenant Non-Compliance”), pursuant to which, among other things, the Institutional Lender waived (1) the non-compliance as of December 31, 2022 and (2) their right to exercise certain remedies under the Institutional Loans, including the right to accelerate the indebtedness owed by us thereunder, resulting in the indebtedness under the Institutional Loans to be immediately due and payable, which would have a material adverse effect on the Company. The Post-Distribution/Fixed Charge Covenant requires we maintain a ratio of at least 1.15 to 1.00 and for the twelve (12) months ended April 1, 2023 our ratio was calculated to be 1.25 to 1.00. We have prepared projections for the next three (3) fiscal quarters and expect to be in compliance. As a result, our classification of debt is for fifty (50) years, triple netappropriate as of April 1, 2023.

For further information regarding the Company's long-term debt, refer to the landlord with fixed rent of $78,000 perConsolidated Financial Statements and related notes included in the Company’s Annual Report on Form 10K for the year with two (2%) percent annual increases commencing in year five.ended October 1, 2022.

(6) INSURANCE PREMIUMS

Acquisition

Brendan’s Sports Pub, Pompano Beach, Florida

During the thirdfirst quarter of our fiscal year 2022 and simultaneously with2023, for the execution of the Lease, we acquired a business known as “Brendan’s Sports Pub” located at 868 South Federal Highway, Pompano Beach, Florida for a purchase price of $75,000, including but not limited to the furniture, fixtures, equipment and service mark, “Brendan’s Sports Pub”, but excluding the 4 COP quota liquor license used in the operation of the business. We did not assume any obligations of the business.

(7) DEBT:

Financed Insurance Premiums

During the thirty-nine weeks ended July 2,policy year commencing December 30, 2022, we financedpaid the premiums on the following property, general liability, excess liability and terrorist policies, totaling approximately $2.54$3.281 million, which property, general liability, excess liability and terrorist insurance includes coverage for our franchisesfranchisees (which is $658,000), which are not included in our consolidated financial statements:

(i)For the policy year beginning December 30, 2021,2022, our general liability insurance, excluding limited partnerships, is a one (1) year policy with our insurance carriers. The one (1)(1) year general liability insurance premium is in the amount of $467,000;$512,000;

10

Index

(ii)For the policy year beginning December 30, 2021,2022, our general liability insurance for our limited partnerships is a one (1) year policy with our insurance carriers. The one (1)(1) year general liability insurance premium is in the amount of $589,000;$672,000;

(iii)For the policy year beginning December 30, 2021,2022, our automobile insurance is a one (1) year policy. The one (1)(1) year automobile insurance premium is in the amount of $194,000;$190,000;

(iv)For the policy year beginning December 30, 2021,2022, our property insurance is a one (1) year policy. The one (1)(1) year property insurance premium is in the amount of $700,000;$1,248,000;

(v)For the policy year beginning December 30, 2021,2022, our excess liability insurance are two (2)is a one (1) year policies.policy. The aggregate one (1)(1) year excess liability insurance premiums arepremium is in the amount of $576,000;$634,000;

(vi)For the policy year beginning December 30, 2021,2022, our terrorist insurance is a one (1) year policy. The one (1)(1) year terrorist insurance premium is in the amount of $8,900;$14,000; and

(vii)For the policy year beginning December 30, 2021,2022, our equipment breakdown insurance is a one (1) year policy. The one (1)(1) year equipment breakdown insurance premium is in the amount of $6,800.$11,000.

Of

We paid the $2,542,000$3,281,000 annual premium amounts on January 9, 2023, which includes coverage for our franchisesfranchisees which are not included in our consolidated financial statements, we financed $2,328,000 through an unaffiliated third party lender. The finance agreement obligates us to repay the amounts financed together with interest at the ratestatements.

11 

Table of 2.55% per annum, over 11 months, with monthly payments of principal and interest of $215,000. The finance agreement is secured by a first priority security interest in all insurance policies, all unearned premium, return premiums, dividend payments and loss payments thereof.Contents

As of July 2, 2022, the aggregate principal balance owed from the financing of our property and general liability insurance policies is $1,015,000, excluding coverage for our franchises, (of approximately $272,000), which are not included in our consolidated financial statements.

(8)(7) COMMITMENTS AND CONTINGENCIES:

Construction Contracts

a. 7990 Davie Road Extension, Hollywood, Florida (Store #19 – “Big Daddy’s Wine & Liquors”)

During the third quarter of our fiscal year 2019, we entered into an agreement with a third party unaffiliated general contractor for site work at this location totaling $1,618,000, (i) to connect the real property where this restaurant operated (Store #19) to city sewer and (ii) to construct a new building on the adjacent parcel of real property for the operation of a package liquor store. During our fiscal years 2020 and 2021, we agreed to change orders to the agreement for additional construction services increasing the total contract price by $624,000 to $2,242,000, of which $1,951,000 has been paid through July 2, 2022 and $-0- has been paid subsequent to the end of the third quarter of our fiscal year 2022 through the date of filing of this quarterly report.

11

Index

b.(a) 2505 N. University Drive, Hollywood, Florida (Store #19 – “Flanigan’s”)

During the third quarter of our fiscal year 2019, we entered into an agreement with an unaffiliated third party architect for design and development services totaling $77,000$77,000 for the re-build of our restaurant located at 2505 N. University Drive, Hollywood, Florida (Store #19), which has been closed since October 2, 2018 due to damages caused by a fire, of which $62,000$62,000 has been paid. During the first quarter of our fiscal year 2022, we entered into an agreement with a third party unaffiliated general contractor to re-build our restaurant at this location for $2,515,000,totaling $2,515,000, of which $226,000$302,000 has been paid through July 2, 2022April 1, 2023 and $-0-$314,000 has been paid subsequent to the end of the thirdsecond quarter of our fiscal year 20222023 through the date of filing of this quarterly report.

c.

(b) 14301 W. Sunrise Boulevard, Sunrise, Florida (Store #85 – “Flanigan’s”)

During the third quarter of our fiscal year 2019, we entered into an agreement with an unaffiliated third party design group for design and development services of our new location at 14301 W. Sunrise Boulevard, Sunrise, Florida 33323 (Store #85) for a total contract price of $122,000. During our fiscal year 2020, we agreed upon amendments to the $122,000 Contract for additional design and development services which had the effect of increasing the total contract price by $18,000 to $140,000, of which $131,000 has been paid through July 2, 2022. Additionally, during the fourth quarter of our fiscal year 2020, we entered into an agreement with a third party unaffiliated general contractor for interior renovations at this location totaling $1,236,000 and through the third quarter our fiscal year 2022 we agreed to change orders to the agreement for additional interior renovations increasing the total contract price by $215,000 to $1,451,000, which has been paid in full by the end of the third quarter of our fiscal year 2022.

During the second quarter of our fiscal year 2022, we entered into an agreement with a third party unaffiliated general contractor for exterior renovations at this location totaling $343,000$ 343,000 and through the thirdend of the second quarter of our fiscal year 20222023 we agreed to change orders to the agreement for additional interior renovations increasing the total contract price by $45,000$327,000 to $388,000,$670,000, of which $316,000$417,000 has been paid through July 2, 2022April 1, 2023 and $-0-an additional $114,000 has been paid subsequent to the end of the thirdsecond quarter of our fiscal year 20222023 through the date of filing of this quarterly report.

d.

(c) 11225 Miramar Parkway, #250, Miramar, Florida (Store #25 - “Flanigan’s”(“Flanigan’s”)

During the second quarter of our fiscal year 2022, we entered into an agreement with a third party unaffiliated general contractor for interior renovations at this location totaling $1,421,000,$1,421,000, and through the thirdsecond quarter of our fiscal year 20222023 we agreed to change orders to the agreement increasing the total contract price by $9,000$426,000 to $1,430,000$1,847,000 of which $180,000$1,663,000 has been paid through July 2, 2022April 1, 2023 and $268,000,$13,000, has been paid subsequent to the end of the thirdsecond quarter of our fiscal year 20222023 through the date of filing of this quarterly report.

e. Miramar, Florida (Store #24 - “Big Daddy’s Wine and Liquors”)

During the first quarter12 

Table of our fiscal year 2022, we entered into an agreement with a third party unaffiliated general contractor for interior renovations at this location totaling $317,000, and through the third quarter our fiscal year 2022 we agreed to change orders to the agreement increasing the total contract price by $18,000 to $335,000 of which $254,000 has been paid through July 2, 2022 and $-0- has been paid subsequent to the end of the third quarter of our fiscal year 2022 through the date of filing of this quarterly report.Contents

12Leases

Index

Leases

To conduct certain of our operations, we lease restaurant and package liquor store space in South Florida from unrelated third parties. Our leases have remaining lease terms of up to 1050 years, some of which include options to renew and extend the lease terms for up to an additional 30 years. We presently intend to renew some of the extension options available to us and for purposes of computing the right-of-use assets and lease liabilities required by ASC 842, we have incorporated into all lease terms which may be extended, an additional term of the lesser of (i) the amount of years the lease may be extended; or (ii) 15 years.

Following adoption of ASC 842 during our fiscalthe year ended October 3, 2020, common area maintenance and property taxes are not considered to be lease components.

The components of lease expense are as follows:

13 Weeks

13 Weeks

Ended July 2, 2022

Ended July 3, 2021

Operating Lease Expense, which is included in occupancy costs

$

935,000

$

842,000

  13 Weeks  13 Weeks 
  Ended April 1, 2023  Ended April 2, 2022 
         
Operating Lease Expense, which is included in occupancy costs $956,000  $916,000 

39 Weeks

39 Weeks

Ended July 2, 2022

Ended July 3, 2021

Finance Lease Amortization

$

0—

$

198,000

Finance Lease Expense, which is included in interest expense

0—

109,000

Operating Lease Expense, which is included in occupancy costs

2,769,000

2,709,000

$

2,769,000

$

3,016,000

  26 Weeks  26 Weeks 
  Ended April 1, 2023  Ended April 2, 2022 
         
Operating Lease Expense, which is included in occupancy costs $1,913,000  $1,834,000 

Supplemental balance sheet information related to leases as follows:

Classification on the Condensed Consolidated Balance Sheet

July 2, 2022

October 2, 2021

 

Assets

Operating lease assets

$

30,122,000

$

28,559,000

 

Liabilities

Operating current liabilities

2,219,000

2,009,000

Operating lease non-current liabilities

$

28,854,000

$

27,183,000

 

Weighted Average Remaining Lease Term:

Operating leases

11.06 Years

8.93 Years

 

Weighted Average Discount:

Operating leases

4.75%

4.62%

Classification on the Condensed Consolidated Balance Sheet April 1, 2023  October 1, 2022 
       
Assets        
Operating lease assets $28,290,000  $29,517,000 
         
Liabilities        
Operating current liabilities $2,323,000  $2,253,000 
Operating lease non-current liabilities $27,106,000  $28,281,000 
         
         
Weighted Average Remaining Lease Term:        
Operating leases  10.34 Years   10.82 Years 
         
Weighted Average Discount:        
Operating leases  4.75%   4.66% 

 

13 

For fiscal year 2022

Operating

2022 (three (3) months to October 1, 2022)

$

870,000

2023

3,579,000

2024

3,622,000

2025

3,615,000

2026

3,450,000

Thereafter

28,546,000

 

Total lease payments

(Undiscounted cash flows)

43,682,000

Less imputed interest

(12,609,000

)

Total

$

31,073,000

Table of Contents

The following table outlines the minimum future lease payments for the next five years and thereafter:

For fiscal year 2023 Operating 
2023 (six (6) months) $1,765,000 
2024  3,622,000 
2025  3,616,000 
2026  3,450,000 
2027  3,353,000 
Thereafter  25,194,000 
Total lease payments    
(Undiscounted cash flows)  41,000,000 
Less imputed interest  (11,571,000)
Total $29,429,000 

13

IndexLitigation

Litigation

Our sale of alcoholic beverages subjects us to “dram shop” statutes, which allow an injured person to recover damages from an establishment that served alcoholic beverages to an intoxicated person. If we receive a judgment substantially in excess of our insurance coverage or if we fail to maintain our insurance coverage, our business, financial condition, operating results or cash flows could be materially and adversely affected. We currently have no “dram shop” claims.

WeFrom time to time, we are a party to various other claims, legal actions and complaints arising in the ordinary course of our business.business, including claims resulting from “slip and fall” accidents, 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. It is our opinion, after consulting with legal counsel, that all such matters are without merit or involve such amounts that an unfavorable disposition, some of which is covered by insurance, would not have a material adverse effect on our financial position or results of operations.

(8) CORONAVIRUS PANDEMIC:

(9) CORONAVIRUS PANDEMIC

In March 2020, a novel strain of coronavirus was declared a global pandemic and a National Public Health Emergency. The novel coronavirus pandemic and related “shelter-in- place”“shelter-in-place” orders and other governmental mandates relating thereto (collectively, “COVID-19”) adversely affected and will, in all likelihood continue to adversely affect, our restaurant operations and financial results for the foreseeable future. Based on current COVID-19 trends, the Department of Health and Human Services (HHS) is planning for the federal Public Health Emergency for COVID-19 (PHE) declared by the Secretary of the Department of Health and Human Services (Secretary) under Section 319 of the Public Health Service (PHS) Act to expire at the end of the day on May 11, 2023.

During the second quarter of our fiscal year 2021, certain of the entities owning the limited partnership stores (the “LP’s”), as well as the store we manage but do not own (the “Managed Store”), applied for and received loans from an unrelated third party lender pursuant to the Paycheck Protection Program (the “PPP”) under the United States Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) enacted March 27, 2020, in the aggregate principal amount of approximately $3.98$3.98 million, (the “2nd“2nd PPP Loans”), of which approximately: (i) $3.35$3.35 million was loaned to six of the LP’s; and (ii) $0.63$0.63 million was loaned to the Managed Store. The 2nd2nd PPP Loan to the Managed Store is not included in our consolidated financial statements. During the first quarter of our fiscal year 2022, we applied for and received forgiveness of the entire amount of principal and accrued interest for all 2nd2nd PPP Loans, including the Managed Store.

COVID-19 has had a material adverse effect on our access to supplies or labor and there can be no assurance that there will not be a significant adverse impact on our supply chain or access to labor in the future. We are actively monitoring our food suppliers to assess how they are managing their operations to mitigate supply flow and food safety risks. To ensure we mitigate potential supply availability risk, we are building additional inventory back stock levels when appropriate and we have also identified alternative supply sources in key product categories including but not limited to food, sanitation and safety supplies.

(10)14 

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(9) 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. The operation of restaurants consists of restaurant food and bar sales. Information concerning the revenues and operating income for the thirteen weeks and thirty-ninetwenty-six weeks ended JulyApril 1, 2023 and April 2, 2022, and July 3, 2021, and identifiable assets for the two reportable segments in which we operate, are shown in the following table.tables. 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.

  (in thousands) 
  Thirteen Weeks
Ending
April 1, 2023		  Thirteen Weeks
Ending
April 2, 2022		 
Operating Revenues:        
Restaurants $34,394  $31,444 
Package stores  8,659   8,148 
Other revenues  750   738 
Total operating revenues $43,803  $40,330 
         
Income from Operations Reconciled to Income After Income Taxes and Net Income (Loss) Attributable to Noncontrolling Interests        
Restaurants $3,001  $1,675 
Package stores  641   760 
   3,642   2,435 
Corporate expenses, net of other revenues  (931)  (585)
Income from Operations  2,711   1,850 
Interest expense  (262)  (177)
Interest and Other income  19   23 
Income Before Provision for Income Taxes $2,468  $1,696 
Provision for Income Taxes  (290)  (353)
Net Income  2,178   1,343 
Net Loss (Income) Attributable to Noncontrolling Interests  (281)   317
Net Income Attributable to Flanigan’s Enterprises, Inc.  Stockholders $1,897  $1,660 
         
Depreciation and Amortization:        
Restaurants $631  $542 
Package stores  119   79 
   750   621 
Corporate  108   101 
Total Depreciation and Amortization $858  $722 
         
Capital Expenditures:        
Restaurants $2,299  $1,671 
Package stores  112   874 
   2,411   2,545 
Corporate  332   239 
Total Capital Expenditures $2,743  $2,784 

14

15 

IndexTable of Contents

(in thousands)

 (in thousands) 

Thirteen Weeks

Ended

July 2, 2022

Thirteen Weeks

Ended

July 3, 2021

 Twenty-six Weeks
Ending
April 1, 2023		 Twenty-six Weeks
Ending
April 2, 2022		 

Operating Revenues:

        

Restaurants

$

32,329

$

29,101

 $66,149  $59,656 

Package stores

7,626

8,082

  18,062   16,659 

Other revenues

720

752

  1,453   1,418 

Total operating revenues

$

40,675

$

37,935

 $85,664  $77,733 

        

Income (Loss) from Operations Reconciled to Income (Loss) After Income Taxes and Net Income (Loss) Attributable to Noncontrolling Interests

Income from Operations Reconciled to Income After Income Taxes and Net Income Attributable to Noncontrolling Interests        

Restaurants

$

1,953

$

3,724

 $3,780  $2,052 

Package stores

705

801

  1,440   1,442 

2,658

4,525

  5,220   3,494 

Corporate expenses, net of other revenues

(575

)

(1,916

)

  (1,312)  (879)

Income from operations

2,083

2,609

Income from Operations  3,908   2,615 

Interest expense

(177

)

(210

)

  (537)  (370)

Interest and other income

80

14

Interest and Other income  34   37 

Gain on forgiveness of PPP Loans

0-

6,483

  —   3,488 

Income Before for Income Taxes

$

1,986

$

8,896

Gain on sale of property and equipment  —   11 
Income Before Provision for Income Taxes $3,405  $5,781 

Provision for Income Taxes

(22

)

(475

)

  (353)  (500)

Net Income

1,964

8,421

  3,052   5,281 

Net Income Attributable to Noncontrolling Interests

(129

)

(1,222

)

  (531)  (2,057)

Net Income Attributable to Flanigan’s Enterprises, Inc.

Stockholders

$

1,835

$

7,199

Net Income Attributable to Flanigan’s Enterprises, Inc. Stockholders $2,521  $3,224 

        

Depreciation and Amortization:

        

Restaurants

$

607

$

585

 $1,257  $1,063 

Package stores

79

85

  209   158 

686

670

  1,466   1,221 

Corporate

102

100

  213   200 

Total Depreciation and Amortization

$

788

$

770

 $1,679  $1,421 

        

Capital Expenditures:

        

Restaurants

$

1,542

$

1,353

 $3,246  $2,924 

Package stores

450

401

  462   1,395 

1,992

1,754

  3,708   4,319 

Corporate

210

678

  534   476 

Total Capital Expenditures

$

2,202

$

2,432

 $4,242  $4,795 

16 

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15

  April 1,  October 1, 
  2023  2022 
Identifiable Assets:        
Restaurants $75,495  $73,596 
Package store  20,477  $20,035 
   95,972   93,631 
Corporate  50,896   53,861 
Consolidated Totals $146,868  $147,492 

Index

Thirty-Nine Weeks

Ended

July 2, 2022

Thirty-Nine Weeks

Ended

July 3, 2021

Operating Revenues:

Restaurants

$

91,985

$

77,611

Package stores

24,285

23,923

Other revenues

2,138

2,138

Total operating revenues

$

118,408

$

103,672

 

Income from Operations Reconciled to Income After Income Taxes and Net Income Attributable to Noncontrolling Interests

Restaurants

$

4,005

$

6,941

Package stores

2,147

2,251

 

6,152

9,192

Corporate expenses, net of other revenues

(1,454

)

(2,520

)

Income from Operations

4,698

6,672

Interest expense

(547

)

(737

)

Interest and other income

117

45

Gain on forgiveness of PPP Loans

3,488

10,136

Gain on sale of property and equipment

11

33

Income Before for Income Taxes

$

7,767

$

16,149

Provision for Income Taxes

(522

)

(1,004

)

Net Income

7,245

15,145

Net Income Attributable to Noncontrolling Interests

(2,186

)

(4,715

)

Net Income Attributable to Flanigan’s Enterprises, Inc.

Stockholders

$

5,059

$

10,430

 

Depreciation and Amortization:

Restaurants

1,670

1,756

Package stores

237

261

 

1,907

2,017

Corporate

302

289

Total Depreciation and Amortization

$

2,209

$

2,306

 

Capital Expenditures:

Restaurants

$

4,466

$

7,640

Package stores

1,845

683

 

6,311

8,323

Corporate

686

1,360

Total Capital Expenditures

$

6,997

$

9,683

 

July 2,

October 2,

2022

2021

Identifiable Assets:

Restaurants

$

73,057

$

67,978

Package store

19,435

15,563

92,492

83,631

Corporate

46,917

44,371

Consolidated Totals

$

139,409

$

128,002

16

Index

(11)(10) SUBSEQUENT EVENTS:

PURCHASE OF 4 COP LIQUOR LICENSE:

Purchase of Real Property

El Portal, Florida (“Big Daddy’s Liquors”/Warehouse)

During the first quarter of our fiscal year 2023, we entered into a Commercial Contract with a non-affiliated third party for the purchase of the real property it owns located at 8600 Biscayne Boulevard, El Portal, Florida consisting of approximately 6,000 square feet of commercial space which we sublease and where our “Big Daddy’s Liquors” package liquor store and our warehouse (Store #47) operate for $3,200,000. We paid $160,000 on deposit under the contract for this transaction and paid the balance of $3,040,000 in cash at closing. On April 25, 2023, we closed on the acquisition of the property.

Hallandale Beach, Florida

During the third quarter of our fiscal year 2022 we entered into an agreementcontracted for the purchase of a three building shopping center in Hallandale Beach, Florida, which consists of one stand-alone building which is leased to purchasetwo unaffiliated third parties (approximately 1,450 square feet); a 4 COP quota liquor license for Broward County, Florida from an unrelatedsecond stand-alone building which is leased to one unaffiliated third party (approximately 1,500 square feet); and a third stand-alone building which is leased to one unaffiliated third party (approximately 2,500 square feet) for $445,000$8,500,000. The real property is located adjacent to our real property located at 4 N. Federal Highway, Hallandale Beach, Florida, where our combination package store and restaurant, (Store #31), operates. We paid $2,000,000 on deposit under the contract for this transaction and paid the balance of $6,500,000 in cash at closing. On April 27, 2023, we closed on such purchase subsequent to the endacquisition of the third quarterproperty.


Table of our fiscal year 2022. The liquor license is currently inactive, but we intend to use it in connection with the operation of the package liquor store we are developing in Miramar, Florida. The 4 COP quota liquor license for Broward County, Florida which we purchased during the third quarter of our fiscal year 2021 and was inactive, was transferred for use in our operation of “Brendan’s Sports Pub”.Contents

RE-FINANCING OF EXISTING MORTGAGE

Subsequent to the end of the third quarter of our fiscal year 2022, we requested and received an advance of $697,000 from the payee of an entity controlled by a member of our Board of Directors, which holds a mortgage note in the original principal amount of $1,000,000 (the “$1,000,000 Note”), resulting in a principal amount outstanding thereunder of $1,100,000 as of August 1, 2022. Our repayment obligations under the $1,000,000 Note continue to be secured by a first mortgage on the real property and improvements where our restaurant located at 2600 West Davie Boulevard, Fort Lauderdale, Florida operates. The terms of the $1,000,000 Note are that it bears interest at 6% annually, (increased from 5% annually), is amortizable over 15 years with monthly installments of principal and interest of approximately $9,300 required to be made and a final balloon payment of approximately $487,000 required to be made August 1, 2032.

Subsequent events have been evaluated through the date these condensed consolidated financial statements were issued and except as disclosed herein, no further events required disclosure.

ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

CAUTIONARY NOTE REGARDING LOOKING FORWARD STATEMENTS

 

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 the effect of the novel coronavirus pandemic and related “shelter-in-place” orders and other governmental mandates (“COVID 19”), 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 our periodic reports, including our Annual Report on Form 10-K for the fiscal year ended October 2, 2021.1, 2022. 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.

 

17 

Index

OVERVIEW

 

As of July 2, 2022,April 1, 2023, Flanigan’s Enterprises, Inc., a Florida corporation, together with its subsidiaries (“we”, “our”, “ours” and “us” as the context requires), (i) operates 3032 units, consisting of restaurants, package liquor stores, and combination restaurants/restaurant/package liquor stores and a sports bar that we either own or have operational control over and partial ownership in; and franchises an additional five units, consisting of two restaurants (one of which we operate) and three combination restaurants/restaurant/package liquor stores. The table below provides information concerning the type (i.e. restaurant, sports bar, package liquor 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 July 2, 2022April 1, 2023 and as compared to October 2, 2021 and July 3, 2021.1, 2022. With the exception of “The Whale’s Rib”, a restaurant we operate but do not own, and “Brendan’s Sports Pub” a restaurant/bar we own, all of the restaurants operate under our service marks “Flanigan’s Seafood Bar and Grill” or “Flanigan’s” and all of the package liquor stores operate under our service marks “Big Daddy’s Liquors” or “Big Daddy’s Wine & Liquors”.

 

Types of Units

July 2,

2022

October 2,
2021		July 3, 2021 
Company Owned:    
Combination package and restaurant333(1)
Restaurant only, including a sports bar877(2)
Package store only777 
     
Company Operated Restaurants Only:    
Limited Partnerships1088(3)
Franchise111 
Unrelated Third Party111 
     
Total Company Owned/Operated Units302727 
Franchised Units555(4)

 

TYPES OF UNITS

April 1,

2023

October 1,
2022		 
Company Owned:   
Combination package liquor store and restaurant33 
Restaurant only, including sports bar88(1)
Package liquor store only97(2)(3)
    
Company Managed Restaurants Only:   
Limited partnerships1010(4)
Franchise11 
Unrelated Third Party11 
    
Total Company Owned/Operated Units3230 
Franchised Units55(5)

Notes:

(1) During the first quarter of our fiscal year 2019, our combination package liquor store and restaurant located at 2505 N. University Drive, Hollywood, Florida (Store #19), was damaged by a fire which has caused it to be closed since the first quarter of our fiscal year 2019. Store #19 remains closed through July 2, 2022.

18 

Index

(2) During the third quarter of our fiscal year 2022, we entered into a new lease for the business premises and purchased the assets of a restaurant/bar known as “Brendan’s Sports Pub” located at 868 S. Federal Highway, Pompano Beach, Florida and began operating the location under its current trade name.

(2) During the first quarter of our fiscal year 2019, our combination package liquor store and restaurant located at 2505 N. University Drive, Hollywood, Florida (Store #19), was damaged by a fire which has caused it to be closed since the first quarter of our fiscal year 2019. During the first quarter of our fiscal year 2023, we opened our newly built stand-alone package liquor store on this site replacing our package liquor store destroyed by fire and previously operating here (Store #19P). We are constructing a stand-alone restaurant building on this site (adjacent to the package liquor store), replacing our restaurant destroyed by fire and previously operating here (Store #19R). We do not believe this restaurant will be operational during our fiscal year 2023.

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Table of Contents

(3) During the second quarter of our fiscal year 2023, our package liquor store located at 11225 Miramar Parkway #245, Miramar, Florida (Store #25) opened for business.

(4) During the second quarter of our fiscal year 2022, our limited partnership owned restaurant located at 14301 West Sunrise Boulevard, Sunrise, Florida (Store #85) opened for business in March, 2022 (the “2022 Sunrise Restaurant”). Our limited partnership owned restaurant located at 11225 Miramar Parkway #250, Miramar, Florida (Store #25) is expected to openopened for business in January,on April 18, 2023 (the “2022“2023 Miramar Restaurant”).

(4)(5) 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” or “Flanigan’s” and “Big Daddy’s Liquors” or “Big Daddy’s Wine & 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 as defined, 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 of accounting. 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 July 2, 2022,April 1, 2023, all limited partnerships, with the exception of the 2022 Sunrise Restaurant, which opened for business in March, 2022 and the 20222023 Miramar Restaurant, which we anticipate will openopened for business in January,April, 2023, 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” or “Flanigan’s”.

 

19 

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RESULTS OF OPERATIONS

  -----------------------Thirteen Weeks Ended----------------------- 
  July 2, 2022  July 3, 2021 
  

Amount

(In thousands)

  

 

Percent

  

Amount

(In thousands)

  

 

Percent

 
Restaurant food sales $25,574   64.01  $23,484   63.16 
Restaurant bar sales  6,755   16.91   5,617   15.10 
Package store sales  7,626   19.08   8,082   21.74 
                 
Total Sales $39,955   100.00  $37,183   100.00 
                 
Franchise related revenues  460       444     
Rental income  213       250     
Other operating income  47       58     
                 
Total Revenue $40,675      $37,935     

 

19 

  -----------------------Thirteen Weeks Ended----------------------- 
  April 1, 2023  April 2, 2022 
  Amount
(In thousands)		  Percent  Amount
(In thousands)		  Percent 
Restaurant food sales $27,113   62.98  $24,775   62.58 
Restaurant bar sales  7,281   16.91   6,669   16.84 
Package store sales  8,659   20.11   8,148   20.58 
                 
Total Sales $43,053   100.00  $39,592   100.00 
                 
Franchise related revenues  484       478     
Rental income  218       199     
Other operating income  48       61     
                 
Total Revenue $43,803      $40,330     

Index

  -----------------------Thirty-Nine Weeks Ended----------------------- 
  July 2, 2022  July 3, 2021 
  

Amount

(In thousands)

  

 

Percent

  

Amount

(In thousands)

  

 

Percent

 
Restaurant food sales $72,554   62.40  $62,501   61.56 
Restaurant bar sales  19,431   16.71   15,110   14.88 
Package store sales  24,285   20.89   23,923   23.56 
                 
Total Sales $116,270   100.00  $101,534   100.00 
                 
Franchise related revenues  1,384       1,252     
Rental income  611       663     
Other operating income  143       223     
                 
Total Revenue $118,408      $103,672     

 

  -----------------------Twenty-six Weeks Ended----------------------- 
  April 1, 2023  April 2, 2022 
  Amount
(In thousands)		  Percent  Amount
(In thousands)		  Percent 
Restaurant food sales $51,880   61.61  $46,980   61.56 
Restaurant bar sales  14,269   16.94   12,676   16.61 
Package store sales  18,062   21.45   16,659   21.83 
                 
Total Sales $84,211   100.00  $76,315   100.00 
                 
Franchise related revenues  943       924     
Rental income  431       398     
Other operating income  79       96     
                 
Total Revenue $85,664      $77,733     

Comparison of Thirteen Weeks Ended JulyApril 1, 2023 and April 2, 2022 and July 3, 2021.2022.

Revenues.Total revenue for the thirteen weeks ended July 2, 2022April 1, 2023 increased $2,740,000$3,473,000 or 7.22%8.61% to $40,675,000$43,803,000 from $37,935,000$40,330,000 for the thirteen weeks ended July 3,April 2, 2022 due primarily to increased package liquor store and restaurant sales, revenue generated from the opening of our limited partnership owned restaurant in Sunrise, Florida (Store #85) in March 2022, the opening of Brendan’s Sports Pub (Store #30) in June 2022, the opening of the package liquor store in Hollywood, Florida (Store #19P) in December 2022 and the comparatively less adverse effects of COVID-19 on our operations during the thirteen weeks ended April 1, 2023 as compared with the thirteen weeks ended April 2, 2022.

Restaurant Food Sales. Restaurant revenue generated from the sale of food, including non-alcoholic beverages, at restaurants totaled $27,113,000 for the thirteen weeks ended April 1, 2023 as compared to $24,775,000 for the thirteen weeks ended April 2, 2022. The increase in restaurant food sales during the thirteen weeks ended April 1, 2023 as compared to restaurant food sales during the thirteen weeks ended April 2, 2022 is attributable to restaurant food sales generated from the opening of our limited partnership owned restaurant in Sunrise, Florida (Store #85) in March 2022, the opening of Brendan’s Sports Pub (Store #30) in June 2022 and the comparatively greater adverse effects of COVID-19 on our operations during the thirteen weeks ended April 2, 2022 as compared with the thirteen weeks ended April 1, 2023. Comparable weekly restaurant food sales (for restaurants open for all of the thirteen weeks ended April 1, 2023 and April 2, 2022 respectively, which consists of nine restaurants owned by us and eight restaurants owned by affiliated limited partnerships (excluding our Sunrise, Florida location (Store #85), and Brendan’s Sports Pub (Store #30), both of which opened for business during the second and third quarters of our fiscal year 2022, respectively) was $1,946,000 and $1,802,000 for the thirteen weeks ended April 1, 2023 and April 2, 2022, respectively, an increase of 7.99%. Comparable weekly restaurant food sales for Company owned restaurants only (excluding Store #30 which opened for business during the third quarter of our fiscal year 2022), was $993,000 and $887,000 for the thirteen weeks ended April 1, 2023 and April 2, 2022, respectively, an increase of 11.95%. Comparable weekly restaurant food sales for affiliated limited partnership owned restaurants only (excluding Store #85 which opened for business during the second quarter of our fiscal year 2022), was $953,000 and $915,000 for the thirteen weeks ended April 1, 2023 and April 2, 2022, respectively, an increase of 4.15%. We expect that restaurant food sales, including non-alcoholic beverages, for the balance of our fiscal year 2023 will increase due to increased restaurant traffic and the opening for business of the 2023 Miramar Restaurant during the third quarter of fiscal year 2023.

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Restaurant Bar Sales. Restaurant revenue generated from the sale of alcoholic beverages at restaurants totaled $7,281,000 for the thirteen weeks ended April 1, 2023 as compared to $6,669,000 for the thirteen weeks ended April 2, 2022. The increase in restaurant bar sales during the thirteen weeks ended April 1, 2023 is primarily due to restaurant bar sales generated from the opening of our limited partnership owned restaurant in Sunrise, Florida (Store #85) in March 2022, the opening of Brendan’s Sports Pub (Store #30) in June 2022 and the comparatively more adverse effects of COVID-19 on our operations during the thirteen weeks ended April 2, 2022 as compared with the thirteen weeks ended April 1, 2023. Comparable weekly restaurant bar sales (for restaurants open for all of the thirteen weeks ended April 1, 2023 and April 2, 2022 respectively, which consists of nine restaurants owned by us and eight restaurants owned by affiliated limited partnerships, (excluding our Sunrise, Florida location (Store #85), and Brendan’s Sports Pub, (Store #30), which opened for business during the second and third quarters of our fiscal year 2022, respectively) was $516,000 and $509,000 for the thirteen weeks ended April 1, 2023 and April 2, 2022, respectively, an increase of 1.38%. Comparable weekly restaurant bar sales for Company owned restaurants only (excluding Store #30 which opened for business during third quarter of our fiscal year 2022), was $225,000 and $225,000 for the thirteen weeks ended April 1, 2023 and April 2, 2022. Comparable weekly restaurant food sales for affiliated limited partnership owned restaurants only (excluding Store #85 which opened for business during the second quarter of our fiscal year 2022), was $291,000 and $284,000 for the thirteen weeks ended April 1, 2023 and April 1, 2022, respectively, an increase of 2.46%. We expect that restaurant bar sales for the balance of our fiscal year 2023 will increase due to increased restaurant traffic and the opening for business of the 2023 Miramar Restaurant during the third quarter of fiscal year 2023.

Package Store Sales. Revenue generated from sales of liquor and related items at package liquor stores totaled $8,659,000 for the thirteen weeks ended April 1, 2023 as compared to $8,148,000 for the thirteen weeks ended April 2, 2022, an increase of $511,000. This increase was primarily due to increased package liquor store traffic due to what appears to be continued increased demand for package liquor store products resulting from the COVID-19 pandemic and package liquor sales generated from the opening of our package liquor store in Hollywood, Florida (Store #19P) in December 2022. The weekly average of same store package liquor store sales, which includes nine (9) Company-owned package liquor stores (excluding Store #19, which was closed for our fiscal years 2022 and 2021 due to a fire on October 2, 2018 but re-opened for business during the first quarter of our fiscal year 2023), was $637,000 and $644,000 for the thirteen weeks ended April 1, 2023 and April 2, 2022, respectively, a decrease of 1.09%. We expect that package liquor store sales for our fiscal year 2023 will increase due to increased package liquor store traffic and the opening of the package liquor stores located at 7990 Davie Road Extension, Hollywood, Florida (Store #19P) which opened for business during the first quarter of our fiscal year 2023 and 11225 Miramar Parkway #245, Miramar, Florida (Store #24), which opened for business during the second quarter of our fiscal year 2023.

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, 2023 increased $2,612,000 or 6.79% to $41,092,000 from $38,480,000 for the thirteen weeks ended April 2, 2022. The increase was primarily due to increased payroll and an expected general increase in food costs, costs and expenses incurred from the opening of our limited partnership owned restaurant in Sunrise, Florida (Store #85) in March 2022, Brendan’s Sports Pub (Store #30) in June 2022, the package liquor store in Hollywood, Florida (Store #19P) in December 2022, pre-opening expenses from our limited partnership owned restaurant in Miramar, Florida (Store #25) and pre-opening expenses from our package liquor store in Miramar, Florida (Store #24), partially offset by actions taken by management to reduce and/or control costs. We anticipate that our operating costs and expenses will continue to increase through our fiscal year 2023. Operating costs and expenses decreased as a percentage of total revenue to approximately 93.81% for the thirteen weeks ended April 1, 2023 from 95.41% for the thirteen weeks ended April 2, 2022.

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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 thirteen weeks ended April 1, 2023 increased to $23,184,000 from $20,070,000 for the thirteen weeks ended April 2, 2022. Gross profit margin for the restaurant food and bar sales increased during the thirteen weeks ended April 1, 2023 when compared to the thirteen weeks ended April 2, 2022 due to decreases in our cost of ribs, partially offset by, among other things, higher food costs. Our gross profit margin for restaurant food and bar sales (calculated as gross profit reflected as a percentage of restaurant food and bar sales), was 67.41% for the thirteen weeks ended April 1, 2023 and 63.83% for the thirteen weeks ended April 2, 2022.

Package Store Sales. Gross profit for package store sales for the thirteen weeks ended April 1, 2023 increased to $2,447,000 from $2,279,000 for the thirteen weeks ended April 2, 2022. Our gross profit margin (calculated as gross profit reflected as a percentage of package liquor store sales), for package store sales was 28.26% for the thirteen weeks ended April 1, 2023 and 27.97% for the thirteen weeks ended April 2, 2022. We anticipate that the gross profit margin for package liquor store merchandise will decrease during our fiscal year 2023 due to higher costs and 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, 2023 increased $2,143,000 or 17.81% to $14,174,000 from $12,031,000 for the thirteen weeks ended April 2, 2022. Payroll and related costs for the thirteen weeks ended April 1, 2023 were higher due primarily to the opening of our limited partnership owned restaurant in Sunrise, Florida (Store #85) in March 2022, Brendan’s Sports Pub (Store #30) in June 2022, the retail package liquor store on Hollywood, Florida (Store #19P) in December 2022, and higher salaries to employees to remain competitive with other potential employees in a tight labor market. Payroll and related costs as a percentage of total revenue was 32.36% in the thirteen weeks ended April 1, 2023 and 29.83% of total revenue in the thirteen weeks ended April 2, 2022.

Occupancy Costs. Occupancy costs (consisting of percentage rent, common area maintenance, repairs, real property taxes, amortization of leasehold interests and rent expense associated with operating lease liabilities under ASC 842) for the thirteen weeks ended April 1, 2023 increased $163,000 or 9.50% to $1,878,000 from $1,715,000 for the thirteen weeks ended April 2, 2022. The increase in occupancy costs was primarily due to the payment of rent for our retail package liquor store located at 11225 Miramar Parkway, #245, Miramar, Florida (Store #24) and our restaurant location which we are developing located at 11225 Miramar Parkway, #250, Miramar, Florida (Store #25) during the entire second quarter of our fiscal year 2023, as opposed to a part of the second quarter of our fiscal year 2022, and the payment of rent for the second quarter of our fiscal year 2023 for Brendan’s Sports Pub (Store #30) which we acquired and opened for business in June 2022.

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, 2023 increased $127,000 or 1.70% to $7,618,000 from $7,491,000 for the thirteen weeks ended April 2, 2022, due primarily to Store #19P, Store #30 and Store #85 being open for the thirteen weeks ended April 1, 2023 only, inflation and otherwise to increases in expenses across all categories. Selling, general and administrative expenses decreased as a percentage of total revenue for the thirteen weeks ended April 1, 2023 to 17.39% as compared to 18.57% for the thirteen weeks ended April 2, 2022.

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Depreciation and Amortization. Depreciation and amortization expense for the thirteen weeks ended April 1, 2023, which is included in selling, general and administrative expenses, increased $136,000 or 18.84% to $858,000 from $722,000 from the thirteen weeks ended April 2, 2022. As a percentage of total revenue, depreciation and amortization expense was 1.96% of revenue in the thirteen weeks ended April 1, 2023 and 1.79% of revenue in the thirteen weeks ended April 2, 2022.

Interest Expense, Net. Interest expense, net, for the thirteen weeks ended April 1, 2023 increased $85,000 to $262,000 from $177,000 for the thirteen weeks ended April 2, 2022. Interest expense, net, increased for the thirteen weeks ended April 1, 2023 due to the interest on our borrowing of $8,900,000 during the fourth quarter of our fiscal year 2022 from an unrelated third party lender to re-finance the mortgage loan on our property located at 4 N. Federal Highway, Hallandale Beach, Florida (Store #31).

Income Taxes. Income tax for the thirteen weeks ended April 1, 2023 was an expense of $290,000, as compared to an expense of $353,000 for the thirteen weeks ended April 2, 2022.

Net Income. Net income for the thirteen weeks ended April 1, 2023 increased $835,000 or 62.17% to $2,178,000 from $1,343,000 for the thirteen weeks ended April 2, 2022 due primarily due to increased revenue at our retail package liquor stores and restaurants partially offset by higher food costs and overall increased expenses. As a percentage of revenue, net income for the thirteen weeks ended April 1, 2023 is 4.97%, as compared to 3.33% in the thirteen weeks ended April 2, 2022.

Net Income Attributable to Flanigan’s Enterprises, Inc. Stockholders. Net income attributable to Flanigan’s Enterprises, Inc. stockholders for the thirteen weeks ended April 1, 2023 increased $237,000 or 14.28% to $1,897,000 from $1,660,000 for the thirteen weeks ended April 2, 2022 due primarily to increased revenue at our retail package liquor stores and restaurants partially offset by higher food costs and overall increased expenses. As a percentage of revenue, net income attributable to stockholders for the thirteen weeks ended April 1, 2023 is 4.33%, as compared to 4.12% for the thirteen weeks ended April 2, 2022.

Comparison of Twenty-Six Weeks Ended April 1, 2023 and April 2, 2022.

Revenues. Total revenue for the twenty-six weeks ended April 1, 2023 increased $7,931,000 or 10.20% to $85,664,000 from $77,733,000 for the twenty-six weeks ended April 2, 2022 due primarily to increased package liquor store and restaurant sales, increased menu prices, revenue generated from the opening of our limited partnership owned restaurant in Sunrise, Florida (Store #85) in March 2022, the opening of Brendan’s Sports Pub (Store #30) on June 2022, the opening of the package liquor store in Hollywood, Florida (Store #19P) in December 2022, and the comparatively less adverse effects of COVID-19 on our operations during the thirteen weeks ended July 2, 2022April 1, 2023 as compared with the thirteen weeks ended July 3, 2021.April 2, 2022. Effective October 3, 2021 and then effective December 19, 2021 we increased menu prices for our food offerings to target an increase to our food revenues of approximately 2.38% and 3.34% annually, respectively, to offset higher food costs and higher overall expenses and effective December 12, 2021 we increased menu prices for our bar offerings to target an increase to our bar revenues of approximately 7.80% annually, (collectively the “Recent Price Increases”). Prior to these increases, we previously raised menu prices in the third quarter of our fiscal year 2021. We expect that the new package liquor store located at 7990 Davie Road Extension, Hollywood, Florida will open for business during our fiscal year 2022 and we expect to generate revenue from it. We do not anticipate that the restaurant located at 2505 N. University Drive, Hollywood, Florida, which has been closed since October, 2018 due to a fire (the “Hollywood restaurant”) or the Miramar Restaurant will open for business during our fiscal year 2022 and accordingly we do not expect to generate any revenue from them.

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Restaurant Food Sales. Restaurant revenue generated from the sale of food, including non-alcoholic beverages, at restaurants totaled $25,574,000$51,880,000 for the thirteentwenty-six weeks ended July 2, 2022April 1, 2023 as compared to $23,484,000$46,980,000 for the thirteentwenty-six weeks ended July 3, 2021.April 2, 2022. The increase in restaurant food sales forduring the thirteentwenty-six weeks ended July 2, 2022April 1, 2023 as compared to restaurant food sales during the thirteentwenty-six weeks ended July 3, 2021April 2, 2022 is attributable to menu price increases,the Recent Price Increases, restaurant food sales generated from the opening of our limited partnership owned restaurant in Sunrise, Florida (Store #85) in March 2022, the opening of Brendan’s Sports Pub (Store #30) in June 2022 and the comparatively greater adverse effects of COVID-19 on our operations during the thirteentwenty-six weeks ended July 3, 2021April 2, 2022 as compared with the thirteentwenty-six weeks ended July 2, 2022.April 1, 2023. Comparable weekly restaurant food sales (for restaurants open for all of the thirteentwenty-six weeks ended JulyApril 1, 2023 and April 2, 2022 and July 3, 2021 respectively, which consists of nine restaurants owned by us (excluding Store #19 which was closed for the thirteen weeks ended July 2, 2022 and July 3, 2021 due to a fire on October 2, 2018) and eight restaurants owned by affiliated limited partnerships, (excluding Store #85our Sunrise, Florida location (Store #85), and Brendan’s Sports Pub (Store #30), both of which opened for business during the second quarter of our fiscal year 2022) was $1,860,000$1,859,000 and $1,789,000$1,775,000 for the thirteentwenty-six weeks ended JulyApril 1, 2023 and April 2, 2022, and July 3, 2021, respectively, an increase of 3.97%4.73%. Comparable weekly restaurant food sales for Company owned restaurants only (excluding Store #30 which opened for business during the second quarter of our fiscal year 2022), was $931,000$911,000 and $893,000$872,000 for the thirteentwenty-six weeks ended JulyApril 1, 2023 and April 2, 2022, and July 3, 2021, respectively, an increase of 4.26%4.47%. Comparable weekly restaurant food sales for affiliated limited partnership owned restaurants only (excluding Store #85 which opened for business during the second quarter of our fiscal year 2022), was $930,000$948,000 and $896,000$903,000 for the thirteentwenty-six weeks ended JulyApril 1, 2023 and April 2, 2022, and July 3, 2021 respectively, an increase of 3.79%4.98%. We expect that restaurant food sales, including non-alcoholic beverages, for the balance of our fiscal year 2023 will increase due to increased restaurant traffic and the opening for business of the 2023 Miramar Restaurant during the third quarter of fiscal year 2023.

 

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Restaurant Bar Sales. Restaurant revenue generated from the sale of alcoholic beverages at restaurants totaled $6,755,000$14,269,000 for the thirteentwenty-six weeks ended July 2, 2022April 1, 2023 as compared to $5,617,000$12,676,000 for the thirteentwenty-six weeks ended July 3, 2021.April 2, 2022. The increase in restaurant bar sales during the thirteentwenty-six weeks ended July 2, 2022April 1, 2023 is primarily due to the Recent Price Increases, restaurant bar sales generated from the opening of our limited partnership owned restaurant in Sunrise, Florida (Store #85) in March 2022, the opening of Brendan’s Sports Pub (Store #30) in June 2022 and the comparatively more adverse effects of COVID-19 on our operations during the thirteentwenty-six weeks ended July 3, 2021April 2, 2022 as compared with the thirteentwenty-six weeks ended July 2, 2022.April 1, 2023. Comparable weekly restaurant bar sales (for restaurants open for all of the thirteentwenty-six weeks ended JulyApril 1, 2023 and April 2, 2022 and July 3. 2021 respectively, which consists of nine restaurants owned by us (excluding Store #19 which was closed for the thirteen weeks ended July 2. 2022 and July 3, 2021 due to a fire on October 2, 2018), and eight restaurants owned by affiliated limited partnerships, (excluding our Sunrise, Florida location (Store #85), and Brendan’s Sports Pub (Store #30), both of which opened for business during the second quarter of our fiscal year 2022) was $508,000 and $485,000 for the twenty-six weeks ended April 1, 2023 and April 2, 2022, respectively, an increase of 4.74%. Comparable weekly restaurant bar sales for Company owned restaurants only was $219,000 and $214,000 for the twenty-six weeks ended April 1, 2023 and April 2, 2022, respectively, an increase of 2.34%. Comparable weekly restaurant food sales for affiliated limited partnership owned restaurants only (excluding Store #85 which opened for business during the second quarter of our fiscal year 2022)), was $492,000$289,000 and $271,000 for the thirteentwenty-six weeks ended JulyApril 1, 2023 and April 2, 2022, and $432,000 for the thirteen weeks ended July 3, 2021,respectively, an increase of 13.89%6.64%. Comparable weeklyWe expect that restaurant bar sales for Company owned restaurants only was $212,000the balance of our fiscal year 2023 will increase due to increased restaurant traffic and $188,000the opening for business of the thirteen weeks ended July 2, 2022 and July 3, 2021, respectively, an increase2023 Miramar Restaurant during the third quarter of 12.77%. Comparable weekly restaurant bar sales for affiliated limited partnership owned restaurants only was $280,000 and $244,000 for the thirteen weeks ended July 2, 2022 and July 3, 2021 respectively, an increase of 14.75%.fiscal year 2023.

Package Store Sales. Revenue generated from sales of liquor and related items at package liquor stores totaled $7,626,000$18,062,000 for the thirteentwenty-six weeks ended July 2, 2022April 1, 2023 as compared to $8,082,000$16,659,000 for the thirteentwenty-six weeks ended July 3, 2021, a decreaseApril 2, 2022, an increase of $456,000.$1,403,000. This increase was primarily due to increased package liquor store traffic due to what appears to be continued increased demand for package liquor store products resulting from the COVID-19 pandemic and package liquor sales generated rom the opening of our package liquor store in Hollywood, Florida (Store #19P) in December 2022. The weekly average of same store package liquor store sales, which includes nine (9) Company-owned package liquor stores, (excluding Store #19, which was closed for the thirteen weeks ended July 2,our fiscal years 2022 and July 3, 2021 due to a fire on October 2, 2018)2018 but re-opened for business during the first quarter of our fiscal year 2023), was $587,000$677,000 and $622,000$649,000 for the thirteentwenty-six weeks ended JulyApril 1, 2023 and April 2, 2022, respectively, an increase of 4.31%. We expect that package liquor store sales for our fiscal year 2023 will increase due to increased package liquor store traffic and July 3, 2021 respectively, a decreasethe opening of 5.63%.the package liquor stores located at 7990 Davie Road Extension, Hollywood, Florida (Store #19P) which opened for business during the first quarter of our fiscal year 2023 and 11225 Miramar Parkway, Miramar, Florida (Store #24) which opened for business during the second quarter of our fiscal year 2023.

 

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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 thirteentwenty-six weeks ended July 2, 2022April 1, 2023 increased $3,266,000$6,638,000 or 9.25%8.84% to $38,592,000$81,756,000 from $35,326,000$75,118,000 for the thirteentwenty-six weeks ended July 3, 2021.April 1, 2023. The increase was primarily due to increased payroll and an expected general increase in food costs, costs and expenses incurred from the opening of our limited partnership owned restaurant in Sunrise, Florida (Store #85) in March 2022, Brendan’s Sports Pub (Store #30) in June 2022, pre-opening expenses from our limited partnership owned restaurant in Miramar, Florida (Store #25) and pre-opening expenses from our package liquor store in Miramar, Florida (Store #24), partially offset by actions taken by management to reduce and/or control costs. We anticipate that our operating costs and expenses will continue to increase through our fiscal year 2022.2023. Operating costs and expenses increaseddecreased as a percentage of total revenue to approximately 94.88% in95.44% for the third quarter of our fiscal year 2022twenty-six weeks ended April 1, 2023 from 93.12% in96.64% for the third quarter of our fiscal year 2021.twenty-six weeks ended April 2, 2022.

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 thirteentwenty-six weeks ended July 2, 2022April 1, 2023 increased to $20,459,000$44,133,000 from $19,137,000$37,949,000 for the thirteentwenty-six weeks ended July 3, 2021.April 2, 2022. Our gross profit margin for restaurant food and bar sales (calculated as gross profit reflected as a percentage of restaurant food and bar sales), was 63.28%66.72% for the thirteentwenty-six weeks ended July 2, 2022April 1, 2023 and 65.76%63.61% for the thirteentwenty-six weeks ended July 3, 2021.April 2, 2022. Gross profit margin for restaurant food and bar sales decreasedincreased during the third quartertwenty-six weeks of our fiscal year 2023 when compared to the twenty-six weeks of our fiscal year 2022 when compared todue among other things by the third quarterRecent Price Increases and decreases in our cost of our fiscal year 2021 due to higher food costs,ribs, partially offset by, among other things, the Recent Price Increases.higher food costs.

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Package Store Sales. Gross profit for package store sales for the thirteentwenty-six weeks ended July 2, 2022 decreasedApril 1, 2023 increased to $1,996,000$4,866,000 from $2,171,000$4,450,000 for the thirteentwenty-six weeks ended July 3, 2021.April 2, 2022. Our gross profit margin (calculated as gross profit reflected as a percentage of package liquor store sales), for package store sales was 26.17%26.94% for the thirteentwenty-six weeks ended July 2, 2022April 1, 2023 and 26.86%26.71% for the thirteentwenty-six weeks ended July 3, 2021.April 2, 2022. We anticipate that the gross profit margin for package liquor store merchandise will decrease during our fiscal year 2023 due to higher costs and a reduction in pricing of certain package store merchandise to be more competitive.

 

Payroll and Related CostsCosts.. Payroll and related costs for the thirteentwenty-six weeks ended July 2, 2022April 1, 2023 increased $250,000$3,543,000 or 1.99%14.60% to $12,798,000$27,810,000 from $12,548,000$24,267,000 for the thirteentwenty-six weeks ended July 3, 2021.April 2, 2022. Payroll and related costs for the thirteentwenty-six weeks ended July 2, 2022April 1, 2023 were higher due primarily to the opening of our limited partnership owned restaurant in Sunrise, Florida (Store #85) in March 2022, Brendan’s Sports Pub (Store #30) in June 2022, the retail package liquor store in Hollywood, Florida (Store #19P) in December 2022 and higher costs forsalaries to employees such as cooks.to remain competitive with other potential employers in a tight labor market. Payroll and related costs as a percentage of total revenue was 31.46%32.46% in the thirteentwenty-six weeks ended July 2, 2022April 1, 2023 and 33.08%31.22% of total revenue in the thirteentwenty-six weeks ended July 3, 2021.April 2, 2022.

Occupancy CostsCosts.. Occupancy costs (consisting of percentage rent, common area maintenance, repairs, real property taxes, amortization of leasehold purchasesinterests and rent expense associated with operating lease liabilities under ASC 842) for the thirteentwenty-six weeks ended July 2, 2022April 1, 2023 increased $126,000$313,000 or 7.63%9.17% to $1,777,000$3,726,000 from $1,651,000$3,413,000 for the thirteentwenty-six weeks ended July 3, 2021.April 2, 2022. The increase in occupancy costs was primarily due to the commencementpayment of rent for our retail package liquor store which we are developing located at 11225 Miramar Parkway, #245, Miramar, Florida (Store #24) and our restaurant location which we are developing located at 11225 Miramar parkway,Parkway, #250, Miramar, Florida (Store #25) during the second quartertwenty-six weeks of our fiscal year 2023, as opposed to a part of the twenty-six weeks of our fiscal year 2022 and the payment of rent for the twenty-six weeks of our fiscal year 2023 for Brendan’s Sports Pub (Store #30) which we acquired and opened for business in June 2022.

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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 thirteentwenty-six weeks ended July 2, 2022April 1, 2023 increased $1,265,000$1,486,000 or 24.09%10.99% to $6,517,000$15,008,000 from $5,252,000$13,522,000 for the thirteentwenty-six weeks ended July 3, 2021. Selling, general and administrative expenses increased as a percentage of total revenue in the thirteen weeks ended JulyApril 2, 2022 to 16.02% as compared to 13.84% in the thirteen weeks ended July 3, 2021, due primarily to increases in expenses across all categories. We anticipate that our selling, general and administrative expenses as a percentage of total revenue will increase throughout the balance of our fiscal year 2022 due primarily to increases across all categories.

DepreciationStore #19P, Store #30 and Amortization. Depreciation and amortization expenseStore #85 being open for the thirteentwenty-six weeks ended July 2, 2022 increased $18,000 or 2.34%April 1, 2023 only, inflation and otherwise to $788,000 from $770,000 from the thirteen weeks ended July 3, 2021. As a percentage of total revenue, depreciation and amortization expense was 1.94% of revenue in the thirteen weeks ended July 2, 2022 and 2.03% of revenue in the thirteen weeks ended July 3, 2021.

Interest Expense, Net. Interest expense, net, for the thirteen weeks ended July 2, 2022 decreased $33,000 to $177,000 from $210,000 for the thirteen weeks ended July 3. 2021. Interest expense, net, decreased for the thirteen weeks ended July 2, 2022 due to the forgiveness of principal and all accrued interest on the borrowing by certain of our limited partnerships of an additional $3.35 million of 2nd PPP Loans during the first quarter of our fiscal year 2022, partially offset by interest on our borrowing of $4,300,000 during the third quarter of our fiscal year 2021 from an unrelated third party lender to re-finance our mortgage loan of our property located at 13105 – 13205 Biscayne Boulevard, North Miami, Florida (Store #20).

Income Taxes. Income tax for the thirteen weeks ended July 2, 2022 was an expense of $22,000, as compared to an expense of $475,000 for the thirteen weeks ended July 3, 2021.

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Index

Net Income. Net income for the thirteen weeks ended July 2, 2022 decreased $6,457,000 or 76.68% to $1,964,000 from $8,421,000 for the thirteen weeks ended July 3, 2021 due primarily to the income attributable to the forgiveness of debt of certain of our PPP Loans during the thirteen weeks ended July 3, 2021 and higher food costs and overall increased expenses during the thirteen weeks ended July 2, 2022, partially offset by increased revenue at our restaurants during the thirteen weeks ended July 2, 2022 and the Recent Price Increases. As a percentage of revenue, net income for the thirteen weeks ended July 2, 2022 is 4.83%, as compared to 22.20% in the thirteen weeks ended July 3, 2021.

Net Income Attributable to Flanigan’s Enterprises, Inc. Stockholders. Net income attributable to stockholders for the thirteen weeks ended July 2, 2022 decreased $5,364,000 or 74.51% to $1,835,000 from $7,199,000 for the thirteen weeks ended July 3, 2021 due primarily to the income attributable to the forgiveness of debt of certain of our PPP Loans during the thirteen weeks ended July 3, 2021 and higher food costs and overall increased expenses during the thirteen weeks ended July 2, 2022, partially offset by increased revenue at our restaurants during the thirteen weeks ended July 2, 2022 and the Recent Price Increases. As a percentage of revenue, net income attributable to stockholders for the thirteen weeks ended July 2, 2022 is 4.51%, as compared to 18.98% for the thirteen weeks ended July 3, 2021.

Comparison of Thirty-Nine Weeks Ended July 2, 2022 and July 3, 2021.

Revenues. Total revenue for the thirty-nine weeks ended July 2, 2022 increased $14,736,000 or 14.21% to $118,408,000 from $103,672,000 for the thirty-nine weeks ended July 3, 2021 due primarily to increased package liquor store and restaurant sales, the Recent Price Increases, revenue generated from the opening of our limited partnership owned restaurant in Sunrise, Florida, (Store #85) in March 2022 and the comparatively less adverse effects of COVID-19 on our operations during the thirty-nine weeks ended July 2, 2022 as compared with the thirty-nine weeks ended July 3, 2021.

Restaurant Food Sales. Restaurant revenue generated from the sale of food, including non-alcoholic beverages, at restaurants totaled $72,554,000 for the thirty-nine weeks ended July 2, 2022 as compared to $62,501,000 for the thirty-nine weeks ended July 3, 2021. The increase in restaurant food sales for the thirty-nine weeks ended July 2, 2022 as compared to restaurant food sales during the thirty-nine weeks ended July 3, 2021 is attributable to the Recent Price Increases, restaurant food sales generated from the opening of our limited partnership owned restaurant in Sunrise, Florida, (Store #85) in March 2022 and the comparatively more adverse effects of COVID-19 on our operations during the thirty-nine weeks ended July 3, 2021 as compared with the thirty-nine weeks ended July 2, 2022. Comparable weekly restaurant food sales (for restaurants open for all of the thirty-nine weeks ended July 2, 2022 and July 3, 2021 respectively, which consists of nine restaurants owned by us, (excluding Store #19 which was closed for the thirty-nine weeks ended July 2, 2022 and July 3, 2021 due to a fire on October 2, 2018) and eight restaurants owned by affiliated limited partnerships, (excluding Store #85 which opened for business during the second quarter of our fiscal year 2022)) was $1,803,000 and $1,590,000 for the thirty-nine weeks ended July 2, 2022 and July 3, 2021, respectively, an increase of 13.40%. Comparable weekly restaurant food sales for Company owned restaurants only was $892,000 and $787,000 for the thirty-nine weeks ended July 2, 2022 and July 3, 2021, respectively, an increase of 13.34%. Comparable weekly restaurant food sales for affiliated limited partnership owned restaurants only, (excluding Store #85 which opened for business during the second quarter of our fiscal year 2022), was $912,000 and $803,000 for the thirty-nine weeks ended July 2, 2022 and July 3, 2021 respectively, an increase of 13.57%.

Restaurant Bar Sales. Restaurant revenue generated from the sale of alcoholic beverages at restaurants totaled $19,431,000 for the thirty-nine weeks ended July 2, 2022 as compared to $15,110,000 for the thirty-nine weeks ended July 3, 2021. The increase in restaurant bar sales during the thirty-nine weeks ended July 2, 2022 is primarily due to the Recent Price Increases, restaurant bar sales generated from the opening of our limited partnership owned restaurant in Sunrise, Florida, (Store #85) in March 2022 and the comparatively greater adverse effects of COVID-19 on our operations during the thirty-nine weeks ended July 3, 2021 as compared with the thirty-nine weeks ended July 2, 2022. Comparable weekly restaurant bar sales (for restaurants open for all of the thirty-nine weeks ended July 2, 2022 and July 3. 2021 respectively, which consists of nine restaurants owned by us, (excluding Store #19 which was closed for the thirty-nine weeks ended July 2. 2022 and July 3, 2021 due to a fire on October 2, 2018), and eight restaurants owned by affiliated limited partnerships, (excluding Store #85 which opened for business during the second quarter of our fiscal year 2022)) was $488,000 for the thirty-nine weeks ended July 2, 2022 and $387,000 for the thirty-nine weeks ended July 3, 2021, an increase of 26.10%. Comparable weekly restaurant bar sales for Company owned restaurants only was $213,000 and $165,000 for the thirty-nine weeks ended July 2, 2022 and July 3, 2021, respectively, an increase of 29.09%. Comparable weekly restaurant bar sales for affiliated limited partnership owned restaurants only was $274,000 and $222,000 for the thirty-nine weeks ended July 2, 2022 and July 3, 2021 respectively, an increase of 23.42%.

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Index

Package Store Sales. Revenue generated from sales of liquor and related items at package liquor stores totaled $24,285,000 for the thirty-nine weeks ended July 2, 2022 as compared to $23,923,000 for the thirty-nine weeks ended July 3, 2021, an increase of $362,000. This increase was primarily due to increased package liquor store traffic due to what appears to be continued increased demand for package liquor store products resulting from COVID-19. The weekly average of same store package liquor store sales, which includes nine (9) Company-owned package liquor stores, (excluding Store #19, which was closed for the thirty-nine weeks ended July 2, 2022 and July 3, 2021 due to a fire on October 2, 2018), was $623,000 and $613,000 for the thirty-nine weeks ended July 2, 2022 and July 3, 2021 respectively, an increase of 1.63%.

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 thirty-nine weeks ended July 2, 2022 increased $16,710,000 or 17.23% to $113,710,000 from $97,000,000 for the thirty-nine weeks ended July 3, 2021. The increase was primarily due to payroll and an expected general increase in food costs, costs and expenses incurred from the opening of our limited partnership owned restaurant in Sunrise, Florida, (Store #85) in March 2022 partially offset by actions taken by management to reduce and/or control costs. We anticipate that our operating costs and expenses will continue to increase through our fiscal year 2022. Operating costs and expenses increased as a percentage of total revenue to approximately 96.03% in the thirty-nine weeks ended July 2, 2022 from 93.56% in the thirty-nine weeks ended July 3, 2021.

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 thirty-nine weeks ended July 2, 2022 increased to $58,408,000 from $51,663,000 for the thirty-nine weeks ended July 3, 2021. Our gross profit margin for restaurant food and bar sales (calculated as gross profit reflected as a percentage of restaurant food and bar sales), was 63.50% for the thirty-nine weeks ended July 2, 2022 and 66.57% for the thirty-nine weeks ended July 3, 2021. Gross profit margin for restaurant food and bar sales decreased during the thirty-nine weeks ended July 2, 2022 when compared to the thirty-nine weeks ended July 3, 2021 due to higher food costs, partially offset by, among other things, the Recent Price Increases.

Package Store Sales. Gross profit for package store sales for the thirty-nine weeks ended July 2, 2022 decreased to $6,446,000 from $6,493,000 for the thirty-nine weeks ended July 3, 2021. Our gross profit margin, (calculated as gross profit reflected as a percentage of package liquor store sales), for package store sales was 26.54% for the thirty-nine weeks ended July 2, 2022 and 27.14% for the thirty-nine weeks ended July 3, 2021.

Payroll and Related Costs. Payroll and related costs for the thirty-nine weeks ended July 2, 2022 increased $4,590,000 or 14.13% to $37,065,000 from $32,475,000 for the thirty-nine weeks ended July 3, 2021. Payroll and related costs for the thirty-nine weeks ended July 2, 2022 were higher due primarily to higher costs for employees such as cooks and to a lesser extent due to the opening of our limited partnership owned restaurant in Sunrise, Florida, (Store #85) in March 2022. Payroll and related costs as a percentage of total revenue was 31.30% in the thirty-nine weeks ended July 2, 2022 and 31.32% of total revenue in the thirty-nine weeks ended July 3, 2021.

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Index

Occupancy Costs. Occupancy costs (consisting of percentage rent, common area maintenance, repairs, real property taxes, amortization of leasehold purchases and rent expense associated with operating lease liabilities under ASC 842) for the thirty-nine weeks ended July 2, 2022 increased $131,000 or 2.59% to $5,190,000 from $5,059,000 for the thirty-nine weeks ended July 3, 2021. The increase in occupancy costs was primarily due to the commencement of rent for our retail package liquor store which we are developing located at 11225 Miramar Parkway, #245, Miramar, Florida (Store #24) and our restaurant location which we are developing located at 11225 Miramar parkway, #250, Miramar, Florida (Store #25) during the second quarter of our fiscal year 2022, partially offset by the elimination of rent for our restaurant location located at 14301 West Sunrise Boulevard, Sunrise, Florida (Store #85), the real property and improvements of which we purchased on March 2, 2021.

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 thirty-nine weeks ended July 2, 2022 increased $3,951,000 or 24.56% to $20,039,000 from $16,088,000 for the thirty-nine weeks ended July 3, 2021 due primarily to the payment by the Company of pre-opening expenses in the amount of $856,000 for its limited partnership owning the new restaurant in Sunrise, Florida (Store #85) due to delays in the development of the new restaurant, including delays caused by COVID-19 and increases in expenses across all categories. Selling, general and administrative expenses increased as a percentage of total revenue infor the thirty-ninetwenty-six weeks ended July 2, 2022April 1, 2023 to 16.92%17.52% as compared to 15.52% in17.40% for the thirty-ninetwenty-six weeks ended July 3, 2021. We anticipate that our selling, general and administrative expenses as a percentage of total revenue will increase throughout the balance of our fiscal year 2022 due primarily to increases across all categories.April 2, 2022.

Depreciation and AmortizationAmortization. . Depreciation and amortization expense for the thirty-ninetwenty-six weeks ended July 2, 2022 decreased $97,000April 1, 2023, which is included in selling, general and administrative expenses, increased $258,000 or 4.21%18.16% to $2,209,000$1,679,000 from $2,306,000$1,421,000 from the thirty-ninetwenty-six weeks ended July 3, 2021.April 2, 2022. As a percentage of total revenue, depreciation and amortization expense was 1.87%1.96% of revenue in the thirty-ninetwenty-six weeks ended July 2, 2022April 1, 2023 and 2.22%1.83% of revenue in the thirty-ninetwenty-six weeks ended July 3, 2021.April 2, 2022.

 

Interest Expense, Net.. Interest expense, net, for the thirty-ninetwenty-six weeks ended July 2, 2022 decreased $190,000April 1, 2023 increased $167,000 to $547,000$537,000 from $737,000$370,000 for the thirty-ninetwenty-six weeks ended July 3, 2021.April 2, 2022. Interest expense, net, decreasedincreased for the thirty-ninetwenty-six weeks ended July 2, 2022April 1, 2023 due to the forgiveness of principal and all accrued interest on theour borrowing by certain of our limited partnerships of an additional $3.35 million related to the 2nd PPP Loans$8,900,000 during the firstfourth quarter of our fiscal year 2022 partially offset by interest on (i) our borrowing of $2,200,000 during the second quarter of our fiscal year 2021 from an unrelated third party lender used to finance our purchase of the real property and improvements located at 14301 West Sunrise Boulevard, Sunrise, Florida (Store #85) (the “$2.2 Million Borrowing”) and (ii) our borrowing of $4,300,000 during the third quarter of our fiscal year 2021 from an unrelated third party lender to re-finance ourthe mortgage loan ofon our property located at 13105 – 13205 Biscayne Boulevard, North Miami,4 N. Federal Highway, Hallandale Beach, Florida (Store #20)#31).

 

Income TaxesTaxes. . Income tax for the thirty-ninetwenty-six weeks ended July 2, 2022April 1, 2023 was an expense of $522,000,$353,000, as compared to an expense of $1,004,000$500,000 for the thirty-ninetwenty-six weeks ended July 3, 2021.April 2, 2022.

 

Net Income.Net income for the thirty-ninetwenty-six weeks ended JulyApril 1, 2023 decreased $2,229,000 or 42.21% to $3,052,000 from $5,281,000 for the twenty-six weeks ended April 2, 2022 decreased $7,900,000 or 52.16% to $7,245,000 from $15,145,000 for the thirty-nine weeks ended July 3, 2021 due primarily to the greater income attributable to the forgiveness of debt of certain of our PPP Loans during the thirty-nine weeks ended July 3, 2021 as compared to the income attributable to the forgiveness of debt of certain of our 2nd PPP Loans during the thirty-nine weeksfirst quarter ended July 2,January 1, 2022, and higher food costs and overall increased expenses during the thirty-ninetwenty-six weeks ended July 2, 2022,April 1, 2023, partially offset by increased revenue at our retail package liquor stores and restaurants during the thirty-nine weeks ended July 2, 2022 and the Recent Price Increases. As a percentage of revenue, net income for the thirty-ninetwenty-six weeks ended July 2, 2022April 1, 2023 is 6.12%3.56%, as compared to 14.61%6.79% in the thirty-ninetwenty-six weeks ended July 3, 2021.

April 2, 2022.

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Net Income Attributable to Flanigan’s Enterprises, Inc. Stockholders.Net income attributable to Flanigan’s Enterprises, Inc. stockholders for the thirty-ninetwenty-six weeks ended JulyApril 1, 2023 decreased $703,000 or 21.81% to $2,521,000 from $3,224,000 for the twenty-six weeks ended April 2, 2022 decreased $5,371,000 or 51.50% to $5,059,000 from $10,430,000 for the thirty-nine weeks ended July 3, 2021 due primarily to the greater income attributable to the forgiveness of debt of certain of our PPP Loans during the thirty-nine weeks ended July 3, 2021 as compared to the income attributable to the forgiveness of debt of certain of our 2nd PPP Loans during the thirty-nine weeksfirst quarter ended July 2,January 1, 2022, and higher food costs and overall increased expenses during the thirty-ninetwenty-six weeks ended July 2, 2022,April 1, 2023, partially offset by increased revenue at our retail package liquor stores and restaurants during the thirty-nine weeks ended July 2, 2022 and the Recent Price Increases. During the thirty-nine weeks ended July 2, 2022, due to losses attributable to the 2022 Sunrise Restaurant and a lesser extent the 2022 Miramar Restaurant, there was less of a gain attributable to the noncontrolling interests as compared to a gain for the thirty-nine weeks ended July 3, 2021 which contributes to the net income attributable to Flanigan’s Enterprises, Inc. Stockholders for the thirty-nine weeks ended July 2, 2022. As a percentage of revenue, net income attributable to stockholders for the thirty-ninetwenty-six weeks ended July 2, 2022April 1, 2023 is 4.27%2.94%, as compared to 10.06%4.15% for the thirty-ninetwenty-six weeks ended July 3, 2021.April 2, 2022.

 

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New Limited Partnership Restaurants

 

As new restaurants open, our income from operations will be adversely affected due to our obligation to advance pre-opening costs, including but not limited to pre-opening rent for the new locations. During the thirty-ninetwenty-six weeks ended July 2, 2022,April 1, 2023, we openedhad one new restaurant location in Sunrise, Florida for business as a new “Flanigan’s” and had a second new restaurant location in Miramar, Florida in the development stage, towhich location will house a new “Flanigan’s”. Rent for the new restaurant location in Miramar, Florida commenced during the second quarter of our fiscal year 2022.2022 and the restaurant opened for business subsequent to the end of the second quarter of our fiscal year 2023.

 

Menu Price Increases and Trends

 

During the thirty-ninetwenty-six weeks ended July 2,April 1, 2023, we increased menu prices for our food offerings (effective March 26, 2023) to target an aggregate increase to our food revenues of approximately 2.06% annually and we increased menu prices for our bar offerings (effective March 20, 2023) to target an increase to our bar revenues of approximately 5.65% annually to offset higher food and liquor costs and higher overall expenses. During the twenty-six weeks ended January 1, 2022, we increased menu prices for our food offerings (effective October 3, 2021 and December 19, 2021, respectively) to target an aggregate increase to our food revenues of approximately 8.83% annually and we increased menu prices for our bar offerings (effective December 12, 2021) to target an increase to our bar revenues of approximately 7.80% annually to offset higher food and liquor costs and higher overall expenses. Prior to these increases, we previously raised menu prices in the third quarter of our fiscal year 2021.

 

COVID-19 has and will continue to materially and adversely affect our restaurant business for what may be a prolonged period of time. This damage and disruption has resulted from events and factors that were impossible for us to predict and are beyond our control. As a result, COVID-19 has materially adversely affected our results of operations for our fiscal year 2021, as well as the thirty-ninetwenty-six weeks ended July 2, 2022April 1, 2023 and will, in all likelihood, impact our results of operations, liquidity and/or financial condition throughout the balance of our fiscal year 2022.2023. The extent to which our restaurant business may be adversely impacted and its effect on our operations, liquidity and/or financial condition cannot be accurately predictedpredicted.

 

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Index

Based on current COVID-19 trends, the Department of Health and Human Services (HHS) is planning for the federal Public Health Emergency for COVID-19 (PHE) declared by the Secretary of the Department of Health and Human Services (Secretary) under Section 319 of the Public Health Service (PHS) Act to expire at the end of the day on May 11, 2023.

Liquidity and Capital Resources

 

We fund our operations through cash from operations and borrowings from third parties. As of July 2, 2022,April 1, 2023, we had cash and cash equivalents of approximately $35,659,000, an increase$37,764,000, a decrease of $2,983,000$4,374,000 from our cash balance of $32,676,000$42,138,000 as of October 2, 2021. During the thirty-nine weeks ended July 2, 2022, we generated proceeds from the closing of the sale, in a private offering of limited partnership interests in (i) CIC Investors #85, Ltd., the limited partnership which owns and operates the 2022 Sunrise Restaurant, of $5,000,000, of which we purchased $370,000 of limited partnership interests; and (ii) CIC Investors #25, Ltd., the limited partnership which owns and is developing the “Flanigan’s” restaurant located at 11225 Miramar Parkway, Suite 250, Miramar, Florida 33025 of $4,000,000. Capital raised from private investors in the private offerings is credited to sale of noncontrolling interests in our Statements of Stockholders’ Equity.1, 2022.

 

During the second quarter of our fiscal year 2021, certain of the entities owning the limited partnership stores (the “LP’s”), as well as the store we manage but do not own (the “Managed Store”) (collectively, the “Borrowers”), applied for and received loans from an unrelated third party lender (the “Lender”) pursuant to the Paycheck Protection Program (the “PPP”) under the United States Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) enacted March 27, 2020, in the aggregate principal amount of approximately $3.98 million (the “2nd PPP Loans”), of which approximately: (i) $3.46 million was loaned to six (6) of the LP’s; and (ii) $0.52 million was loaned to the Managed Store. During the first quarter of our fiscal year 2022, we applied for forgiveness for all PPP Loans, including the Managed Store, and as of July 2, 2022,April 1, 2023, the entire amount of principal and accrued interest was forgiven under the 2nd PPP Loans. During the third quarter

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Inflation is affecting all aspects of our fiscal year 2021, we generated net proceeds of $2.8 million from the re-finance ofoperations, including but not limited to food, beverage, fuel and labor costs. Supply chain issues also contribute to inflation. Inflation, including supply chain issues are having a material impact on our mortgage loan encumbering the real property and improvements located at 13105 – 13205 Biscayne Boulevard, North Miami, Florida where our Flanigan’s Seafood Bar and Grill restaurant and Big Daddy’s Liquors retail package liquor store operate (Store #20) with an unrelated third-party lender, increasing the principal amount borrowed from $1.5 million to $4.3 million. During the second quarter of our fiscal year 2021, we closed on the purchase of the real property and improvements located at 14301 West Sunrise Boulevard, Sunrise, Florida for $4,800,000 where our “Flanigan’s Seafood Bar and Grill” restaurant (Store #85) for operates. We financed this acquisition with a loan from an unrelated third-party lender in the principal amount of $2.2 million and paid cash for the balance. During the first quarter of our fiscal year 2021, we closed on the purchase of the real property and improvements located at 5450 N. State Road 7, North Lauderdale, Florida where we operate a combination “Flanigan’s Seafood Bar and Grill” restaurant and “Big Daddy’s Liquors” package liquor store (Store #40) and paid $1,200,000 cash at closing.operating results.

 

Notwithstanding the negative effects of COVID 19COVID-19 on our operations, we believe that our current cash availability from our cash on hand, positive cash flow from operations and borrowed funds 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 thirty-ninetwenty-six weeks ended JulyApril 1, 2023 and April 2, 2022 and July 3, 2021.

2022.

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  ---------Thirty-Nine Weeks Ended-------- 
  July 2, 2022  July 3, 2021 
  (in Thousands) 
       
Net cash provided by operating activities $7,825  $11,523 
Net cash used in investing activities  (6,519)  (8,374)
Net cash provided by (used in) financing activities  1,677   (1,118)
         
Net Increase in Cash and Cash Equivalents  2,983   2,031 
         
Cash and Cash Equivalents, Beginning  32,676   29,922 
         
Cash and Cash Equivalents, Ending $35,659  $31,953 
  ---------Twenty-Six Weeks Ended-------- 
  April 1, 2023  April 2, 2022 
  (in thousands) 
       
Net cash provided by operating activities $4,194  $7,190 
Net cash used in investing activities  (5,273)  (4,574)
Net cash used in financing activities  (3,295)  (5,374)
         
Net (Decrease) Increase in Cash and Cash Equivalents  (4,374)  7,990 
         
Cash and Cash Equivalents, Beginning  42,138   32,676 
         
Cash and Cash Equivalents, Ending $37,764  $40,666 

 

We did not declare or pay a cash dividend on our capital stock during the twenty-six weeks ended April 1, 2023. During the thirty-ninetwenty-six weeks ended JulyApril 2, 2022, our Board of Directors declared a cash dividend of $1.00 per share to shareholders of record on March 31, 2022 and paidwas made payable on April 19, 2022. During the thirty-nine weeks ended July 3, 2021, we did not declare or pay a cash dividend on our capital stock. 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. During the thirty-ninetwenty-six weeks ended JulyApril 1, 2023, we acquired property and equipment and construction in progress of $3,698,000, (of which $114,000 was purchase deposits transferred to property and equipment and $439,000 was purchase deposits transferred to construction in process as of October 1, 2022) including $105,000 for renovations to two (2) existing limited partnership owned restaurants and $187,000 for renovations to three (3) Company owned restaurants. During the twenty-six weeks ended April 2, 2022, we acquired property and equipment and construction in progress of $10,227,000,$4,111,000, (of which $562,000$353,000 was deposits recorded in other assets as of October 2, 2021 and $549,000$331,000 was construction in progress in accounts payable), including $727,000$717,000 for renovations to three (3) existing limited partnership owned restaurants and $149,000$82,000 for renovations to two (2)one (1) Company owned restaurants. During the thirty-nine weeks ended July 3, 2021, we acquired property, plant and equipment and construction in progressrestaurant.

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Table of $9,683,000, (of which $58,000 was for the purchase of a motor vehicle; $2,200,000 was for the purchase of real property; $14,000 was deposits recorded in other assets and $18,000 was purchase deposits transferred to construction in process as of October 3, 2020), which amount included $35,000 for the renovation to two (2) existing limited partnership restaurants and $70,000 for renovations to two (2) Company owned restaurants.Contents

All of our owned units require periodic refurbishing in order to remain competitive. We anticipate the cost of this refurbishment in ourthe remainder of fiscal year 20222023 will be approximately $1,000,000,$650,000, excluding construction/renovations to Store #19#19R (our combination package liquor store and restaurant which is being rebuilt due to damages caused by a fire), Store #85 (our Sunrise, Florida restaurant location opened for business during the thirty-nine weeks ended July 2, 2022), and Store #24 (our Miramar, Florida package store location in development) and Store #25 (our Miramar, Florida restaurant location in development), which funds willalthough capital expenditures for our refurbishing program for fiscal year 2023 may be provided from operations, subject to reimbursement of all or a part of the cost of construction/renovations through the proceeds generated from the closing of the private offerings for the limited partnerships which own Store #85 and Store #25.significantly higher.

 

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Index

Long Term Debt

 

As of July 2, 2022,April 1, 2023, we had long term debt of $17,773,000,$23,732,000, as compared to $22,115,000$25,389,000 as of October 2, 2021.1, 2022. Our long term debt decreased as of July 2, 2022April 1, 2023 as compared to October 2, 20211, 2022 because we satisfied the principal balance and all accrued interest ($367,000) due on our $5.5 million term loan. In addition, we did not finance our insurance premiums for our annual insurance renewal effective December 30, 2022.

In February 2023, we determined that as of December 31, 2022, we did not meet the required Post-Distribution Basic Fixed Charge Coverage Ratio (the “Post-Distribution/Fixed Charge Covenant”) contained in each of our six (6) loans (the “Institutional Loans”) with our unrelated third party institutional lender (the “Institutional Lender’). On February 23, 2023, we received from the Institutional Lender, a written waiver of the non-compliance with the Post-Distribution/Fixed Charge Covenant (the “Covenant Non-Compliance”), pursuant to which, among other things, the Institutional Lender waived (1) the non-compliance as of December 31, 2022 and (2) their right to exercise certain remedies under the Institutional Loans, including the right to accelerate the indebtedness owed by us thereunder, resulting in the indebtedness under the Institutional Loans to be immediately due and payable, which would have a material adverse effect on the Company. The Post-Distribution/Fixed Charge Covenant requires we maintain a ratio of at least 1.15 to 1.00 and for the twelve (12) months ended April 1, 2023 our ratio was calculated to be 1.35 to 1.00. As a result, our classification of debt is appropriate as of April 1, 2023.

For further information regarding the Company's long-term debt, refer to the forgiveness of all principalConsolidated Financial Statements and accrued interest of the 2nd PPP Loans, partially offset by $1,861,000 for financed insurance premiums, less any payments made on account thereof. As of July 2, 2022, we are in compliance with the covenants of all loans with our lender.

As of July 2, 2022, the aggregate principal balance owed from the financing of our property and general liability insurance policies is $1,015,000, excluding coverage for our franchises, (of approximately $272,000), which are notrelated notes included in our consolidated financial statements.the Company’s Annual Report on Form 10K for the year ended October 1, 2022.

 

Construction Contracts

(a) 7990 Davie Road Extension,2505 N. University Drive, Hollywood, Florida (Store #19 – “Big Daddy’s Wine & Liquors”“Flanigan’s”)

 

During the third quarter of our fiscal year 2019, we entered into an agreement with aan unaffiliated third party unaffiliated general contractorarchitect for site work at this locationdesign and development services totaling $1,618,000, (i) to connect the real property where this restaurant operated (Store #19) to city sewer and (ii) to construct a new building on the adjacent parcel of real property$77,000 for the operationre-build of a package liquor store. Through the thirty-nine weeks ended July 2, 2022, we agreed to change orders to the agreement for additional construction services increasing the total contract price by $624,000 to $2,242,000, of which $1,951,000 of the total amount obligated has been paid through July 2, 2022 and an additional $-0- has been paid subsequent to the end of the thirty-nine weeks of ended July 2, 2022 through the date of filing this quarterly report.

(b)our restaurant located at 2505 N. University Drive, Hollywood, Florida (Store #19 – “Flanigan’s”)

#19), which has been closed since October 2, 2018 due to damages caused by a fire, of which $62,000 has been paid. During the first quarter of our fiscal year 2022, we entered into an agreement with a third party unaffiliated general contractor to re-build our restaurant at this location totaling $2,515,000, of which $226,000$302,000 has been paid through July 2, 2022April 1, 2023 and an additional $-0-$314,000 has been paid subsequent to the end of the thirdsecond quarter of our fiscal year 20222023 through the date of filing of this quarterly report.

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(c)(b) 14301 W. Sunrise Boulevard, Sunrise, Florida (Store #85 – “Flanigan’s”)

 

During the fourth quarter of our fiscal year 2020, we entered into an agreement with a third party unaffiliated general contractor for interior renovations at this location totaling $1,236,000 and through the second quarter our fiscal year 2022 we agreed to change orders to the agreement for additional interior renovations increasing the total contract price by $215,000 to $1,451,000, which has been paid in full by the end of the third quarter of our fiscal year 2022. During the second quarter of our fiscal year 2022, we entered into an agreement with a third party unaffiliated general contractor for exterior renovations at this location totaling $343,000$ 343,000 and through the thirdend of the second quarter of our fiscal year 20222023 we agreed to change orders to the agreement for additional interior renovations increasing the total contract price by $45,000$327,000 to $388,000,$670,000, of which $316,000$417,000 has been paid through July 2, 2022April 1, 2023 and $-0-an additional $114,000 has been paid subsequent to the end of the thirdsecond quarter of our fiscal year 20222023 through the date of filing of this quarterly report.

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Index

(d)

(c) 11225 Miramar Parkway, #250, Miramar, Florida (Store #25 - “Flanigan’s”(“Flanigan’s”)

During the firstsecond quarter of our fiscal year 2022, we entered into an agreement with a third party unaffiliated general contractor for interior renovations at this location totaling $1,421,000, and through the thirdsecond quarter of our fiscal year 20222023 we agreed to change orders to the agreement increasing the total contract price by $9,000$426,000 to $1,430,000$1,847,000 of which $180,000$1,663,000 has been paid through July 2, 2022April 1, 2023 and $268,000$13,000, has been paid subsequent to the end of the thirty-nine weeks ended July 2, 2022second quarter of our fiscal year 2023 through the date of filing of this quarterly report.

 

(e) Miramar, Florida (Store #24 - “Big Daddy’s Wine and Liquors”)

During the first quarter of our fiscal year 2022, we entered into an agreement with a third party unaffiliated general contractor for interior renovations at this location totaling $317,000, and through the third quarter our fiscal year 2022 we agreed to change orders to the agreement increasing the total contract price by $18,000 to $335,000 of which $254,000 has been paid through July 2, 2022 and $-0- has been paid subsequent to the end of the thirty-nine weeks ended July 2, 2022 through the date of filing of this quarterly report.

Purchase Commitments

 

In order to fix the cost and ensure adequate supply of baby back ribs for our restaurants for calendar year 2022, on October 4, 2021,2023, we entered into a purchase agreement with our current rib supplier, whereby we agreed to purchase approximately $10,414,000$6.8 million of “2.25 & Down Baby Back Ribs” (industry jargon for the weight range in which slabs of baby back ribs are sold) from this vendor during calendar year 2022 from this vendor at market cost. Our purchase agreement provides for the purchase of 2.25 & Down Baby Back Ribs,2023, at a monthlyprescribed cost, which we believe is competitive. The decrease in our cost of the averagebaby back ribs for calendar year 2023 compared to calendar year 2022 ($10.4 million) is due to a decrease in market price per pound of the prior 4 weeks.price.

 

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

 

Working Capital

 

The table below summarizes the current assets, current liabilities, and working capital for our fiscal quarter ended July 2, 2022April 1, 2023, and our fiscal year ended October 2, 2021.1, 2022.

 

Item July 2, 2022  Oct. 2, 2021 
  (in Thousands) 
       
Current Assets $45,320  $39,790 
Current Liabilities  22,932   20,223 
Working Capital $22,388  $19,567 
Item April 1, 2023  Oct. 1, 2022 
  (in Thousands) 
       
Current Assets $47,920  $50,893 
Current Liabilities  21,887   22,176 
Working Capital $26,033  $28,717 

 

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Our working capital increaseddecreased during our fiscal quarter ended July 2, 2022April 1, 2023 from our working capital as offor our fiscal year ended October 2, 20211, 2022 primarily due to capital raisesincreases in (i) purchases of two (2) limited partnership offerings totaling $8,595,000.property and equipment; (ii) deposits on property and equipment; and (iii) deferred revenue.

 

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 borrowed funds will adequately fund operations, debt reductions and planned capital expenditures throughout our fiscal year 2022.2023.

 

Off-Balance Sheet Arrangements

 

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

 

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Critical Accounting Policies

During the twenty-six weeks ended April 1, 2023, we have not made any change to our critical accounting policies. See Item 7, page 51 of our Annual Report on Form 10-K for our fiscal year ended October 1, 2022 for a discussion of significant accounting policies.

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. Inflation is having a material impact on our operating results, especially rising food, fuel and labor costs. We are unablehave endeavored to predict when inflation rates will drop, if at all, inoffset the future.adverse effects of cost increases by increasing our menu prices.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

We do not ordinarily hold market risk sensitive instruments for trading purposes and as of July 2, 2022April 1, 2023 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 1215 “Fair Value Measurements of Financial Instruments” to the Consolidated Financial Statements included in “Item 8. Financial Statements and Supplementary Data” of ourthis Annual Report on Form 10-K for our fiscal year ended October 2, 2021,1, 2022, 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 July 2, 2022,April 1, 2023, we had twoone variable rate debt instrumentsinstrument outstanding that areis impacted by changes in interest rates. The interest rate of both variable rate debt instruments is equal to the lender’s LIBOR Rate plus two and one-quarter percent (2.25%) per annum. The debt instruments further provide that the “LIBOR Rate” is a rate of interest equal to the British Bankers Association LIBOR Rate or successor thereto approved by the lender if the British Bankers Association is no longer making a LIBOR rate available. 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 entitled 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 thesethis debt instruments,instrument, we entered into an interest rate swap agreementsagreement with our unrelated third-party lender to convert thesethis variable rate debt obligationsobligation to a fixed rates.rate. We are currently party to the following two (2) interest rate swap agreements:agreement:

 

(i)        The first interest rate swap agreement entered into in January 2013September 2022 relates to the $1.405M$8.90M Loan (the “$1.405M8.90M Term Loan Swap”). The $1.405M$8.90M Term Loan Swap requires us to pay interest for a twenty (20)fifteen (15) year period at a fixed rate of 4.35%4.90% on an initial amortizing notional principal amount of $1,405,000,$8,900,000, while receiving interest for the same period at LIBORBSBY Screen Rate – 1 Month, plus 2.25%1.50%, on the same amortizing notional principal amount. We determined that at July 2, 2022,April 1, 2023, the interest rate swap agreement is an effective hedging agreement and the fair value was not material; andmaterial.

(ii)        The second interest rate swap agreement entered into in December 2016 and became effective December 28, 2017, relates to the Term Loan (the “Term Loan Swap”). The Term Loan Swap requires us to pay interest for a five (5) year period at a fixed rate of 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 July 2, 2022, the interest rate swap agreement is an effective hedging agreement and the fair value was not material

 

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At July 2, 2022,During the twenty-six weeks ended April 1, 2023 we invested the aggregate sum of $600,000 in 90 day certificates of deposit, fully government guaranteed and at an average fixed annual interest rate of 4.52%. Otherwise, at April 1, 2023, our cash resources offset our bank charges and any excess 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 July 2, 2022,April 1, 2023, 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 as a result of the material weaknesses in internal control over financial reporting described below, our disclosure controls and procedures were not effective as of July 2, 2022.April 1, 2023.

 

Material Weakness in Internal Control Over Financial Reporting

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our interim or annual financial statements will not be prevented or detected on a timely basis.

During the course of our independent registered public accounting firm performing its quarterly review procedures in connection with our unaudited condensed consolidated financial statements to be included in our Form 10-Q for the first quarter of our 2023 fiscal year, we became aware of certain errors made by management in recording certain transactions and in performing debt covenant calculations. As a result of these errors we have concluded that we do not have a sufficient complement of trained and knowledgeable accounting personnel to prevent and detect errors on a timely basis and that this deficiency constitutes a material weakness in our internal control over financial reporting as of April 1, 2023.

Subsequent to the twenty-six weeks ended April 1, 2023, we began the process of addressing this material weakness by engaging qualified accounting consultants who have been brought on to enhance our internal controls over financial reporting. These individuals are licensed CPA’s with appropriate levels of knowledge and experience in public accounting.

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Changes in Internal Control Over Financial Reporting

 

During the thirteen weeks ended July 2, 2022,April 1, 2023, 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. However, we are in the process of designing and planning to enhance certain controls to address the material weakness discussed above. There is no assurance that this process will result in remediation of the material weakness or prevent other material weaknesses from arising in the future.

 

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

 

See “Litigation” on page 1412 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 2, 20211, 2022 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 thirty-ninetwenty-six weeks ended JulyApril 1, 2023 and April 2, 2022, and July 3, 2021, we did not purchase any shares of our common stock. As of July 2, 2022,April 1, 2023, 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.

 

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ITEM 6. EXHIBITS

 

The following exhibits are filed with this Report:

 

 ExhibitDescription
   
 31.1Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
   
 31.2Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
   
 32.1Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
 32.2Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

List of XBRL documents as exhibits 101

 

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SIGNATURES

 

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 FLANIGAN'S ENTERPRISES, INC.
  
Date: AugustMay 16, 20222023/s/ James G. Flanigan
 JAMES G. FLANIGAN, Chief Executive Officer and President
  
  
 /s/ Jeffrey D. Kastner
JEFFREY D. KASTNER, Chief Financial Officer and Secretary
 (Principal(Principal Financial and Accounting Officer)

 

 

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