Flanigans Enterprises Inc: Form 10-Q for the period ended Jun 28, 2025

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 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 September 28, 2024. We undertake no obligation to publicly release the results of any revisions to these forward-looking statements that may reflect events or circumstances after the date of this report.

OVERVIEW

As of June 28, 2025, Flanigan’s Enterprises, Inc., a Florida corporation, together with its subsidiaries (“we”, “our”, “ours” and “us” as the context requires), (i) operates 32 units, consisting of restaurants, package liquor stores, combination restaurant/package liquor stores and a sports bar that we either own or have operational control over and partial ownership in; and (ii) franchises an additional five units, consisting of two restaurants (one of which we operate) and three combination 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 June 28, 2025 and as compared to September 28, 2024. 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”.

Notes:

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

Limited Partnership Financial Arrangement: We manage and control the operations of all restaurants owned by limited partnerships, except the Fort Lauderdale, Florida restaurant which is owned by a related franchisee. Accordingly, the results of operations of all limited partnership owned restaurants, except the Fort Lauderdale, Florida restaurant are consolidated into our operations for accounting purposes. The results of operations of the Fort Lauderdale, Florida restaurant are accounted for by us utilizing the equity method 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 as a return of capital. 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 a profit distribution. As of June 28, 2025, all limited partnerships, with the exception of the limited partnership which owns the restaurant in Sunrise, Florida (Store #85), which opened for business in March 2022 and the limited partnership which owns the restaurant in Miramar, Florida (Store #25), which opened for business in 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”.

RESULTS OF OPERATIONS

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Comparison of Thirteen Weeks Ended June 28, 2025 and June 29, 2024.

Revenues. Total revenue for the thirteen weeks ended June 28, 2025 increased $3,062,000 or 6.24% to $52,164,000 from $49,102,000 for the thirteen weeks ended June 29, 2024 due primarily to increased package liquor store and restaurant sales and increased menu prices. Effective February 23, 2025 we increased our menu prices for our bar offerings to target an increase to our bar revenues of approximately 0.84% annually. Effective December 4, 2024 we increased our menu prices for our bar offerings to target an increase to our bar revenues of approximately 4.90% annually and effective November 17, 2024 we increased our menu prices for our food offerings to target an increase to our food revenues of approximately 4.14% annually. Effective August 25, 2024, we increased menu prices for our bar offerings to target an increase to our bar revenues of approximately 5.63% annually to offset higher food and liquor costs and higher overall expenses (collectively the “Recent Price Increases”).

Restaurant Food Sales. Restaurant revenue generated from the sale of food, including non-alcoholic beverages, at restaurants totaled $31,933,000 for the thirteen weeks ended June 28, 2025 as compared to $30,471,000 for the thirteen weeks ended June 29, 2024. The increase in restaurant food sales during the thirteen weeks ended June 28, 2025 as compared to restaurant food sales during the thirteen weeks ended June 29, 2024 is attributable to the Recent Price Increases. Comparable weekly restaurant food sales for restaurants open for all of the thirteen weeks ended June 28, 2025 and June 29, 2024 respectively, which consists of eleven restaurants owned by us and ten restaurants owned by affiliated limited partnerships was $2,431,000 and $2,322,000 for the thirteen weeks ended June 28, 2025 and June 29, 2024, respectively, an increase of 4.69%. Comparable weekly restaurant food sales for Company-owned restaurants was $1,153,000 and $1,110,000 for the thirteen weeks ended June 28, 2025 and June 29, 2024, respectively, an increase of 3.87%. Comparable weekly restaurant food sales for affiliated limited partnership owned restaurants only was $1,278,000 and $1,212,000 for the thirteen weeks ended June 28, 2025 and June 29, 2024, respectively, an increase of 5.45%. We expect that restaurant food sales, including non-alcoholic beverages, for the balance of our fiscal year 2025 will increase due to the Recent Price Increases.

Restaurant Bar Sales. Restaurant revenue generated from the sale of alcoholic beverages at restaurants totaled $7,931,000 for the thirteen weeks ended June 28, 2025 as compared to $7,577,000 for the thirteen weeks ended June 29, 2024. The increase in restaurant bar sales during the thirteen weeks ended June 28, 2025 is primarily due to the Recent Price Increases. Comparable weekly restaurant bar sales for restaurants open for all of the thirteen weeks ended June 28, 2025 and June 29, 2024 respectively, which consists of eleven restaurants owned by us and ten restaurants owned by affiliated limited partnerships was $610,000 and $583,000 for the thirteen weeks ended June 28, 2025 and June 29, 2024, respectively, an increase of 4.63%. Comparable weekly restaurant bar sales for Company-owned restaurants only was $268,000 and $259,000 for the thirteen weeks ended June 28, 2025 and June 29, 2024, respectively, an increase of 3.47%. Comparable weekly restaurant bar sales for affiliated limited partnership owned restaurants only was $342,000 and $324,000 for the thirteen weeks ended June 28, 2025 and June 29, 2024, an increase of 5.56%. We expect that restaurant bar sales for the balance of our fiscal year 2025 will increase due to the Recent Price Increases.

Package Store Sales. Revenue generated from sales of liquor and related items at package liquor stores totaled $11,522,000 for the thirteen weeks ended June 28, 2025 as compared to $10,292,000 for the thirteen weeks ended June 29, 2024, an increase of $1,230,000. This increase was primarily due to increased package liquor store traffic. The weekly average of same store package liquor store sales, which includes eleven (11) Company-owned package liquor stores was $886,000 and $792,000 for the thirteen weeks ended June 28, 2025 and June 29, 2024, respectively, an increase of 11.87%. We expect that package liquor store sales for the balance of our fiscal year 2025 will increase due to increased package liquor store traffic.

Costs and Expenses. Costs and expenses (consisting of cost of merchandise sold, payroll and related costs, operating expenses, occupancy costs, selling, general and administrative expenses and depreciation and amortization), for the thirteen weeks ended June 28, 2025 increased $2,375,000 or 5.07% to $49,190,000 from $46,815,000 for the thirteen weeks ended June 29, 2024. The increase was primarily due to increased payroll and operating expenses partially offset by actions taken by management to reduce and/or control costs. We anticipate that our costs and expenses will continue to increase through the balance of our fiscal year 2025. Costs and expenses decreased as a percentage of total revenue to approximately 94.30% for the thirteen weeks ended June 28, 2025 from 95.34% for the thirteen weeks ended June 29, 2024.

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 June 28, 2025 increased to $26,909,000 from $24,944,000 for the thirteen weeks ended June 29, 2024. Our gross profit margin for restaurant food and bar sales (calculated as gross profit reflected as a percentage of restaurant food and bar sales), increased to 67.50% for the thirteen weeks ended June 28, 2025 as compared to 65.56% for the thirteen weeks ended June 29, 2024 due primarily to the Recent Price Increases and lower food costs.

Package Store Sales. Gross profit for package store sales for the thirteen weeks ended June 28, 2025 increased to $2,743,000 from $2,589,000 for the thirteen weeks ended June 29, 2024. Our gross profit margin (calculated as gross profit reflected as a percentage of package liquor store sales), for package store sales was 23.81% for the thirteen weeks ended June 28, 2025 and 25.16% for the thirteen weeks ended June 29, 2024. We anticipate that the gross profit margin for package liquor store merchandise will decrease for the balance of our fiscal year 2025 due to higher costs and a reduction in pricing of certain package store merchandise to remain competitive.

Payroll and Related Costs. Payroll and related costs for the thirteen weeks ended June 28, 2025 increased $805,000 or 5.26% to $16,106,000 from $15,301,000 for the thirteen weeks ended June 29, 2024. Payroll and related costs for the thirteen weeks ended June 28, 2025 were higher due primarily to the increase to the Florida minimum wage. Payroll and related costs as a percentage of total revenue was 30.88 % for the thirteen weeks ended June 28, 2025 and 31.16% of total revenue for the thirteen weeks ended June 29, 2024.

Operating Expenses. Operating expenses (including but not limited to utilities, insurance, cleaning, credit card fees, supplies, security, and other costs closely related to operating restaurant and package stores) for the thirteen weeks ended June 28, 2025 increased $761,000 or 12.14% to $7,029,000 from $6,268,000 for the thirteen weeks ended June 29, 2024 due primarily to inflation and increases in expenses across all categories.

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 June 28, 2025 increased $46,000 or 2.27% to $2,070,000 from $2,024,000 for the thirteen weeks ended June 29, 2024.

Selling, General and Administrative Expenses. Selling, general and administrative expenses (consisting of general corporate expenses, including but not limited to advertising, professional costs, clerical and administrative overhead) for the thirteen weeks ended June 28, 2025 decreased $204,000 or 15.84% to $1,084,000 from $1,288,000 for the thirteen weeks ended June 29, 2024 due primarily to lower consulting fees. Selling, general and administrative expenses decreased as a percentage of total revenue for the thirteen weeks ended June 28, 2025 to 2.08% as compared to 2.62% for the thirteen weeks ended June 29, 2024.

Depreciation and Amortization. Depreciation and amortization expense for the thirteen weeks ended June 28, 2025 increased $40,000 or 3.55% to $1,167,000 from $1,127,000 for the thirteen weeks ended June 29, 2024. As a percentage of total revenue, depreciation and amortization expense was 2.24% of revenue for the thirteen weeks ended June 28, 2025 and 2.30% of revenue for the thirteen weeks ended June 29, 2024.

Interest Expense, Net. Interest expense, net, for the thirteen weeks ended June 28, 2025 decreased $14,000 to $237,000 from $251,000 for the thirteen weeks ended June 29, 2024.

Income Taxes. Income tax expense for the thirteen weeks ended June 28, 2025 was $242,000 compared to $282,000 for the thirteen weeks ended June 29, 2024. This is primarily due to the tax expense that is anticipated based on the projected pre-tax income and permanent differences.

Net Income. Net income for the thirteen weeks ended June 28, 2025 increased $687,000 or 38.12% to $2,489,000 from $1,802,000 for the thirteen weeks ended June 29, 2024 due primarily to the Recent Price Increases and lower food costs, partially offset by overall increased expenses. As a percentage of revenue, net income for the thirteen weeks ended June 28, 2025 is 4.77%, as compared to 3.67% for the thirteen weeks ended June 29, 2024.

Net Income Attributable to Flanigan’s Enterprises, Inc. Stockholders. Net income attributable to Flanigan’s Enterprises, Inc.’s stockholders for the thirteen weeks ended June 28, 2025 increased $271,000 or 24.17% to $1,392,000 from $1,121,000 for the thirteen weeks ended June 29, 2024 due primarily to the Recent Price Increases and lower food costs, partially offset by overall increased expenses. As a percentage of revenue, net income attributable to stockholders for the thirteen weeks ended June 28, 2025 is 2.67% as compared to 2.28% for the thirteen weeks ended June 29, 2024.

Comparison of Thirty-Nine Weeks Ended June 28, 2025 and June 29, 2024.

Revenues. Total revenue for the thirty-nine weeks ended June 28, 2025 increased $13,747,000 or 9.66% to $156,058,000 from $142,311,000 for the thirty-nine weeks ended June 29, 2024 due primarily to increased package liquor store and restaurant sales, the Recent Price Increases and revenue generated from the opening of our corporate owned restaurant in Hollywood, Florida (Store #19R) in March 2024.

Restaurant Food Sales. Restaurant revenue generated from the sale of food, including non-alcoholic beverages, at restaurants totaled $93,645,000 for the thirty-nine weeks ended June 28, 2025 as compared to $86,182,000 for the thirty-nine weeks ended June 29, 2024. The increase in restaurant food sales during the thirty-nine weeks ended June 28, 2025 as compared to restaurant food sales during the thirty-nine weeks ended June 29, 2024 is attributable to the Recent Price Increases and restaurant food sales generated from the opening of our corporate owned restaurant in Hollywood, Florida (Store #19R) during the second quarter of our fiscal year 2024. Comparable weekly restaurant food sales for restaurants open for all of the thirty-nine weeks ended June 28, 2025 and June 29, 2024 respectively, which consists of ten restaurants owned by us (excluding our Hollywood, Florida location Store #19R which opened for business during the second quarter of our fiscal year 2024) and ten restaurants owned by affiliated limited partnerships was $2,253,000 and $2,141,000 for the thirty-nine weeks ended June 28, 2025 and June 29, 2024, respectively, an increase of 5.23%. Comparable weekly restaurant food sales for Company-owned restaurants (excluding our Hollywood, Florida location Store #19R which opened for business during the second quarter of our fiscal year 2024) was $1,003,000 and $948,000 for the thirty-nine weeks ended June 28, 2025 and June 29, 2024, respectively, an increase of 5.80%. Comparable weekly restaurant food sales for affiliated limited partnership owned restaurants only was $1,250,000 and $1,193,000 for the thirty-nine weeks ended June 28, 2025 and June 29, 2024, respectively, an increase of 4.78%. We expect that restaurant food sales, including non-alcoholic beverages, for the balance of our fiscal year 2025 will increase due to the Recent Price Increases.

Restaurant Bar Sales. Restaurant revenue generated from the sale of alcoholic beverages at restaurants totaled $24,087,000 for the thirty-nine weeks ended June 28, 2025 as compared to $22,780,000 for the thirty-nine weeks ended June 29, 2024. The increase in restaurant bar sales during the thirty-nine weeks ended June 28, 2025 is primarily due to the Recent Price Increases and the opening of our corporate owned restaurant in Hollywood, Florida (Store #19R) during the second quarter of our fiscal year 2024. Comparable weekly restaurant bar sales for restaurants open for all of the thirty-nine weeks ended June 28, 2025 and June 29, 2024 respectively, which consists of ten restaurants owned by us (excluding our Hollywood, Florida location Store #19R which opened for business during the second quarter of our fiscal year 2024) and ten restaurants owned by affiliated limited partnerships was $590,000 and $573,000 for the thirty-nine weeks ended June 28, 2025 and June 29, 2024, respectively, an increase of 2.97%. Comparable weekly restaurant bar sales for Company-owned restaurants only (excluding our Hollywood, Florida location Store #19R which opened for business during the second quarter of our fiscal year 2024) was $248,000 and $238,000 for the thirty-nine weeks ended June 28, 2025 and June 29, 2024, respectively, an increase of 4.20%. Comparable weekly restaurant bar sales for affiliated limited partnership owned restaurants only was $342,000 and $335,000 for the thirty-nine weeks ended June 28, 2025 and June 29, 2024, an increase of 2.09%. We expect that restaurant bar sales for the balance of our fiscal year 2025 will increase due to the Recent Price Increases.

Package Store Sales. Revenue generated from sales of liquor and related items at package liquor stores totaled $36,008,000 for the thirty-nine weeks ended June 28, 2025 as compared to $31,034,000 for the thirty-nine weeks ended June 29, 2024, an increase of $4,974,000. This increase was primarily due to increased package liquor store traffic. The weekly average of same store package liquor store sales, which includes eleven (11) Company-owned package liquor stores was $923,000 and $796,000 for the thirty-nine weeks ended June 28, 2025 and June 29, 2024, respectively, an increase of 15.95%. We expect that package liquor store sales for the balance of our fiscal year 2025 will increase due to increased package liquor store traffic.

Costs and Expenses. Costs and expenses (consisting of cost of merchandise sold, payroll and related costs, operating expenses, occupancy costs, selling, general and administrative expenses and depreciation and amortization), for the thirty-nine weeks ended June 28, 2025 increased $12,044,000 or 8.82% to $148,591,000 from $136,547,000 for the thirty-nine weeks ended June 29, 2024. The increase was primarily due to increased payroll, an expected general increase in food costs and overall expenses as well as costs and expenses incurred from the opening of our Company-owned restaurant in Hollywood Florida (Store #19R) during the second quarter of our fiscal year 2024, partially offset by actions taken by management to reduce and/or control costs. We anticipate that our costs and expenses will continue to increase through the balance of our fiscal year 2025. Costs and expenses decreased as a percentage of total revenue to approximately 95.22% for the thirty-nine weeks ended June 28, 2025 from 95.95% for the thirty-nine weeks ended June 29, 2024.

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 June 28, 2025 increased to $78,383,000 from $71,817,000 for the thirty-nine weeks ended June 29, 2024. Our gross profit margin for restaurant food and bar sales (calculated as gross profit reflected as a percentage of restaurant food and bar sales), increased to 66.58% for the thirty-nine weeks ended June 28, 2025 as compared to 65.91% for the thirty-nine weeks ended June 29, 2024.

Package Store Sales. Gross profit for package store sales for the thirty-nine weeks ended June 28, 2025 increased to $9,079,000 from $7,959,000 for the thirty-nine weeks ended June 29, 2024. Our gross profit margin (calculated as gross profit reflected as a percentage of package liquor store sales), for package store sales was 25.21% for the thirty-nine weeks ended June 28, 2025 and 25.65% for the thirty-nine weeks ended June 29, 2024. We anticipate that the gross profit margin for package liquor store merchandise will decrease for the balance of our fiscal year 2025 due to higher costs and a reduction in pricing of certain package store merchandise to remain competitive.

Payroll and Related Costs. Payroll and related costs for the thirty-nine weeks ended June 28, 2025 increased $3,378,000 or 7.56% to $48,036,000 from $44,658,000 for the thirty-nine weeks ended June 29, 2024. Payroll and related costs for the thirty-nine weeks ended June 28, 2025 were higher due primarily to the opening of our company owned restaurant in Hollywood, Florida (Store #19R) during the second quarter of our fiscal year 2024 and the increase to the Florida minimum wage. Payroll and related costs as a percentage of total revenue was 30.78% for the thirty-nine weeks ended June 28, 2025 and 31.38% of total revenue for the thirty-nine weeks ended June 29, 2024.

Operating Expenses. Operating expenses (including but not limited to utilities, insurance, cleaning, credit card fees, supplies, security, and other costs closely related to operating restaurant and package stores) for the thirty-nine weeks ended June 28, 2025 increased $2,075,000 or 11.18% to $20,640,000 from $18,565,000 for the thirty-nine weeks ended June 29, 2024 due primarily to the opening of our company owned restaurant in Hollywood, Florida (Store #19R) during the second quarter of our fiscal year 2024, inflation and otherwise to increases in expenses across all categories.

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 thirty-nine weeks ended June 28, 2025 increased $9,000 or 0.15% to $6,127,000 from $6,118,000 for the thirty-nine weeks ended June 29, 2024.

Selling, General and Administrative Expenses. Selling, general and administrative expenses (consisting of general corporate expenses, including but not limited to advertising, professional costs, clerical and administrative overhead) for the thirty-nine weeks ended June 28, 2025 increased $169,000 or 4.37% to $4,036,000 from $3,867,000 for the thirty-nine weeks ended June 29, 2024 due primarily to increased television and radio advertising costs. Selling, general and administrative expenses decreased as a percentage of total revenue for the thirty-nine weeks ended June 28, 2025 to 2.59% as compared to 2.72% for the thirty-nine weeks ended June 29, 2024.

Depreciation and Amortization. Depreciation and amortization expense for the thirty-nine weeks ended June 28, 2025 increased $355,000 or 11.38% to $3,474,000 from $3,119,000 for the thirty-nine weeks ended June 29, 2024. This increase is driven by the opening of our company owned restaurant in Hollywood, Florida (Store #19R) during the second quarter of our fiscal year 2024. As a percentage of total revenue, depreciation and amortization expense was 2.23% of revenue for the thirty-nine weeks ended June 28, 2025 and 2.19% of revenue for the thirty-nine weeks ended June 29, 2024.

Interest Expense, Net. Interest expense, net, for the thirty-nine weeks ended June 28, 2025 decreased $46,000 to $722,000 from $768,000 for the thirty-nine weeks ended June 29, 2024.

Income Taxes. Income tax expense for the thirty-nine weeks ended June 28, 2025 was $588,000, as compared to $209,000 for the thirty-nine weeks ended June 29, 2024. This is primarily due to the tax expense that is anticipated based on the projected pre-tax income and permanent differences.

Net Income. Net income for the thirty-nine weeks ended June 28, 2025 increased $1,547,000 or 31.44% to $6,467,000 from $4,920,000 for the thirty-nine weeks ended June 29, 2024 due primarily to the Recent Price Increases and the operation of our Company-owned restaurant of Hollywood, Florida (Store #19R) during the thirty-nine weeks ended June 28, 2025, offset by higher food costs and overall increased expenses. As a percentage of revenue, net income for the thirty-nine weeks ended June 28, 2025 is 4.14%, as compared to 3.46% for the thirty-nine weeks ended June 29, 2024.

Net Income Attributable to Flanigan’s Enterprises, Inc. Stockholders. Net income attributable to Flanigan’s Enterprises, Inc.’s stockholders for the thirty-nine weeks ended June 28, 2025 increased $965,000 or 30.42 % to $4,137,000 from $3,172,000 for the thirty-nine weeks ended June 29, 2024 due primarily to the Recent Price Increases and the operation of our Company-owned restaurant of Hollywood, Florida (Store #19R) during the thirty-nine weeks ended June 28, 2025, offset by higher food costs and overall increased expenses. As a percentage of revenue, net income attributable to stockholders for the thirty-nine weeks ended June 28, 2025 is 2.65%, as compared to 2.23% for the thirty-nine weeks ended June 29, 2024.

Menu Price Increases and Trends

During the thirteen weeks ended March 29, 2025, we increased our menu prices for our bar offerings (effective February 23, 2025) to target an increase to our bar revenues of approximately 0.84% annually to offset higher food and liquor costs and higher overall expenses. During the thirteen weeks ended December 28, 2024, we increased our menu prices for our bar offerings (effective December 4, 2024) to target an increase to our bar revenues of approximately 4.90% annually and we increased our menu prices for our food offerings (effective November 17, 2024) to target an increase to our food revenues of approximately 4.14% annually to offset higher food and liquor costs and higher overall expenses. During our fiscal year 2024, we increased menu prices for our bar offerings (effective August 25, 2024) to target an increase to our bar revenues of approximately 5.63% annually to offset higher food and liquor costs and higher overall expenses. Prior to these increases we previously raised menu prices in the second quarter of our fiscal year 2023.

Liquidity and Capital Resources

We fund our operations through cash from operations and borrowings from third parties. As of June 28, 2025, we had cash and cash equivalents of approximately $18,210,000, a decrease of $3,192,000 from our cash balance of $21,402,000 as of September 28, 2024. This decrease is primarily due to the expenditure of $2.2 million for the purchase of undeveloped land in Cutler Bay, Florida for a future restaurant site. This acquisition reflects our ongoing investment in strategic expansion. While no construction has commenced as of the reporting date, management anticipates capital expenditures related to site development and build-out in future fiscal quarters.

Inflation is affecting all aspects of our operations, including but not limited to food, beverage, fuel and labor costs. Supply chain issues also contribute to inflation. Inflation is having a material impact on our operating results.

We believe that our current cash availability from our cash on hand and positive cash flow from operations 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-nine weeks ended June 28, 2025 and June 29, 2024.

(in thousands)

During the thirty-nine weeks ended June 28, 2025 our Board of Directors declared a cash dividend of $0.55 per share to shareholders of record on June 12, 2025 and was made payable on June 27, 2025. During the thirty-nine weeks ended June 29, 2024 our Board of Directors declared a cash dividend of $0.50 per share to shareholders of record on June 14, 2024 and was made payable on June 28, 2024. 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-nine weeks ended June 28, 2025, we acquired property and equipment of $4,956,000, (of which $2.2 million was for the purchase of the Cutler Bay Property and $57,000 was purchase deposits transferred to property and equipment), including $285,000 for renovations to four (4) Company-owned location and $43,000 for renovations to one (1) limited partnership owned restaurant. During the thirty-nine weeks ended June 29, 2024, we acquired property and equipment and construction in progress of $5,282,000, (of which $255,000 was purchase deposits transferred to property and equipment, $715,000 was purchase deposits transferred to CIP, and $308,000 was property and equipment in accounts payable), including $437,000 for renovations to three (3) Company-owned restaurants.

We anticipate the cost of refurbishment in our fiscal year 2025 will be approximately $550,000, although capital expenditures for our refurbishing program for fiscal year 2025 may be significantly higher.

Long-Term Debt

As of June 28, 2025, we had long-term debt (including the current portion) of $20,926,000, as compared to $21,912,000 as of September 28, 2024.

As of June 28, 2025, we are in compliance with all of the covenants contained in our loan agreements.

Purchase Commitments

In order to fix the cost and ensure adequate supply of baby back ribs for our restaurants for calendar year 2025, we entered into a purchase agreement with a new rib supplier, whereby we agreed to purchase approximately $7.8 million of “2.5 & Down Baby Back Ribs” (weight range in which baby back ribs are sold) during calendar year 2025, at a prescribed cost, which we believe is competitive.

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

During the first quarter of our fiscal year 2025, we entered into a new Master Services Agreement with our current major vendor for a period of one (1) year effective January 1, 2025, with Company options for four (4) one (1) year renewal options to extend the term of the same. In this new Master Service Agreement, as in our prior Master Service Agreements, we commit to purchase specific products through our current major vendor but are free to purchase other products through other vendors, provided no less than 80% of our overall product needs are purchased through our current major vendor. During the third quarter of our fiscal year 2025 we exercised the first one (1) year renewal option and extended the term of the Master Services Agreement for a period of one (1) year effective January 1, 2026.

Working Capital

The table below summarizes the current assets, current liabilities, and working capital for our fiscal quarter ended June 28, 2025, and our fiscal year ended September 28, 2024.

(in thousands)

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 and positive cash flow from operations will adequately fund operations, debt reductions and planned capital expenditures throughout our fiscal year 2025.

Off-Balance Sheet Arrangements

The Company does not have off-balance sheet arrangements.

Critical Accounting Policies and Estimates

We describe our significant accounting policies in Note 1. “Summary of Significant Accounting Policies” of our consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data” of our Annual Report on Form 10-K for the fiscal year ended September 28, 2024.

Critical accounting estimates are those that we believe are both significant and require us to make difficult, subjective or complex judgments, often because we need to estimate the effect of inherently uncertain matters. We base our estimates and judgments on historical experiences and other assumptions that we believe are reasonable under the circumstances and we evaluate these estimates on an ongoing basis. Actual results may differ from these estimates and we might obtain different estimates if we use different assumptions or factors.

Leases

We currently lease a portion of our restaurant and package locations under various lease agreements. Determining the probable term for each lease requires judgment by management and can impact the classification and accounting for a lease as financing or operating, as well as the period for straight-lined rent expense and the depreciation period for lease hold improvements. Generally, the lease term is a minimum of the noncancelable period of the lease or the lease term inclusive of reasonably certain renewal periods up to a term of 15 years. If the estimate of our reasonably certain lease term was changed, our depreciation and rent expense could differ materially. To determine the present value of lease payments not yet paid, we estimate incremental borrowing rates (IBR) corresponding to the reasonably certain lease term. The IBR is an estimate based on several factors, including financial market conditions, comparable company and credit analysis as well as management judgment. If the IBR was changed, our operating lease right-of-use assets and lease liabilities could differ materially.

Valuation of Long-Lived Assets

We continually evaluate whether events and circumstances have occurred that may warrant revision of the estimated life of our intangible and other long-lived assets and/or whether the remaining balance of our intangible and other long-lived assets should be evaluated for possible impairment. If and when such factors, events or circumstances indicate that intangible and/or other long-lived assets should be evaluated for possible impairment, we will determine the fair value of the asset by making an estimate of expected future cash flows over the remaining lives of the respective assets and compare that fair value with the carrying value of the assets in measuring their recoverability. In determining the expected future cash flows, the assets will be grouped at the lowest level for which there are cash flows, at the individual store level.

Loyalty Programs

We offer loyalty programs to customers of our restaurants and package liquor stores. The gift cards distributed as a part of our loyalty programs have expiration dates and we estimate breakage for such gift cards. We estimate the value of breakage based on historical redemption patterns. If actual redemptions vary from assumptions used to estimate breakage, gift card breakage income may differ from the amount recorded.

Gift Cards

We offer gift cards to customers of our restaurants and package liquor stores. The gift cards distributed do not have expiration dates and we estimate breakage for the restaurant gift cards. We estimate the value of breakage based on historical redemption patterns. If actual redemptions vary from assumptions used to estimate breakage, gift card breakage income may differ from the amount recorded.

Consolidation of Limited Partnerships

As of June 28, 2025 we operate ten (10) restaurants as general partner of the limited partnerships that own the operations of these restaurants. We expect that any expansion which takes place in opening new restaurants will also result in us operating the restaurants as general partner. In addition to the general partnership interest we also purchased limited partnership units ranging from 0% to 49% of the total units outstanding. As a result of these controlling interests, we consolidate the operations of these limited partnerships with ours despite the fact that we do not own in excess of 50% of the equity interests. All intercompany transactions are eliminated in consolidation. The non-controlling interests in the earnings of these limited partnerships are removed from net income and are not included in the calculation of earnings per share.

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 tax credits to the extent that realization of said tax benefits is more likely than not. For discussion regarding our carryforwards refer to Note 10 in the consolidated financial statements for our fiscal year 2024.

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 have endeavored to offset the adverse effects of cost increases by increasing our menu prices.

We do not ordinarily hold market risk sensitive instruments for trading purposes and as of June 28, 2025 held no equity securities.

Economic Risk

The new government administration has imposed changes in trade policy, including an increase in the use of tariffs which has resulted in retaliatory tariffs by other countries, shifts in immigration policies and international relations and changes to the overall regulation and enforcement by government agencies. We cannot predict the timing or impact, if any, of such actions.

Legislative and Regulatory Risk

On July 4, 2025, the One Big Beautiful Bill Act (Public Law No. 119-21) was signed into law. Among other provisions, the legislation includes certain tax incentives and regulatory changes applicable to businesses in the food service and hospitality industries. We are in the process of reviewing the legislation to determine its potential impact.

Interest Rate Risk

As part of our ongoing operations, we are exposed to interest rate fluctuations on our borrowings. 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 June 28, 2025, we had one variable rate instrument outstanding that is impacted by changes in interest rates. In September 2022, we refinanced the mortgage loan encumbering the property where our combination package liquor store and restaurant located at 4 N. Federal Highway, Hallandale Beach, Florida, (Store #31) operates, which mortgage loan is held by an unaffiliated third-party lender (the “$8.90M Loan”). The interest rate of our variable rate debt instrument was equal to the lender’s BSBY Screen Rate plus one and one-half percent (1.50%) per annum. Effective November 15, 2024, the publication of BSBY was terminated and as of such date, the variable rate of interest under our debt instrument is equal to the lender’s 1 Month CME Term Secured Overnight Financing Rate (“SOFR”), plus 10 basis points, as an equivalent alternative approved by the lender.

As a means of managing our interest rate risk on this debt instrument, we entered into an interest rate swap agreement with an unrelated third-party lender to convert this variable rate debt obligation to a fixed rate. We entered into an interest rate swap agreement in September 2022 relating to the $8.90M Loan (the “$8.90M Term Loan Swap”). The $8.90M Term Loan Swap required us to pay interest for a fifteen (15) year period at a fixed rate of 4.90% on an initial amortizing notional principal amount of $8,900,000, while receiving interest for the same period at BSBY Screen Rate – 1 Month, plus 1.50%, on the same amortizing notional principal amount. We had previously determined that this interest rate swap agreement was an effective hedging agreement and we recorded changes in fair value to accumulated other comprehensive income each quarter from the fourth quarter of our fiscal year 2023 through the first quarter of our fiscal year 2025.

On November 22, 2024, we terminated the $8.90M Term Loan Swap and simultaneously entered into a new interest rate swap agreement for $8,015,601, the balance due on the $8.90M Loan, which requires us to pay interest for twelve (12) years, ten (10) months, which is the balance of the original fifteen (15) year period at a fixed rate of 4.90% on an initial amortizing notional principal amount of $8,015,601, while receiving interest for the same period at the lender’s 1 Month CME Term Secured Overnight Financing Rate (“SOFR”), plus 10 basis points, at the same amortizing notional principal amount. During the second quarter of our fiscal year 2025, we recognized the $290,000 of non-cash gains, net of tax, related to the above interest rate swap agreement as interest and other income. We determined that the new interest rate swap agreement is an economic hedge and beginning in the second quarter of our fiscal year 2025, we recognize the changes in fair value on our interest rate swap in interest and other income on our unaudited condensed consolidated statements of income.

During the thirty-nine weeks ended June 28, 2025, we had approximately an aggregate principal amount of $733,000 of 90-day government guaranteed certificates of deposit at fixed annual interest rates between 4.20% and 4.25%. The Company also had approximately an aggregate principal amount of $732,000 of 180-day government guaranteed certificates of deposit at fixed annual interest rates between 4.05% and 4.25%. These are classified as short-term investments and recorded under current assets, as they are expected to mature within one year. Otherwise, at June 28, 2025, 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 in interest rates will not have a material adverse effect on our operations.

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 June 28, 2025, an evaluation was performed under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) to the Securities Exchange Act of 1934). Based on that evaluation, management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were not effective as of June 28, 2025.

Material Weaknesses 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.

Information technology general controls (ITGCs) were not designed and implemented effectively to ensure (i) that access to applications and data, and the ability to make program and database changes, were adequately restricted to appropriate personnel and (ii) that database changes were logged completely and accurately. Business process controls (automated and manual) that are dependent on the affected ITGCs were also deemed ineffective because they could have been adversely impacted.

We currently do not have adequate internal controls to ensure the timely and accurate recognition of deferred revenues associated with promotional gift cards that are provided in conjunction with certain sales from time to time, including during holiday periods. During the course of our independent registered public accounting firm performing its quarterly review procedures in connection with our unaudited condensed consolidated financial statements for the first and second quarters of our fiscal year 2025, we became aware of certain errors made by management in recording revenues and deferred revenue liabilities pertaining to the package loyalty program and the restaurant promotional gift cards, which constituted a material weakness in our internal controls.

The material weaknesses identified above did not result in any material misstatements in our financial statements or disclosures, and there were no changes to previously released financial results. However, as a result of these findings, we continued the process of remediating these material weaknesses to our controls.

Changes in Internal Control Over Financial Reporting

During the fiscal quarter ended June 28, 2025, we have not made any additional changes to our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.