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 June 29, 2024

 

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, INC.

(Exact name of registrant as specified in its charter)

 

Florida	59-0877638
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
5059 N.E. 18th Avenue, Fort Lauderdale, Florida	33334
(Address of principal executive offices)	(Zip 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

 

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 August 12, 2024, 1,858,647 shares of Common Stock, $0.10 par value per share, were outstanding.

 

FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES

 

PART I. FINANCIAL INFORMATION
ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME	1
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	2
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF JUNE 29, 2024 (UNAUDITED) AND SEPTEMBER 30, 2023	3
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY	5
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	6
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	8
ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	18
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	27
ITEM 4.  CONTROLS AND PROCEDURES	28
PART II. OTHER INFORMATION	29
ITEM 1.  LEGAL PROCEEDINGS	29
ITEM 1A.   RISK FACTORS	Not Applicable
ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	29
ITEM 3.  DEFAULTS UPON SENIOR SECURITIES	Not Applicable
ITEM 4.  MINE SAFETY DISCLOSURES	Not Applicable
ITEM 5.  OTHER INFORMATION	Not Applicable
ITEM 6. EXHIBITS	30
SIGNATURES	31

 

LIST XBRL DOCUMENTS

  

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

 

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

 

 

 

FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except share and per share amounts)

 

		Thirteen Weeks Ended								Thirty-Nine Weeks Ended
		June 29, 2024				July 1, 2023				June 29, 2024				July 1, 2023
REVENUES:
Restaurant food sales		$	30,471			$	28,126			$	86,182			$	80,006
Restaurant bar sales			7,577				7,687				22,780				21,956
Package store sales			10,292				8,791				31,034				26,853
Franchise related revenues			428				466				1,291				1,409
Rental income			278				252				844				683
Other operating income			56				50				180				129
			49,102				45,372				142,311				131,036
COSTS AND EXPENSES:
Cost of merchandise sold:
Restaurant and lounges			13,104				11,735				37,145				33,751
Package goods			7,703				6,498				23,075				19,694
Payroll and related costs			15,301				14,598				44,658				42,408
Operating expenses			6,268				6,008				18,565				17,452
Occupancy costs			2,024				1,914				6,118				5,640
Selling, general and administrative expenses			1,288				991				3,867				2,887
Depreciation and amortization			1,127				928				3,119				2,596
			46,815				42,672				136,547				124,428
Income from Operations			2,287				2,700				5,764				6,608
OTHER INCOME (EXPENSE):
Interest expense			(251	)			(264	)			(768	)			(801	)
Interest and other income			46				26				131				60
Gain on sale of property and equipment			2				—				2				—
			(203	)			(238	)			(635	)			(741	)
Income before provision for income taxes			2,084				2,462				5,129				5,867
Provision for income taxes			(282	)			(51	)			(209	)			(404	)
Net Income			1,802				2,411				4,920				5,463
Less: Net Income attributable to noncontrolling interests			(681	)			(806	)			(1,748	)			(1,337	)
Net Income Attributable to Flanigan’s Enterprises Inc. Stockholders		$	1,121			$	1,605			$	3,172			$	4,126
Net Income Per Common Share:
Basic and Diluted		$	0.60			$	0.86			$	1.71			$	2.22
Weighted Average Shares and Equivalent Shares Outstanding
Basic and Diluted			1,858,647				1,858,647				1,858,647				1,858,647

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

 

		Thirteen Weeks Ended								Thirty-Nine Weeks Ended
		June 29,				July 1,				June 29,				July 1,
		2024				2023				2024				2023
Net Income:		$	1,802			$	2,411			$	4,920			$	5,463
Other comprehensive income (loss):
Change in fair value of interest rate swap, net of tax			31				—				(184	)			—
Total Comprehensive Income		$	1,833			$	2,411			$	4,736			$	5,463

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

JUNE 29, 2024 (UNAUDITED) AND SEPTEMBER 30, 2023

(in thousands, except share and per share amounts)

 

ASSETS		June 29, 2024				September 30, 2023
Current Assets:
Cash and cash equivalents		$	22,123			$	25,532
Prepaid income taxes			150				219
Other receivables			961				834
Inventories			7,523				7,198
Prepaid expenses			2,545				1,511
Total current assets			33,302				35,294
Property and equipment, net			82,179				74,724
Construction in progress			—				5,416
			82,179				80,140
Right-of-use assets, operating leases			25,260				26,987
Investment in limited partnerships			279				252
Other Assets:
Liquor licenses			1,268				1,268
Deposits on property and equipment			35				887
Leasehold interests, net			75				63
Other			691				878
Total other assets			2,069				3,096
Total assets		$	143,089			$	145,769

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

FLANIGAN’S ENTERPRISES, INC, AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

JUNE 29, 2024 (UNAUDITED) AND SEPTEMBER 30, 2023

(in thousands, except share and per share amounts)

 

(Continued)

 

LIABILITIES AND STOCKHOLDERS' EQUITY		June 29, 2024				September 30, 2023
Current Liabilities:
Accounts payable and accrued expenses		$	7,462			$	9,271
Accrued compensation			2,522				1,808
Due to franchisees			4,438				4,977
Current portion of long-term debt			1,376				1,295
Operating lease liabilities, current			2,478				2,385
Deferred revenue			2,988				2,635
Total current liabilities			21,264				22,371
Long-Term Debt, Net of Current Portion			20,845				21,833
Operating lease liabilities, non-current			24,218				25,850
Deferred tax liabilities			738				801
Total liabilities			67,065				70,855
Commitments and contingencies
Stockholders' equity:
Flanigan’s Enterprises, Inc. Stockholders’ Equity
Common stock, $.10 par value, 5,000,000 shares authorized; 4,197,642 shares issued; 1,858,647 shares outstanding			420				420
Capital in excess of par value			6,240				6,240
Retained earnings			60,490				58,247
Accumulated other comprehensive income			211				395
Treasury stock, at cost, 2,338,995 shares			(6,077	)			(6,077	)
Total Flanigan’s Enterprises, Inc. stockholders’ equity			61,284				59,225
Noncontrolling interests			14,740				15,689
Total stockholders' equity			76,024				74,914
Total liabilities and stockholders' equity		$	143,089			$	145,769

  

See accompanying notes to unaudited condensed consolidated financial statements.

 

FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS

OF STOCKHOLDERS’ EQUITY

FOR THE THIRTEEN AND THIRTY-NINE WEEKS ENDED JUNE 29, 2024 AND JULY 1, 2023

(in thousands, except share amounts)

 

		Common Stock								Capital in Excess of								Retained				Treasury Stock								Noncontrolling
		Shares				Amount				Par Value				AOCI				Earnings				Shares				Amount				Interests				Total
Balance, September 30, 2023			4,197,642			$	420			$	6,240			$	395			$	58,247				2,338,995			$	(6,077	)		$	15,689			$	74,914
Net income			—				—				—				—				109				—				—				485				594
Other comprehensive loss			—				—				—				(338	)			—				—				—				—				(338	)
Distributions to noncontrolling interests			—				—				—				—				—				—				—				(990	)			(990	)
Balance, December 30, 2023			4,197,642			$	420			$	6,240			$	57			$	58,356				2,338,995			$	(6,077	)		$	15,184			$	74,180
Net income			—				—				—				—				1,942				—				—				582				2,524
Other comprehensive income			—				—				—				123				—				—				—				—				123
Distributions to noncontrolling interests			—				—				—				—				—				—				—				(867	)			(867	)
Balance, March 30, 2024			4,197,642			$	420			$	6,240			$	180			$	60,298				2,338,995			$	(6,077	)		$	14,899			$	75,960
Net income			—				—				—				—				1,121				—				—				681				1,802
Other comprehensive income			—				—				—				31				—				—				—				—				31
Distributions to noncontrolling interests			—				—				—				—				—				—				—				(840	)			(840	)
Dividends paid			—				—				—				—				(929	)			—				—				—				(929	)
Balance, June 29, 2024			4,197,642			$	420			$	6,240			$	211			$	60,490				2,338,995			$	(6,077	)		$	14,740			$	76,024

 

		Common Stock								Capital in Excess of								Retained				Treasury Stock								Noncontrolling
		Shares				Amount				Par Value				AOCI				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
Net income			—				—				—				—				1,605				—				—				806			$	2,411
Distributions to noncontrolling interests			—				—				—				—				—				—				—				(791	)		$	(791	)
Dividends paid			—				—				—				—				(838	)			—				—				—			$	(838	)
Balance, July 1, 2023			4,197,642			$	420			$	6,240			$	—			$	58,374				2,338,995			$	(6,077	)		$	16,599			$	75,556

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THIRTY-NINE WEEKS ENDED JUNE 29, 2024 AND JULY 1, 2023

(in thousands)

 

		June 29, 2024				July 1, 2023
Cash Flows from Operating Activities:
Net income		$	4,920			$	5,463
Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities:
Depreciation and amortization			3,119				2,596
Amortization of leasehold interests			19				17
Amortization of operating lease right-of-use assets			1,910				1,902
Gain on sale of property and equipment			(2	)			—
Loss on abandonment of property and equipment			57				31
Amortization of deferred loan costs			27				28
Income from equity method investment			(43	)			(9	)
Changes in operating assets and liabilities:
(Increase) decrease in:
Other receivables			(127	)			(198	)
Prepaid income taxes			69				(26	)
Inventories			(325	)			(655	)
Prepaid expenses			(1,034	)			(579	)
Other assets			(60	)			(22	)
Increase (decrease) in:
Accounts payable and accrued expenses			(1,403	)			538
Operating lease liabilities			(1,722	)			(1,726	)
Due to franchisees			(539	)			(226	)
Deferred revenue			353				66
Net cash and cash equivalents provided by operating activities			5,219				7,200
Cash Flows from Investing Activities:
Purchase of property and equipment			(2,410	)			(12,541	)
Purchase of construction in progress			(1,594	)			(2,811	)
Deposits on property and equipment			(118	)			(1,711	)
Purchase of leaseholds			(31	)			—
Proceeds from sale of property and equipment			69				38
Distributions from unconsolidated limited partnership			16				27
Net cash and cash equivalents used in investing activities			(4,068	)			(16,998	)

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THIRTY-NINE WEEKS ENDED JUNE 29, 2024 AND JULY 1, 2023

(in thousands)

 

(Continued)

 

		June 29, 2024				July 1, 2023
Cash Flows from Financing Activities:
Payments on long-term debt			(934	)			(1,987	)
Dividends paid			(929	)			(838	)
Distributions to limited partnerships’ noncontrolling interests			(2,697	)			(2,409	)
Net cash and cash equivalents used in financing activities			(4,560	)			(5,234	)
Net Decrease in Cash and Cash Equivalents			(3,409	)			(15,032	)
Cash and Cash Equivalents - Beginning of Period			25,532				42,138
Cash and Cash Equivalents - End of Period		$	22,123			$	27,106
Supplemental Disclosure for Cash Flow Information:
Cash paid during the year for:
Interest		$	768			$	801
Income taxes		$	141			$	431
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Decrease in fair value of interest rate swap		$	247			$	—
Purchase deposits capitalized to property and equipment		$	255			$	2,298
Purchase deposits transferred to construction in progress		$	715			$	502
Construction in progress transferred to property and equipment		$	7,676			$	7,110
Property and equipment and construction in progress in accounts payable and accrued expenses		$	308			$	538
Remeasurement of right-of-use operating lease		$	183			$	—

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THIRTEEN AND THIRTY-NINE WEEKS ENDED JUNE 29, 2024 AND JULY 1, 2023

 

(1) BASIS OF PRESENTATION:

 

The accompanying condensed consolidated financial information for the thirteen and thirty-nine weeks ended June 29, 2024 and July 1, 2023 is unaudited. Financial information as of September 30, 2023 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 September 30, 2023. 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.

 

The consolidated financial statements and 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 and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and revenue and expenses during the periods reported. 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 and estimates relating to loyalty reward programs. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in our condensed consolidated financial statements in the period they are determined to be necessary. Although these estimates are based on our knowledge of current events and actions we may undertake in the future, they may ultimately differ from actual results.

 

Certain amounts in the prior year condensed consolidated financial statements and related disclosures for interim reporting have been reclassified herein to conform to the presentation of the thirteen and thirty-nine weeks ended June 29, 2024 condensed consolidated financial statements and related disclosures for interim reporting, which did not have a material impact on our net income or total assets.

 

(2) EARNINGS PER SHARE:

 

We follow Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Section 260 - “Earnings per Share”. This section provides for the calculation of basic and diluted earnings per share. The data on Page 1 shows the amounts used in computing earnings per share. As of June 29, 2024 and July 1, 2023, no stock options or other potentially dilutive securities were outstanding and, accordingly, there is no difference in basic and diluted per share amounts.

 

(3) RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:

 

Adopted

 

The FASB issued guidance, Accounting Standards Update (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 was effective for the Company in the first quarter of our fiscal year 2024; however, after performing a thorough analysis the Company concluded there was no material impact from the adoption of this ASU.

 

 

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which updates reportable segment disclosure requirements, primarily through requiring enhanced disclosures about significant segment expenses and information used to assess segment performance. We adopted this ASU in the third quarter of our fiscal year 2024 and this ASU affected the expense presentation of our Unaudited Condensed Consolidated Statements of Income and our Business Segments footnote. For further information regarding the Company’s Business Segments, please refer to our Unaudited Condensed Consolidated Statements of Income and Business Segments footnote.

 

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 an 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 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 ASU provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. LIBOR rates were published until June 30, 2023. All principal and interest of the Term Loan was paid during the first quarter of our fiscal year 2023, so the discontinuance of LIBOR rates did not impact us.

  

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires enhanced income tax disclosures, primarily related to standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. This ASU will be effective for the Company in our fiscal year 2026, with the guidance applied either prospectively or retrospectively. Early adoption is permitted. We are currently evaluating the impact the adoption of the new accounting guidance will have on our tax disclosures.

 

There are no other recently issued accounting pronouncements that we have not yet adopted that we believe may have a material effect on our condensed consolidated 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, income tax credits, and noncontrolling interests.

 

(5) PURCHASE OF LEASEHOLD / SUB-LEASEHOLD INTERESTS:

In 1974, we sold the underlying ground lease to the real property located at 8600 Biscayne Boulevard, El Portal, Florida to related and unrelated third parties and simultaneously subleased it back. We operate our retail package liquor store (Store #47) and warehouse from this location. In the first quarter of our fiscal year 2024, we re-purchased a 4% interest in the underlying ground lease, as well as the sublease agreement from an unrelated third party for $31,000 and currently own 56% of each lease. As a result, we now only pay 44% of the rent due under the sublease agreement.

 

(6) DEBT:

 

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 an 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 June 29, 2024 our ratio was calculated to be 1.52 to 1.00. As of June 29, 2024 we are in compliance with all of our loan covenant ratios and as a result, our classification of debt is appropriate.

 

For further information regarding the Company’s long-term debt, refer to the Consolidated Financial Statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2023.

 

(7) INSURANCE PREMIUMS:

 

During the first quarter of our fiscal year 2024, for the policy year commencing December 30, 2023, we obtained coverage on the following property, general liability, excess liability and terrorism policies with premiums totaling approximately $3.920 million, of which property, general liability, excess liability and terrorism insurance includes coverage for our franchises (of approximately $850,000), which are not included in our condensed consolidated financial statements:

 

(i)       For the policy year beginning December 30, 2023, our general liability insurance, excluding limited partnerships, is a one (1) year policy with our insurance carriers. For the policy commencing December 30, 2023, the $10,000 self-insured retention per occurrence increases to $50,000 for us but remains the same at $10,000 for the limited partnerships. The one (1) year general liability insurance premium is in the amount of $455,000;

 

(ii)        For the policy year beginning December 30, 2023, our general liability insurance for our limited partnerships is a one (1) year policy with our insurance carriers. The one (1) year general liability insurance premium is in the amount of $1,055,000;

 

(iii)       For the policy year beginning December 30, 2023, our automobile insurance is a one (1) year policy. The one (1) year automobile insurance premium is in the amount of $211,000;

 

(iv)       For the policy year beginning December 30, 2023, our property insurance is a one (1) year policy. The one (1) year property insurance premium is in the amount of $1,416,000;

 

(v)       For the policy year beginning December 30, 2023, our excess liability insurance is a one (1) year policy. The one (1) year excess liability insurance premium is in the amount of $764,000;

  

(vii)       For the policy year beginning December 30, 2023, our terrorism insurance is a one (1) year policy. The one (1) year terrorism insurance premium is in the amount of $19,000.

  

We paid the $3,920,000 annual premium amounts on January 4, 2024, which includes coverage for our franchises which are not included in our condensed consolidated financial statements. 

 

(8) COMMITMENTS AND CONTINGENCIES:

 

Construction Contract

 

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

 

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 located at 2505 N. University Drive, Building B, Hollywood, Florida (Store #19R), which had been closed since October 2, 2018 due to damage caused by a fire and re-opened March 26, 2024. The contract totaled $2,515,000 and through the end of the third quarter of our fiscal year 2024 we agreed to change orders increasing the total contract price by $1,507,000 to $4,022,000, of which $3,596,000 has been paid through June 29, 2024 and $308,000 has been paid subsequent to the end of the third quarter of our fiscal year 2024.

   

ERP Contract

 

In the third quarter of our fiscal year 2024, we entered into an agreement with Oracle, an unrelated third party vendor for the licensing and support of NetSuite, a cloud-based Oracle ERP solution to replace our general ledger. The agreement is for a period of five years at a fixed rate of approximately $40,000 annually, with a cap on the percentage increase to our fees for our options to extend the term of the agreement for years six and seven. The fee for the five year agreement will be paid to the unrelated third party vendor over a period of five years, with a deferral of any payments for the first six months of the agreement. We do not expect the implementation of NetSuite to be complete and functional until the second quarter of our fiscal year 2025.

 

In the third quarter of our fiscal year 2024, we also entered into an agreement with an unrelated third party implementation partner for the implementation of NetSuite. The fee for its implementation services will be approximately $237,000, payable as hourly services are performed and billed.

 

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 48 years, some of which include options to renew and extend the lease terms for up to an additional 26 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 fiscal 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:

 

		(in thousands)
		13 Weeks				13 Weeks
		Ended June 29, 2024				Ended July 1, 2023
Operating Lease Expense, which is included in occupancy costs		$	950			$	955
Variable Lease Expense, which is included in occupancy costs		$	235			$	263

 

		(in thousands)
		39 Weeks				39 Weeks
		Ended June 29, 2024				Ended July 1, 2023
Operating Lease Expense, which is included in occupancy costs		$	2,898			$	2,868
Variable Lease Expense, which is included in occupancy costs		$	715			$	807

 

		(in thousands)
Classification on the Condensed Consolidated Balance Sheets		June 29, 2024				September 30, 2023
Assets
Operating lease assets		$	25,260			$	26,987
Liabilities
Operating lease current liabilities		$	2,478			$	2,385
Operating lease non-current liabilities		$	24,218			$	25,850
Weighted Average Remaining Lease Term:
Operating Leases			10.18 Years				9.86 Years
Weighted Average Discount:
Operating leases			4.82%				4.75%

 

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

 

		(in thousands)
For fiscal year		Operating
2024 (13 weeks remaining)		$	904
2025			3,598
2026			3,432
2027			3,335
2028			3,346
Thereafter			22,406
Total lease payments (undiscounted cash flows)			37,021
Less imputed interest			(10,325	)
Total operating lease liabilities		$	26,696

 

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.

 

From time to time, we are a party to various other claims, legal actions and complaints arising in the ordinary course of our 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.

 

(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, (“COVID-19”) adversely affected our restaurant operations and financial results. The Department of Health and Human Services (HHS) permitted 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.

  

(10) BUSINESS SEGMENTS:

 

We operate 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. Operating income is total revenue less cost of merchandise sold and operating expenses relative to each segment. In order to evaluate each of these two operating segments we also break out our Corporate entity which functions as a cost center accumulating expenses that do not directly relate to the reportable segments operations. As such, our Chief Operating Decision Maker (CODM) (our Chief Financial Officer) ensures that these expenses are separated in order to properly evaluate the two main reportable segments as presented below. The key areas of focus by CODM for allocation of resources are Revenues from each reportable segment, as well as their cost of merchandise sold, payroll related costs, and operating expenses (these figures are presented both pre-elimination and post-elimination with a line clearly distinguishing the elimination amounts). While CODM analyzes these categories the area of focus is period over period fluxes to determine the right allocation of resources is attributed to each segment in order to ensure profitability is maximized. In computing operating income, none of the following items have been included: interest expense, other non-operating income and expenses and income taxes. Identifiable assets by segment are those assets that are used in our operations in each segment. Corporate assets are principally cash and real property, improvements, furniture, equipment and vehicles used at our corporate headquarters. We do not have any operations outside of the United States and transactions between restaurants and package liquor stores are not material. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. CODM analyzes each segment’s income from operations for making decisions regarding resource allocation. Information concerning the revenues and operating income for the thirteen weeks and thirty-nine weeks ended June 29, 2024 and July 1, 2023, and identifiable assets for the two reportable segments in which we operate, are shown in the following tables.

 

Thirteen Weeks Ended June 29, 2024

(in thousands)

 

		Restaurant				Package				Corporate				Eliminations				Total
REVENUES:
Restaurant food sales		$	30,471			$	—			$	—			$	—			$	30,471
Intersegment revenues			1,092				—				—				(1,092	)			—
Restaurant bar sales			7,577				—				—				—				7,577
Package goods sales			—				10,292				—				—				10,292
TOTAL REVENUE:			39,140				10,292				—				(1,092	)			48,340
COST OF MERCHANDISE SOLD:
Cost of merchandise sold:			13,104				7,703				—				—				20,807
Intersegment cost of merchandise sold			1,092				—				—				(1,092	)			—
TOTAL COST OF MERCHANDISE SOLD:			14,196				7,703				—				(1,092	)			20,807
GROSS PROFIT:			24,944				2,589				—				—				27,533
ADDITIONAL REVENUES:
Franchise-related revenues			—				—				428				—				428
Intersegment franchise-related revenues			—				—				1,390				(1,390	)			—
Rental income			—				—				278				—				278
Intersegment rental income			—				—				214				(214	)			—
Intersegment partnership income			—				—				357				(357	)			—
Other operating income			40				—				16				—				56
TOTAL ADDITIONAL REVENUES:			40				—				2,683				(1,961	)			762
ADDITIONAL EXPENSES:
Payroll and related costs			12,658				816				1,827				—				15,301
Intersegment payroll costs			—				(6	)			—				6				—
Operating expenses			5,202				699				367				—				6,268
Intersegment operating expenses			613				—				716				(1,329	)			—
Occupancy costs			1,623				248				153				—				2,024
Intersegment occupancy costs			166				47				—				(213	)			—
Selling, general and administrative expenses			259				42				987				—				1,288
Intersegment selling, general and administrative expenses			—				—				72				(72	)			—
Depreciation and amortization			864				123				140				—				1,127
TOTAL ADDITIONAL EXPENSES:			21,385				1,969				4,262				(1,608	)			26,008
Income from Operations			3,599				620				(1,579	)			(353	)			2,287
OTHER INCOME (EXPENSE):
Interest expense			—				—				(251	)			—				(251	)
Intersegment interest expense			—				—				(2	)			2				—
Interest and other income			4				23				19				—				46
Intersegment interest and other income			—				5				2				(7	)			—
Gain on sale of property and equipment			—				—				2				—				2
			4				28				(230	)			(5	)			(203	)
Income (loss) before provision for income taxes:			3,603				648				(1,809	)			(358	)			2,084
Provision for income taxes			—				—				(282	)			—				(282	)
Net Income			3,603				648				(2,091	)			(358	)			1,802
Less: Net Income attributable to noncontrolling interests			(681	)			—				—				—				(681	)
Net Income Attributable to Flanigan's Enterprises, Inc.		$	2,922			$	648			$	(2,091	)		$	(358	)		$	1,121

 

Thirteen Weeks Ended July 1, 2023

(in thousands)

 

		Restaurant				Package				Corporate				Eliminations				Total
REVENUES:
Restaurant food sales		$	28,126			$	—			$	—			$	—			$	28,126
Intersegment revenues			1,092				—				—				(1,092	)			—
Restaurant bar sales			7,687				—				—				—				7,687
Package goods sales			—				8,791				—				—				8,791
TOTAL REVENUE:			36,905				8,791				—				(1,092	)			44,604
COST OF MERCHANDISE SOLD:			11,735				6,498				—				—				18,233
Intersegment cost of merchandise sold			1,092				—				—				(1,092	)			—
TOTAL COST OF MERCHANDISE SOLD:			12,827				6,498				—				(1,092	)			18,233
GROSS PROFIT:			24,078				2,293				—				—				26,371
ADDITIONAL REVENUES:
Franchise-related revenues			—				—				466				—				466
Intersegment franchise-related revenues			—				—				1,694				(1,694	)			—
Rental income			—				—				252				—				252
Intersegment rental income			—				—				206				(206	)			—
Intersegment partnership income			—				—				446				(446	)			—
Other operating income			45				—				5				—				50
TOTAL ADDITIONAL REVENUES:			45				—				3,069				(2,346	)			768
ADDITIONAL EXPENSES:
Payroll and related costs			12,007				692				1,899				—				14,598
Intersegment payroll costs			—				(6	)			—				6				—
Operating expenses			4,989				649				370				—				6,008
Intersegment operating expenses			619				—				1,015				(1,634	)			—
Occupancy costs			1,579				207				128				—				1,914
Intersegment occupancy costs			165				41				—				(206	)			—
Selling, general and administrative expenses			282				42				667				—				991
Intersegment selling, general and administrative expenses			—				—				71				(71	)			—
Depreciation and amortization			684				129				115				—				928
TOTAL ADDITIONAL EXPENSES:			20,325				1,754				4,265				(1,905	)			24,439
Income from Operations			3,798				539				(1,196	)			(441	)			2,700
OTHER INCOME (EXPENSE):
Interest expense			—				—				(264	)			—				(264	)
Intersegment interest expense			—				—				(2	)			2				—
Interest and other income			1				16				9				—				26
Intersegment interest and other income			—				5				2				(7	)			—
			1				21				(255	)			(5	)			(238	)
Income (loss) before provision for income taxes:			3,799				560				(1,451	)			(446	)			2,462
Provision for income taxes			—				—				(51	)			—				(51	)
Net Income			3,799				560				(1,502	)			(446	)			2,411
Less: Net Income attributable to noncontrolling interests			(806	)			—				—				—				(806	)
Net Income Attributable to Flanigan's Enterprises, Inc.		$	2,993			$	560			$	(1,502	)		$	(446	)		$	1,605

Thirty-Nine Weeks Ended June 29, 2024

(in thousands)

 

		Restaurant				Package				Corporate				Eliminations				Total
REVENUES:
Restaurant food sales		$	86,182			$	—			$	—			$	—			$	86,182
Intersegment revenues			3,115				—				—				(3,115	)			—
Restaurant bar sales			22,780				—				—				—				22,780
Package goods sales			—				31,034				—				—				31,034
TOTAL REVENUE:			112,077				31,034				—				(3,115	)			139,996
COST OF MERCHANDISE SOLD:
Cost of merchandise sold:			37,145				23,075				—				—				60,220
Intersegment cost of merchandise sold			3,115				—				—				(3,115	)			—
TOTAL COST OF MERCHANDISE SOLD:			40,260				23,075				—				(3,115	)			60,220
GROSS PROFIT:			71,817				7,959				—				—				79,776
ADDITIONAL REVENUES:
Franchise-related revenues			—				—				1,291				—				1,291
Intersegment franchise-related revenues			—				—				4,484				(4,484	)			—
Rental income			—				—				844				—				844
Intersegment rental income			—				—				635				(635	)			—
Intersegment partnership income			—				—				986				(986	)			—
Other operating income			127				—				53				—				180
TOTAL ADDITIONAL REVENUES:			127				—				8,293				(6,105	)			2,315
ADDITIONAL EXPENSES:
Payroll and related costs			36,777				2,394				5,487				—				44,658
Intersegment payroll costs			—				(18	)			—				18				—
Operating expenses			15,328				2,051				1,186				—				18,565
Intersegment operating expenses			1,845				—				2,457				(4,302	)			—
Occupancy costs			4,942				745				431				—				6,118
Intersegment occupancy costs			498				137				—				(635	)			—
Selling, general and administrative expenses			828				132				2,907				—				3,867
Intersegment selling, general and administrative expenses			—				—				215				(215	)			—
Depreciation and amortization			2,338				375				406				—				3,119
TOTAL ADDITIONAL EXPENSES:			62,556				5,816				13,089				(5,134	)			76,327
Income from Operations			9,388				2,143				(4,796	)			(971	)			5,764
OTHER INCOME (EXPENSE):
Interest expense			—				—				(768	)			—				(768	)
Intersegment interest expense			—				—				(6	)			6				—
Interest and other income			17				60				54				—				131
Intersegment interest and other income			—				15				6				(21	)			—
Gain on sale of property and equipment			—				—				2				—				2
			17				75				(712	)			(15	)			(635	)
Income (loss) before provision for income taxes:			9,405				2,218				(5,508	)			(986	)			5,129
Provision for income taxes			—				—				(209	)			—				(209	)
Net Income			9,405				2,218				(5,717	)			(986	)			4,920
Less: Net Income attributable to noncontrolling interests			(1,748	)			—				—				—				(1,748	)
Net Income Attributable to Flanigan's Enterprises, Inc.		$	7,657			$	2,218			$	(5,717	)		$	(986	)		$	3,172

Thirty-Nine Weeks Ended July 1, 2023

(in thousands)

 

		Restaurant				Package				Corporate				Eliminations				Total
REVENUES:
Restaurant food sales		$	80,006			$	—			$	—			$	—			$	80,006
Intersegment revenues			3,216				—				—				(3,216	)			—
Restaurant bar sales			21,956				—				—				—				21,956
Package goods sales			—				26,853				—				—				26,853
TOTAL REVENUE:			105,178				26,853				—				(3,216	)			128,815
COST OF MERCHANDISE SOLD:			33,751				19,694				—				—				53,445
Intersegment cost of merchandise sold			3,216				—				—				(3,216	)			—
TOTAL COST OF MERCHANDISE SOLD:			36,967				19,694				—				(3,216	)			53,445
GROSS PROFIT:			68,211				7,159				—				—				75,370
ADDITIONAL REVENUES:
Franchise-related revenues			—				—				1,409				—				1,409
Intersegment franchise-related revenues			—				—				4,932				(4,932	)			—
Rental income			—				—				683				—				683
Intersegment rental income			—				—				619				(619	)			—
Intersegment partnership income			—				—				1,163				(1,163	)			—
Other operating income			113				—				16				—				129
TOTAL ADDITIONAL REVENUES:			113				—				8,822				(6,714	)			2,221
ADDITIONAL EXPENSES:
Payroll and related costs			34,602				2,236				5,570				—				42,408
Intersegment payroll costs			—				(18	)			—				18				—
Operating expenses			14,375				2,021				1,056				—				17,452
Intersegment operating expenses			1,718				—				3,045				(4,763	)			—
Occupancy costs			4,661				628				351				—				5,640
Intersegment occupancy costs			496				123				—				(619	)			—
Selling, general and administrative expenses			777				131				1,979				—				2,887
Intersegment selling, general and administrative expenses			—				—				201				(201	)			—
Depreciation and amortization			1,930				338				328				—				2,596
TOTAL ADDITIONAL EXPENSES:			58,559				5,459				12,530				(5,565	)			70,983
Income from Operations			9,765				1,700				(3,708	)			(1,149	)			6,608
OTHER INCOME (EXPENSE):
Interest expense			—				—				(801	)			—				(801	)
Intersegment interest expense			—				—				(6	)			6				—
Interest and other income			6				42				12				—				60
Intersegment interest and other income			—				14				6				(20	)			—
			6				56				(789	)			(14	)			(741	)
Income (loss) before provision for income taxes:			9,771				1,756				(4,497	)			(1,163	)			5,867
Provision for income taxes			—				—				(404	)			—				(404	)
Net Income			9,771				1,756				(4,901	)			(1,163	)			5,463
Less: Net Income attributable to noncontrolling interests			(1,337	)			—				—				—				(1,337	)
Net Income Attributable to Flanigan's Enterprises, Inc.		$	8,434			$	1,756			$	(4,901	)		$	(1,163	)		$	4,126

 

		(in thousands)
		Thirteen Weeks Ended								Thirty-Nine Weeks Ended
		June 29,				July 1,				June 29,				July 1,
		2024				2023				2024				2023
Capital Expenditures:
Restaurants		$	848			$	2,511			$	4,486			$	5,757
Package stores			48				3,299				114				3,761
Corporate			72				8,638				682				9,172
Consolidated Totals		$	968			$	14,448			$	5,282			$	18,690

 

		(in thousands)
		June 29,				September 30,
		2024				2023
Identifiable Assets:
Restaurants		$	77,183			$	76,575
Package stores			23,636				23,714
Corporate			42,270				45,480
Consolidated Totals		$	143,089			$	145,769

 

(11) SUBSEQUENT EVENTS:

 

Subsequent events have been evaluated through the date the unaudited condensed financial statements were issued and no events required adjustments or disclosure. 

 

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 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 30, 2023. 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 29, 2024, 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 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 29, 2024 and as compared to September 30, 2023. 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”.

 

	June 29, 2024	September 30, 2023
TYPES OF UNITS
Company Owned:
Combination package liquor store and restaurant	2	3	(1)
Restaurant only, including sports bar	9	8	(1)
Package liquor store only	9	8	(1)
Company Managed Restaurants Only:
Limited partnerships	10	10
Franchise	1	1
Unrelated Third Party	1	1
Total Company Owned/Operated Units	32	31
Franchised Units	5	5	(2)

 

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 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 (2505 N. University Drive, Building A, Hollywood, Florida) (Store #19P), replacing our package liquor store destroyed by fire and previously operating here. Store #19P is now reflected in the above chart as a stand-alone liquor store, rather than as a combination unit. Store #19R, a stand-alone restaurant building on this site, (2505 N. University Drive, Building B, Hollywood, Florida) opened on March 26, 2024 (adjacent to the package liquor store), and replaced our restaurant destroyed by fire and previously operating here. Store #19R is now reflected in the above chart as a stand-alone restaurant, rather than as a combination unit.

 

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

 

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

 

Limited Partnership Financial Arrangement: We manage and control the operations of all restaurants owned by limited partnerships, except the Fort Lauderdale, Florida restaurant which is owned by a related franchisee. Accordingly, the results of operations of all limited partnership owned restaurants, except the Fort Lauderdale, Florida restaurant are consolidated into our operations for accounting purposes. The results of operations of the Fort Lauderdale, Florida restaurant are accounted for by us utilizing the equity method 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 29, 2024, all limited partnerships, with the exception of the 2022 Sunrise restaurant (Store #85), which opened for business in March 2022 and the 2023 Miramar restaurant (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

 

		-----------------------Thirteen Weeks Ended-----------------------
		June 29, 2024								July 1, 2023
		Amount								Amount
		(in thousands)				Percent				(in thousands)				Percent
Restaurant food sales		$	30,471				63.04			$	28,126				63.06
Restaurant bar sales			7,577				15.67				7,687				17.23
Package store sales			10,292				21.29				8,791				19.71
Total Sales		$	48,340				100.00			$	44,604				100.00
Franchise related revenues			428								466
Rental income			278								252
Other operating income			56								50
Total Revenue		$	49,102							$	45,372

 

 

		-----------------------Thirty-Nine Weeks Ended-----------------------
		June 29, 2024								July 1, 2023
		Amount								Amount
		(in thousands)				Percent				(in thousands)				Percent
Restaurant food sales		$	86,182				61.56			$	80,006				62.11
Restaurant bar sales			22,780				16.27				21,956				17.04
Package store sales			31,034				22.17				26,853				20.85
Total Sales		$	139,996				100.00			$	128,815				100.00
Franchise related revenues			1,291								1,409
Rental income			844								683
Other operating income			180								129
Total Revenue		$	142,311							$	131,036

 

Comparison of Thirteen Weeks Ended June 29, 2024 and July 1, 2023.

 

Revenues. Total revenue for the thirteen weeks ended June 29, 2024 increased $3,730,000 or 8.22% to $49,102,000 from $45,372,000 for the thirteen weeks ended July 1, 2023 due primarily to increased package liquor store and restaurant sales, revenue generated from the opening of our corporate owned restaurant in Hollywood, Florida (Store #19R) in March 2024 and the opening of our limited partnership owned restaurant in Miramar, Florida (Store #25) in April 2023.

 

Restaurant Food Sales. Restaurant revenue generated from the sale of food, including non-alcoholic beverages, at restaurants totaled $30,471,000 for the thirteen weeks ended June 29, 2024 as compared to $28,126,000 for the thirteen weeks ended July 1, 2023. The increase in restaurant food sales during the thirteen weeks ended June 29, 2024 as compared to restaurant food sales during the thirteen weeks ended July 1, 2023 is attributable to 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 and the opening of our limited partnership owned restaurant in Miramar, Florida (Store #25) during the third quarter of our fiscal year 2023. Comparable weekly restaurant food sales for restaurants open for all of the thirteen weeks ended June 29, 2024 and July 1, 2023 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 nine restaurants owned by affiliated limited partnerships (excluding our Miramar, Florida location (Store #25) which opened for business during the third quarter of our fiscal year 2023) was $2,053,000 and $2,016,000 for the thirteen weeks ended June 29, 2024 and July 1, 2023, respectively, an increase of 1.84%. 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 $977,000 and $951,000 for the thirteen weeks ended June 29, 2024 and July 1, 2023, respectively, an increase of 2.73%. Comparable weekly restaurant food sales for affiliated limited partnership owned restaurants only (excluding our Miramar, Florida location (Store #25) which opened for business during the third quarter of our fiscal year 2023), was $1,076,000 and $1,065,000 for the thirteen weeks ended June 29, 2024 and July 1, 2023, respectively, an increase of 1.03%. We expect that restaurant food sales, including non-alcoholic beverages, for the balance of our fiscal year 2024 will increase due to the operation of our re-opened Store #19R.

 

Restaurant Bar Sales. Restaurant revenue generated from the sale of alcoholic beverages at restaurants totaled $7,577,000 for the thirteen weeks ended June 29, 2024 as compared to $7,687,000 for the thirteen weeks ended July 1, 2023. The decrease in restaurant bar sales during the thirteen weeks ended June 29, 2024 is primarily due to increased competition and notwithstanding the opening of our corporate owned restaurant in Hollywood, Florida (Store #19R). Comparable weekly restaurant bar sales (for restaurants open for all of the thirteen weeks ended June 29, 2024 and July 1, 2023 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 nine restaurants owned by affiliated limited partnerships, (excluding our Miramar, Florida location Store #25, which opened for business during the third quarter of our fiscal year 2023) was $517,000 and $552,000 for the thirteen weeks ended June 29, 2024 and July 1, 2023, respectively, a decrease of 6.34%. 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 $229,000 and $234,000 for the thirteen weeks ended June 29, 2024 and July 1, 2023, respectively, a decrease of 2.14%. Comparable weekly restaurant bar sales for affiliated limited partnership owned restaurants only (excluding Store #25 which opened for business during the third quarter of our fiscal year 2023), was $288,000 and $318,000 for the thirteen weeks ended June 29, 2024 and July 1, 2023, respectively, a decrease of 9.43%. We expect that restaurant bar sales for the balance of our fiscal year 2024 will increase due to the operation of our re-opened Store #19R.

 

Package Store Sales. Revenue generated from sales of liquor and related items at package liquor stores totaled $10,292,000 for the thirteen weeks ended June 29, 2024 as compared to $8,791,000 for the thirteen weeks ended July 1, 2023, an increase of $1,501,000. 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 $792,000 and $676,000 for the thirteen weeks ended June 29, 2024 and July 1, 2023, respectively, an increase of 17.16%. We expect that package liquor store sales for our fiscal year 2024 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 29, 2024 increased $4,143,000 or 9.71% to $46,815,000 from $42,672,000 for the thirteen weeks ended July 1, 2023. The increase was primarily due to increased payroll, increased consultant fees to improve our accounting process, an expected general increase in food costs, costs and expenses incurred from our company owned restaurant in Hollywood Florida (Store #19R), 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 our fiscal year 2024. Costs and expenses increased as a percentage of total revenue to approximately 95.34% for the thirteen weeks ended June 29, 2024 from 94.05% for the thirteen weeks ended July 1, 2023.

 

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 29, 2024 increased to $24,944,000 from $24,078,000 due to higher sales volume for the thirteen weeks ended June 29, 2024. Gross profit margin for the restaurant food and bar sales decreased during the thirteen weeks ended June 29, 2024 when compared to the thirteen weeks ended July 1, 2023 due to 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 65.56% for the thirteen weeks ended June 29, 2024 and 67.23% for the thirteen weeks ended July 1, 2023.

 

Package Store Sales. Gross profit for package store sales for the thirteen weeks ended June 29, 2024 increased to $2,589,000 from $2,293,000 for the thirteen weeks ended July 1, 2023. Our gross profit margin (calculated as gross profit reflected as a percentage of package liquor store sales), for package store sales was 25.16% for the thirteen weeks ended June 29, 2024 and 26.08% for the thirteen weeks ended July 1, 2023. We anticipate that the gross profit margin for package liquor store merchandise will decrease for the balance of fiscal year 2024 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 June 29, 2024 increased $703,000 or 4.82% to $15,301,000 from $14,598,000 for the thirteen weeks ended July 1, 2023. Payroll and related costs for the thirteen weeks ended June 29, 2024 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, the increase to the Florida minimum wage and higher salaries to employees to remain competitive with other potential employers in a tight labor market. Payroll and related costs as a percentage of total revenue was 31.16% in the thirteen weeks ended June 29, 2024 and 32.17% of total revenue in the thirteen weeks ended July 1, 2023.

 

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 29, 2024 increased $260,000 or 4.33% to $6,268,000 from $6,008,000 for the thirteen weeks ended July 1, 2023 due primarily to our company owned restaurant in Hollywood, Florida (Store #19R) being open for the thirteen weeks ended June 29, 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 thirteen weeks ended June 29, 2024 increased $110,000 or 5.75% to $2,024,000 from $1,914,000 for the thirteen weeks ended July 1, 2023.

 

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 29, 2024 increased $297,000 or 29.97% to $1,288,000 from $991,000 for the thirteen weeks ended July 1, 2023 due primarily to increased consultant fees to improve our accounting process. Selling, general and administrative expenses increased as a percentage of total revenue for the thirteen weeks ended June 29, 2024 to 2.62% as compared to 2.18% for the thirteen weeks ended July 1, 2023.

 

Depreciation and Amortization. Depreciation and amortization expense for the thirteen weeks ended June 29, 2024 increased $199,000 or 21.44% to $1,127,000 from $928,000 from the thirteen weeks ended July 1, 2023. This increase is driven by the opening of Store #19R. As a percentage of total revenue, depreciation and amortization expense was 2.30% of revenue in the thirteen weeks ended June 29, 2024 and 2.05% of revenue in the thirteen weeks ended July 1, 2023.

 

Interest Expense, Net. Interest expense, net, for the thirteen weeks ended June 29, 2024 decreased $13,000 to $251,000 from $264,000 for the thirteen weeks ended July 1, 2023.

 

Income Taxes. Income tax for the thirteen weeks ended June 29, 2024 was an expense of $282,000, as compared to an expense of $51,000 for the thirteen weeks ended July 1, 2023. This is primarily due 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 29, 2024 decreased $609,000 or 25.26% to $1,802,000 from $2,411,000 for the thirteen weeks ended July 1, 2023 due primarily to higher food costs and overall increased expenses, partially offset by increased revenue at our retail package liquor stores and restaurants. As a percentage of revenue, net income for the thirteen weeks ended June 29, 2024 is 3.67%, as compared to 5.31% for the thirteen weeks ended July 1, 2023.

 

Net Income Attributable to Flanigan’s Enterprises, Inc. Stockholders. Net income attributable to Flanigan’s Enterprises, Inc. stockholders for the thirteen weeks ended June 29, 2024 decreased $484,000 or 30.16% to $1,121,000 from $1,605,000 for the thirteen weeks ended July 1, 2023 due primarily to higher food costs and overall increased expenses, partially offset by increased revenue at our retail package liquor stores and restaurants. As a percentage of revenue, net income attributable to stockholders for the thirteen weeks ended June 29, 2024 is 2.28%, as compared to 3.54% for the thirteen weeks ended July 1, 2023.

 

Comparison of Thirty-Nine Weeks Ended June 29, 2024 and July 1, 2023.

 

Revenues. Total revenue for the thirty-nine weeks ended June 29, 2024 increased $11,275,000 or 8.60% to $142,311,000 from $131,036,000 for the thirty-nine weeks ended July 1, 2023 due primarily to increased package liquor store and restaurant sales, the increased menu prices, revenue generated from the opening of our corporate owned restaurant in Hollywood, Florida (Store #19R) in March 2024, the opening of our limited partnership owned restaurant in Miramar, Florida (Store #25) in April 2023, the opening of the package liquor store in Miramar, Florida (Store #24) in March 2023 and the opening of the package liquor store in Hollywood, Florida (Store #19P) in December 2022. Effective March 26, 2023 we increased menu prices for our food offerings to target an increase to our food revenues of approximately 2.06% and effective March 19, 2023 we increased menu prices for our bar offerings to target an increase to our bar revenues of approximately 5.65% annually, to offset higher food costs and higher overall expenses (collectively the “Recent Price Increases”). Prior to these increases, we previously raised menu prices in the first quarter of our fiscal year 2022.

 

Restaurant Food Sales. Restaurant revenue generated from the sale of food, including non-alcoholic beverages, at restaurants totaled $86,182,000 for the thirty-nine weeks ended June 29, 2024 as compared to $80,006,000 for the thirty-nine weeks ended July 1, 2023. The increase in restaurant food sales 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 and the opening of our limited partnership owned restaurant in Miramar, Florida (Store #25) during the third quarter of our fiscal year 2023. Comparable weekly restaurant food sales for restaurants open for all of the thirty-nine weeks ended June 29, 2024 and July 1, 2023 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 nine restaurants owned by affiliated limited partnerships, (excluding our Miramar, Florida location Store #25 which opened for business during the third quarter of our fiscal year 2023) was $2,005,000 and $1,986,000 for the thirty-nine weeks ended June 29, 2024 and July 1, 2023, respectively, an increase of 0.96%. Comparable weekly restaurant food 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 $948,000 and $933,000 for the thirty-nine weeks ended June 29, 2024 and July 1, 2023, respectively, an increase of 1.61%. Comparable weekly restaurant food sales for affiliated limited partnership owned restaurants only, (excluding our Miramar, Florida location (Store #25) which opened for business during the third quarter of our fiscal year 2023), was $1,057,000 and $1,053,000 for thirty-nine weeks ended June 29, 2024 and July 1, 2023, respectively, an increase of 0.38%. We expect that restaurant food sales, including non-alcoholic beverages, for the balance our fiscal year 2024 will increase due to the operation of our re-opened Store #19R.

Restaurant Bar Sales. Restaurant revenue generated from the sale of alcoholic beverages at restaurants totaled $22,780,000 for the thirty-nine weeks ended June 29, 2024 as compared to $21,956,000 for the thirty-nine weeks ended July 1, 2023. The increase in restaurant bar sales for the thirty-nine weeks ended June 29, 2024 is primarily due to Recent Price Increases and restaurant bar sales generated from the opening of our corporate owned restaurant in Hollywood, Florida (Store #19R) during the second quarter of our fiscal year 2024 and the opening of our limited partnership owned restaurant in Miramar, Florida (Store #25) during the third quarter of our fiscal year 2023. Comparable weekly restaurant bar sales for restaurants open for all of the thirty-nine weeks ended June 29, 2024 and July 1, 2023 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 nine restaurants owned by affiliated limited partnerships, (excluding our Miramar, Florida location (Store #25), which opened for business during the third quarter of our fiscal year 2023) was $537,000 for the thirty-nine weeks ended June 29, 2024 and $550,000 for the thirty-nine weeks ended July 1, 2023, a decrease of 2.36%. 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 $239,000 and $236,000 for the thirty-nine weeks ended June 29, 2024 and July 1, 2023 respectively, an increase of 1.27%. Comparable weekly restaurant bar sales for affiliated limited partnership owned restaurants only (excluding our Miramar, Florida location (Store #25) which opened for business during the third quarter of our fiscal year 2023) was $298,000 and $314,000 for the thirty-nine weeks ended June 29, 2024 and July 1, 2023 respectively, a decrease of 5.10%. We expect that restaurant bar sales for our fiscal year 2024 will increase due to our newly re-opened Store #19R.

 

Package Store Sales. Revenue generated from sales of liquor and related items at package liquor stores totaled $31,034,000 for the thirty-nine weeks ended June 29, 2024 as compared to $26,853,000 for the thirty-nine weeks ended July 1, 2023, an increase of $4,181,000. This increase was primarily due to increased package liquor store traffic and the package liquor sales generated from the operation of our package liquor stores in Hollywood, Florida (Store #19P) and Miramar, Florida (Store #24). The weekly average of same store package liquor store sales, which includes nine (9) Company-owned package liquor stores, (excluding Store #19P which reopened during the first quarter of fiscal year 2023, and Store #24 which opened for business during the second quarter of our fiscal year 2023), was $693,000 and $653,000 for the thirty-nine weeks ended June 29, 2024 and July 1, 2023 respectively, an increase of 6.13%. We expect that package liquor store sales for our fiscal year 2024 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 29, 2024 increased $12,119,000 or 9.74% to $136,547,000 from $124,428,000 for the thirty-nine weeks ended July 1, 2023. The increase was primarily due to increased payroll, increased consultant fees to improve our accounting process, an expected general increase in food costs, costs and expenses incurred from our company owned restaurant in Hollywood Florida (Store #19R), our limited partnership owned restaurant in Miramar, Florida (Store #25), the package liquor store in Miramar, Florida (Store #24) and the package liquor store in Hollywood, Florida (Store #19P), 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 2024. Operating costs and expenses increased as a percentage of total revenue to approximately 95.95% for the thirty-nine weeks ended June 29, 2024 from 94.96% for the thirty-nine weeks ended July 1, 2023.

 

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 29, 2024 increased to $71,817,000 from $68,211,000 due to higher sales volume for the thirty-nine weeks ended June 29, 2024. Gross profit margin for the restaurant food and bar sales decreased during the thirty-nine weeks ended June 29, 2024 when compared to the thirty-nine weeks ended July 1, 2023 due to higher food costs partially offset by, among other things, the Recent Price Increases. 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 65.91% for the thirty-nine weeks ended June 29, 2024 and 66.90% for the thirty-nine weeks ended July 1, 2023.

 

 

Package Store Sales. Gross profit for package store sales for the thirty-nine weeks ended June 29, 2024 increased to $7,959,000 from $7,159,000 for the thirty-nine weeks ended July 1, 2023. Our gross profit margin, (calculated as gross profit reflected as a percentage of package liquor store sales), for package store sales was 25.65% for the thirty-nine weeks ended June 29, 2024 and 26.66% for the thirty-nine weeks ended July 1, 2023. We anticipate that the gross profit margin for package liquor store merchandise will decrease for the balance of our fiscal year 2024 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 thirty-nine weeks ended June 29, 2024 increased $2,250,000 or 5.31% to $44,658,000 from $42,408,000 for the thirty-nine weeks ended July 1, 2023. Payroll and related costs for the thirty-nine weeks ended June 29, 2024 were higher due primarily to the opening of the company owned restaurant in Hollywood, Florida (Store #19R) in March 2024, our limited partnership owned restaurant in Miramar, Florida (Store #25) in April 2023, the retail package liquor store in Miramar, Florida (Store #24) in March 2023, the retail package liquor store in Hollywood, Florida (Store #19P) in December 2022, the increase to the Florida minimum wage and higher salaries to employees to remain competitive with other potential employers in a tight labor market. Payroll and related costs as a percentage of total revenue was 31.38% for the thirty-nine weeks ended June 29, 2024 and 32.36% of total revenue for the thirty-nine weeks ended July 1, 2023.

 

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 29, 2024 increased $1,113,000 or 6.38% to $18,565,000 from $17,452,000 for the thirty-nine weeks ended July 1, 2023 due primarily to the opening of Store #19R, Store #25, Store #24 and Store #19P, inflation and otherwise due 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 purchases and rent expense associated with operating lease liabilities under ASC 842) for the thirty-nine weeks ended June 29, 2024 increased $478,000 or 8.48% to $6,118,000 from $5,640,000 for the thirty-nine weeks ended July 1, 2023. The increase in occupancy costs was primarily due to an increase in real property taxes.

 

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 29, 2024 increased $980,000 or 33.95% to $3,867,000 from $2,887,000 for the thirty-nine weeks ended July 1, 2023 due primarily to increased consultant fees to improve our accounting process. Selling, general and administrative expenses increased as a percentage of total revenue for the thirty-nine weeks ended June 29, 2024 to 2.72% as compared to 2.20% for the thirty-nine weeks ended July 1, 2023.

 

Depreciation and Amortization. Depreciation and amortization expense for the thirty-nine weeks ended June 29, 2024 increased $523,000 or 20.15% to $3,119,000 from $2,596,000 from the thirty-nine weeks ended July 1, 2023. This increase is driven by the opening of Store #19R, Store #25, Store #24 and Store #19P. As a percentage of total revenue, depreciation and amortization expense was 2.19% of revenue for the thirty-nine weeks ended June 29, 2024 and 1.98% of revenue for the thirty-nine weeks ended July 1, 2023.

 

Interest Expense, Net. Interest expense, net, for the thirty-nine weeks ended June 29, 2024 decreased $33,000 to $768,000 from $801,000 for the thirty-nine weeks ended July 1, 2023.

 

Income Taxes. Income tax for the thirty-nine weeks ended June 29, 2024 was an expense of $209,000 as compared to an expense of $404,000 for the thirty-nine weeks ended July 1, 2023. This is primarily due 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 29, 2024 decreased $543,000 or 9.94% to $4,920,000 from $5,463,000 for the thirty-nine weeks ended July 1, 2023 due primarily to higher food costs and overall increased expenses, including but not limited to, increased consultant fees to improve our accounting process. As a percentage of revenue, net income for the thirty-nine weeks ended June 29, 2024 is 3.46%, as compared to 4.17% for the thirty-nine weeks ended July 1, 2023.

 

Net Income Attributable to Flanigan’s Enterprises, Inc. Stockholders. Net income attributable to stockholders for the thirty-nine weeks ended June 29, 2024 decreased $954,000 or 23.12% to $3,172,000 from $4,126,000 for the thirty-nine weeks ended July 1, 2023 due primarily to higher food costs and overall increased expenses, including but not limited to, increased consultant fees to improve our accounting process and a higher portion of our net income attributable to noncontrolling interests (specifically the operation of our Miramar location). As a percentage of revenue, net income attributable to stockholders for the thirty-nine weeks ended June 29, 2024 is 2.23%, as compared to 3.15% for the thirty-nine weeks ended July 1, 2023.

 

Menu Price Increases and Trends

During the thirty-nine weeks ended June 29, 2024, we did not increase our menu prices. During the thirty-nine weeks ended July 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 19, 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. Prior to these increases we previously raised menu prices in the first quarter of our fiscal year 2022.

  

Liquidity and Capital Resources

 

We fund our operations through cash from operations and borrowings from third parties. As of June 29, 2024, we had cash and cash equivalents of approximately $22,123,000, a decrease of $3,409,000 from our cash balance of $25,532,000 as of September 30, 2023. The decrease in cash as of June 29, 2024 was primarily due to (i) the payment of $3.92 million for insurance for the period from December 30, 2023 to December 30, 2024 and (ii) to the completion of the construction of our Company-owned restaurant in Hollywood, Florida (Store #19) which opened for business during the end of the second quarter of our fiscal year 2024.

  

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, including supply chain issues are 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 29, 2024 and July 1, 2023.

 

		---------Thirty-Nine Weeks Ended--------
		June 29, 2024				July 1, 2023
		(in thousands)
Net cash provided by operating activities		$	5,219			$	7,200
Net cash used in investing activities			(4,068	)			(16,998	)
Net cash used in financing activities			(4,560	)			(5,234	)
Net Decrease in Cash and Cash Equivalents			(3,409	)			(15,032	)
Cash and Cash Equivalents, Beginning			25,532				42,138
Cash and Cash Equivalents, Ending		$	22,123			$	27,106

 

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. During the thirty-nine weeks ended July 1, 2023, our Board of Directors declared a cash dividend of $0.45 per share to shareholders of record on June 12, 2023 and was made payable on June 26, 2023. 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 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. During the thirty-nine weeks ended July 1, 2023, we acquired property and equipment and construction in progress of $15,890,000, (of which $2,298,000 was purchase deposits transferred to property and equipment and $502,000 was purchase deposits transferred to construction in progress and $538,000 was construction in progress in accounts payable), including $105,000 for renovations to two (2) existing limited partnership owned restaurants and $294,000 for renovations to three (3) Company-owned restaurants.

 

We anticipate the cost of refurbishment in our fiscal year 2024 will be approximately $450,000, excluding construction/renovations to Store #19R (our restaurant which was rebuilt due to damages caused by a fire), although capital expenditures for our refurbishing program for fiscal year 2024 may be significantly higher.

 

Long-Term Debt

 

As of June 29, 2024, we had long-term debt (including the current portion) of $22,221,000, as compared to $23,128,000 as of September 30, 2023.

 

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 had 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 June 29, 2024 our ratio was calculated to be 1.52 to 1.00. As of June 29, 2024 we are in compliance with all of our loan covenant ratios and as a result, our classification of debt is appropriate.

 

For further information regarding the Company’s long-term debt, refer to the Consolidated Financial Statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2023.

 

Construction Contract

 

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

 

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 located at 2505 N. University Drive, Building B, Hollywood, Florida (Store #19R), which had been closed since October 2, 2018 due to damage caused by a fire and re-opened March 26, 2024. The contract totaled $2,515,000 and through the end of the third quarter of our fiscal year 2024 we agreed to change orders increasing the total contract price by $1,507,000 to $4,022,000, of which $3,596,000 has been paid through June 29, 2024 and $308,000 has been paid subsequent to the end of the third quarter of our fiscal year 2024.

  

Purchase Commitments

 

In order to fix the cost and ensure adequate supply of baby back ribs for our restaurants for calendar year 2024, we entered into a purchase agreement with our current rib supplier, whereby we agreed to purchase approximately $7.0 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 2024, at a prescribed cost, which we believe is competitive.

 

Working Capital

 

The table below summarizes the current assets, current liabilities, and working capital for our fiscal quarter ended June 29, 2024, and our fiscal year ended September 30, 2023.

 

Item		June 29, 2024				September 30, 2023
		(in thousands)
Current Assets		$	33,302			$	35,294
Current Liabilities			21,264				22,371
Working Capital		$	12,038			$	12,923

 

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 2024.

 

Off-Balance Sheet Arrangements

 

The Company does not have off-balance sheet arrangements.

 

Critical Accounting Policies

 

During the thirty-nine weeks ended June 29, 2024, we have not made any change to our critical accounting policies. See Item 7, page 40 of our Annual Report on Form 10-K for our fiscal year ended September 30, 2023 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 have endeavored to offset the 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 June 29, 2024 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 15 “Fair Value Measurements of Financial Instruments” to the Consolidated Financial Statements included in “Item 8. Financial Statements and Supplementary Data” of our Annual Report on Form 10-K for our fiscal year ended September 30, 2023, 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 29, 2024, we had one variable rate instrument outstanding that is impacted by changes in interest rates. The interest rate of our variable rate debt instrument is equal to the lender’s BSBY Screen Rate plus one and one-half percent (1.50%) per annum. 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”).

 

As a means of managing our interest rate risk on this debt instrument, we entered into an interest rate swap agreement with our unrelated third-party lender to convert this variable rate debt obligation to a fixed rate. We are currently a party to the following interest rate swap agreement:

 

(i) The interest rate swap agreement entered into in September 2022 relates to the $8.90M Loan (the “$8.90M Term Loan Swap”). The $8.90M Term Loan Swap requires 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 determined that the interest rate swap agreement is an effective hedging agreement and that changes in fair value will be adjusted quarterly based on the valuation statement. As of June 29, 2024 the fair value of the swap agreement is reflected on the condensed consolidated balance sheet in other assets and accumulated other comprehensive income.

 

During our fiscal year 2023, we invested the aggregate sum of $900,000 in 90 day certificates of deposit, fully government guaranteed and at an average fixed annual interest rate of 4.87%. During the thirty-nine weeks ended June 29, 2024, the aggregate balance of our 90 day certificates of deposit from 2023 were either redeemed or rolled over into new 90 day certificates of deposit, fully government guaranteed and at fixed annual interest rates between 4.65% and 5.35%. Otherwise, at June 29, 2024, 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 June 29, 2024, 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 remediation of our material weaknesses in internal control over financial reporting described below, our disclosure controls and procedures were effective as of June 29, 2024.

 

Remediation of Material Weakness in Internal Control Over Financial Reporting

 

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, which constituted material weaknesses in our internal controls. As a result of this finding, during the second quarter of our fiscal year 2023, we began the process of addressing these material weaknesses by bolstering our internal controls over the review of certain financial transactions and their impact on our interim and annual financial statements, as well as our review of the debt covenant calculations. During the second quarter of our fiscal year 2024 the additional controls had been implemented and evaluated by management and determined to be operating effectively and as a result of our findings, as of the end of the second quarter of our fiscal year 2024, we have concluded that our previously listed material weaknesses had been remediated.

 

Changes in Internal Control Over Financial Reporting

 

Outside the changes discussed above, which were in place since the second quarter of 2023, 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.  

 

PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

See “Litigation” in Note 8 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 September 30, 2023 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-nine weeks ended June 29, 2024 and July 1, 2023, we did not purchase any shares of our common stock. As of June 29, 2024, we still have authority to purchase 65,414 shares of our common stock under the discretionary plan approved by the Board of Directors at its meeting on May 17, 2007.

 

ITEM 6. EXHIBITS

 

The following exhibits are filed with this Report:

 

	Exhibit	Description
	31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
	31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
	32.1	Certification 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.
	32.2	Certification 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

 

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: August 13, 2024	/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 Financial and Accounting Officer)