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Item 7. Management’s Discussion and Analysis

2023-01-18 compared with 2022-01-14 · 370 added, 375 removed, 216 unchanged (78% of the section changed)

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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.

In addition, the following discussion and analysis should be read in conjunction with the 2022 and 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

Our business is conducted principally

in two segments:

the restaurant segment and the package liquor store segment.

Financial information broken into these two industry segments for

the two fiscal years ended October 2, 2021 and October 3, 2020 is set forth in the Consolidated Financial Statements which are attached

Financial information broken into these two principal industry

segments for the two fiscal years ended October 1, 2022 and October 2, 2021 is set forth in the Consolidated Financial Statements which

are attached hereto.

As of October 1, 2022, 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.

operated 30 units, consisting of restaurants, sports bar, 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.

An additional limited partnership owned

restaurant located at 11225 Miramar Parkway #250, Miramar, Florida (Store #25) is expected to open for business in February, 2023.

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.

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

We manage and control the operations of the ten restaurants owned by limited partnerships, except

the Fort Lauderdale, Florida restaurant which is managed and controlled by a related franchisee.

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Rental income

Other operating income (Loss)

Other operating income

Total Revenue

Comparison of Fiscal Years Ended October 1, 2022 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.

Total revenue for our fiscal year 2022 increased $20,825,000 or 15.17% to $158,132,000 from $137,307,000 for our fiscal year 2021 due

primarily to increased package liquor store and restaurant sales, increased menu prices, revenue generated from the opening of our limited

partnership owned restaurant in Sunrise, Florida, (Store #85) in March 2022 and the comparatively less adverse effects of COVID-19 on

our operations during our fiscal year 2022 as compared with our fiscal year 2021.

Effective October 3, 2021 and then effective December

19, 2021 we increased menu prices for our food offerings to target an increase to our food revenues of approximately 2.38% and 3.34% annually,

respectively, to offset higher food costs and higher overall expenses and effective December 12, 2021 we increased menu prices for our

bar offerings to target an increase to our bar revenues of approximately 7.80% annually, (collectively the “Recent Price Increases”).

Prior to these increases, we previously raised menu prices in the third quarter of our fiscal year 2021.

Restaurant Food Sales .

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The increase in restaurant food sales for our fiscal year 2022 as compared

to restaurant food sales during our fiscal year 2020 is attributable to increased restaurant traffic, the Recent Price Increases and the

comparatively more adverse effects of COVID-19 on our operations during our fiscal year 2020 as compared with our fiscal year 2021 and

notwithstanding the fifty third week in our fiscal year 2020.

Comparable weekly restaurant food sales (for restaurants, other than for

closures due to COVID-19, open for all of our fiscal years 2021 and 2020, respectively, which consists of nine restaurants owned by us,

(excluding the Hollywood Restaurant) and eight restaurants owned by affiliated limited partnerships) was $1,610,000 and $1,287,000 for

our fiscal years 2021 and 2020, respectively, an increase of 25.10%.

Comparable weekly restaurant food sales for Company-owned restaurants

only was $797,000 and $649,000 for our fiscal years 2021 and 2020 respectively, an increase of 22.80%.

Comparable weekly restaurant food

sales for affiliated limited partnership owned restaurants only was $813,000 and $638,000 for our fiscal years 2021 and 2020, respectively,

an increase of 27.43%.

We expect that restaurant food sales, including non-alcoholic beverages, for our fiscal year 2022 will increase

due to increased restaurant traffic and the Recent Price Increases.

to restaurant food sales during our fiscal year 2021 is attributable to the Recent Price Increases, restaurant food sales generated from

the opening of our limited partnership owned restaurant in Sunrise, Florida, (Store #85) in March 2022, the opening of Brendan’s

Sports Pub (Store #30) in June, 2022 and the comparatively greater adverse effects of COVID-19 on our operations during our fiscal year

2021 as compared with our fiscal year 2022.

Comparable weekly restaurant food sales (for restaurants open for all of our fiscal years

2022 and 2021 respectively, which consists of nine restaurants owned by us and eight restaurants owned by affiliated limited partnerships,

(excluding our Sunrise, Florida location, (Store #85), and Brendan’s Sports Pub, (Store #30), both of which opened for business

during the second quarter of our fiscal year 2022) was $1,798,000 and $1,610,000 for our fiscal years 2022 and 2021, respectively, an

increase of 11.68%.

Comparable weekly restaurant food sales for Company owned restaurants only was $886,000 and $797,000 for our fiscal

years 2022 and 2021, respectively, an increase of 11.17%.

Comparable weekly restaurant food sales for affiliated limited partnership owned

restaurants only, (excluding Store #85 which opened for business during the second quarter of our fiscal year 2022), was $912,000 and

$813,000 for our fiscal years 2022 and 2021 respectively, an increase of 12.18%.

We expect that restaurant food sales, including non-alcoholic

beverages, for our fiscal year 2023 will increase due to increased restaurant traffic and the opening for business of the 2023 Miramar

Restaurant during our fiscal year 2023.

Restaurant Bar Sales .

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to $20,832,000 for our fiscal year 2021.

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%.

The increase in restaurant bar sales during our fiscal year 2022 is primarily due to the Recent

Price Increases, restaurant bar sales generated from the opening of our limited partnership owned restaurant in Sunrise, Florida, (Store

#85) in March 2022, the opening of Brendan’s Sports Pub (Store #30) in June, 2022 and the comparatively more adverse effects of

COVID-19 on our operations during our fiscal year 2021 as compared with our fiscal year 2022.

Comparable weekly restaurant bar sales (for

restaurants open for all of our fiscal years 2022 and 2021 respectively, which consists of nine restaurants owned by us and eight restaurants

owned by affiliated limited partnerships, (excluding our Sunrise, Florida location (Store #85) and Brendan’s Sports Pub (Store #30)

both of which opened for business during the second quarter of our fiscal year 2022) was $487,000 for our fiscal year 2022 and $401,000

for our fiscal year 2021, an increase of 21.45%.

Comparable weekly restaurant bar sales for Company owned restaurants only was $211,000

and $172,000 for our fiscal years 2022 and 2021, respectively, an increase of 22.67%.

Comparable weekly restaurant bar sales for affiliated

limited partnership owned restaurants only was $276,000 and $229,000 for our fiscal years 2022 and 2021 respectively, an increase of 20.05%.

We expect that restaurant bar sales for our fiscal year 2023 will increase due to increased restaurant traffic and the opening for business

of the 2023 Miramar Restaurant during our fiscal year 2023.

Liquor Store Sales .

Revenue generated from sales of liquor and related items at package liquor stores totaled $31,692,000 for

our fiscal year 2022 as compared to $29,304,000 for our fiscal year 2021, an increase of $2,388,000.

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 the COVID-19 pandemic.

The weekly average of same store package liquor store sales, which includes nine (9) Company-owned package

liquor stores, (excluding Store #19, which was closed for our fiscal years 2022 and 2021 due to a fire on October 2, 2018 but re-opened

subsequent to our fiscal year ended October 1, 2022 ), was $609,000 and $564,000 for our fiscal years 2022

and 2021 respectively, an increase of 7.98%.

We expect that package liquor store sales for our fiscal year 2023 will increase due to increased

package liquor store traffic and the opening of the package liquor stores located at 7990 Davie Road Extension, Hollywood, Florida (Store

#19P) which opened for business subsequent to our fiscal year end 2023 and 11225 Miramar Parkway, Miramar, Florida (Store #24)

which we anticipate will open for business during our fiscal year 2023.

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.

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 2022 increased $22,546,000 or 17.52% to $151,202,000 from $128,657,000 for our fiscal year 2021.

was primarily due to increased payroll and an expected general increase in food costs, costs and expenses incurred from the opening of

our limited partnership owned restaurant in Sunrise, Florida, (Store #85) in March 2022, Brendan’s Sports Pub (Store #30) in June,

2022, pre-opening expenses from our limited partnership owned restaurant in Miramar, Florida (Store # 25) and pre-opening expenses from

our package liquor store in Miramar, Florida, (Store #24), partially offset by actions taken by management to reduce and/or control costs.

We anticipate that our operating costs and expenses will continue to increase through our fiscal year 2023.

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.

Operating costs and expenses

increased as a percentage of total revenue to approximately 95.62% in our fiscal year 2022 from 93.70% in fiscal year 2021.

Gross Profit .

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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

during our fiscal year 2022 when compared to our fiscal year 2021 due to higher food costs, partially offset by, among other things, the

Recent Price Increases which did not fully absorb increased costs of restaurant food and bar sales.

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

Gross profit for package store sales for our fiscal year 2022 increased to $8,382,000 from $6,956,000 for our fiscal year

Our gross profit margin, (calculated as gross profit reflected as a percentage of package liquor store sales), for package store

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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.

Payroll and Related

Payroll and related costs for our fiscal year 2022 increased $6,271,000 or 14.43% to $49,736,000 from $43,465,000 for our

fiscal year 2021.

Payroll and related costs for our fiscal year 2022 were higher due primarily to the opening of our limited partnership

owned restaurant in Sunrise, Florida, (Store #85) in March 2022, Brendan’s Sports Pub (Store #30) in June, 2022 and higher costs

for employees such as cooks.

Payroll and related costs as a percentage of total revenue was 31.45% for our fiscal year 2022 and 31.66%

of total revenue for our fiscal year 2021.

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

and rent expense associated with operating lease liabilities under ASC 842) for our fiscal year 2022 increased $436,000 or 6.61% to $7,031,000

from $6,595,000 for our fiscal year 2021.

The decrease in occupancy costs were impacted by the termination of rent for our combination

retail package liquor store and restaurant located at 5450 N.

State Road 7, North Lauderdale, Florida (Store #40), the real property and

improvements of which we purchased on December 31, 2020 and the elimination of occupancy costs due to the elimination of rent for our

restaurant location which we are developing located at 14301 West Sunrise Boulevard, Sunrise, Florida (Store #85), the real property and

improvements of which we purchased on March 2, 2021.

We anticipate that our occupancy costs will increase through our fiscal year 2022

due to the commencement of rent for our retail package liquor store location in a shopping center at 11225 Miramar Parkway, #245, Miramar,

Florida (Store #24) and our restaurant location in a shopping center at 11225 Miramar Parkway, #250, Miramar, Florida (Store #25).

Selling, General and

Administrative Expenses .

Selling, general and administrative expenses (consisting of general corporate expenses, including but

not limited to advertising, insurance, professional costs, clerical and administrative overhead) for our fiscal year 2021 increased $358,000

or 1.80% to $20,275,000 from $19,917,000 for our fiscal year 2020.

Selling, general and administrative expenses decreased as a percentage

of total revenue in our fiscal year 2021 to 14.77% as compared to 17.63% for our fiscal year 2020.

We anticipate that our selling, general

and administrative expenses as a percentage of total revenue will increase through our fiscal year 2022 due primarily to increases in

expenses across all categories.

The increase in occupancy costs was primarily due to the commencement of rent for our retail

package liquor store which we are developing located at 11225 Miramar Parkway, #245, Miramar, Florida (Store #24) and our restaurant location

which we are developing located at 11225 Miramar Parkway, #250, Miramar, Florida (Store #25) during the second quarter of our fiscal year

2022, both of which we anticipate will open during our fiscal year 2023 and Brendan’s Sports Pub (Store #30) which we acquired and

opened for business in June, 2022.

Selling, General and Administrative

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 2022 increased $6,296,000 or 31.05%

to $26,571,000 from $20,275,000 for our fiscal year 2021.

Selling, general and administrative expenses increased as a percentage of total

revenue in our fiscal year 2022 to 16.80% as compared to 14.77% in our fiscal year 2021, due primarily to increases in expenses across

all categories.

We anticipate that our selling, general and administrative expenses as a percentage of total revenue will increase during

our fiscal year 2023 due primarily to increases across all categories.

Depreciation and

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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, for our fiscal year 2022 decreased $181,000 to $757,000 from $938,000 for our fiscal year 2021.

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.

net, decreased for our fiscal year 2022 due to the forgiveness of principal and all accrued interest on the borrowing by certain of our

limited partnerships of an additional $3.35 million of 2 nd PPP Loans during the first quarter of our fiscal year 2022, partially

offset by 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 (Store #20).

expense, net, will increase for our fiscal year 2023 due to interest on our borrowing of $8,900,000 during the fourth quarter of our fiscal

year 2022 from an unrelated third party lender to re-finance the mortgage loan on our property located at 4 N.

Federal Highway, Hallandale

Beach, Florida (Store #31).

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 tax for our fiscal year 2022 was an expense of $763,000, as compared to an expense of $1,185,000 for our fiscal year 2021.

taxes as a percentage of income before provision for income taxes increased for our fiscal year 2022 (7.78%) as compared to our fiscal

year 2021 (6.60%) due primarily to the higher income attributable to the forgiveness of debt of certain of our PPP Loans during our fiscal

income for our fiscal year 2022 decreased $7,716,000 or 46.02% to $9,049,000 from $16,765,000 for our fiscal year 2021 due primarily to

the higher income attributable to the forgiveness of debt of certain of our PPP Loans during our fiscal year 2021 and higher food costs

and overall increased expenses during our fiscal year 2022, partially offset by increased revenue at our restaurants during our fiscal

year 2022 and the Recent Price Increases.

As a percentage of revenue, net income for our fiscal year 2022 is 5.72%, as compared to 12.21%

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.

to Flanigan’s Enterprise, Inc.

Stockholders.

Net income attributable to stockholders for our fiscal year 2022 decreased

$5,472,000 or 46.44% to $6,312,000 from $11,784,000 for our fiscal year 2021 due primarily to the higher income attributable to noncontrolling

interests as all income attributable to the forgiveness of debt of certain of our PPP Loans during our fiscal year 2021, higher net income

attributable to noncontrolling interests as all income attributable to the forgiveness of debt of certain of our PPP Loans was attributed

to our limited partnerships and higher food costs and overall increased expenses during our fiscal year 2022, partially offset by increased

revenue at our restaurants during our fiscal year 2022 and the Recent Price Increases.

As a percentage of revenue, net income attributable

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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.

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 2022, we opened one new restaurant location in Sunrise, Florida for business as a new

“Flanigan’s” and had a second new restaurant location in Miramar, Florida in the development stage, to house a new “Flanigan’s”.

Rent for the new restaurant location in Miramar, Florida commenced during our fiscal year 2022.

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.

During our fiscal year 2022, we

increased menu prices for our food offerings (effective October 3, 2021 and December 19, 2021, respectively) to target an aggregate increase

to our food revenues of approximately 8.83% annually and we increased menu prices for our bar offerings (effective December 12, 2021)

to target an increase to our bar revenues of approximately 7.80% annually to offset higher food and liquor costs and higher overall expenses.

Prior to these increases, we previously raised menu prices in the third quarter of our fiscal year 2021.

COVID-19 has and will continue

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its effect on our operations, liquidity and/or financial condition cannot be accurately predicted.

LIQUIDITY AND CAPITAL RESOURCES

fund our operations through cash from operations and borrowings from third parties.

As of October 2, 2021, we had cash of approximately

$32,676,000, an increase of $2,754,000 from our cash balance of $29,922,000 as of October 3, 2020.

During the third quarter of our fiscal

year 2021, we generated net proceeds of $2.8 million from the re-finance of our mortgage loan encumbering the real property and improvements

located at 13105 – 13205 Biscayne Boulevard, North Miami, Florida where our Flanigan’s Seafood Bar and Grill restaurant and

Big Daddy’s Liquors retail package liquor store operate (Store #20) with an unrelated third-party lender, increasing the principal

amount borrowed from $1.5 million to $4.3 million.

During the second quarter of our fiscal year 2021, we closed on the purchase of the

real property and improvements located at 14301 West Sunrise Boulevard, Sunrise, Florida where we are developing a “Flanigan’s

Seafood Bar and Grill” restaurant (Store #85) for $4,800,000.

We financed this acquisition with a loan from an unrelated third-party

lender in the principal amount of $2.2 million and paid cash for the balance.

During the first quarter of our fiscal year 2021, we closed

on the purchase of the real property and improvements located at 5450 N.

State Road 7, North Lauderdale, Florida where we operate a combination

“Flanigan’s Seafood Bar and Grill” restaurant and “Big Daddy’s Liquors” package liquor store (Store

#40) and paid $1,200,000 cash at closing.

During the second quarter of our fiscal year 2021, six of the entities owning limited partnership

stores (the “LP’s”) and the store we manage but do not own (the “Managed Store”) (collectively, the “Borrowers”),

applied for and received net amounts of approximately $3.98 million from the 2 nd PPP Loans, of which approximately:

million was loaned to six of the LP’s ;

LIQUIDITY AND CAPITAL

We fund our operations through

cash from operations and borrowings from third parties.

As of October 1, 2022, we had cash of approximately $42,138,000, an increase of

$9,462,000 from our cash balance of $32,676,000 as of October 2, 2021.

During our fiscal year 2022, we generated proceeds from the closing

of the sale, in a private offering of limited partnership interests in (i) CIC Investors #85, Ltd., the limited partnership which owns

and operates the 2022 Sunrise Restaurant, of $5,000,000, of which we purchased $370,000 of limited partnership interests;

Investors #25, Ltd., the limited partnership which owns and is developing the “Flanigan’s” restaurant located at 11225

Miramar Parkway, Suite 250, Miramar, Florida 33025 of $4,000,000.

We also generated net proceeds of $7.88 million from the re-finance

of our mortgage loan encumbering the real property and improvements located at 4 N.

Federal Highway, Hallandale Beach, Florida where our

Flanigan’s Seafood Bar and Grill restaurant and Big Daddy’s Liquors retail package liquor store operate (Store #31) with an

unrelated third-party lender, increasing the principal amount we borrowed to $8.90 million (the “Hallandale Mortgage Debt”).

During our fiscal year 2022, we requested and received a loan advance of $697,000 from an entity managed by a member of our Board of Directors

and who is also our Chief Financial Officer, which entity currently holds a first priority mortgage note on our real property and improvements

where our restaurant located at 2600 West Davie Boulevard, Fort Lauderdale, Florida operates (the “West Davie Mortgage Note”),

which loan advance increased the principal amount we borrowed to $1.1 million (the “West Davie Mortgage Debt”).

second quarter of our fiscal year 2021, certain of the entities owning the limited partnership stores (the “LP’s”),

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 $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 (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.

During first quarter of our fiscal year 2022, we

applied for forgiveness for all PPP Loans, including the Managed Store, and as of October 1, 2022, the entire amount of principal and

accrued interest was forgiven under the 2 nd PPP Loans.

During the third quarter of our fiscal year 2021, we generated net proceeds

of $2.8 million from the re-finance of our mortgage loan encumbering the real property and improvements located at 13105 – 13205

Biscayne Boulevard, North Miami, Florida where our Flanigan’s Seafood Bar and Grill restaurant and Big Daddy’s Liquors retail

package liquor store operate (Store #20) with an unrelated third-party lender, increasing the principal amount borrowed from $1.5 million

to $4.3 million.

During the fourth quarter of our fiscal year 2022 we closed on the purchase of a 4 COP Quota Liquor License for Broward

County for $446,000.

This 4 COP Quota Liquor license will be used at our package liquor store located at 11225 Miramar Parkway #245, Miramar,

Florida (Store #24), which is currently under development.

During the third quarter of our fiscal year 2022, we closed on the purchase

of the assets of the business known as “Brendan’s Sports Pub” located at 868 South Federal Highway, Pompano Beach, Florida

for a purchase price of $75,000.

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 for $4,800,000 where our “Flanigan’s Seafood Bar and

Grill” restaurant (Store #85) operates.

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.

inflationary factors affecting our operations are food, beverage and labor costs.

Supply chain issues also contribute to inflation.

including supply chain issues are having a material impact on our operating results, especially rising food, fuel and labor costs.

Notwithstanding

the negative effects of COVID 19 and inflation, including supply chain issues 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

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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;

During our fiscal year 2022, we acquired property and equipment of $12,655,000, (of which $3,849,000 was

for construction in progress;

$3,258,000 construction in progress transferred to property and equipment;

$969,000 construction in progress

in accounts payable;

$50,000 was deposits recorded in other assets;

and $48,000 was deposits transferred to construction in progress as of October 3, 2020), which

amount included $464,000 for renovations to two (2) existing limited partnership restaurant and $440,000 for renovations to five(5) Company-owned

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

and $512,000 was deposits transferred to construction in progress

as of October 2, 2021), which amount included $937,000 for renovations to three (3) existing limited partnership restaurants and $159,000

for renovations to two (2) Company-owned 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

$14,000 was deposits recorded in other assets;

and $10,000 was deposits transferred to construction in progress as of September

28, 2019), which amount included $278,000 for renovations to two (2) existing limited partnership restaurant and $466,000 for renovations

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 restaurants and $440,000 for renovations

to five (5) Company-owned restaurants.

We anticipate the cost of this refurbishment in our fiscal year 2023 will be approximately $650,000,

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

2, 2021, we are in compliance with the covenants of all loans with our lenders.

excluding construction/renovations to Store #19R (our restaurant which is being rebuilt due to damages caused by a fire) and Store #24

(our Miramar, Florida package store location in development), although capital expenditures for our refurbishing program for our fiscal

year 2023 may be significantly higher.

As of October 1, 2022, we had long

term debt of $25,389,000, as compared to $22,115,000 as of October 2, 2021.

Our long term debt increased as of October 1, 2022 as compared

to October 2, 2021 due (i) to an approximately $8.0 million increase in the amount we borrowed under the Hallandale Mortgage Debt;

to a $403,000 increase in the amounts we borrowed to finance certain insurance premiums;

and (iii) to a $697,000 increase in the amount

we borrowed under the West Davie Mortgage Debt less any payments on account thereof, partially offset by the forgiveness of all principal

and accrued interest of the 2 nd PPP Loans.

As of October 1, 2022, we are in compliance with the covenants of all loans with

(See Item 7A.

Quantitative and Qualitative Disclosures About Market Risk for a discussion of interest rate swap agreements

that we used to fix interest rate fluctuations on certain of our borrowings on page 52.)

We repaid long term debt,

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2021, 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.

(a) Advance on Existing Mortgage Loan –

Fort Lauderdale, Florida

During our fiscal year 2022, we

requested and received a loan advance of $697,000 from an entity controlled by a member of our Board of Directors, which entity currently

holds a first priority mortgage note on our real property and improvements where our restaurant located at 2600 West Davie Boulevard,

Fort Lauderdale, Florida operates (the “West Davie Mortgage Note”).

Including the $697,000 advance, the principal amount outstanding

amount owed under the West Davie Mortgage Note as of October 1, 2022 is $1,100,000.

The West Davie Mortgage Note accrues interest at 6%

annually, (increased from 5% annually), is amortizable over 15 years with monthly installments of principal and interest of approximately

$9,300 required to be made and a final balloon payment of approximately $487,000 required to be made August 1, 2032.

(b) Re-Finance of Mortgage on Real Property

– Hallandale Beach, Florida

During our fiscal year 2022, we

re-financed our mortgage debt with our non-affiliated third-party lender secured by our real property located at 4 N.

Federal Highway,

Hallandale, Florida where our combination package liquor store and restaurant (Store #31) operates and borrowed an additional $8,012,000

raising the principal balance to $8,900,000, (the “$8.90M Mortgage”).

The $8.90M Mortgage bears interest at a variable rate

equal to the BSBY Screen Rate – 1 Month plus 1.50%.

We entered into an interest rate swap agreement to hedge the interest rate risk,

which fixed the interest rate on the $8.90M Mortgage at 4.90% per annum throughout its term.

The $8.90M Mortgage is fully amortized over

fifteen (15) years, with our monthly payment of principal and interest totaling $33,000.

(c ) Financed Insurance Premiums

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is in the amount of $700,000;

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;

policy year beginning December 30, 2021, our excess liability insurance are two (2) one (1) year policies.

The aggregate one (1) year

excess liability insurance premiums are in the amount of $576,000;

the policy year beginning December 30, 2021, our terrorist insurance is a one (1) year policy.

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is in the amount of $8,900;

(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.

(vii) For the policy year beginning December 30, 2021,

our equipment breakdown insurance is a one (1) year policy.

The one (1) year equipment breakdown insurance premium is in the amount of

Of the $2,542,000 annual premium

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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 1, 2022, 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 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.

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.

principal balance owed from the financing of our property and general liability insurance policies, excluding coverage for our franchises,

(of approximately $136,000), which are not included in our consolidated financial statements is $507,000.

Construction Contracts

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to change orders to the agreement for additional construction services increasing the total contract price by $624,000 to $2,242,000,

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.

of which $1,951,000 has been paid through October 1, 2022 and $-0- has been paid subsequent to the end of our fiscal year 2022 through

the date of filing of this annual report.

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.

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.

During the first quarter of our

fiscal year 2022, we entered into an agreement with a third party unaffiliated general contractor to re-build our restaurant at this location

for $2,515,000, of which $226,000 has been paid through October 1, 2022 and $75,000 has been paid subsequent to the end of our fiscal

year 2022 through the date of filing of this annual report.

Sunrise Boulevard, Sunrise, Florida

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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.

fiscal year 2019, we 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.

During our fiscal

year 2020, we agreed upon amendments to the $122,000 Contract for additional design and development services which had the effect of increasing

the total contract price by $18,000 to $140,000, of which $131,000 has been paid through October 1, 2022.

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 through our fiscal year 2022 we agreed to change orders to the agreement for additional interior

renovations increasing the total contract price by $215,000 to $1,451,000, which has been paid in full by the end of our fiscal year 2022.

During the second quarter of our fiscal year 2022, we entered into an agreement with a third party unaffiliated general contractor for

exterior renovations at this location totaling $343,000 and through our fiscal year 2022 we agreed to change orders to the agreement for

additional interior renovations increasing the total contract price by $61,000 to $404,000, of which $353,000 has been paid through October

1, 2022 and $-0- has been paid subsequent to the end of our fiscal year 2022 through the date of filing of this annual report.

(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.

(Store #25 - “Flanigan’s”)

During the second quarter of our

fiscal year 2022, we entered into an agreement with a third party unaffiliated general contractor for interior renovations at this location

totaling $1,421,000, and through our fiscal year 2022 we agreed to change orders to the agreement increasing the total contract price

by $128,000 to $1,549,000 of which $932,000 has been paid through October 1, 2022 and $226,000, has been paid subsequent to the end of

our fiscal year 2022 through the date of filing of this annual report.

(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

During the first quarter

of our fiscal year 2022, 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.

location totaling $317,000, and through our fiscal year 2022 we agreed to change orders to the agreement increasing the total contract

price by $45,000 to $362,000 of which $316,000 has been paid through October 1, 2022 and $-0- has been paid subsequent to the end of our

fiscal year 2022 through the date of filing of this annual report.

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

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.

adequate supply of baby back ribs for our restaurants for calendar years 2022 and 2023, we entered into purchase agreements with our current

rib supplier, whereby we agreed to purchase approximately $10.4 million and $ 6.8 million of “2.25 & Down Baby Back Ribs”

(industry jargon for the weight range in which slabs of baby back ribs are sold) from this vendor during calendar years 2022 and 2023,

at prescribed costs, which we believe are competitive.

The decrease in our cost of baby back ribs for calendar year 2023 as compared to

calendar year 2022 is due to a decrease in market price.

While we anticipate purchasing

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In addition, the 49%

of FFC owned by the unrelated third party is recognized as noncontrolling interest in our consolidated financial statements.

of FFC owned by the unrelated third party is recognized as a noncontrolling interest in our consolidated financial statements.

Purchase of Limited Partnership

During our fiscal years 2020 and

During our fiscal year 2022 we

purchased 74 limited partnership units (7.4% limited partnership interest) in CIC Investors #85, Ltd.

During our fiscal year

2021, we did not purchase any limited partnership interests.

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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.

as of October 1, 2022 from our working capital as of October 2, 2021 due to our increased borrowings resulting from the Hallandale Mortgage

Debt and the West Davie Mortgage Debt, significant portions of which we classified as long term liabilities as of October 1, 2022.

While there can be no assurance

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

flow from operations and funds available from our borrowings will adequately fund operations, debt reductions and planned capital expenditures

throughout our fiscal year 2022.

due to, among other things, unanticipated expenses or unanticipated decline in revenues, or both, especially in the current economic conditions,

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 2023.

During our fiscal year 2023, 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.

plan to use certain funds on-hand, funds raised through our private offerings, borrowed funds and/or insurance proceeds 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;

and (ii) for the cost of renovations to develop the “Big Daddy’s

Wine & Liquors” which we are currently developing at 11225 Miramar Parkway, #245, Miramar, Florida (Store #24).

no assurances as to the timing for us to re-build the restaurant for Store #19 or to complete the renovations for the retail package liquor

store for our Store #24.

Sheet Arrangements

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Recently Adopted

Effective September 29, 2019,

we adopted Accounting Standards Codification 842, Leases (“ASC 842”).

The new guidance requires that lease arrangements be

presented on the lessee’s balance sheet by recording a right-of-use asset and a lease liability equal to the present value of the

related future minimum lease payments.

We adopted the standard in the first quarter of fiscal 2020, using the modified retrospective approach.

We elected the transition package

of practical expedients, under which we are not required to reassess (1) whether any expired or existing contracts are leases, or contain

leases, (2) the lease classification for any expired or existing leases, and (3) initial direct costs for any existing leases.

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 accounting pronouncements

that we have recently adopted.

The FASB issued guidance, Reference

Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedient

and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected

by reference rate reform if certain criteria are met.

In response to the concerns about structural risks of interbank offered rates (“IBORs”)

and, particularly, the risk of cessation of the LIBOR, regulators in several jurisdictions around the world have undertaken reference

rate reform initiatives to identify alternative reference rates that are more observable or transaction based and less susceptible to

manipulation.

This accounting standards update provides companies with optional guidance to ease the potential accounting burden associated

with transitioning away from reference rates that are expected to be discontinued.

LIBOR rates will be published until June 30, 2023.

All principal and interest of the Term Loan was paid in full as of December 28, 2022, so the discontinuance of LIBOR rates will have no

impact on us.

There are no recently issued accounting

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As of October 1, 2022, 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.

ten (10) restaurants as general partner of the limited partnerships that own the operations of these restaurants.

We expect that any expansion

which takes place in opening new restaurants will also result in us operating the restaurants as general partner.

In addition to the general

partnership interest we also purchased limited partnership units ranging from 0% to 49% of the total units outstanding.

As a result of

these controlling interests, we consolidate the operations of these limited partnerships with ours despite the fact that we do not own

in excess of 50% of the equity interests.

All intercompany transactions are eliminated in consolidation.

The non-controlling

interests in the earnings of these limited partnerships are removed from net income and are not included in the calculation of earnings

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

1 unchanged sentence

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.

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 12 to the consolidated financial statements for our fiscal year 2022.

Effective September 29, 2019,

we adopted Accounting Standards Codification Topic 842, Leases (“ASC 842”), which 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.

This standard had a material impact on our 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.

Estimates associated with leases include lease classification,

discount rate and lease term.

Loyalty Programs

We offer loyalty programs to customers

of our restaurants and package liquor stores.

The gift cards distributed as a part of our loyalty programs have expiration dates and we

estimate breakage for such gift cards.

Other Matters

Impact of Inflation

The primary inflationary factors

affecting our operations are food, beverage and labor costs.

A large number of restaurant personnel are paid at rates based upon applicable

minimum wage and increases in minimum wage directly affect labor costs.

Although inflation has had a material impact on our operating

results, we have offset increased costs by increasing our menu prices.

The primary inflationary factors affecting our

operations are food, beverage and labor costs.

A large number of restaurant personnel are paid at rates based upon applicable minimum

wage and increases in minimum wage directly affect labor costs.

Inflation is having a material impact on our operating results, especially

rising food, fuel and labor costs.

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