What changed in this filing

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Item 7. Management’s Discussion and Analysis

2021-01-15 compared with 2019-12-20 · 510 added, 400 removed, 151 unchanged (86% of the section changed)

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Except for the historical

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Financial Information Concerning Industry Segments

Our business is conducted principally in

two segments:

Our business is conducted principally

in two segments:

the restaurant segment and the package liquor store segment.

Financial information broken into these two principal

industry segments for the two fiscal years ended September 28, 2019 and September 29, 2018 is set forth in the Consolidated Financial

Statements which are attached hereto.

As of September 28, 2019,

we (i) operated 26 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) franchise an additional five units, consisting

of two restaurants, (one of which we operate), and three combination restaurants/package liquor stores.

The foregoing excludes

an adult entertainment club that we owned but did not operate and which was permanently closed on September 20, 2018 after a federal

court in Georgia upheld recently enacted local legislation prohibiting the operation of the club as it was then operated.

Financial information broken into these two

principal industry segments for the two fiscal years ended October 3, 2020 and September 28, 2019 is set forth in the

Consolidated Financial Statements which are attached hereto.

As of October 3, 2020,

Flanigan’s Enterprises, Inc., a Florida corporation, together with its subsidiaries (“we”, “our”,

“ours”

and “us”

as the context requires), (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

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 .

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Franchise related revenues

Owner’s fee

Other operating income

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Total Revenues

Comparison of Fiscal Years Ended September 28, 2019

and September 29, 2018

Total revenue for our fiscal year 2019 increased $2,705,000 or 2.38% to $116,202,000 from $113,497,000 for our fiscal year 2018

due primarily to increased restaurant traffic and partially due to increased menu prices and despite the loss of revenue from our

combination restaurant/package liquor store located at 2505 N.

University Drive, Hollywood, Florida (Store #19), which was closed

for our fiscal year 2019 due to a fire on October 2, 2018, (the “Store #19 Closure”).

Fiscal year 2018 total revenue

for our Store #19 was $5,333,000.

Effective June 16, 2019 we increased certain menu prices for our bar offerings to target an increase

to our total bar revenues of approximately 6.2% annually and effective June 23, 2019 we increased certain menu prices for our food

offerings to target an increase to our total food revenues of approximately 3.4% annually, (the “2019 Price Increases”).

We anticipate that total revenue for our fiscal year 2020 will increase due to increased restaurant traffic and the 2019 Price

We currently believe that Store #19 will remain closed during our fiscal year 2020 and accordingly do not expect to

generate any revenue from it during the coming fiscal year.

Comparison of Fiscal Years Ended October 3, 2020 and

September 28, 2019

Total revenue for our fiscal year 2020 decreased $3,225,000 or 2.78% to $112,977,000 from $116,202,000 for our fiscal year

The decrease in total revenue was due primarily to the negative impact of COVID-19 on our operations.

Due to COVID-19,

from mid-March 2020 through mid-May 2020, we ceased all dining and bar services at all of our restaurants, limiting service

to take-out and delivery only of food, and implemented reduced hours at our retail package liquor stores.

From mid-May 2020

through the beginning of July 2020, there was a gradual elimination of restrictions on our restaurant operations, permitting

us to, among other things, provide dining for outdoor seating patrons with appropriate social distancing and provide dining

for indoor patrons at up to 50% capacity (depending on the location of the restaurant), but with no bar service and increased

operating hours at our package liquor stores.

From the beginning of July 2020 through the beginning of September 2020, we

ceased dine-in service at all of our Miami-Dade County, Florida restaurants, (two Company-owned and six limited partnership

owned restaurants).

Since the beginning of September 2020, we have been offering both food and bar options at all of our

restaurants, including those located in Miami-Dade County, Florida, with appropriate social distancing and dine-in service at

up to 100% capacity, including outdoor dining.

The negative effect of COVID-19 on our operations was partially offset by the

fifty-third week in our fiscal year 2020, the 2019 Price Increases (defined below) and increased package liquor store sales.

Effective June 16, 2019 we increased certain menu prices for our bar offerings to target an increase to our total bar

revenues of approximately 6.2% annually and effective June 23, 2019 we increased certain menu prices for our food offerings

to target an increase to our total food revenues of approximately 3.4% annually, (the “2019 Price Increases”).

expect that total revenue for our fiscal year 2021 will decrease due to our operations being adversely impacted by COVID-19.

We expect that Store #19 will remain closed during our fiscal year 2021 and accordingly do not expect to generate any revenue

Restaurant revenue generated from the sale of food, including non-alcoholic beverages, at restaurants

(food sales) totaled $68,685,000 for our fiscal year 2020 as compared to $71,814,000 for our fiscal year 2019.

The increase in

restaurant revenue from the sale of food at restaurants for our fiscal year 2019 as compared to our fiscal year 2018 is due to

increased restaurant traffic and partially due to the 2019 Price Increases, offset by the loss of food sales at Store #19 resulting

from the Store #19 Closure.

Restaurant revenue from the sale of food at our Store #19 was $3,498,000 for our fiscal year 2018.

Comparable weekly restaurant food sales (for restaurants open for all of our fiscal years 2019 and 2018, which consists of nine

restaurants owned by us, (excluding Store #19 which was closed for our fiscal year 2019) and eight restaurants owned by affiliated

limited partnerships) was $1,379,000 and $1,289,000 for our fiscal years 2019 and 2018, respectively, an increase of 6.98%.

weekly restaurant food sales for Company owned restaurants only was $696,000 and $646,000 for our fiscal years 2019 and 2018, respectively,

an increase of 7.74%.

Comparable weekly restaurant food sales for affiliated limited partnership owned restaurants only was $683,000

and $643,000 for our fiscal years 2019 and 2018, respectively, an increase of 6.22%.

We anticipate that restaurant revenue from

food sales, including non-alcoholic beverages, at restaurants will increase when compared to our fiscal year 2019 due to increased

restaurant traffic and the 2019 Price Increases.

The decrease in

restaurant food sales for our fiscal year 2020 as compared to restaurant food sales during our fiscal year 2019 is attributable

to the negative effects of COVID-19 on our operations, partially offset by the fifty-third week in our fiscal year 2020 and the

2019 Price Increases.

Comparable weekly restaurant food sales (for restaurants, subject to closures for COVID-19, open for all

of our fiscal years 2020 and 2019, which consists of nine restaurants owned by us, (excluding Store #19 which was closed for our

fiscal years 2020 and 2019 due to a fire on October 2, 2018) and eight restaurants owned by affiliated limited partnerships) was

$1,287,000 and $1,379,000 for our fiscal years 2020 and 2019, respectively, a decrease of 6.67%.

Comparable weekly restaurant food

sales for Company-owned restaurants only was $649,000 and $696,000 for our fiscal years 2020 and 2019, respectively, a decrease

Comparable weekly restaurant food sales for affiliated limited partnership owned restaurants only was $638,000 and $683,000

for our fiscal years 2020 and 2019, respectively, a decrease of 6.59%.

We expect that restaurant food sales, including non-alcoholic

beverages, for our fiscal year 2021 will decrease due to the negative effects of COVID-19 on our operations.

Restaurant revenue generated from the sale of alcoholic beverages at restaurants totaled $15,967,000

for our fiscal year 2020 as compared to $22,476,000 for our fiscal year 2019.

The increase in restaurant revenue from the sale

of alcoholic beverages from restaurants for our fiscal year 2019 as compared to our fiscal year 2018 is due to increased restaurant

traffic and partially due to the 2019 Prices Increases, offset by the loss of revenue from the sale of alcoholic beverages at Store

#19 resulting from the Store #19 Closure.

Restaurant revenue from the sale of alcoholic beverages at our Store #19 was $748,000

for our fiscal year 2018.

Comparable weekly restaurant alcoholic bar sales (for restaurants open for all of our fiscal years 2019

and 2018, which consists of nine restaurants owned by us, (excluding Store #19 which was closed for our fiscal year 2019) and eight

restaurants owned by affiliated limited partnerships) was $432,000 and $404,000 for our fiscal years 2019 and 2018, respectively,

an increase of 6.93%.

Comparable weekly restaurant alcoholic bar sales for Company owned restaurants only was $197,000 and $182,000

for our fiscal years 2019 and 2018, respectively, an increase of 8.24%.

Comparable weekly restaurant bar sales for affiliated limited

partnership owned restaurants only was $235,000 and $222,000 for our fiscal years 2019 and 2018, respectively, an increase of 5.86%.

We anticipate that restaurant revenue from the sale of alcoholic beverages at restaurants will increase when compared to our fiscal

year 2019 due to increased restaurant traffic and the 2019 Price Increases.

The decrease in restaurant bar sales for our fiscal

year 2020 as compared to restaurant bar sales during our fiscal year 2019 is attributable to the negative effects of COVID-19 on

our operations, partially offset by the fifty third week in our fiscal year 2020 and the 2019 Price Increases.

Comparable weekly

restaurant bar sales (for restaurants, open (except, however, when closed due to government directives in fiscal year 2020) for

all of our fiscal years 2020 and 2019, which consists of nine restaurants owned by us, (excluding Store #19 which was closed for

our fiscal years 2020 and 2019 due to a fire on October 2, 2018) and eight restaurants owned by affiliated limited partnerships)

was $301,000 and $432,000 for our fiscal years 2020 and 2019, respectively, a decrease of 30.32%.

Comparable weekly restaurant

bar sales for Company-owned restaurants only was $135,000 and $197,000 for our fiscal years 2020 and 2019, respectively, a decrease

Comparable weekly restaurant bar sales for affiliated limited partnership owned restaurants only was $166,000 and $235,000

for our fiscal years 2020 and 2019, respectively, a decrease of 29.36%.

We expect that restaurant bar sales, including non-alcoholic

beverages, for our fiscal year 2021 will decrease due to the negative effects of COVID-19 on our operations.

Package Liquor

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our fiscal year 2020 as compared to $19,327,000 for our fiscal year 2019, an increase of $6,949,000 or 35.95%.

This increase was primarily

due to increased package liquor store traffic, offset by the loss of revenue generated from sales of liquor and related items at

Store #19 resulting from the Store #19 Closure.

Revenue generated from the sales of liquor and related items at Store #19 was $1,087,000

for our fiscal year 2018.

The weekly average of same store package liquor store sales, which includes eight (8) Company owned package

liquor stores, (excluding Store #19, which was closed for our fiscal year 2019), was $372,000 and $336,000 for our fiscal years

2019 and 2018, respectively, an increase of 10.71%.

We anticipate that revenue generated from the sale of liquor and related items

at package liquor stores for our fiscal year 2020 will increase when compared to our fiscal year 2019 due to increased package

liquor store traffic and the October, 2019 opening of our new package liquor store in Miami, Florida (Store #45).

Operating Costs

and Expenses .

This increase was

primarily due to increased package liquor store traffic despite COVID-19 and because of the opening of our new retail package liquor

store (Store #45) located in Kendall, Florida during the first quarter of our fiscal year 2020.

The weekly average of same store

package liquor store sales, which includes eight (8) Company-owned package liquor stores, (excluding Store #19, which was closed

for our fiscal years 2020 and 2019 due to a fire on October 2, 2018 and also excluding Store #45, which opened for business on

October 10, 2019), was $462,000 and $372,000 for our fiscal years 2020 and 2019 respectively, an increase of 24.19%.

We anticipate

that revenue generated from the sale of liquor and related items at package liquor stores for our fiscal year 2021 will increase

when compared to our fiscal year 2020 due to what appears to be an increased demand for package liquor store products resulting

from COVID-19.

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 2019 increased $3,833,000 or 3.61% to $109,886,000

from $106,053,000 for our fiscal year 2018.

The increase was primarily due to an expected general increase in food costs, offset

by a reduction of operating costs and expenses at Store #19, which was closed for our fiscal year 2019 due to the Store #19 Closure

and actions taken by management to reduce and/or control costs and expenses.

Operating costs and expenses at Store #19 were $2,211,000

costs and selling, general and administrative expenses), for our fiscal year 2020 increased $180,000 or 0.16% to $110,066,000 from

$109,886,000 for our fiscal year 2019.

We anticipate that our operating costs and expenses will continue to increase through our fiscal year

2020 for the same reasons.

Operating costs and expenses increased as a percentage of total sales to approximately 94.56% in our

fiscal year 2019 from 93.44% in our fiscal year 2018.

The minimal increase was primarily due to cost cutting measures we have implemented since

mid-March 2020 to reduce and/or control costs because of the negative effects of COVID-19 on our operations.

We expect our operating

costs and expenses will increase for our fiscal year 2021 as cost cutting measures are reversed.

Operating costs and expenses increased

as a percentage of total sales to approximately 97.42% in our fiscal year 2020 from 94.56% in our fiscal year 2019.

Gross Profit .

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Food and Bar Sales .

Gross profit for food and bar sales for our fiscal year 2019 increased to $61,212,000 from $60,172,000

Gross profit for restaurant food and bar sales for our fiscal year 2020 decreased to $56,134,000 from

$61,212,000 for our fiscal year 2019.

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 64.92% for our fiscal year 2019 and 65.19% for our fiscal year 2018.

We anticipate

that our gross profit for restaurant food and bar sales may increase during our fiscal year 2020 due to the 2019 Price Increases,

partially offset by 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 66.31% for our fiscal year 2020 and 64.92% for our fiscal year 2019.

profit margin for restaurant food and bar sales increased during our fiscal year 2020 when compared to our fiscal year 2019 due

to the inclusion of a 10% take-out charge on restaurant food sales, offset by the negative effects of COVID-19 on our restaurant

bar operations and higher gross profit margin items as well as higher food costs.

If we can maintain the same level of our take

out charges on restaurant food sales, we expect that our gross profit margin for restaurant food and bar sales will increase during

our fiscal year 2021 for the same reasons.

Package Liquor

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Gross profit for package liquor store sales for our fiscal year 2020 increased to $7,084,000 from $5,269,000

for our fiscal year 2018.

Our gross profit margin (calculated as gross profit reflected as a percentage of package liquor store

sales) for package liquor store sales was 27.26% for our fiscal year 2019 and 27.91% for our fiscal year 2018.

We anticipate that

our gross profit margin for package liquor store sales will decrease during our fiscal year 2020 due to anticipated lower pricing

of certain package store merchandise undertaken in order for us to remain competitive.

for our fiscal year 2019, due primarily to increased package liquor store traffic which we believe has been caused by COVID-19,

as well as the opening of our new Store #45 during the first quarter of our fiscal year 2020.

Our gross profit margin (calculated

as gross profit reflected as a percentage of package liquor store sales) for package liquor store sales was 26.96% for our fiscal

year 2020 and 27.26% for our fiscal year 2019.

We anticipate that the gross profit margin for package liquor store merchandise

will decrease during our fiscal year 2021 due to higher costs and a reduction in pricing of certain package store merchandise to

be more competitive.

Related Costs .

Payroll and related costs for our fiscal year 2019 increased $1,005,000 or 2.88% to $35,873,000 from $34,868,000

Payroll and related costs for our fiscal year 2020 decreased $474,000 or 1.32% to $35,399,000 from $35,873,000

for our fiscal year 2019.

Higher payroll and related costs for our fiscal year 2019 were primarily due to higher restaurant sales,

which require additional payroll and related costs for employees such as cooks, bartenders and servers and higher pay rates, offset

by a decrease in payroll and related costs of $1,494,000 at Store #19, which was closed substantially all of our 2019 fiscal year

due to the Store #19 Closure.

Payroll and related costs as a percentage of total sales was 30.87% for our fiscal year 2019 as compared

to 30.72% for our fiscal year 2018.

Occupancy Costs .

Occupancy costs (consisting of rent, common area maintenance, repairs, real property taxes and amortization of leasehold purchases)

for our fiscal year 2019 increased $328,000 or 5.73% to $6,054,000 from $5,726,000 for our fiscal year 2018.

We anticipate that

our occupancy costs will increase throughout our fiscal year 2020 due primarily to the rent we are required to pay pursuant to

the newly acquired Sunrise Lease Agreement for our expected new restaurant to be located in Sunrise, Florida.

Lower payroll and related costs for our fiscal year 2020 were due to certain cost cutting measures including

material layoffs at our restaurants and reduced corporate personnel salaries from mid-March 2020 through mid-May 2020 and thereafter

due to an adjustment to our traditional staffing model to meet customer demand, increased by payroll for our package liquor store

in Kendall, Florida, which opened for business during the first quarter of our fiscal year 2020.

We anticipate that until our restaurant

operations are restored to pre-COVID-19 levels, of which there can be no assurance, payroll and related costs will be less than

our costs from 2019.

Payroll and related costs as a percentage of total sales was 31.33% in our fiscal year 2020 as compared to

30.87% of total sales in our fiscal year 2019.

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 2020 increased

$986,000 or 16.29% to $7,040,000 from $6,054,000 for our fiscal year 2019 primarily due to our adoption of ASC 842.

We anticipate

that our occupancy costs will remain stable throughout our fiscal year 2021.

Selling, General

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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 2019 increased

but not limited to advertising, insurance, professional costs, clerical and administrative overhead) for our fiscal year 2020 decreased

$906,000 or 4.35% to $19,917,000 from $20,823,000 for our fiscal year 2019.

Selling, general and administrative expenses increased

Selling, general and administrative expenses decreased

as a percentage of total sales in our fiscal year 2020 to 17.63% as compared to 17.92% in our fiscal year 2019.

We anticipate that

our selling, general and administrative expenses will increase throughout our fiscal year 2020 due primarily to increases across

all categories.

until our operations are restored to pre-COVID-19 levels, of which there can be no assurance, our selling, general and administrative

expenses will be less than our expenses for our fiscal year 2020, offset by increases in expenses across all categories.

and Amortization.

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Interest Expense,

Interest expense for our fiscal year 2019 decreased $45,000 to $708,000 from $753,000 for our fiscal year 2018.

anticipate that interest expense will increase throughout our fiscal year 2020 due to the anticipated borrowing of additional

funds from our unrelated third party lender during the fiscal year.

Income taxes for our fiscal year 2019 was $887,000 and $1,371,000 for our fiscal year 2018.

fiscal year 2018, income taxes increased due to a reduction of $268,000 to our deferred tax asset

due to the corporate tax rate reduction, which reduction was a part of our current tax expense.

Interest expense, net, for our fiscal year 2020 increased $128,000 to $836,000 from $708,000 for our fiscal year 2019.

Interest expense, net, increased for our fiscal year 2020 due to our borrowing of an additional $4.5 million during the first quarter

of our fiscal year 2020 on the re-financing by our wholly owned subsidiary, Flanigan’s Calusa Center, LLC, of its mortgage

loan with an unrelated third party lender, increasing the principal amount borrowed from $2.72 million to $7.21 million and our

borrowing of an additional approximately $10.0 million during the third quarter of our fiscal year 2020 on our PPP Loans.

expense, net, will increase for our fiscal year 2021 due to our borrowing of an additional $10.0 million during the third quarter

of our fiscal year 2020 on our PPP Loans, if not forgiven.

Income tax expense for our fiscal year 2020 was a benefit of $60,000, as compared to an expense of $887,000

for our fiscal year 2019.

Net income for our fiscal year 2020 decreased $3,193,000 or 59.38% to $2,184,000 from $5,377,000 for our fiscal year 2019.

for our fiscal year 2019 decreased when compared to our fiscal year 2018 primarily due to higher food costs and overall expenses

and a net loss of $318,000 from Store #19 resulting from the Store #19 Closure, offset by the receipt in the first quarter of our

2019 fiscal year of a $602,000 insurance recovery, as a result of the Store #19 Closure and higher restaurant traffic.

fiscal year 2018, the net income from Store #19 was $765,000.

As a percentage of total revenue, net income for our fiscal year 2019 is 4.63%, as compared

to 4.75% for our fiscal year 2018.

We anticipate that Store #19 will remain closed through at least our fiscal year 2020 and we

do not anticipate receiving any additional insurance proceeds from the Store #19 Closure, other than $132,000 in depreciation insurance

Net Income Attributable

to Stockholders.

Net income attributable to stockholders for our fiscal year 2019 decreased $29,000 or 0.79% to $3,648,000

from $3,677,000 for our fiscal year 2018.

Net income attributable to stockholders for our fiscal year 2019 decreased when compared

to our fiscal year 2018 primarily due to higher food costs and overall expenses and a net loss of $318,000 from Store #19 resulting

from the Store #19 Closure, offset by the receipt in the first quarter of our fiscal year 2019 of a $602,000 insurance recovery,

as a result of the Store #19 Closure and higher restaurant traffic.

During our fiscal year 2018, the net income from Store #19

was $765,000.

As a percentage of total revenue, net income attributable to stockholders for our fiscal year 2019 is 3.14%,

as compared to 3.24% for our fiscal year 2018.

We anticipate that Store #19 will remain closed through at least our fiscal year

2020 and we do not anticipate receiving any additional insurance proceeds from the Store #19 Closure, other than $132,000 in depreciation

insurance recovery.

for our fiscal year 2020 decreased when compared to net income for our fiscal year 2019 due to the negative effects of COVID-19

on our operations, our adoption of ASC 842, higher food costs and overall expenses, offset by our implementation of the cost cutting

measures and the 2019 Price Increases.

As a percentage of sales, net income in our fiscal year 2020 is 1.93%, as compared to 4.63%

in our fiscal year 2019.

Income (Loss) Attributable to Stockholders.

Net income attributable to stockholders for our fiscal year 2020

decreased $2,538,000 or 69.57% to $1,110,000 from $3,648,000 for our fiscal year 2019.

Net income attributable to

stockholders for our fiscal year 2020 decreased when compared to our fiscal year 2019 primarily due to the negative effects

of COVID-19 on our operations, our adoption of ASC 842, higher food costs and overall expenses, offset by our implementation

of the cost cutting measures, increased revenue at our package retail stores and the 2019 Price Increases.

As a percentage of

sales, net income for our fiscal year 2020 is 0.98%, as compared to 3.14% for our fiscal year 2019.

New Limited Partnership Restaurants

As new restaurants open,

our income from operations will be adversely affected due to our obligation to advance pre-opening costs, including but not limited

to pre-opening rent for the new locations.

During our fiscal year 2019, we had one new restaurant location in Sunrise, Florida

in the development stage and have advanced $337,000 through September 28, 2019.

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 2020, 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, which

shopping center is currently under construction.

Menu Price Increases and Trends

Effective June 16,

we increased menu prices for our bar offerings to target an increase to our bar revenues of approximately 6.2% annually and effective

June 23, 2019 we increased menu prices for our food offerings to target an increase to our food revenues of approximately 3.4%

2019 we increased menu prices for our bar offerings to target an increase to our bar revenues of approximately 6.2% annually and

effective June 23, 2019 we increased menu prices for our food offerings to target an increase to our food revenues of approximately

3.4% annually to offset higher food costs and higher overall expenses.

Prior to these increases, we previously raised menu prices in

the fourth quarter of our fiscal year 2017.

During the next twelve months, if demand for our restaurant and bar offerings remain

substantially similar to the demand during our fiscal year 2019, (including a lack of restaurant and bar sales from Store #19 which

we expect will be closed for our entire fiscal year 2020), of which there can be no assurance, we expect that restaurant and bar

sales in our restaurants as well as gross profit for food and bar operations (including a lack of restaurant and bar sales from

Store #19 which we expect will be closed for our entire fiscal year 2020) should increase as a result of the 2019 Price Increases,

offset partially by higher food costs.

We anticipate that our package liquor store sales will continue to increase, primarily due

to our recently opened (October, 2019) package liquor store in Miami, Florida (Store #45),(excluding package liquor store sales

from Store #19, which we expect will be closed for our entire fiscal year 2020 due to the Store #19 Closure), while gross profit

margin for package liquor store sales will, in all likelihood, decrease.

In addition to the rebuilding

of Store #19, which was closed in October 2018 due to a fire, we have a new “Flanigan’s Seafood Bar and Grill”

restaurant in Sunrise, Florida in the development stage.

During the fourth quarter of our fiscal year 2019, we also signed a lease

for the development of a new “Flanigan’s Seafood Bar and Grill”

in a shopping center in Miramar, Florida, which

shopping center is in the development stage.

We also continue to search for new locations to open restaurants and thereby expand

our business.

We are not actively searching

for locations for the operation of new package liquor stores, but when our attempt to expand “The Whale’s Rib”

restaurant concept in Miami, Florida was abandoned, we decided that the space we had targeted for the “The Whales Rib”

would be ideal for the operation of a package liquor store and during the fourth quarter of our fiscal year 2018, we received governmental

approval to operate a package liquor store.

The new package liquor store opened for business in October, 2019.

During the fourth

quarter of our fiscal year 2019, we also signed a lease for the development of a new “Big Daddy’s Wine & Liquors”

package liquor store in the shopping center in Miramar, Florida adjacent to our new “Flanigan’s Seafood Bar and Grill”,

Prior to these increases, we previously raised menu prices

in the fourth quarter of our fiscal year 2017.

Subsequent to

the end of our fiscal year 2020, we increased menu prices for our bar offerings (effective November 29, 2020) to target an

increase of 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.

COVID-19 has and

will continue to materially and adversely affect our restaurant business for what may be a prolonged period of time.

and disruption has resulted from events and factors that were impossible for us to predict and are beyond our control.

and despite experiencing increased sales and traffic at certain of our package liquor stores, COVID-19 has materially adversely

affected our results of operations for our fiscal year 2020 and will, in all likelihood, impact our results of operations, liquidity

and/or financial condition for our fiscal year 2021.

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.

We are not actively

searching for locations for the operation of new package liquor stores, but when our attempt to expand “The Whale’s

restaurant concept in Miami, Florida was abandoned, we decided that the space we had targeted for the “The Whales

would be ideal for the operation of a package liquor store and during the fourth quarter of our fiscal year 2018, we

received governmental approval to operate a package liquor store at that location.

The new package liquor store (Store #45) located

in Kendall, Florida opened for business in October 2019.

During the fourth quarter of our fiscal year 2019, we entered a lease

to house a new “Big Daddy’s Wine & Liquors”

package liquor store in space adjacent to where we are planning

a new “Flanigan’s Seafood Bar and Grill”, restaurant in a shopping center in Miramar, Florida, which shopping

center is currently under construction.

LIQUIDITY AND CAPITAL RESOURCES

We fund our day to

day operations through cash generated from operations.

As of September 28, 2019, we had cash of approximately $13,672,000, an

increase of $258,000 from our cash balance of $13,414,000 as of September 29, 2018.

During our fiscal year 2019, (i) on March

29, 2019 we paid a cash dividend of 28 cents per share to shareholders of record as of March 15, 2019 (compared to a dividend

of 25 cents per share paid on March 30, 2018 to shareholders of record on March 16, 2018);

and (ii) in the second quarter of

our fiscal year 2019, we purchased the vacant real property in Pompano Beach, Florida for $1,300,000 cash at closing.

Subsequent to the end of our fiscal year 2019, our wholly owned subsidiary, Flanigan’s Calusa Center, LLC, re-financed

its mortgage with our unrelated third party lender, increasing the principal amount from $2.72 million to $7.21 million.

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.

We fund our operations

through cash from operations.

As of October 3, 2020, we had cash of approximately $29,922,000, an increase of $16,250,000 from

our cash balance of $13,672,000 as of September 28, 2019.

During the third quarter of our fiscal year 2020, we, certain of the

entities owning the limited partnership stores (the “LP’s”), franchised stores (the “Franchisees”)

as well as the store we manage but do not own (the “Managed Store”) (collectively, the “Borrowers”), applied

for and received loans from an unrelated third party lender (the “Lender”) pursuant to the Paycheck Protection Program

(the “PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) enacted March 27,

2020, in the aggregate principal amount of approximately $13.1 million (the “PPP Loans”), of which approximately:

$5.9 million was loaned to us;

(ii) $4.1 million was loaned to 8 of the LP’s;

(iii) $2.6 million was loaned to 5 of the Franchisees;

and (iv) $0.5 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.

The PPP Loans,

which are in the form of Notes issued by each of the Borrowers, mature two years from the date of funding (dates ranging from

May 5, 2022 to May 11, 2022) and bear interest at a rate of 1.00% per annum, payable monthly commencing approximately six

months from the date of issuance of the Notes (issuance dates ranging from April 30, 2020 to May 6, 2020).

The Notes may be

prepaid by the applicable Borrower at any time prior to maturity with no prepayment penalties.

Proceeds from the PPP Loans

are 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 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.

No assurance can be given that the

Borrowers will obtain forgiveness of the PPP Loan in whole or in part.

With respect to

any portion of any of the PPP Loans that is not forgiven under the terms of the PPP, such amounts will be subject to customary

provisions for a loan of this type, including customary events of default relating to, among other things, payment defaults, breaches

of the provisions of the applicable PPP Note and cross-defaults on any other loan with the Lender or other creditors.

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

(in thousands)

Net cash and cash equivalents

provided by operating activities

Net cash and cash equivalents

used in investing activities

Net cash and cash equivalents

used in financing activities

Net increase (decrease)

in cash and equivalents

Cash and equivalents,

beginning of year

Cash and equivalents,

Net cash and cash equivalents provided by operating activities

Net cash and cash equivalents used in investing activities

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

Net increase in cash and equivalents

Cash and equivalents, beginning of year

Cash and equivalents, end of year

Capital Expenditures

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 2019, we acquired property and

equipment of $6,323,000, (of which $1,300,000 was for the purchase of vacant real property in Pompano Beach, Florida;

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 2020, we acquired property and equipment of $2,766,000, (of which

$379,000 was for construction in progress;

$595,000 was deposits recorded in other assets and $386,000 was deposits

transferred to construction in progress as of September 29, 2018), which amount included $120,000 for renovations one (1)

existing limited partnership restuarant and $559,000 for renovations to three (3) Company owned restaurants.

fiscal year 2018, we acquired property and equipment of $5,511,000, (of which $81,000 was for the purchase of a vehicle for

$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.

During our fiscal year 2019, we acquired

property and equipment of $6,323,000, (of which $1,300,000 was for the purchase of vacant real property in Pompano Beach, Florida;

$1,058,000 was for construction in progress;

and $146,000 was deposits recorded in other assets as of September 30,

2017), during our fiscal year 2018, which amount included $446,000 for renovations to four (4) existing Company owned

We anticipate the cost of this refurbishment in our fiscal year 2020 will be approximately $750,000, excluding

construction/renovations to Store #19 and Store #85, which funds will be provided from operations.

As of September 28, 2019,

$595,000 was deposits recorded in other assets;

and $386,000 was deposits transferred

to construction in progress as of September 29, 2018), which amount included $120,000 for renovations to one (1) existing limited

partnership restaurant and $559,000 for renovations to three (3) Company-owned restaurants.

We anticipate the cost of this refurbishment

in our fiscal year 2021 will be approximately $950,000, excluding construction/renovations to Store #19 (our combination package

liquor store and restaurant which is being rebuilt due to damages caused by a fire) and Store #85 (our Sunrise, Florida restaurant

location in development), which funds will be provided from operations.

As of October 3,

2020, we had long term debt of $26,323,000, as compared to $13,080,000 as of September 28, 2019.

As of September 28, 2019, we are in

compliance with the covenants of all loans with our lender.

We repaid long term debt,

including auto loans, financed insurance premiums and mortgages in the amount of $2,820,000 and $2,500,000 in our fiscal years

2019 and 2018, respectively.

Our long term debt increased as

of October 3, 2020 as compared to September 28, 2019 due to (i) the PPP Loan to us of $5.9 million;

(ii) the PPP Loans to our eight

limited partnerships of $4.1 million;

(iii) the re-financing of its mortgage loan by our wholly owned subsidiary, Flanigan’s

Calusa Center, LLC, increasing the principal amount borrowed from $2.72 million to $7.21 million;

and (iv) $1,317,000 for financed

insurance premiums, less any payments made on account thereof.

obtaining the PPP Loans, we were in compliance with the financial covenants contained in our loans with our unrelated third

party institutional lender (the “Institutional Lender”) under which as of October 3, 2020, we owe in the

aggregate approximately $12,209,000 (the “Institutional Loans”).

We determined that as of the end of the third

quarter of our fiscal year 2020, we were not in compliance with our financial covenants contained in the Institutional Loans

related to the Rent Adjusted Funded Debt to EBITDA Ratio because our consolidated debt during the third quarter of our fiscal

year 2020 increased due to our repayment obligations under the PPP Loans (the “Covenant Breach’).

Pursuant to the

terms of the Institutional Loans, the Covenant Breach, grants the Institutional Lender the right to exercise certain remedies

under the Institutional Loans, including the right to accelerate the indebtedness owed by us to the Institutional Lender

On August 10, 2020, we received a written waiver of the Covenant Breach from the Institutional Lender, which,

among other things, waives the Covenant Breach through June 30, 2021.

As of October 3, 2020, we are in compliance with the

financial covenants contained in our loans with our Institutional Lender.

There can be no

assurances that we will be in compliance with our financial covenants thereafter due to, among other things, that our results of

operations will likely continue to be materially impacted by the COVID-19 pandemic.

Absent a waiver, failure to be in compliance

with our financial covenants would constitute a default under the Institutional Loans with our Institutional Lender when reported.

Such a default, if not cured or waived, would allow the Institutional Lender to accelerate the maturity of the indebtedness we

owe under the Institutional Loans, making it due and payable at the time.

If maturity of the Institutional Loans were accelerated,

it would have a material adverse impact on our consolidated financial statements and results of operations.

We repaid long term

debt, including auto loans, financed insurance premiums and mortgages in the amount of $2,540,000 and $2,820,000 in our fiscal

years 2020 and 2019, respectively.

(a) Mortgage on Real Property

the first quarter of our fiscal year 2019, we borrowed the sum of $250,000 from a related third party lender (the “$250,000

Loan”).

The proceeds of the $250,000 Loan are being used as working capital.

Our repayment obligations under the $250,000

Loan are secured by a first mortgage on our quadraplex located at 1420 N.E.

50th Court, Fort Lauderdale, Florida 33334.

Loan bears interest at the fixed rate of 4.00% per annum and is amortizable over an eight (8) year period, with our current monthly

payment of principal and interest totaling $3,047.

The entire principal balance and all accrued but unpaid interest are due on

November 1, 2026.

On November 27,

2019, 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.

The principal balance and all accrued interest

of the mortgage loan that had been outstanding matured November 30, 2019.

The re-financed mortgage loan earns interest at the fixed

annual rate of 3.86%, is amortized over twenty (20) years, requires us to pay monthly payments of principal and interest in the

amount of $43,373 with the entire principal balance and all accrued interest due in November 2026.

We intend to use the excess

funds we received from the re-financing of this mortgage loan (approximately $4.4 million) for working capital.

( b) Financed Insurance Premiums

During our fiscal year

2019, we financed the premiums on the following three (3) property and general liability insurance policies, totaling approximately

$1.65 million, which property and general liability insurance includes coverage for our franchises which are not included in our

consolidated financial statements:

the policy year beginning December 30, 2018, our general liability insurance, excluding limited partnerships, is a one (1) year

policy with our insurance carriers, including automobile and excess liability coverage.

The one (1) year general liability insurance

premiums, including automobile and excess liability coverage, total, in the aggregate $620,000, of which $494,000 is financed through

an unaffiliated third party lender (the “Third Party Lender”).

The finance agreement obligates us to repay the amounts

financed together with interest at the rate of 3.85% per annum, over 10 months, with monthly payments of principal and interest,

each in the amount of $39,000.

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.

the policy year beginning December 30, 2018, our general liability insurance for our limited partnerships is a one (1) year policy

with our insurance carriers, including excess liability coverage.

The one (1) year general liability insurance premiums, including

excess liability coverage, total, in the aggregate $521,000, of which $416,000 is financed through the Third Party Lender.

finance agreement obligates us to repay the amounts financed, together with interest at the rate of 3.85% per annum, over 10 months,

with monthly payments of principal and interest, each in the amount of $51,000.

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.

the policy year beginning December 30, 2018, our property insurance is a one (1) year policy.

The one (1) year property insurance

premium is in the amount of $506,000, of which $385,000 is financed through the Third Party Lender.

The finance agreement provides

that we are obligated to repay the amounts financed, together with interest at the rate of 3.85% per annum, over 10 months, with

monthly payments of principal and interest, each in the amount of approximately $42,000.

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

As of September 28, 2019,

the aggregate principal balance owed from the financing of our property and general liability insurance policies is $208,000.

2020, we bound and financed through an unrelated third party lender the premiums on the following property, general liability,

excess liability and terrorism insurance policies:

(i) For the policy year beginning December 30, 2019, our general liability insurance, excluding limited

partnerships, is a one (1) year policy, including automobile and excess liability coverage.

The annual premium for this insurance

coverage is $418,000;

(ii) For the policy year beginning December 30, 2019, our general liability insurance for our limited

partnerships is a one (1) year policy, including excess liability coverage.

The annual premium for this insurance coverage is $459,000;

(iii) For the policy year beginning December 30, 2019, our property insurance is a one (1) year policy

and the annual premium for this insurance coverage is $561,000;

(iv) For the policy year beginning December 30, 2019, our excess liability insurance is a one (1) year

policy and the annual premium for this insurance coverage is $360,000;

(v) For the policy year beginning December 30, 2019, our terrorism insurance is a one (1) year policy

and the annual premium for this insurance coverage is $12,000.

Of the $1,810,000 annual

premium amounts, which includes coverage for our franchises which are not included in our consolidated financial statements, we

financed $1,656,000 through an unaffiliated third party lender.

The finance agreement obligates us to repay the amounts financed

together with interest at the rate of 2.55% per annum, over 11 months, with monthly payments of principal and interest, each in

the amount of $158,000.

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.

As of October 3, 2020,

the aggregate principal balance owed to the third party lender from the financing of our insurance policies is $365,000, excluding

amounts which are reimbursed by our franchises for insurances covering their operations, but including the annual premiums for

boiler insurance ($2,000) and directors and officers liability insurance ($34,000), which were added to the finance agreement during

the third quarter of our fiscal year 2020 and are financed over the balance of the term of the same.

During the third quarter

of our fiscal year 2020, we, certain of the entities owning the limited partnership stores (the “LP’s”), franchised

stores (the “Franchisees”), as well as the store we manage but do not own (the “Managed Store”) (collectively,

the “Borrowers”), applied for and received loans from an unrelated third party lender pursuant to the Paycheck Protection

Program (the “PPP”) under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) enacted

March 27, 2020, in the aggregate principal amount of approximately $13.1 million, (the “PPP Loans”), of which approximately:

(i) $5.9 million was loaned to us ;

(ii) $4.1 million was loaned to 8 of the LP’s ;

(iii) $2.6 million was loaned to 5 of

the Franchisees;

and (iv) $0.5 million was loaned to the Managed Store.

The PPP Loans to the Franchisees and the Managed Store

are not included in our consolidated financial statements.

The PPP Loans,

which are in the form of Notes issued by each of the Borrowers, mature two years from the date of funding (dates ranging from

May 5, 2022 to May 11, 2022) and bear interest at a rate of 1.00% per annum, payable monthly commencing approximately six

months from the date of issuance of the Notes (issuance dates ranging from April 30, 2020 to May 6, 2020).

The Notes may be

prepaid by the applicable Borrower at any time prior to maturity with no prepayment penalties.

Proceeds from the PPP Loans

are 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 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.

No assurance can be given that the

Borrowers will obtain forgiveness of the PPP Loans in whole or in part.

With respect to any portion

of any of the PPP Loans that is not forgiven under the terms of the PPP, such amounts will be subject to customary provisions for

a loan of this type, including customary events of default relating to, among other things, payment defaults, breaches of the provisions

of the applicable PPP Note and cross-defaults on any other loan with the Lender or other creditors.

To conduct certain

of our operations, we lease restaurant and package liquor store space in South Florida from unrelated third parties.

have remaining lease terms of up to 10 years, some of which include options to renew and extend the lease terms for up to an additional

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, common area maintenance and property taxes are not considered to be lease components.

The components

of lease expense are as follows:

Ended October 3, 2020

Operating Lease Expense, which is included in occupancy costs

Supplemental balance sheet information related to leases as follows:

Classification on the Condensed Consolidated Balance Sheet

October 3, 2020

Finance lease assets

Operating lease assets

Finance current liabilities

Operating current liabilities

Operating lease non-current liabilities

Weighted Average Remaining Lease Term:

Finance leases

Operating leases

Weighted Average Discount:

Finance leases

Operating leases

The following table outlines the minimum future lease

payments for the next five years and thereafter:

For fiscal year

Operating Leases

Finance Leases

Total lease payments (Undiscounted cash flows)

Less imputed interest

Total rent expense for

all of our operating leases was approximately $3,963,000 in our fiscal year 2019 and is included in “Occupancy Costs”

in our accompanying consolidated statements of income.

The total rent expense is comprised of the following:

Minimum Base Rent

Contingent Percentage Rent

Construction Contracts

(a ) 13205 Biscayne Boulevard, North Miami, Florida (Store #20)

On June 14, 2017, we entered

into an agreement with a third party unaffiliated general contractor to renovate our restaurant located at 13205 Biscayne Boulevard,

North Miami, Florida, (Store #20) for a total contract price of $880,000.

The renovations include, but are not limited to the construction

of a new kitchen and the expansion of the restaurant into our former package liquor store location.

During the term of the agreement,

we agreed to change orders which had the effect of increasing the total contract price for the renovations to $1,177,000.

our fiscal year 2019, the unaffiliated general contractor completed its work under the agreement and the total contract was paid

During our fiscal year

2018, we entered into an agreement with a third party unaffiliated general contractor to renovate and add an outdoor patio area

to the front of our restaurant located at 13205 Biscayne Boulevard, North Miami, Florida (Store #20) for a total contract price

During the term of the agreement, we agreed to change orders which had the effect of decreasing the total contract

price for the renovation to $880,000.

During our fiscal year 2019, the unaffiliated general contractor completed its work under

the agreement and the total contract was paid in full.

University Drive, Hollywood,

Florida (Store #19)

During our fiscal year

2018 and prior to its being closed in the first quarter of our fiscal year 2019 due to fire damage, we entered into two agreements

with a third party unaffiliated general contractor for design and development services for a total contract price of $127,000 (the

“$127,000 Contract”) and $174,000 (the “$174,000 Contract”).

The $127,000 Contract provided for design

and development services for the construction of a new building (the “New Building”) on a parcel of real property which

we own and which is adjacent to the real property where our combination package liquor store and restaurant located at 2505 N.

University Drive, Hollywood, Florida, (Store #19) operated until it was closed in October 2018 due to fire damage.

Contract provided for design and development services for the renovation of the existing building which housed the combination

package liquor store and restaurant until it was closed in October 2018 due to fire damage.

If we complete the construction of

the New Building and as a result of the fire, the rebuild of the existing building, (the “Rebuilt Building”), we plan

to re-locate our package liquor store located at the property to the New Building and to operate the restaurant located at the

property in the Rebuilt Building.

During the term of the $127,000 Contract, we agreed to a change orders which had the effect of

increasing the total contract price of the same to $138,000, and during the second quarter of our fiscal year 2019, we paid the

balance of the total contract price of the $127,000 Contract, in the amount of $25,000.

Subsequent to the end of our fiscal year

2019, we agreed upon changes to the $127,000 Contract for additional design and development services for the construction of the

New Building which had the effect of increasing the total contract price of the same by $10,000 to $148,000, of which $6,000 has

During the term of the $174,000 Contract, we also agreed to change orders which had the effect of increasing the total

contract price of the same to $187,000, and during the second quarter of our fiscal year 2019, we paid $46,000 as the final payment

of the contract price of the $174,000 Contract, (of which a total of $157,000 was paid), which we cancelled during the first quarter

of our fiscal year 2019 due to the building being damaged by fire.

During the third quarter

of our fiscal year 2019, we entered into an agreement with a third party unaffiliated 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 2018 due to fire damage.

Additionally, during the third quarter of our fiscal year 2019, we entered into

an agreement with a third party unaffiliated general contractor for site work 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.

As of September 28, 2019, we paid $-0- on account of the contract.

Federal Highway, Hallandale Beach,

During the third

quarter of our fiscal year 2019, we entered into an agreement with a third party unaffiliated 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 2018 due to damages caused by a fire, of which $62,000 has been paid.

Additionally, 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 year 2020, we agreed to change orders to the agreement for additional

construction services increasing the total contract price by $112,000 to $1,730,000, of which $-0- has been paid through

October 3, 2020.

Subsequent to the end of our fiscal year 2020, we agreed to additional change orders to the agreement for

additional construction services increasing the total contract price by $28,000 to $1,757,000 of which $64,000 has been

Sunrise Boulevard, Sunrise,

Florida (Store #85)

During the first quarter

of our fiscal year 2019, we entered into an agreement with a third party unaffiliated design group for design and development services

for a contract price of $356,000 (the “$356,000 Contract”), providing for design and development services for the construction

of two (2) new buildings on the real property which we own and where our combination package liquor store and restaurant located

Federal Highway, Hallandale Beach, Florida, (Store #31) operates.

Our plan for the real property was to (i) demolish the

building which currently houses our combination package liquor store and restaurant, (ii) build two new buildings, one of which

will house our package liquor store and the other of which will house our restaurant;

and (iii) enter into a ground lease with

an existing retail tenant for a parcel of land which will not be improved by the two buildings.

During the second quarter of our

fiscal year 2019, we learned that our planned development of Store #31 would cause the loss of too many parking spaces, so we abandoned

our development plans and terminated the $356,000 Contract.

We paid $130,000 on account of the $356,000 Contract and owe no further

amounts under it.

Sunrise Boulevard, Sunrise, Florida

During the third quarter

of our fiscal year 2019, we entered into an agreement with a third party unaffiliated design group for design and development services

of our anticipated new restaurant location at 14301 W.

Sunrise Boulevard, Sunrise, Florida 33323 (Store #85) for a total contract

price of $122,000, of which we paid $77,000 through September 28, 2019.

During the third

quarter of our fiscal year 2019, we also entered into an agreement with a third party unaffiliated 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

$106,000 has been paid through October 3, 2020.

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, of which $-0- has been paid through October 3, 2020.

Subsequent to October 3, 2020, $111,000 has been paid.

Purchase Commitments/Supply

5 unchanged sentences

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

Flanigan’s Fish Company, LLC

During the third quarter

of our fiscal year 2020, we temporarily suspended the operation of our Flanigan’s Fish Company, LLC, a Florida limited liability

company (“FFC”) due to the decrease in demand for imported fresh fish caused by restrictions placed upon the operation

of our restaurants due to COVID-19, relying instead on outside fresh fish purveyors.

The suspension of operations lasted approximately

weeks, after which we resumed operations.

As of October 3, 2020, 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

Purchase of Limited Partnership Interests

During our fiscal year

2019, we purchased from one limited partner (who is not an officer, director or family member of officers or directors) a limited

partnership interest of 0.63% in a limited partnership which owns a restaurant, for a purchase price of $4,800.

During our fiscal

year 2018, we purchased from one limited partner (who is not an officer, director or family member of officers or directors) a

limited partnership interest of 0.21% in a limited partnership which owns a restaurant, for a purchase price of $1,600.

2020, we did not purchase any limited partnership interests.

During our fiscal year 2019, we purchased from one limited partner

(who is not an officer, director or family member of officers or directors) a limited partnership interest of 0.63% in a limited

partnership which owns a restaurant, for a purchase price of $4,800.

Working Capital

5 unchanged sentences

Working capital

Our working capital

as of our fiscal year ended September 28, 2019 increased $749,000 or $13.11% to $6,464,000 from $5,715,000 as of September

29, 2018 notwithstanding our use of $1,300,000 to close on our purchase of the

vacant parcel of property located at 2119 S.E.

9 th Street, Pompano Beach, Florida during the second quarter of our

fiscal year 2019.

During our fiscal year 2018, we used working capital of approximately $2,157,000 towards the renovation of

our restaurant located at 13205 Biscayne Boulevard, North Miami, Florida.

We also used $550,000 to fund the purchase price of

our acquisition of the real property and improvements contiguous to the real property we own where our franchised restaurant

located at 1479 E.

Commercial Boulevard, Fort Lauderdale, Florida (Store #15) operates.

Our working capital as

of our fiscal year ended October 3, 2020 increased $4,682,000 or 72.43% to $11,146,000 from $6,464,000 as of September 28, 2019

due to the cash received from (i) the PPP Loan to us of $5.9 million;

(ii) the PPP Loans to our eight limited partnerships of $4.1

and (iii) the re-financing of its mortgage loan by our wholly owned subsidiary, Flanigan’s Calusa Center, LLC, increasing

the principal amount borrowed from $2.72 million to $7.21 million, offset by $1,281,000 due to our adoption of ASC 842.

our fiscal year 2019, we used working capital of approximately $1,300,000 to close on our purchase of the vacant parcel of property

located at 2119 S.E.

9 th Street, Pompano Beach, Florida.

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 2021.

During our fiscal year

2020, we plan to use certain borrowed funds and insurance proceeds to construct a new building on a parcel of real property which

we own which is adjacent to the real property where our combination package liquor store and restaurant located at 2505 N.

Drive, Hollywood, Florida (Store #19) operated into which we plan to re-locate our package liquor store and to re-build the restaurant.

There can be no assurances as to the timing for us to construct the new building and re-build the restaurant.

While there can be no

assurance due to, among other things, unanticipated expenses or unanticipated decline in revenues, or both, we believe that our

cash on hand, positive cash flow from operations and funds available from our term loan will adequately fund operations, debt reductions

and planned capital expenditures throughout our fiscal year 2020.

2021, we plan to use certain funds on-hand, borrowed funds and/or insurance proceeds (i) to construct a new building on a parcel

of real property which we own which is adjacent to the real property where our combination package liquor store and restaurant

located at 2505 N.

University Drive, Hollywood, Florida (Store #19) operated into which we plan to re-locate our package liquor

store and to re-build the restaurant;

(ii) to exercise the option to purchase the real property and improvements located at 5450

State Road 7, North Lauderdale, Florida from which we operate our combination “Flanigan’s Seafood Bar and Grill”

restaurant and “Big Daddy’s Liquors”

package liquor store (Store #40);

(iii) to exercise the option to purchase

the real property and improvements located at 14301 W.

Sunrise Boulevard, Sunrise, Florida which we are currently developing for

a limited partnership for operation as a “Flanigan’s Seafood Bar and Grill”

restaurant (Store #85);

the cost of renovations to develop the “Flanigan’s Seafood Bar and Grill”

restaurant which we are currently developing

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 restaurant for Store #85.

Off-Balance Sheet Arrangements

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Accounting Pronouncements

May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

2014-09, “Revenue

from Contracts with Customers,”

(ASU 2014-09), which requires an entity to recognize the amount of revenue to which it expects

to be entitled for the transfer of promised goods or services to customers.

The new standard was effective for interim and annual

periods in fiscal years beginning after December 15, 2017.

The standard permits the use of either the retrospective or cumulative

effect transition method.

The adoption of this new guidance did not have a material impact on our consolidated financial

August 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-15 “Classification of

Certain Cash Receipts and Cash Payments”, which addresses how certain cash receipts and cash payments are presented and classified

in the statement of cash flows under Topic 230, “Statement of Cash Flows”, and other Topics.

The new standard

was effective for interim and annual periods in fiscal years beginning after December 15, 2017.

The adoption of this new guidance

did not have a material impact on our consolidated financial statements.

In February 2016, the FASB

issued ASU 2016-02, Leases (Topic 842) .

ASU 2016-02 requires a lessee to recognize on the balance sheet a liability to make

lease payments and a corresponding right-of-use asset for virtually all leases, other than leases with a term of 12 months or less.

The update also requires additional disclosures about the amount, timing and uncertainty of cash flows arising from leases.

2016-02 is effective for annual and interim periods beginning after December 15, 2018, which will require us to adopt these provisions

in the first quarter of our fiscal year 2020.

Early adoption is permitted for financial statements that have not been previously

ASU 2016-02 will be applied on a modified

retrospective basis to each prior reporting period presented with various optional practical expedients.

The discounted minimum

remaining rental payments is the starting point for determining the right-of-use asset and lease liability.

The adoption of the

new guidance will have a material impact on our consolidated financial statements as we will be recording material right-of-use

assets and lease liabilities of $27,822,000 each at the adoption date related to certain of our current equipment, office and operating

The adoption of this standard is expected to have no impact on our cash flows.

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 retrospective approach.

Upon adoption, the Company recorded a right-of-use asset of $27.8 million and

a lease liability of $27.8 million.

At October 1, 2020, the Company decreased the operating lease right-of-use asset by $2.6

million and the operating lease liability by $2.6 million with the reclassification of an operating lease to a finance lease

due to the exercise of a purchase option subsequent to the end of our fiscal year 2020.

The Company recorded a finance lease

right-of-use asset of $4.8 million and a finance lease liability of $4.8 million.

We elected the transition

package of practical expedients, under which the Company does not have 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 12 months or

less from the balance sheet.

This standard had a material impact on the Condensed Consolidated Statements of Income due to the

escalations of rent in the extensions but did not have a material impact on the Condensed Consolidated Statement of Cash Flows.

See Note 13 for further disclosures resulting from the adoption of this new standard.

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.

Critical Accounting Policies

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Consolidation of Limited Partnerships

As of September 28, 2019,

As of October 3, 2020,

we operate eight (8) restaurants as general partner of the limited partnerships that own the operations of these restaurants.

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not included in the calculation of earnings per share.

FASB ASC Topic 740 –

Income Taxes , requires, among other things, recognition of future tax benefits measured at enacted rates attributable to

deductible temporary differences between financial statement and income tax bases of assets and liabilities and to tax net operating

loss and tip credit carryforwards to the extent that realization of said benefits is more likely than not.

For discussion regarding

our carryforwards refer to Note 9 to the consolidated financial statements for our fiscal year 2019.

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 11 to the

consolidated financial statements for our fiscal year 2020.

Other Matters

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What changed 10-K

Item 7. Management’s Discussion and Analysis