FLANIGANS ENTERPRISES INC MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS. (Form 10-K)

Except for the historical information contained herein, the following discussion
contains forward-looking statements that are subject to known and unknown risks,
uncertainties and other factors that may cause our actual results to differ
materially from those expressed or implied by such forward-looking statements.
We discuss such risks, uncertainties and other factors throughout this report
and specifically under the captions "Risk Factors". In addition, the following
discussion and analysis should be read in conjunction with the 2021 Consolidated
Financial Statements and the related Notes to Consolidated Financial Statements
included elsewhere in this report.



PREVIEW

Financial information concerning business segments

Our business is conducted in two segments: the restaurant segment and the
package liquor store segment. Financial information broken into these two
industry segments for the two fiscal years ended October 2, 2021 and October 3,
2020 is set forth in the Consolidated Financial Statements which are attached
hereto.



General


As of October 2, 2021, we (i) operated 27 units, consisting of restaurants,
package liquor stores and combination restaurants/package liquor stores that we
either own or have operational control over and partial ownership in; and (ii)
franchises an additional five units, consisting of two restaurants (one of which
we operate) and three combination restaurants/package liquor stores.



Franchised Units. 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 liquor 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.



Affiliated Limited Partnership Owned Units. We manage and control the operations
of the eight restaurants owned by limited partnerships, except the Fort
Lauderdale, Florida restaurant which is managed and controlled by a related
franchisee. Accordingly, the results of operations of all limited partnership
owned restaurants, except the Fort Lauderdale, Florida restaurant are
consolidated with our results of operations for accounting purposes. The results
of operations of the Fort Lauderdale, Florida restaurant are accounted for
by us
utilizing the equity method.



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RESULTS OF OPERATIONS



REVENUES (in thousands):



                                                52 Weeks Ended                      53 Weeks Ended
                                                October 2, 2021                     October 3, 2020
                                             Amount                              Amount
                                         (In thousands)       Percent        (In thousands)       Percent
Restaurant food sales                   $         84,466         62.75%     $         68,685          61.9%
Restaurant bar sales                              20,832         15.48%               15,967          14.4%
Package store sales                               29,304         21.77%               26,276          23.7%

Total Sales                             $        134,602        100.00%     $        110,928        100.00%

Franchise related revenues                         1,673                               1,260
Rental income                                        770                                 680
Other operating income (Loss)                        262                                 109

Total Revenue                           $        137,307                    $        112,977



Comparison of the years ended October 2, 2021 and October 3, 2020



Revenues. Total revenue for our fiscal year 2021 increased $24,330,000 or 21.54%
to $137,307,000 from $112,977,000 for our fiscal year 2020 due primarily to
increased package liquor store and restaurant sales, increased menu prices and
the comparatively more adverse effects of COVID-19 on our operations during our
fiscal year 2020 as compared with our fiscal year 2021 and notwithstanding the
fifty third week in our fiscal year 2020. Effective December 6, 2020 and then
effective April 11, 2021 we increased menu prices for our food offerings to
target an increase to our food revenues of approximately 2.45% and 4.60%
annually, respectively, to offset higher food costs and higher overall expenses
and effective November 29, 2020 we increased menu prices for our bar offerings
to target an increase to our bar revenues of approximately 1.83% annually,
(collectively the "Recent Price Increases"). Prior to these increases, we
previously raised menu prices in the third quarter of our fiscal year 2019. We
expect that total revenue for our fiscal year 2022 will increase due to
increased traffic and the Recent Price Increases. We expect that the new package
liquor store located at 7990 Davie Road Extension, Hollywood, Florida) will open
for business during our fiscal year 2022 and we expect to generate revenue from
it. We do not anticipate that the restaurant located at 2505 N. University
Drive, Hollywood, Florida, which has been closed since October, 2018 due to a
fire (the"Hollywood restaurant") will open for business during our fiscal year
2022 and accordingly we do not expect to generate any revenue from it.



Restaurant Food Sales.Restaurant revenue generated from the sale of food,
including non-alcoholic beverages, at restaurants totaled $84,466,000 for our
fiscal year 2021 as compared to $68,685,000 for our fiscal year 2020. The
increase in restaurant food sales for our fiscal year 2021 as compared to
restaurant food sales during our fiscal year 2020 is attributable to increased
restaurant traffic, the Recent Price Increases and the comparatively more
adverse effects of COVID-19 on our operations during our fiscal year 2020 as
compared with our fiscal year 2021 and notwithstanding the fifty third week in
our fiscal year 2020. Comparable weekly restaurant food sales (for restaurants,
other than for closures due to COVID-19, open for all of our fiscal years 2021
and 2020, respectively, which consists of nine restaurants owned by us,
(excluding the Hollywood Restaurant) and eight restaurants owned by affiliated
limited partnerships) was $1,610,000 and $1,287,000 for our fiscal years 2021
and 2020, respectively, an increase of 25.10%. Comparable weekly restaurant food
sales for Company-owned restaurants only was $797,000 and $649,000 for our
fiscal years 2021 and 2020 respectively, an increase of 22.80%. Comparable
weekly restaurant food sales for affiliated limited partnership owned
restaurants only was $813,000 and $638,000 for our fiscal years 2021 and 2020,
respectively, an increase of 27.43%. We expect that restaurant food sales,
including non-alcoholic beverages, for our fiscal year 2022 will increase due to
increased restaurant traffic and the Recent Price Increases.



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Restaurant Bar Sales.Restaurant revenue generated from the sale of alcoholic
beverages at restaurants totaled $20,832,000 for our fiscal year 2021 as
compared to $15,967,000 for our fiscal year 2020. The increase in restaurant bar
sales during our fiscal year 2021 as compared to restaurant bar sales during our
fiscal year 2020 is primarily due to increased restaurant traffic, the Recent
Price Increases and the comparatively more adverse effects of COVID-19 on our
operations during our fiscal year 2020 as compared with our fiscal year 2021 and
notwithstanding the fifty third week in our fiscal year 2020. Comparable weekly
restaurant bar sales (for restaurants, other than for closures due to COVID-19,
open for all of our fiscal years 2021 and 2020, respectively, which consists of
nine restaurants owned by us, (excluding the Hollywood Restaurant), and eight
restaurants owned by affiliated limited partnerships) was $401,000 and $301,000
for our fiscal years 2021 and 2020 respectively, an increase of 33.22%.
Comparable weekly restaurant bar sales for Company owned restaurants only was
$172,000 and $135,000 for our fiscal years 2021 and 2021, respectively, an
increase of 27.41%. Comparable weekly restaurant bar sales for affiliated
limited partnership owned restaurants only was $229,000 and $166,000 for our
fiscal years 2021 and 2021, respectively, an increase of 37.95%. We expect that
restaurant bar sales, including non-alcoholic beverages, for our fiscal year
2022 will increase due to increased restaurant traffic and the Recent Price
Increases.



Package Liquor Store Sales. Revenue generated from sales of liquor and related
items at package liquor stores totaled $29,304,000 for our fiscal year 2021 as
compared to $26,276,000 for our fiscal year 2020, an increase of $3,028,000.
This increase was primarily due to increased package liquor store traffic due to
what appears to be continued increased demand for package liquor store products
resulting from COVID-19 and notwithstanding the fifty third week in our fiscal
year 2020. The weekly average of same store package liquor store sales, which
includes nine (9) Company-owned package liquor stores, (excluding the package
liquor store which in combination with the Hollywood Restaurant was the subject
of a fire in October 2018 (Store #19), but including our new package liquor
store located at 12776 S.W. 88th Street, Miami, Florida, which opened for
business on October 10, 2019 (Store #45)), was $564,000 and $496,000 for our
fiscal years 2021 and 2020 respectively, an increase of 13.71%.



Operating Costs and Expenses. Operating costs and expenses, (consisting of cost
of merchandise sold, payroll and related costs, occupancy costs and selling,
general and administrative expenses), for our fiscal year 2021 increased
$18,591,000 or 16.89% to $128,657,000 from $110,066,000 for our fiscal year
2020. The increase was primarily due to payroll and an expected general increase
in food costs, offset by actions taken by management to reduce and/or control
costs. We anticipate that our operating costs and expenses will continue to
increase through our fiscal year 2022 for the same reasons. Operating costs and
expenses decreased as a percentage of total revenue to approximately 93.70% in
our fiscal year 2021 from 97.42% in our fiscal year 2020.



Gross profit. Gross margin is calculated by subtracting cost of goods sold from sales.

Restaurant Food and Bar Sales. Gross profit for food and bar sales for our
fiscal year 2021 increased to $69,324,000 from $56,134,000 for our fiscal year
2020. 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
65.84% for our fiscal year 2021 and 66.31% for our fiscal year 2020. Gross
profit margin for restaurant food and bar sales decreased during our fiscal year
2021 when compared to our fiscal year 2020 due to higher food costs, offset
among other things by the Recent Price Increases.

Package Liquor Store Sales. Gross profit for package store sales for our fiscal
year 2021 decreased to $6,956,000 from $7,084,000 for our fiscal year 2020. Our
gross profit margin, (calculated as gross profit reflected as a percentage of
package liquor store sales), for package store sales was 23.74% for our fiscal
year 2021 and 26.96% for our fiscal year 2020. We anticipate that the gross
profit margin for package liquor store merchandise will decrease during our
fiscal year 2022 due to higher costs and a reduction in pricing of certain
package store merchandise to be more competitive.

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Payroll and Related Costs. Payroll and related costs for our fiscal year 2021
increased $8,066,000 or 22.79% to $43,465,000 from $35,399,000 for our fiscal
year 2020. Payroll and related costs for the fiscal year 2021 were higher due
primarily to increased performance bonuses and higher costs for employees such
as cooks. Payroll and related costs as a percentage of total revenue was 31.66%
for our fiscal year 2021 and 31.33% of total revenue for our fiscal year 2020.

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
our fiscal year 2021 decreased $445,000 or 6.32% to $6,595,000 from $7,040,000
for our fiscal year 2020. The decrease in occupancy costs were impacted by the
termination of rent for our combination retail package liquor store and
restaurant located at 5450 N. State Road 7, North Lauderdale, Florida (Store
#40), the real property and improvements of which we purchased on December 31,
2020 and the elimination of occupancy costs due to the elimination of rent for
our restaurant location which we are developing located at 14301 West Sunrise
Boulevard, Sunrise, Florida (Store #85), the real property and improvements of
which we purchased on March 2, 2021. We anticipate that our occupancy costs will
increase through our fiscal year 2022 due to the commencement of rent for our
retail package liquor store location in a shopping center at 11225 Miramar
Parkway, #245, Miramar, Florida (Store #24) and our restaurant location in a
shopping center at 11225 Miramar Parkway, #250, Miramar, Florida (Store #25).



Selling, General and Administrative Expenses. Selling, general and
administrative expenses (consisting of general corporate expenses, including but
not limited to advertising, insurance, professional costs, clerical and
administrative overhead) for our fiscal year 2021 increased $358,000 or 1.80% to
$20,275,000 from $19,917,000 for our fiscal year 2020. Selling, general and
administrative expenses decreased as a percentage of total revenue in our fiscal
year 2021 to 14.77% as compared to 17.63% for our fiscal year 2020. We
anticipate that our selling, general and administrative expenses as a percentage
of total revenue will increase through our fiscal year 2022 due primarily to
increases in expenses across all categories.

Depreciation and Amortization. Depreciation and amortization expense for our
fiscal year 2021, which is included in selling, general and administrative
expenses, decreased $177,000 or 5.46% to $3,063,000 from $3,240,000 from our
fiscal year 2020. As a percentage of total revenue, depreciation and
amortization expense was 2.23% of revenue for our fiscal year 2021 and 2.87% of
revenue for our fiscal year 2020.

Interest Expense, Net. Interest expense, net, for our fiscal year 2021 increased
$102,000 to $938,000 from $836,000 for our fiscal year 2020. Interest expense,
net, increased for our fiscal year 2021 due to interest on our borrowing of
$2,200,000 during the second quarter of our fiscal year 2021 from an unrelated
third party lender used to finance our purchase of the real property and
improvements located at 14301 West Sunrise Boulevard, Sunrise, Florida (Store
#85) (the "$2.2 Million Borrowing"), interest on our borrowing of $4,300,000
during the third quarter of our fiscal year 2021 from an unrelated third party
lender to re-finance our mortgage loan of our property located at 13105 - 13205
Biscayne Boulevard, North Miami, Florida (the "$4.3 Million Borrowing"), and the
borrowing by six of our limited partnerships of an additional approximately
$3.35 million of 2nd PPP Loans during the second quarter of our fiscal year
2021. Interest expense, net, will increase for our fiscal year 2022 due to (i)
the $2.2 Million Borrowing; (ii) the $4.3 Million Borrowing; and (iii) the
borrowing by certain of our limited partnerships of an additional $3.35 million
of 2nd PPP Loans during the second quarter of our fiscal year 2021, if not
forgiven.



Income taxes. Income tax for our fiscal year 2021 was an expense of $1,185,000, compared to an advantage of $60,000 for our 2020 fiscal year.

Net Income. Net income for our fiscal year 2021 increased $14,581,000 or 667.63%
to $16,765,000 from $2,184,000 for our fiscal year 2020 due primarily to the
forgiveness of debt of certain of the PPP Loans and increased revenue at our
retail package liquor stores and restaurants, offset by higher food costs and
overall expenses. As a percentage of revenue, net income in our fiscal year 2021
is 12.21%, as compared to 1.93% in our fiscal year 2020.



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Net Income Attributable to Stockholders. Net income attributable to stockholders
for our fiscal year 2021 increased $10,674,000 or 961.62% to $11,784,000 from
$1,110,000 for our fiscal year 2020 due primarily to the forgiveness of debt of
the PPP Loans and increased revenue at our retail package liquor stores and
restaurants, offset by higher food costs and overall expenses. As a percentage
of revenue, net income attributable to stockholders for our fiscal year 2021 is
8.58%, as compared to 0.98% for our fiscal year 2020.



New Sponsored Restaurants

As new restaurants open, our income from operations will be adversely affected
due to our obligation to advance pre-opening costs, including but not limited to
pre-opening rent for the new locations. During our fiscal year 2021, we had one
new restaurant location in Sunrise, Florida in the development stage. During the
fourth quarter of our fiscal year 2019, we entered leases for two spaces
adjacent to each other, to house a new "Flanigan's Seafood Bar and Grill" as
well as a "Big Daddy's Wine and Liquors" in a shopping center in Miramar,
Florida. During the fourth quarter of our fiscal year 2021, we received
notification from the landlord that it had completed substantially all of the
landlord's work under the lease agreements and was delivering possession of
the
leased premises to us.


Menu price increases and trends

During the third quarter of our fiscal year 2021, we increased menu prices for
our food offerings (effective April 11, 2021) to target an increase to our food
revenues of approximately 4.60% annually to offset higher food costs and higher
overall expenses.

During the first quarter of our fiscal year 2021, we increased menu prices for
our bar offerings (effective November 29, 2020) to target an increase to our bar
revenues of approximately 1.83% annually and we increased menu prices for our
food offerings (effective December 6, 2020) to target an increase to our food
revenues of approximately 2.45% annually to offset higher food costs and higher
overall expenses. Prior to these increases, we previously raised menu prices in
the third quarter of our fiscal year 2019.

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

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CASH AND CAPITAL RESOURCES

We fund our operations through cash from operations and borrowings from third
parties. As of October 2, 2021, we had cash of approximately $32,676,000, an
increase of $2,754,000 from our cash balance of $29,922,000 as of October 3,
2020. During the third quarter of our fiscal year 2021, we generated net
proceeds of $2.8 million from the re-finance of our mortgage loan encumbering
the real property and improvements located at 13105 - 13205 Biscayne Boulevard,
North Miami, Florida where our Flanigan's Seafood Bar and Grill restaurant and
Big Daddy's Liquors retail package liquor store operate (Store #20) with an
unrelated third-party lender, increasing the principal amount borrowed from $1.5
million to $4.3 million. During the second quarter of our fiscal year 2021, we
closed on the purchase of the real property and improvements located at 14301
West Sunrise Boulevard, Sunrise, Florida where we are developing a "Flanigan's
Seafood Bar and Grill" restaurant (Store #85) for $4,800,000. We financed this
acquisition with a loan from an unrelated third-party lender in the principal
amount of $2.2 million and paid cash for the balance. During the first quarter
of our fiscal year 2021, we closed on the purchase of the real property and
improvements located at 5450 N. State Road 7, North Lauderdale, Florida where we
operate a combination "Flanigan's Seafood Bar and Grill" restaurant and "Big
Daddy's Liquors" package liquor store (Store #40) and paid $1,200,000 cash at
closing. During the second quarter of our fiscal year 2021, six of the entities
owning limited partnership stores (the "LP's") and the store we manage but do
not own (the "Managed Store") (collectively, the "Borrowers"), applied for and
received net amounts of approximately $3.98 million from the 2nd PPP Loans, of
which approximately: (i) $3.46 million was loaned to six of the LP's ; and (ii)
$0.52 million was loaned to the Managed Store. During the first quarter of our
fiscal year 2020, our wholly owned subsidiary, Flanigan's Calusa Center, LLC,
re-financed its mortgage loan with an unrelated third party lender, increasing
the principal amount borrowed from $2.72 million to $7.21 million.

Notwithstanding the negative effects of COVID-19 on our operations, we believe
that our current cash availability from our cash on hand, positive cash flow
from operations and borrowed funds will be sufficient to fund our operations and
planned capital expenditures for at least the next twelve months.

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. There can be no
assurances that any future dividends will be paid.



CASH FLOW

The following table is a summary of our cash flows for our fiscal years 2021 and 2020.

———Fiscal Years ——–

                                                                       2021                  2020
                                                                            (in thousands)

Net cash and cash equivalents from operating activities $14,361 $8,785
Net cash used in investing activities

                                     (11,901 )             (3,271 )
Net cash provided by financing activities                                     294               10,736

Net Increase in Cash and Cash Equivalents                                   2,754               16,250

Cash and Cash Equivalents, Beginning                                       29,922               13,672

Cash and Cash Equivalents, Ending                                $        
32,676       $       29,922




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Capital Expenditures



In addition to using cash for our operating expenses, we use cash to fund the
development and construction of new restaurants and to fund capitalized property
improvements for our existing restaurants. During our fiscal year 2021, we
acquired property and equipment of $13,255,000, (of which $58,000 was for the
purchase of a motor vehicle; $3,229,000 was for the purchase of real property;
$4,416,000 was for construction in progress; $14,000 was deposits recorded in
other assets; and $48,000 was deposits transferred to construction in progress
as of October 3, 2020), which amount included $464,000 for renovations to two
(2) existing limited partnership restaurant and $440,000 for renovations to
five(5) Company-owned restaurants. During our fiscal year 2020, we acquired
property and equipment of $2,766,000, (of which $379,000 was for construction in
progress; $118,000 was deposits recorded in other assets; and $10,000 was
deposits transferred to construction in progress as of September 28, 2019),
which amount included $278,000 for renovations to two (2) existing limited
partnership restaurant and $466,000 for renovations to five (5) Company-owned
restaurants. We anticipate the cost of this refurbishment in our fiscal year
2022 will be approximately $1,000,000, excluding construction/renovations to
Store #19 (our combination package liquor store and restaurant which is being
rebuilt due to damages caused by a fire), Store #85 (our Sunrise, Florida
restaurant location in development), Store #24 (our Miramar, Florida package
store location in development) and Store #25 (our Miramar, Florida restaurant
location in development), which funds will be provided from operations, subject
to reimbursement of all or a part of the cost of construction/renovations
through private offerings for the limited partnerships which will own Store
#85
and Store #25.



Debt


As of October 2, 2021, we had long-term debt of $22,115,000, as compared to
$26,323,000 as of October 3, 2020. Our long-term debt decreased as of October 2,
2021 as compared to October 3, 2020 due to the forgiveness of our PPP Loan and
the PPP Loans of our limited partnerships, offset by (i) our re-financing of our
mortgage loan encumbering the real property and improvements located at 13105 -
13205 Biscayne Boulevard, North Miami, Florida where our Flanigan's Seafood Bar
and Grill restaurant and Big Daddy's Liquors retail package liquor store operate
(Store #20), increasing the principal amount borrowed from $1.5 million to $4.3
million; (ii) our purchase of the real property and improvements located at
14301 West Sunrise Boulevard, Sunrise, Florida where we are developing a
"Flanigan's" restaurant (Store #85) for $4,800,000 with a loan in the principal
amount of $2.2 million; (iii), the 2nd PPP Loans received by six of our limited
partnerships in the approximate of $3,500,000; and $1,429,000 for financed
insurance premiums, less any payments made on account thereof. As of October 2,
2021, we are in compliance with the covenants of all loans with our lenders.



We repaid long term debt, including auto loans, financed insurance premiums and
mortgages in the amount of $4,100,000 and $2,540,000 in our fiscal years 2021
and 2020, respectively.

(a) Mortgage on immovable property – Sunrise, Florida



During the first quarter of our fiscal year 2021, we exercised the Option to
Purchase and during the second quarter of our fiscal year 2021 we closed on the
acquisition of the real property located at 14301 W. Sunrise Boulevard, Sunrise,
Florida. We financed this acquisition with a loan from an unrelated third party
lender in the principal amount of $2.2 million. The mortgage loan accrues
interest at the fixed annual rate of 3.65%, is amortized over fifteen (15)
years, and requires us to pay monthly payments of principal and interest in the
amount of $15,900 with the entire principal balance and all accrued but unpaid
interest due in March, 2036.

(b) Mortgage on immovable property – North Miami, Florida

During the third quarter of our fiscal year 2021, we re-financed with an
unrelated third party lender, our mortgage loan encumbering the real property
and improvements located at 13105 - 13205 Biscayne Boulevard, North Miami,
Florida where our Flanigan's Seafood Bar and Grill restaurant and Big Daddy's
Liquors retail package liquor store operate (Store #20), increasing the
principal amount borrowed from $1.5 million to $4.3 million. We received the net
cash proceeds from the refinancing transaction ($2.8 million) shortly after the
end of the third quarter of our fiscal year 2021. The re-financed mortgage loan
earns interest at the fixed annual rate of 3.63%, is amortized over fifteen (15)
years, requires us to pay monthly payments of principal and interest in the
amount of $31,129 with the entire principal balance and all accrued interest due
in July 2036. We intend to use the excess funds we received from the
re-financing of this mortgage loan for working capital purposes.



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(c) Financed insurance premiums



During our fiscal year 2021, we financed the premiums on the following property,
general liability, excess liability and terrorist policies, totaling
approximately $1.94 million, which property, general liability, excess liability
and terrorist insurance includes coverage for our franchises which are not
included in our consolidated financial statements:



(i)    For the policy year beginning December 30, 2020, our general liability
insurance, excluding 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 $340,000;



(ii)     For the policy year beginning December 30, 2020, 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 $426,000;


(iii) For the insurance year commencing December 30, 2020, our auto insurance is a one (1) year policy. The one (1) year car insurance premium is an amount of $93,000;



(iv)    For the policy year beginning December 30, 2020, our property insurance
is a one (1) year policy. The one (1) year property insurance premium is in
the
amount of $627,000;



(v)    For the policy year beginning December 30, 2020, our excess liability
insurance is a one (1) year policy. The one (1) year excess liability insurance
premium is in the amount of $443,000;



(vi)    For the policy year beginning December 30, 2020, our terrorist insurance
is a one (1) year policy. The one (1) year terrorist insurance premium is in the
amount of $5,000; and


(vii) For the policy year commencing December 30, 2020, our equipment breakdown insurance is a one (1) year policy. The one (1) year equipment breakdown insurance premium is in the amount of $6,000.



Of the $1,940,000 annual premium amounts, which includes coverage for our
franchises which are not included in our consolidated financial statements, we
financed $1,776,000 through an unaffiliated third party lender. The finance
agreement obligates us to repay the amounts financed together with interest at
the rate of 2.45% per annum, over 11 months, with monthly payments of principal
and interest of $164,000. The finance agreement is secured by a first priority
security interest in all insurance policies, all unearned premium, return
premiums, dividend payments and loss payments thereof.



During the third quarter of our fiscal year 2021, we financed the premium of our
directors and officers liability insurance policy for the one (1) year period
commencing April 15, 2021. The one (1) year directors and officers liability
insurance policy premium is in the amount of $55,000. Of the $55,000 annual
premium amount, we financed $50,000 through an unaffiliated third party lender.
The finance agreement obligates us to repay the amount financed together with
interest at the rate of 4.00% per annum, over 11 months, with monthly payments
of principal and interest of $4,700. The finance agreement is secured by a first
priority security interest in all insurance policies, all unearned premium,
return premiums, dividend payments and loss payments thereof.



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As of October 2, 2021, the aggregate principal balance owed from the financing
of our property and general liability insurance policies, including the
financing of our directors and officers liability insurance policy, but
excluding coverage for our franchises, (of approximately $113,000), which are
not included in our consolidated financial statements is $408,000.



(d) Second Paycheck Protection Loans



During the second quarter of our fiscal year 2021, certain of the LPs, as well
as the Managed Store, applied for and received 2ndPPP loans, in the aggregate
principal amount of approximately $3.98 million (the "2nd PPP Loans"), of which
approximately: (i) $3.46 million was loaned to six (6) of the LP's; and (iv)
$0.52 million was loaned to the Managed Store.

The 2nd PPP Loans, which are in the form of notes issued by each of the
Borrowers, mature five (5) years from the date of funding (March 23, 2021) and
bear interest at a rate of 1.00% per annum, payable monthly commencing after the
U.S. Small Business Administration makes a determination of the forgiveness of
the 2nd PPP Loans. The notes may be prepaid by the applicable Borrower at any
time prior to maturity with no prepayment penalties. Proceeds from the PPP Loans
have been available to the respective Borrower to fund designated expenses,
including certain payroll costs, group health care benefits and other permitted
expenses, including rent and interest on mortgages and other debt obligations
incurred before February 15, 2020. Under the terms of the PPP, up to the entire
amount of principal and accrued interest may be forgiven to the extent the
proceeds of the 2nd PPP Loans are used for qualifying expenses as described in
the CARES Act and applicable implementing guidance issued by the U.S. Small
Business Administration under the PPP. Subsequent to the end of our fiscal year
2021, we applied for and received forgiveness of the entire principal amount and
all accrued interest of the 2nd PPP Loans.



Construction Contracts


a) Extension of 7990 Davie Road, Hollywood, Florida (Store #19 – “Big Daddy’s Wines and Liquors”)



During the third quarter of our fiscal year 2019, we entered into an agreement
with a third party unaffiliated general contractor for site work at this
location totaling $1,618,000, (i) to connect the real property where this
restaurant operated (Store #19) to city sewer and (ii) to construct a new
building on the adjacent parcel of real property for the operation of a package
liquor store. During our fiscal years 2020 and 2021, we agreed to change orders
to the agreement for additional construction services increasing the total
contract price by $536,000 to $2,156,000, of which $1,092,000 of the total
amount obligated has been paid through October 2, 2021 and an additional
$335,000 has been paid subsequent to the end of our fiscal year 2021.



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



During the third quarter of our fiscal year 2019, we entered into an agreement
with an unaffiliated third party architect for design and development services
totaling $77,000 for the re-build of our restaurant located at 2505 N.
University Drive, Hollywood, Florida (Store #19), which has been closed since
October 2, 2018 due to damages caused by a fire, of which $62,000 has been paid.
Subsequent to the end of our fiscal year 2021, we entered into an agreement with
a third party unaffiliated general contractor to re-build our restaurant at this
location totaling $2,515,000, of which none has been paid.



(c) 14301 W. Sunrise Boulevard, Sunrise, Florida (Store #85 - "Flanigan's")



During the third quarter of our fiscal year 2019, we also entered into an
agreement with an unaffiliated third party design group for design and
development services of our new location at 14301 W. Sunrise Boulevard, Sunrise,
Florida 33323 (Store #85) for a total contract price of $122,000. During our
fiscal year 2020, we agreed upon amendments to the $122,000 Contract for
additional design and development services which had the effect of increasing
the total contract price by $18,000 to $140,000, of which $131,000 has been paid
through October 2, 2021. Additionally, during the fourth quarter of our fiscal
year 2020, we entered into an agreement with a third party unaffiliated general
contractor for interior renovations at this location totaling $1,236,000 and
during our fiscal year 2021 we agreed to change orders to the agreement for
additional interior renovations increasing the total contract price by $197,000
to $1,433,000, of which $1,081,000 has been paid through October 2, 2021 and an
additional $187,000 has been paid subsequent to the end of our fiscal year 2021.



(D) 11225 Miramar Drive, #250, Miramar, Florida (“Flanigan’s”)

During the fourth quarter of our fiscal year 2019, we entered into a Lease
Agreement with a non-affiliated third party, (the "Landlord") to rent
approximately 6,000 square feet of commercial space for a restaurant location in
a shopping center at 11225 Miramar Parkway, #250, Miramar, Florida (Store #25),
which shopping center was under construction. During the second quarter of our
fiscal year 2021, we entered into an Architectural Professional Services
Agreement with a third-party unaffiliated architect for design and development
services for this, new location (Store #25) for a total contract price of
$73,850, which contract price has been paid in full through October 2, 2021.
During the fourth quarter of our fiscal year 2021, we received notification from
the Landlord that it had completed substantially all of the Landlord's work
under the Lease Agreement and was delivering possession of the leased premises
to us. Subsequent to the end of our fiscal year 2021, we entered into an
agreement with a third party unaffiliated general contractor for interior
renovations at this location totaling $1,421,000, of which none has been paid.



(e) 11225 Miramar Drive, #245, Miramar, Florida (“Big Daddy’s Wine and Liquors”)

During the fourth quarter of our fiscal year 2019, we entered into a Lease
Agreement with a non-affiliated third party, (the "Landlord") to rent
approximately 2,000 square feet of commercial space for a retail package liquor
store location in a shopping center at 11225 Miramar Parkway, #245, Miramar,
Florida (Store #24), which shopping center was under construction. During the
second quarter of our fiscal year 2021, we entered into an Architectural
Professional Services Agreement with a third-party unaffiliated architect for
design and development services for this, new location (Store #24) for a total
contract price of $18,650, which contract price has been paid in full through
October 2, 2021. During the fourth quarter of our fiscal year 2021, we received
notification from the Landlord that it had completed substantially all of the
Landlord's work under the Lease Agreement and was delivering possession of the
leased premises to us. Subsequent to the end of our fiscal year 2021, we entered
into an agreement with a third party unaffiliated general contractor for
interior renovations at this location totaling $317,000, of which none has
been
paid.



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Purchase Commitments/Supply



In order to fix the cost and ensure adequate supply of baby back ribs for our
restaurants, on November 9, 2020, we entered into a purchase agreement with our
current rib supplier, whereby we agreed to purchase approximately $6,420,000 of
baby back ribs during calendar year 2021 from this vendor at a fixed cost.
During the third quarter of our fiscal year 2021, we agreed to increase the
fixed cost of the remaining baby back ribs for our calendar year 2021 by
approximately $408,000 to ensure adequate supply for our restaurants during
calendar year 2022.



In order to ensure adequate supply of baby back ribs for our restaurants for
calendar year 2022, on October 4, 2021, we entered into a purchase agreement
with our current rib supplier, whereby we agreed to purchase approximately
$10,414,000 of baby back ribs during calendar year 2022 from this vendor at
market cost. Our purchase agreement provides for the purchase of 2.25 & Down
Baby Back Ribs, at a monthly cost of the average market price per pound of
the
prior 4 weeks.


Although we plan to source all of our rib supply from this supplier, we believe there are several other alternative suppliers available, if required.


Flanigan's Fish Company, LLC



As of October 2, 2021, Flanigan's Fish Company, LLC, a Florida limited liability
company ("FFC") supplies certain of the fish to all of our restaurants. Since we
hold the controlling interest of FFC, the balance sheet and operating results of
this entity are consolidated into the accompanying financial statements of the
Company. Sales and purchases of fish are recognized in restaurant food sales and
restaurant and lounges (cost of merchandise sold), respectively, in the
consolidated statements of income at the time of sale to the restaurant. In
addition, the 49% of FFC owned by the unrelated third party is recognized as
noncontrolling interest in our consolidated financial statements.



Purchase of limited partnership interests

During our 2020 and 2021 fiscal years, we did not purchase any limited partnership interests.


Working Capital


The table below summarizes current assets, current liabilities and working capital at the end of our 2021 and 2020 fiscal years.



Item                   Oct. 2, 2021       Oct. 3, 2020
                               (in Thousands)

Current Assets        $       39,790     $       36,508
Current Liabilities           20,223             25,362
Working Capital       $       19,567     $       11,146




Our working capital increased as of October 2, 2021 from our working capital as
of October 3, 2020 due to (i) our receipt of $3.46 million from the 2nd PPP
Loans and (ii) our receipt of $2.8 million from our re-financing of our mortgage
loan encumbering the real property and improvements located at 13105 - 13205
Biscayne Boulevard, North Miami, Florida where our Flanigan's Seafood Bar and
Grill restaurant and Big Daddy's Liquors retail package liquor store operate
(Store #20), increasing the principal amount borrowed from $1.5 million to
$4.3
million.

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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, cash flow from operations and funds available from our borrowings will
adequately fund operations, debt reductions and planned capital expenditures
throughout our fiscal year 2022.



During our fiscal year 2022, we plan to use certain funds on-hand, borrowed
funds and/or insurance proceeds (i) to construct a new building on the real
property we own located at 7990 Davie Road Extension, Hollywood, Florida, (Store
#19 package), to develop the "Big Daddy's Wine & Liquors" retail package liquor
store location; (ii) to construct a new building on the real property we own
located at 2505 N. University Drive, Hollywood, Florida (Store #19 restaurant)
where we plan to re-build our "Flanigan's" restaurant; (iii) advance the cost of
renovations to develop the "Flanigan's" restaurant which we are currently
developing at 14301 West Sunrise Boulevard, Sunrise, Florida (Store #85); (iv)
advance the cost of renovations to develop the "Flanigan's" restaurant which we
are currently developing at 12215 Miramar Parkway, #250, Miramar, Florida (Store
#25); and (v) advance the cost of renovations to develop the "Big Daddy's Wine &
Liquors" which we are currently developing at 12215 Miramar Parkway, #245,
Miramar, Florida (Store #24). There can be no assurances as to the timing for us
to construct the new building for the package liquor store and re-build the
restaurant for Store #19 or to complete the renovations for the retail package
liquor store for our Store #24 or to complete the renovations for the
restaurants for Store #25 and Store #85.



Off-balance sheet arrangements

We have no off-balance sheet arrangements.

Recently Adopted and Recently Issued Accounting Pronouncements


Recently Adopted


Effective September 29, 2019, we adopted Accounting Standards Codification 842,
Leases ("ASC 842"). The new guidance requires that lease arrangements be
presented on the lessee's balance sheet by recording a right-of-use asset and a
lease liability equal to the present value of the related future minimum lease
payments. We adopted the standard in the first quarter of fiscal 2020, using the
modified retrospective approach.



We elected the transition package of practical expedients, under which we are
not required to reassess (1) whether any expired or existing contracts are
leases, or contain leases, (2) the lease classification for any expired or
existing leases, and (3) initial direct costs for any existing leases. In
addition, we made an accounting policy election to exclude leases with an
initial term of twelve (12) months or less from the balance sheet. This standard
had a material impact on the Consolidated Balance Sheets due to the recording of
a right-of-use asset and lease liability and on the Consolidated Statements of
Income due to the escalations of rent in the extensions but did not have a
material impact on the Consolidated Statement of Cash Flows.



Issued


There are no recently issued accounting pronouncements that we have not yet adopted that we believe will have a material effect on our financial statements.

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Critical Accounting Policies



Our significant accounting policies are more fully described in Note 1 to our
consolidated financial statements located in Item 8 of this Annual Report on
Form 10-K. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues, and expenses, and the related disclosures of
contingent assets and liabilities. Actual results could differ from those
estimates under different assumptions or conditions. We believe that the
following critical accounting policies are subject to estimates and judgments
used in the preparation of our consolidated financial statements:



Estimated useful life of goods and equipment



The estimates of useful lives for property and equipment are significant
estimates. Expenditures for the leasehold improvements and equipment when a
restaurant is first constructed are material. In addition, periodic refurbishing
takes place and those expenditures can be material. We estimate the useful life
of those assets by considering, among other things, expected use, life of the
lease on the building, and warranty period, if applicable. The assets are then
depreciated using a straight line method over those estimated lives. These
estimated lives are reviewed periodically and adjusted if necessary. Any
necessary adjustment to depreciation expense is made in the income statement of
the period in which the adjustment is determined to be necessary.



Consolidation of limited partnerships

As of October 2, 2021, we operate eight (8) restaurants as general partner of
the limited partnerships that own the operations of these restaurants. We expect
that any expansion which takes place in opening new restaurants will also result
in us operating the restaurants as general partner. In addition to the general
partnership interest we also purchased limited partnership units ranging from 5%
to 49% of the total units outstanding. As a result of these controlling
interests, we consolidate the operations of these limited partnerships with ours
despite the fact that we do not own in excess of 50% of the equity interests.
All intercompany transactions are eliminated in consolidation. The
non-controlling interests in the earnings of these limited partnerships are
removed from net income and are not included in the calculation of earnings
per
share.



Income Taxes



We account for our income taxes using FASB ASC Topic 740, "Income Taxes", which
requires among other things, recognition of future tax benefits measured at
enacted rates attributable to deductible temporary differences between financial
statement and income tax basis of assets and liabilities and to tax net
operating loss carryforwards and tax credits to the extent that realization of
said tax benefits is more likely than not. For discussion regarding our
carryforwards refer to Note 9 to the consolidated financial statements for
our
fiscal year 2021.



Other Matters



Impact of 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. Although inflation has had a material impact on our operating results, we
have offset increased costs by increasing our menu prices.

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