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Item 7. Management’s Discussion and Analysis

2025-12-19 compared with 2024-12-27 · 298 added, 298 removed, 120 unchanged (83% 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 2024 and 2023 Consolidated Financial Statements

and the related Notes to Consolidated Financial Statements included elsewhere in this report.

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

We discuss such risks, uncertainties and other factors throughout this report and specifically under the captions “Risk

In addition, the following discussion and analysis should be read in conjunction with the 2025 and 2024 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 principally

in two segments:

Our business is conducted

principally in two segments:

the restaurant segment and the package liquor store segment.

Financial information broken into these two principal industry

segments for the two fiscal years ended September 28, 2024 and September 30, 2023 is set forth in the Consolidated Financial Statements

which are attached hereto.

As of September 28, 2024, we (i)

operated 32 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.

Financial information broken into these two

principal industry segments for the two fiscal years ended September 27, 2025 and September 28, 2024 is set forth in the Consolidated

Financial Statements which are attached hereto.

As of September 27, 2025,

we (i) operated 32 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.

Franchised Units .

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.

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

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Franchise related revenues

Rental income

Other revenues

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Comparison of Fiscal Years Ended September 27, 2025 and September

revenue for our fiscal year 2024 increased $13,925,000 or 7.98% to $188,321,000 from $174,396,000 for our fiscal year 2023 due primarily

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

restaurant in Hollywood, Florida (Store #19R) in March 2024, the operation of our limited partnership owned restaurant in Miramar, Florida

(Store #25) and our package liquor stores in Miramar, Florida (Store #24) and Hollywood, Florida (Store #19P) for our entire fiscal year

2024 as opposed to a part of our fiscal year 2023.

Effective August 25, 2024, we increased menu prices for our bar offerings to target

an increase to our bar revenues of approximately 5.63% annually to offset higher food and liquor costs.

Effective March 26, 2023 we increased

menu prices for our food offerings to target an increase to our food revenues of approximately 2.06% and effective March 20, 2023 we increased

menu prices for our bar offerings to target an increase to our bar revenues of approximately 5.65% annually, to offset higher food costs

and higher overall expenses (collectively the “Recent Price Increases”).

Prior to these increases, we previously raised menu

prices in the first quarter of our fiscal year 2022.

Total revenue for our fiscal year 2025 increased $18,032,000 or 9.63% to $205,248,000 from $187,216,000 for our fiscal year 2024 due

primarily to increased package liquor store and restaurant sales, increased menu prices and revenue generated from our Company-owned

restaurant in Hollywood, Florida (Store #19R) for our entire fiscal year 2025 as opposed to a part of our fiscal year 2024.

Effective February 23, 2025, we increased our menu prices for our bar offerings to target an increase to our bar revenues of

approximately 0.84% annually.

Effective December 4, 2024, we increased our menu prices for our bar offerings to target an increase

to our bar revenues of approximately 4.90% annually and effective November 17, 2024 we increased our menu prices for our food

offerings to target an increase to our food revenues of approximately 4.14% annually.

Effective August 25, 2024, we increased menu

prices for our bar offerings to target an increase to our bar revenues of approximately 5.63% annually to offset higher food and

liquor costs and higher overall expenses (collectively the “Recent Price Increases”).

Restaurant Food Sales .

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The increase in restaurant food sales is attributable to the Recent Price

Increases and food sales generated from the opening of corporate owned restaurant in Hollywood, Florida (Store #19R) during the second

quarter of our fiscal year 2024 and the operation of our limited partnership owned restaurant in Miramar, Florida (Store #25) for our

entire fiscal year 2024 as opposed to a part of our fiscal year 2023.

Comparable weekly restaurant food sales for restaurants open for

all of our fiscal years 2024 and 2023, which consists of ten restaurants owned by us (excluding our Hollywood, Florida location (Store

#19R) which opened for business during the second quarter of our fiscal year 2024) and nine restaurants owned by affiliated limited partnerships,

(excluding our Miramar, Florida location (Store #25) which opened for business during the third quarter of our fiscal year 2023) was $1,987,000

and $1,967,000 for our fiscal years 2024 and 2023 respectively, an increase of 1.02%.

Comparable weekly restaurant food sales for Company-owned

restaurants only (excluding our Hollywood, Florida location (Store #19R) which opened for business during the second quarter of our fiscal

year 2024) was $938,000 and $923,000 for our fiscal years 2024 and 2023, respectively, an increase of 1.63%.

Comparable weekly restaurant

food sales for affiliated limited partnership owned restaurants only, (excluding our Miramar, Florida location (Store #25) which opened

for business during the third quarter of our fiscal year 2023), was $1,049,000 and $1,044,000 for our fiscal years 2024 and 2023 respectively,

Increases and food sales generated from our Company-owned restaurant in Hollywood, Florida (Store #19R) for our entire fiscal year 2025

as opposed to a part of our fiscal year 2024.

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

2025 and 2024, which consists of ten restaurants owned by us (excluding our Hollywood, Florida location Store #19R which opened for business

during the second quarter of our fiscal year 2024) and ten restaurants owned by affiliated limited partnerships was $2,245,000 and $2,122,000

for our fiscal years 2025 and 2024 respectively, an increase of 5.80%.

Comparable weekly restaurant food sales for Company-owned restaurants

only (excluding our Hollywood, Florida location Store #19R which opened for business during the second quarter of our fiscal year 2024)

was $997,000 and $938,000 for our fiscal years 2025 and 2024, respectively, an increase of 6.29%.

Comparable weekly restaurant food sales

for affiliated limited partnership owned restaurants only was $1,248,000 and $1,184,000 for our fiscal years 2025 and 2024 respectively,

an increase of 5.41%.

We expect that restaurant food sales, including non-alcoholic beverages, for our fiscal year 2026 will increase

due to increased restaurant traffic and the operation of our Company-owned Store #19R for our entire fiscal year 2025.

due to increased restaurant traffic.

Restaurant Bar Sales.

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to $30,010,000 for our fiscal year 2024.

The increase in restaurant bar sales is attributable to the Recent Price Increases and food sales

generated from the opening of corporate owned restaurant in Hollywood, Florida (Store #19R) during the second quarter of our fiscal year

2024 and the operation of our limited partnership owned restaurant in Miramar, Florida (Store #25) for our entire fiscal year 2024 as

opposed to a part of our fiscal year 2023.

Comparable weekly restaurant bar sales for restaurants open for all of our fiscal years 2024

and 2023 respectively, which consists of ten restaurants owned by us (excluding our Hollywood, Florida location (Store #19R) which opened

for business during the second quarter of our fiscal year 2024) and nine restaurants owned by affiliated limited partnerships, (excluding

our Miramar, Florida location (Store #25), which opened for business during the third quarter of our fiscal year 2023) was $526,000 for

our fiscal year 2024 and $539,000 for our fiscal year 2023, a decrease of 2.41%.

Comparable weekly restaurant bar sales for Company-owned

restaurants only (excluding our Hollywood, Florida location (Store #19R) which opened for business during the second quarter of our fiscal

year 2024) was $234,000 and $231,000 for our fiscal years 2024 and 2023 respectively, an increase of 1.30%.

Comparable weekly restaurant

bar sales for affiliated limited partnership owned restaurants only (excluding our Miramar, Florida location (Store #25) which opened

for business during the third quarter of our fiscal year 2023) was $292,000 and $307,000 for our fiscal years 2024 and 2023 respectively,

a decrease of 4.89%.

We expect that restaurant bar sales for our fiscal year 2025 will increase due to the operation of our Company-owned

Store #19R for our entire fiscal year 2025.

Package Liquor Store Sales .

Revenue generated from sales of liquor and related items at package liquor stores totaled $40,497,000 for our fiscal year 2024 as compared

to $35,187,000 for our fiscal year 2023, an increase of $5,310,000.

This increase was primarily due to increased package liquor store

traffic and the package liquor sales generated from the operation of our package liquor stores in Hollywood, Florida (Store #19P) and

Miramar, Florida (Store #24), for our entire fiscal year 2024 as opposed to a part of our fiscal year 2023.

The weekly average of same

store package liquor store sales, which includes nine (9) Company-owned package liquor stores, (excluding Store #19P which reopened during

the first quarter of fiscal year 2023, and Store #24 which opened for business during the second quarter of our fiscal year 2023), was

$674,000 and $631,000 for our fiscal years 2024 and 2023 respectively, an increase of 6.81%.

We expect that package liquor store sales

for our fiscal year 2025 will increase due to increased package liquor store traffic.

The increase in restaurant bar sales is attributable to the Recent Price Increases and bar sales

generated from our Company-owned restaurant in Hollywood, Florida (Store #19R) for our entire fiscal year 2025 as opposed to a part of

our fiscal year 2024.

Comparable weekly restaurant bar sales for restaurants open for all of our fiscal years 2025 and 2024 respectively,

which consists of ten restaurants owned by us (excluding our Hollywood, Florida location Store #19R which opened for business during

the second quarter of our fiscal year 2024) and ten restaurants owned by affiliated limited partnerships was $583,000 for our fiscal

year 2025 and $562,000 for our fiscal year 2024, an increase of 3.74%.

Comparable weekly restaurant bar sales for Company-owned restaurants

only (excluding our Hollywood, Florida location Store #19R which opened for business during the second quarter of our fiscal year 2024)

was $244,000 and $234,000 for our fiscal years 2025 and 2024 respectively, an increase of 4.27%.

Comparable weekly restaurant bar sales

affiliated limited partnership owned restaurants only was $339,000 and $328,000 for our fiscal years 2025 and 2024 respectively, an increase

We expect that restaurant bar sales for our fiscal year 2026 will increase due to increased restaurant traffic.

Package Liquor Store

Revenue generated from sales of liquor and related items at package liquor stores totaled $46,988,000 for our fiscal year

2025 as compared to $40,497,000 for our fiscal year 2024, an increase of $6,491,000.

This increase was primarily due to increased package

liquor store traffic.

The weekly average of same store package liquor store sales, which includes eleven (11) Company-owned package liquor

stores was $904,000 and $779,000 for our fiscal years 2025 and 2024 respectively, an increase of 16.05%.

We expect that package liquor

store sales for our fiscal year 2026 will increase due to increased package liquor store traffic.

Costs and Expenses .

Costs and expenses (consisting of cost of merchandise sold, payroll and related costs, operating expenses, occupancy costs, selling, general

and administrative expenses and depreciation and amortization), for our fiscal year 2024 increased $14,553,000 or 8.70% to $181,925,000

Costs and expenses (consisting of cost of merchandise sold, payroll and related costs, operating expenses, occupancy costs, selling,

general and administrative expenses and depreciation and amortization) for our fiscal year 2025 increased $15,128,000 or 8.34% to $196,503,000

from $181,375,000 for our fiscal year 2024.

The increase was primarily due to increased payroll, increased consultant fees to improve

our accounting process, an expected general increase in food costs, costs and expenses incurred from the opening of our Company-owned

restaurant in Hollywood Florida (Store #19R) in March 2024, the operation of our limited partnership owned restaurant in Miramar, Florida

(Store #25), and our package liquor stores in Miramar, Florida (Store #24) and Hollywood, Florida (Store #19P), for our entire fiscal

year 2024 as opposed to a part of our fiscal year 2023, partially offset by actions taken by management to reduce and/or control costs.

The increase was primarily due to increased payroll, an expected general increase in food

costs and overall expenses, as well as costs and expenses incurred from our Company-owned restaurant in Hollywood Florida (Store #19R)

for our entire fiscal year 2025 as opposed to a part of our fiscal year 2024, 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 2026.

Operating costs and expenses

increased as a percentage of total revenue to approximately 96.60% in our fiscal year 2024 from 95.97% in our fiscal year 2023.

costs and expenses decreased as a percentage of total revenue to approximately 95.74% in our fiscal year 2025 from 96.88% in our fiscal

Gross Profit .

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Gross profit for food and bar sales for our fiscal year 2025 increased to $104,091,000 from $94,943,000 for our fiscal

Gross profit margin for the restaurant food and bar sales decreased during our fiscal year 2024 when compared to our fiscal

year 2023 due to higher food costs partially offset by, among other things, the Recent Price Increases.

Our gross profit margin for restaurant

food and bar sales (calculated as gross profit reflected as a percentage of restaurant food and bar sales), was 65.57% for our fiscal

year 2024 and 66.61% for our fiscal year 2023.

Gross profit margin for the restaurant food and bar sales increased during our fiscal year 2025 when compared to our fiscal

year 2024 due to the Recent Price Increases, partially offset by higher food costs.

Our gross profit margin for restaurant food and bar

sales (calculated as gross profit reflected as a percentage of restaurant food and bar sales), was 66.61% for our fiscal year 2025 and

65.57% for our fiscal year 2024.

Package Store Sales .

Gross profit for package store sales for our fiscal year 2025 increased to $11,803,000 from $10,369,000 for our fiscal year 2024.

profit margin, (calculated as gross profit reflected as a percentage of package liquor store sales), for package store sales was 25.60%

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

25.12% for our fiscal year 2025 and 26.60% for our fiscal year 2024.

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

will decrease for our fiscal year 2025 due to higher costs and a reduction in pricing of certain package store merchandise to be more

We anticipate that the gross profit margin for package liquor store

merchandise will decrease for our fiscal year 2026 due to higher costs and a reduction in pricing of certain package store merchandise

to remain competitive.

Payroll and Related

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fiscal year 2024.

Payroll and related costs for our fiscal year 2024 were higher due primarily to the opening of our corporate owned restaurant

in Hollywood, Florida (Store #19R) in March 2024, the operation of our limited partnership owned restaurant in Miramar, Florida (Store

#25) and our package liquor stores in Miramar, Florida (Store #24) and Hollywood, Florida (Store #19P) for our entire fiscal year 2024

as opposed to a part of our fiscal year 2023 and the increase to the Florida minimum wage.

Payroll and related costs as a percentage of

total revenue was 31.51% for our fiscal year 2024 and 32.46% of total revenue for our fiscal year 2023.

Payroll and related costs for our fiscal year 2025 are higher due primarily to the operation of our Company-owned restaurant

in Hollywood, Florida (Store #19R) for our full fiscal year 2025 as opposed to part of our fiscal year 2024 and the increase to the Florida

minimum wage.

Payroll and related costs as a percentage of total revenue was 31.04% for our fiscal year 2025 and 31.70% of total revenue

for our fiscal year 2024.

Operating Expenses .

Operating expenses (including but not limited to utilities, insurance, cleaning, credit card fees, supplies, security, and other costs

closely related to running restaurant and package operations) for our fiscal year 2024 increased $1,234,000 or 5.22% to $24,892,000 from

$23,658,000 for our fiscal year 2023 due primarily to the opening of our corporate owned restaurant in Hollywood, Florida (Store #19R)

in March 2024, the operation of our limited partnership owned restaurant in Miramar, Florida (Store #25) and our package liquor stores

in Miramar, Florida (Store #24) and Hollywood, Florida (Store #19P) for our entire fiscal year 2024 as opposed to a part of our fiscal

year 2023, inflation and otherwise due to increases in expenses across all categories.

closely related to running restaurant and package operations) for our fiscal year 2025 increased $2,737,000 or 11.08% to $27,438,000

from $24,701,000 for our fiscal year 2024 due primarily to the operation of our Company-owned restaurant in Hollywood, Florida (Store

#19R) for our full fiscal year 2025 as opposed to part of our fiscal year 2024, inflation and otherwise due to increases in expenses

across all categories.

Occupancy Costs .

2 unchanged sentences

from $7,754,000 for our fiscal year 2024.

The increase in occupancy costs was primarily due to an increase in real property taxes.

Selling, General

and Administrative Expenses .

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

but not limited to advertising, professional costs, clerical and administrative overhead) for our fiscal year 2024 increased $658,000

or 14.05% to $5,340,000 from $4,682,000 for our fiscal year 2023 due primarily to increased consultant fees to improve our accounting

process and otherwise to increases in expenses across all categories.

Selling, general and administrative expenses increased as a percentage

of total revenue for our fiscal year 2024 to 2.84% as compared to 2.68% for our fiscal year 2023.

Selling, General and

Administrative Expenses .

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

not limited to advertising, professional costs, clerical and administrative overhead) for our fiscal year 2025 increased $150,000 or

2.82% to $5,463,000 from $5,313,000 for our fiscal year 2024 due primarily to increased television and radio advertising costs.

general and administrative expenses decreased as a percentage of total revenue for our fiscal year 2025 to 2.66% as compared to 2.84%

for our fiscal year 2024.

Depreciation and Amortization.

1 unchanged sentence

our fiscal year 2024.

This increase is driven by the opening of our corporate owned restaurant in Hollywood, Florida (Store #19R) in

March 2024, the operation of our limited partnership owned restaurant in Miramar, Florida (Store #25) and our package liquor stores in

Miramar, Florida (Store #24) and Hollywood, Florida (Store #19P) for our entire fiscal year 2024 as opposed to a part of our fiscal year

Depreciation and amortization expense increased as a percentage of total revenue for our fiscal year 2024 to 2.27% as compared

to 2.04% for our fiscal year 2023.

Interest Expense,

This increase is driven by the operation of our Company-owned restaurant in Hollywood, Florida (Store #19R) for

the full fiscal year 2025 as opposed to part of the fiscal year 2024.

Depreciation and amortization remained flat as a percentage of

total revenue at 2.28% for each of our fiscal years 2025 and 2024.

Interest Expense, Net .

Interest expense, net, for our fiscal year 2025 decreased $62,000 to $957,000 from $1,019,000 for our fiscal year 2024.

Rental Income/ Rental

Expense Rental income was $1,077,000 and rental expense was $622,000 for our fiscal year 2025, while rental income was $1,105,000

and rental expense was $550,000 for our fiscal year 2024.

Previously, Rental income was presented in Revenues and rental expense was

presented in Occupancy costs, Operating expense and Selling, general and administrative expenses, however, both Rental income and Rental

expense are now presented in Other Income.

Income Taxes.

tax for our fiscal year 2025 was an expense of $622,000, as compared to an expense of $286,000 for our fiscal year 2024.

as a percentage of income before provision for our fiscal year 2024 is 5.12% as compared to 10.70% in our fiscal year 2023.

income for our fiscal year 2024 decreased $116,000 or 2.14% to $5,300,000 from $5,416,000 for our fiscal year 2023 due primarily to higher

food costs and overall increased expenses, including but not limited to, increased consultant fees to improve our accounting process.

As a percentage of total revenue, net income for our fiscal year 2024 is 2.81%, as compared to 3.11% for our fiscal year 2023.

as a percentage of income before provision for income taxes for our fiscal year 2025 is 7.2% as compared to 5.12% in our fiscal year

income for our fiscal year 2025 increased $2,717,000 or 51.26% to $8,017,000 from $5,300,000 for our fiscal year 2024 due primarily to

the Recent Price Increases and the operation of our Company-owned restaurant in Hollywood, Florida (Store #19R) for our full fiscal year

2025 as opposed to part of our fiscal year 2024.

As a percentage of total revenue, net income for our fiscal year 2025 is 3.91%, as compared

to 2.83% for our fiscal year 2024.

Net Income Attributable

to Flanigan’s Enterprise, Inc.’s Stockholders.

Net income attributable to stockholders for our fiscal year 2024 decreased

$643,000 or 16.08% to $3,356,000 from $3,999,000 for our fiscal year 2023 due primarily to higher food costs and overall increased expenses,

including but not limited to, increased consultant fees to improve our accounting process and a higher portion of our net income attributable

to noncontrolling interests (specifically the operation of our Miramar location for our entire fiscal year 2024 as opposed to a part

of our fiscal year 2023).

As a percentage of revenue, net income attributable to stockholders for our fiscal year 2024 is 1.78%, as compared

to 2.29% for our fiscal year 2023.

Net income attributable to stockholders for our fiscal year 2025 increased

$1,677,000 or 49.97% to $5,033,000 from $3,356,000 for our fiscal year 2024 due primarily to the Recent Price Increases and the operation

of our Company-owned restaurant in Hollywood, Florida (Store #19R) for our full fiscal year 2025 as opposed to part of our fiscal year

As a percentage of revenue, net income attributable to stockholders for our fiscal year 2025 is 2.45%, as compared to 1.79% for

our fiscal year 2024.

New Limited Partnership Restaurants

As new limited partnership 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 limited partnership locations.

During our fiscal year 2024 we did not open any new limited partnership

restaurants, nor did we have any in the development stage.

During our fiscal year 2023, we opened one new limited partnership restaurant

location in Miramar, Florida as a “Flanigan’s”.

As new limited partnership

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 limited partnership locations.

During our fiscal year 2025 we did not open any new limited

partnership restaurants, however, we do have one in the development stage in Cutler Bay, Florida.

Menu Price Increases

During our fiscal year 2024, we

increased menu prices for our bar offerings (effective August 25, 2024) to target an increase to our bar revenues of approximately 5.63%

annually to offset higher food and liquor costs and higher overall expenses.

During our fiscal year 2023, we increased menu prices for

our food offerings (effective March 26, 2023) to target an aggregate increase to our food revenues of approximately 2.06% annually and

we increased menu prices for our bar offerings (effective March 20, 2023) to target an increase to our bar revenues of approximately 5.65%

annually to offset higher food and liquor costs and higher overall expenses.

Prior to these increases, we previously raised menu prices

in the first quarter of our fiscal year 2022.

Subsequent to the end of our fiscal year 2024, we increased our menu prices for our bar

offerings (effective December 4, 2024) to target an increase to our bar revenues of approximately 4.90% annually and we increased our

menu prices for our food offerings (effective November 17, 2024) to target an increase to our food revenues of approximately 4.14% annually

to offset higher food and liquor costs and higher overall expenses.

During the second quarter

of our fiscal year, 2025, we increased our menu prices for our bar offerings (effective February 23, 2025) to target an increase to our

bar revenues of approximately 0.84% annually to offset higher food and liquor costs and higher overall expenses.

During the first quarter

of our fiscal year 2025, we increased our menu prices for our bar offerings (effective December 4, 2024) to target an increase to our

bar revenues of approximately 4.90% annually and we increased our menu prices for our food offerings (effective November 17, 2024) to

target an increase to our food revenues of approximately 4.14% annually to offset higher food and liquor costs and higher overall expenses.

During our fiscal year 2024, we increased menu prices for our bar offerings (effective August 25, 2024) to target an increase to our

bar revenues of approximately 5.63% annually to offset higher food and liquor costs and higher overall expenses.

Prior to these increases

we previously raised menu prices in the second quarter of our fiscal year 2023.

LIQUIDITY AND CAPITAL RESOURCES

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a decrease of $1,308,000 from our cash balance of $21,402,000 as of September 28, 2024.

The decrease is primarily due to the completion

of the construction of our Store #19R ($2,106,000).

Inflation is affecting all aspects

of our operations, including but not limited to food, beverage, fuel and labor costs.

Inflation is having a material impact on our operating

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

The decrease is primarily due to our purchase

of the Cutler Bay property ($2,200,000).

Inflation is affecting all

aspects of our operations, including but not limited to food, beverage, fuel and labor costs.

Inflation is having a material impact on

our operating results.

We believe that our

current cash availability from our cash on hand and positive cash flow from operations will be sufficient to fund our operations and

planned capital expenditures for at least the next twelve months.

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

years 2024 and 2023.

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

The following table is a summary of our cash flows

for our fiscal years 2025 and 2024.

(in thousands)

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Net cash used in financing activities

Net (Decrease) Increase in Cash and Cash Equivalents

Net Decrease in Cash and Cash Equivalents

Cash and Cash Equivalents, Beginning

1 unchanged sentence

Capital Expenditures

In addition to using cash for

our operating expenses, we use cash generated from operations and borrowings to fund the development and construction of new restaurants

and to fund capitalized property improvements for our existing restaurants.

During the fiscal year 2024, we acquired property and equipment

and construction in progress of $6,047,000, (of which $289,000 was purchase deposits transferred to property and equipment, $715,000 was

purchase deposits transferred to CIP, and $4,000 was property and equipment in accounts payable), including $528,000 for renovations to

three (3) Company-owned restaurants and $135,000 for one (1) limited partnership owned restaurant.

During the fiscal year 2023, we acquired

property and equipment and construction in progress of $20,574,000, (including non-cash items which include $2,390,000 of purchase deposits

transferred to property and equipment and $545,000 of purchase deposits transferred to construction in progress and $931,000 of construction

in progress in accounts payable) including $367,000 for renovations to three (3) existing limited partnership owned restaurants and $378,000

for renovations to three (3) Company-owned restaurants.

As of September 28, 2024, we had

long term debt (including the current portion) of $21,912,000, as compared to $23,128,000 as of September 30, 2023.

In February 2023, we determined

that as of December 31, 2022, we did not meet the required Post-Distribution Basic Fixed Charge Coverage Ratio (the “Post-Distribution/Fixed

Charge Covenant”) contained in each of our six (6) loans (the “Institutional Loans”) with our unrelated third party

institutional lender (the “Institutional Lender’).

On February 23, 2023, we received from the Institutional Lender, a written

waiver of the non-compliance with the Post-Distribution/Fixed Charge Covenant (the “Covenant Non-Compliance”), pursuant to

which, among other things, the Institutional Lender waived (1) the non-compliance as of December 31, 2022 and (2) their right to exercise

certain remedies under the Institutional Loans, including the right to accelerate the indebtedness owed by us thereunder, resulting in

the indebtedness under the Institutional Loans to be immediately due and payable, which would have had a material adverse effect on the

The Post-Distribution/Fixed Charge Covenant requires we maintain a ratio of at least 1.15 to 1.00 and for the twelve (12) months

ended September 28, 2024 our ratio was calculated to be 1.62 to 1.00.

As a result, our classification of debt is appropriate as of September

We repaid long term debt, including

auto loans and mortgages in the amount of $1,251,000 and $2,299,000 in our fiscal years 2024 and 2023, respectively.

Construction Contracts

University Drive, Hollywood, Florida

(Store #19 – “Flanigan’s”)

During the first quarter of our

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

University Drive, Building B, Hollywood, Florida (Store #19R), which had been closed since October 2, 2018 due to damage caused

by a fire and re-opened March 26, 2024.

The contract totaled $2,515,000 and through our fiscal year 2024 we agreed to change orders increasing

the total contract price by $1,512,000 to $4,027,000, of which $3,905,000 has been paid through September 28, 2024.

Subsequent to the

end of our fiscal year 2024, we agreed to final change orders increasing the total contract price by $3,000 to $4,030,000 and the balance

of the contract price of $125,000 has been paid subsequent to the end of our fiscal year 2024.

In addition to using cash for our operating expenses, we use cash generated

from operations and borrowings to fund the development and construction of new restaurants and to fund capitalized property improvements

for our existing restaurants.

During the fiscal year 2025, we acquired property and equipment of $5,844,000, (of which $2.2 million was

for the purchase of the Cutler Bay Property and $11,000 was purchase deposits transferred to property and equipment), including $566,000

for renovations to four (4) Company-owned location and $137,000 for renovations to one (1) limited partnership owned restaurant.

the fiscal year 2024, we acquired property and equipment and construction in progress of $6,047,000, (of which $289,000 was purchase deposits

transferred to property and equipment, $715,000 was purchase deposits transferred to CIP, and $4,000 was property and equipment in accounts

payable), including $528,000 for renovations to three (3) Company-owned restaurants and $135,000 for one (1) limited partnership owned

As of September 27, 2025,

we had long term debt (including the current portion) of $20,618,000, as compared to $21,912,000 as of September 28, 2024.

As of September 27, 2025,

we are in compliance with the financial covenants contained in our loans with our unrelated third-party institutional lender (the “Institutional

Lender”) under which we owe in the aggregate, approximately $19,306,000 of our total loans of approximately $20,618,000.

September 27, 2025, the year-end fair value of our debt approximates carrying value.

We repaid long term debt,

including auto loans and mortgages in the amount of $1,330,000 and $1,251,000 in our fiscal years 2025 and 2024, respectively.

Master Service Agreement

During the first quarter

of our fiscal year 2025, we entered into a new Master Services Agreement with our current major vendor for a period of one (1) year

effective January 1, 2025, with Company options for four (4) one (1) year renewal options to extend the term of the same.

fourth quarter of our fiscal year 2025, we exercised the first (1st) one (1) year renewal option for a period of one (1) year

effective January 1, 2026.

In this new Master Service Agreement, as in our prior Master Service Agreements, we commit to purchase

specific products through our current major vendor but are free to purchase other products through other vendors, provided no less

than 80% of our overall product needs are purchased through our current major vendor.

During the third quarter of our fiscal year

2025, we exercised the first one (1) year renewal option and extended the term of the Master Services Agreement for a period of one

(1) year effective January 1, 2026.

In the third quarter of our

fiscal year 2024, we entered into an agreement with Oracle, an unrelated third-party vendor for the licensing and support of NetSuite,

a cloud-based Oracle ERP solution to replace our general ledger.

The agreement is for a period of five years at a fixed rate

of approximately $40,000 annually, with a cap on the percentage increase to our fees for our options to extend the term of the agreement

for years six and seven.

The implementation of NetSuite was complete and functional at the start of the fourth quarter

of our fiscal year 2025.

Purchase Commitments/Supply

In order to fix the cost

and ensure adequate supply of baby back ribs for our restaurants for calendar year 2025, we entered into a purchase agreement with a

new rib supplier, whereby we agreed to purchase approximately $7.8 million of “2.5 & Down Baby Back Ribs” (weight range

in which baby back ribs are sold) during calendar year 2025, at a prescribed cost, which we believe is competitive.

For calendar year

2024, we entered into a purchase agreement with our current rib supplier, whereby we agreed to purchase approximately $7.0 million of

and ensure adequate supply of baby back ribs for our restaurants for calendar year 2026, we entered into a purchase agreement with our

existing rib supplier, whereby we agreed to purchase approximately $9.2 million of “2.5 & Down Baby Back Ribs” (weight

range in which baby back ribs are sold) during calendar year 2026, at a prescribed cost, which we believe is competitive.

year 2025, we entered into a purchase agreement with a new rib supplier, whereby we agreed to purchase approximately $7.8 million of

“2.5 & Down Baby Back Ribs” during calendar year 2025, at a prescribed cost, which we also believe is competitive.

increase in our cost of baby back ribs for calendar year 2025 compared to calendar year 2024 is due to our purchase of larger sized baby

back ribs and the purchase of baby back ribs for Store #19R, Hollywood, Florida for the entire calendar year, offset by a decrease in

market price.

increase in our cost of baby back ribs for calendar year 2026 compared to calendar year 2025 is due to an increase in market price and

quantity ordered.

While we anticipate purchasing

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Flanigan’s Fish Company, LLC

As of September 28, 2024, Flanigan’s

Fish Company, LLC, a Florida limited liability company (“FFC”), supplies certain fish to all of our restaurants.

hold the controlling interest in FFC, the balance sheet and operating results of this entity are consolidated into the accompanying consolidated

financial statements of the Company.

Sales and purchases of fish are recognized in restaurant food sales and restaurant (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 a noncontrolling interest in our consolidated financial statements.

As of September 27, 2025,

Flanigan’s Fish Company, LLC, a Florida limited liability company (“FFC”), supplies certain fish to all of our restaurants.

Since we hold the controlling interest in FFC, the balance sheet and operating results of this entity are consolidated into the accompanying

consolidated financial statements of the Company.

Sales and purchases of fish are recognized in restaurant food sales and restaurant

(cost of merchandise sold), respectively, in the consolidated statements of income at the time of sale to the restaurant.

the 49% of FFC owned by the unrelated third party is recognized as a noncontrolling interest in our consolidated financial statements.

Working Capital

11 unchanged sentences

Off-Balance Sheet Arrangements

We do not have off-balance sheet

arrangements.

We do not have off-balance

sheet arrangements.

Recently Adopted and Recently Issued Accounting

Pronouncements

The FASB issued guidance, Accounting

Standards Update (ASU) 2016-13 Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments,

which provides a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected

to be collected.

The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial

asset(s) to present the net carrying value at the amount expected to be collected on the financial asset.

The measurement of expected

credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable

and supportable forecasts that affect the collectability of the reported amount.

This guidance was effective for the Company in the first

quarter of our fiscal year 2024;

however, after performing a thorough analysis the Company concluded there was no material impact from

the adoption of this ASU.

In November 2023, the FASB issued

ASU 2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures,” which updates reportable segment

disclosure requirements, primarily through requiring enhanced disclosures about significant segment expenses and information used to assess

segment performance.

We early adopted this ASU in the third quarter of our fiscal year 2024 and this ASU affected the expense presentation

of our Consolidated Statements of Income and our Business Segments footnote.

For further information regarding the Company’s Business

Segments, please refer to our Consolidated Statements of Income and Business Segments footnote.

The FASB issued guidance,

Accounting Standards Update (ASU) 2016-13 Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial

Instruments, which provides a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the

net amount expected to be collected.

The allowance for credit losses is a valuation account that is deducted from the amortized cost

basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset.

measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions,

and reasonable and supportable forecasts that affect the collectability of the reported amount.

This guidance was effective for the Company

in the first quarter of our fiscal year 2024;

however, after performing a thorough analysis the Company concluded there was no material

impact from the adoption of this ASU.

In November 2023, the FASB

issued ASU 2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures,” which updates reportable

segment disclosure requirements, primarily through requiring enhanced disclosures about significant segment expenses and information

used to assess segment performance.

We early adopted this ASU in the third quarter of our fiscal year 2024 and this ASU affected the

expense presentation of our Consolidated Statements of Income and our Business Segments footnote.

For further information regarding the

Company’s Business Segments, please refer to our Consolidated Statements of Income and Business Segments footnote.

Recently Issued

In December 2023, the FASB issued

ASU 2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures,” which requires enhanced income tax disclosures,

primarily related to standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction.

ASU will be effective for the Company in our fiscal year 2026, with the guidance applied either prospectively or retrospectively.

adoption is permitted.

We are currently evaluating the impact the adoption of the new accounting guidance will have on our tax disclosures.

There are no other recently

issued accounting pronouncements that we have not yet adopted that we believe will have a material effect on our financial statements.

In December 2023, the FASB

issued ASU 2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures,” which requires enhanced income tax

disclosures, primarily related to standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction.

This ASU will be effective for the Company for our fiscal year 2026 annual reporting period, with the guidance applied either prospectively

or retrospectively.

Early adoption is permitted.

We are currently evaluating the impact that the adoption of this ASU will have on our

tax disclosures.

In November 2024, the FASB

issued ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures” which

requires disclosure of disaggregated information about certain income statement expense line items in the notes to the financial statements

on an interim and annual basis.

In January 2025, the FASB issued ASU 2025-01 clarifying the effective date of ASU 2024-03, which will

be effective for the Company for our fiscal year 2027 annual reporting period, with guidance applied either prospectively or retrospectively.

Early adoption is permitted.

We are currently evaluating the impact that the adoption of this ASU will have on our interim and consolidated

financial statements.

In September 2025, the FASB

issued ASU 2025-06, “Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40)” which eliminates all references

to project stages and requires capitalization of software costs when:

(i) management authorizes and commits to funding the software project,

and (ii) it is probable the software project will be completed and used as intended, known as the “probable-to-completion recognition

threshold.” Entities must consider whether there is significant uncertainty associated with the development activities of the software

in determining if the threshold is met.

In addition, the amendments in the update specify that property, plant and equipment disclosure

requirements are required for capitalized internal-use software costs, regardless of financial statement presentation and also incorporate

the recognition requirements for website-specific development costs.

This ASU will be effective for the Company for our fiscal year fiscal

year 2029 annual reporting period with the guidance applied either prospectively, retrospectively, or via a modified prospective transition

Early adoption is permitted.

We are currently evaluating the impact that the adoption of this ASU will have on our interim and

consolidated financial statements.

There are no other

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 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.

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

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

16 unchanged sentences

in which the adjustment is determined to be necessary.

Consolidation of Limited Partnerships

As of September 28, 2024, we operate

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 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 tax credits to the extent that realization of said tax benefits is more likely than not.

For discussion regarding our carryforwards

refer to Note 10 to the consolidated financial statements for our fiscal year 2024.

Under Accounting Standards Codification

Topic 842, Leases (“ASC 842”), lease arrangements must 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 our fiscal 2020, using the modified retrospective approach.

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.

Valuation of Long-Lived Assets

We continually evaluate whether

events and circumstances have occurred that may warrant revision of the estimated life of our intangible and other long-lived assets

and/or whether the remaining balance of our intangible and other long-lived assets should be evaluated for possible impairment.

when such factors, events or circumstances indicate that intangible and/or other long-lived assets should be evaluated for possible impairment,

we will determine the fair value of the asset by making an estimate of expected future cash flows over the remaining lives of the respective

assets and compare that fair value with the carrying value of the assets in measuring their recoverability.

In determining the expected

future cash flows, the assets will be grouped at the lowest level for which there are cash flows, at the individual store level.

Under Accounting Standards

Codification Topic 842, Leases (“ASC 842”), lease arrangements must 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 currently lease

a portion of our restaurant and package locations under various lease agreements.

Determining the probable term for each lease requires

judgment by management and can impact the classification and accounting for a lease as financing or operating, as well as the period

for straight-lined rent expense and the depreciation period for lease hold improvements.

Generally, the lease term is a minimum

of the noncancelable period of the lease or the lease term inclusive of reasonably certain renewal periods up to a term of 15 years.

If the estimate of our reasonably certain lease term was changed, our depreciation and rent expense could differ materially.

the present value of lease payments not yet paid, we estimate incremental borrowing rates (IBR) corresponding to the reasonably certain

The IBR is an estimate based on several factors, including financial market conditions, comparable company and credit analysis

as well as management judgment.

If the IBR was changed, our operating lease right-of-use assets and lease liabilities could differ materially.

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 tax credits to the extent that realization of said tax benefits is more likely than not.

For discussion regarding

our carryforwards refer to Note 10 to the consolidated financial statements for our fiscal year 2025.

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.

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

rising food, fuel and labor costs.

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