What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-01-14 compared with 2021-01-15 · 544 added, 614 removed, 47 unchanged (96% of the section changed)

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

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 2020 Consolidated Financial Statements and the related Notes to Consolidated Financial Statements included elsewhere in

Financial Information Concerning Industry Segments

Our business is conducted principally

in two segments:

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.

Financial Information

Concerning Industry Segments

Our business is conducted in two

the restaurant segment and the package liquor store segment.

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 .

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.

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

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.

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.

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

RESULTS OF OPERATIONS

2 unchanged sentences

53 Weeks Ended

Restaurant, food

Restaurant, bar

Package goods

October 2, 2021

October 3, 2020

(In thousands)

Restaurant food sales

Restaurant bar sales

Package store sales

Franchise related revenues

Other operating income

Rental income

Total Revenues

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 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%.

Other operating income (Loss)

Total Revenue

Comparison of Fiscal Years Ended October 2, 2021 and October

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

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 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 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

Store Sales .

Revenue generated from sales of liquor and related items at package liquor stores totaled $26,276,000 for

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 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 2020 increased $180,000 or 0.16% to $110,066,000 from

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

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.

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.

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.

88 th 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

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 profit is calculated by subtracting the cost of merchandise sold from sales.

Food and Bar Sales .

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 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

Store Sales .

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 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 2020 decreased $474,000 or 1.32% to $35,399,000 from $35,873,000

for our fiscal year 2019.

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

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 2020 decreased

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.

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

Package Liquor Store

Gross profit for package store sales for our fiscal year 2021 decreased to $6,956,000 from $7,084,000 for our fiscal year

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.

Payroll and Related Costs .

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.

and related costs for the fiscal year 2021 were higher due primarily to increased performance bonuses and higher costs for employees such

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 sales in our fiscal year 2020 to 17.63% as compared to 17.92% in our fiscal year 2019.

We anticipate that

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.

Depreciation and amortization for our fiscal year 2020, which is included in selling, general and administrative

expenses, increased $200,000 or 6.58% to $3,240,000 from $3,040,000 for our fiscal year 2019.

As a percentage of revenue, depreciation

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,

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 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 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%

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 2 nd PPP Loans during the second quarter of our fiscal

Interest expense, net, will increase for our fiscal year 2022 due to (i) the $2.2 Million Borrowing;

(ii) the $4.3 Million

and (iii) the borrowing by certain of our limited partnerships of an additional $3.35 million of 2 nd 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, as compared to a benefit of $60,000 for our fiscal year 2020.

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.

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 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,

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.

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.

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 Limited Partnership

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

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.

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.

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.

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 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

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.

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

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 2 nd PPP Loans, of which approximately:

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.

The following table is a summary of our cash flows for our fiscal

years 2021 and 2020.

---------Fiscal Years --------

(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 provided by (used in) financing activities

Net increase in cash and equivalents

Cash and equivalents, beginning of year

Cash and equivalents, end of year

Net cash used in investing activities

Net cash provided by financing activities

Net Increase in Cash and Cash Equivalents

Cash and Cash Equivalents, Beginning

Cash and Cash Equivalents, Ending

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

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;

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 $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

During our fiscal year 2020, we acquired property and equipment of $2,766,000, (of which $379,000 was for construction in

$118,000 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.

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

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

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.

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.

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 2 nd 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

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;

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 Real Property - Sunrise,

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 Real 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.

(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:

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;

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;

the policy year beginning December 30, 2020, our automobile insurance is a one (1) year policy.

The one (1) year automobile insurance

premium is in the amount of $93,000;

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;

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;

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;

(vii) For the policy year

beginning 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

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

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 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

the second quarter of our fiscal year 2021, certain of the LPs, as well as the Managed Store, applied for and received 2 nd

PPP loans, in the aggregate principal amount of approximately $3.98 million (the “2 nd 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 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.

The 2 nd 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 2 nd 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 2 nd 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

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 2 nd PPP Loans.

Construction Contracts

University Drive, Hollywood,

Florida (Store #19)

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 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.

(a) 7990 Davie Road Extension, Hollywood, Florida

(Store #19 – “Big Daddy’s Wine & Liquors”)

During the third quarter of our

fiscal year 2019, we entered into an agreement with a third party unaffiliated general contractor for site work at this location totaling

$1,618,000, (i) to connect the real property where this restaurant operated (Store #19) to city sewer and (ii) to construct a new building

on the adjacent parcel of real property for the operation of a package liquor store.

During our fiscal years 2020 and 2021, we agreed

to change orders to the agreement for additional construction services increasing the total contract price by $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.

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.

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.

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 Parkway, #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 Parkway, #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.

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.

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

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

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.

While we anticipate purchasing

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

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.

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

During our fiscal years 2020 and

2021, 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

The table below summarizes our current assets,

The table below summarizes the current assets,

current liabilities, and working capital as of the end of our fiscal years 2021 and 2020.

3 unchanged sentences

Working Capital

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.

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 2 nd 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.

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

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

We do not have off-balance

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

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.

Sheet Arrangements

Recently Adopted and Recently Issued

Accounting Pronouncements

We do not have off-balance sheet

arrangements.

Adopted and Recently Issued Accounting Pronouncements

Recently Adopted

Effective September 29, 2019,

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.

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.

we made an accounting policy election to exclude leases with an initial term of twelve (12) months or less from the balance sheet.

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.

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

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

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 Lives of Property 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.

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.

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 Lives of Property

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.

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.

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 3, 2020,

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

expect that any expansion which takes place in opening new restaurants will also result in us operating the restaurants as general

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.

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.

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.

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

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.

To date, inflation has not had a material

impact on our operating results, but this circumstance may change in the future if food and fuel costs continue to rise.

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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis