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Item 1. Business

2022-03-17 compared with 2021-03-11 · 162 added, 178 removed, 101 unchanged (77% of the section changed)

In this Annual Report on Form 10-K, or Annual Report, and unless otherwise indicated, the terms “BT Brands,” the “Company,” “we,” “us,” “our,” “our Company,” and “our business” refer to BT Brands, Inc.

In this Annual Report, and unless otherwise indicated, the terms “BT Brands,” the “Company,” “we,” “us,” “our,” “our Company,” and “our business” refer to BT Brands, Inc.

together with its consolidated subsidiaries.

Effective December 18, 2020 we reincorporated BT Brands from the State of Delaware to the State of Wyoming.

The following discussion should be read in conjunction with our consolidated financial statements, and related notes included elsewhere in this Annual Report.

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Overview of Our Company

We own and operate nine Burger Time restaurants and a Dairy Queen franchise.

Our “Burger Time” restaurants feature a variety of burgers and other affordably priced foods such as chicken sandwiches, pulled pork sandwiches, side dishes and soft drinks.

Our DQ restaurant serves the menu developed by DQ and sold across the country.

We believe that our restaurants appeal to a broad range of consumers.

We serve customers by way of a single or double drive-thru format and walk-up windows.

We generally do not offer interior seating but provide outdoor seating areas and parking areas for customer use.

Our Burger Time restaurants are located in the upper Midwest, including four restaurants in North Dakota, two in South Dakota and three in Minnesota.

Our Dairy Queen franchise is located in Minnesota.

Our Burger Time operating principles include:

(i) offering bigger burgers and more value for the money;

(ii) offering a limited menu to permit the maximum attention to quality and speed of preparation;

(iii) providing fast service by way of the single or double drive-thru design and a point-of-sale system that expedites the ordering and preparation process;

We own and operate fast-food restaurants in the north-central United States and are seeking to expand into other regions and other foodservice businesses.

We currently own and operate nine Burger Time restaurants in Minnesota, North Dakota, and South Dakota and a Dairy Queen franchise in Ham Lake, Minnesota.

Our plan is to purchase one or more existing restaurant businesses.

Our operating principles for Burger Time include:

(i) offering a “Bigger Burger” to deliver our customers “more good food for your money”;

(ii) offering a limited menu to permit attention to quality and speed of preparation;

(iii) providing fast service by way of single and double drive-thru designs and a point-of-sale system at our restaurants that expedites the ordering and preparation process;

and (iv) great tasting quality food made fresh to order at a fair price.

We operate in the fast-food drive-through category of the QSR of the restaurant industry.

The QSR segment comprises fast food restaurants characterized by limited menus, limited or no table service and fast service.

In the United States, the QSR segment is the largest segment of the restaurant industry and has demonstrated growth over a long period of time.

According to recent estimates, this segment represents approximately 80 percent of total commercial foodservice visits in the United States and every day about 50 million Americans eat fast food.

In 2019, this segment generated $273 billion in revenue in the U.S., making it the largest segment of the restaurant industry.

We are seeking to increase value for our shareholders in the foodservice industry.

We expect to pursue the acquisition of multi-unit restaurant concepts and individual restaurant properties at attractive multiples of earnings, subject to our ability to obtain the capital required for any such acquisition.

Once acquired, we will operate the business or businesses with a shared central management organization.

Assuming we are successful in acquiring an operating business, following the acquisition, we expect to pursue expansion in the number of locations and to increase comparable store sales and profits.

One possible growth strategy comprises the acquisition of operating assets and a subsequent franchise rollout of the acquired business, which management may conclude is an appropriate growth plan.

Management of a franchise business will expose the Company to additional risks that we do not currently face.

Our principal business plan is to grow in the foodservice industry.

We may develop additional Burger Time locations through the acquisition and conversion of existing properties.

However, we expect our focus will be to identify and complete acquisitions of existing restaurant units and multi-unit chains which could be operated and expanded through the addition of new locations.

We currently serve the drive-thru and take-out segment of the restaurant industry.

We operate in the fast-food hamburger category of the quick service restaurant, or QSR, a restaurant industry segment.

Fast-food restaurants are characterized by limited menus, limited or no table service, and fast service.

According to IBISWorld, there are nearly 200,000 fast-food restaurants in the United States, and fast food generated an estimated $278.6 billion in revenue in 2021, with an estimated $126.9 billion, or approximately 45% of the U.S.

fast-food market, deriving from the hamburger segment.

Therefore, the hamburger segment is the largest segment of the U.S.

Our objective is to increase value for our shareholders in the foodservice industry.

Our principal strategy is to acquire multi-unit restaurant concepts and individual restaurant properties at attractive earnings multiples.

Though we do not currently plan to do so, we may develop additional Burger Time locations under certain circumstances.

Once acquired, we will operate the acquired business(es) with a shared central management organization.

Assuming we are successful in acquiring an operating business, following the acquisition, we may pursue expansion in the number of locations and will implement programs to increase comparable-store sales and profits and to boost brand awareness

Our Corporate History

The Company was originally incorporated in the state of Delaware as Hartmax of NY, Inc.

in January 2016 with no assets or operations, and, until the Share Exchange described below, was majority-owned by affiliates of the placement agent in the 2018 Private Placement described below.

Upon the closing of the 2018 Private Placement, the Company and BTND, LLC, a Colorado limited liability company, which we refer to as BTND, entered into a Share Exchange Agreement whereby the members of BTND exchanged all of their membership interests in BTND for shares of our common stock comprising 85.9% of the outstanding shares of our Company, without giving effect to the sale of any securities sold in the 2018 Private Placement (the “Share Exchange”).

Two affiliates of the placement agent together held 11.7% of our common stock as of the closing of the Share Exchange, without giving effect to the sale of any securities sold in the 2018 Private Placement.

After giving effect to the Share Exchange, the Company became the sole member of BTND and BTND’s managing member, Gary Copperud, became the chief executive officer of the Company.

Following the Share Exchange, the Company changed its name to BT Brands, which is the parent company of BTND, which in turn became a wholly owned operating subsidiary of the Company.

In July 2018, we completed a private placement of our securities in which we issued and sold an aggregate of 205,002 shares of our common stock at a purchase price of $3.00 per share and warrants to purchase up to 102,503 shares of our common stock with an initial exercise price equal to $4.00 per share, for which Maxim Group, LLC acted as the placement agent (the “2018 Private Placement”).

We received approximately $615,000 in gross proceeds from the sale of the securities in the 2018 Private Placement.

After deducting placement agent fees and other expenses payable by us in connection with the 2018 Private Offering, we received net proceeds of approximately $492,266.

On June 13, 2019, the Company amended and restated its certificate of incorporation to change its corporate name to “BT Brands, Inc.” to better reflect its multi-faceted growth plan, and to adopt certain provisions in line with its status as a public company.

On June 13, 2019, the Company adopted amended and restated bylaws also to reflect the Company’s status as a public company.

The Company was incorporated in Delaware as Hartmax of NY, Inc.

in January 2016.

Prior to the Share Exchange, the Company was majority-owned by affiliates of the placement agent in the 2018 Private Placement described below.

Upon the closing of the 2018 Private Placement, the Company, and BTND, LLC, “BTND,” entered into a Share Exchange Agreement whereby the membership interests in BTND were exchanged for shares of our common stock comprising 85.9% of the outstanding shares of our Company, without giving effect to the sale of any securities sold in the 2018 Private Placement (the “Share Exchange”).

Following the Share Exchange, the Company became the sole member of BTND and changed its name to BT Brands, Inc.

Concurrent with the Share Exchange, Maxim Group, LLC acted as the placement agent for 205,002 shares of our common stock at $3.00 per share and warrants to purchase up to 102,503 shares of our common stock with an initial exercise price of $4.00 per share, for which Maxim Group, LLC acted as the placement agent (the “2018 Private Placement”).

We received approximately $615,000 in gross proceeds and $492,266 in net proceeds from the 2018 Private Placement.

On June 13, 2019, the Company amended and restated its certificate of incorporation to change its corporate name to “BT Brands, Inc.” to better reflect its growth plans and adopt specific provisions in line with its status as a public company.

On June 12, 2020, the holders of 100% of our outstanding shares of common stock adopted resolutions approving the change of corporate domicile from Delaware to Wyoming.

The Company affected the reincorporation by the filing of the appropriate documents with Delaware and Wyoming and as of December 18, 2020, the Company is domiciled in Wyoming.

The Burger Time brand originated in August 1987 with the opening of the first restaurant in Fargo, North Dakota.

As of December 18, 2020, the Company became domiciled in Wyoming.

On November 12, 2021, we completed a public offering of 2,400,000 units of our securities at a public offering price of $5.00 per unit, each unit comprising one share of common stock and one warrant to purchase one share of common stock at an initial exercise price of $5.50 per share.

On November 12, 2021, the underwriters of the offering exercised their option to purchase 360,000 Warrants for $3,600 under the over-allotment option, and on November 16, 2021, the public offering closed.

The net proceeds to the Company from the offering, including the exercise of the underwriter’s option to purchase additional warrants, were approximately $10.7 million, excluding any proceeds from the exercise of warrants, after deducting underwriting discounts and commissions and payment of estimated offering expenses of approximately $1.3 million.

The Burger Time brand originated in August 1987 with its first restaurant in Fargo, North Dakota.

Over the next five years, several additional Burger Time restaurants were opened in Minnesota, North Dakota, and South Dakota.

In 2005, the restaurant assets were sold to STEN Corporation, a public company of which Kenneth Brimmer, our Chief Operating Officer, Chairman and member of board of directors, and Gary Copperud, our Chief Executive Officer and a member of our board of directors, were officers and directors.

In 2005, the restaurant assets were sold to STEN Corporation, a public company of which Kenneth Brimmer, our Chief Operating Officer, Chairman and member of the board of directors, and Gary Copperud, our Chief Executive Officer and a member of our board of directors, were officers and directors.

In May 2007, BTND purchased the Burger Time assets from STEN Corporation.

Gary Copperud was the managing member of BTND from the acquisition in 2007 until the closing of the Share Exchange and 2018 Private Placement.

Since 2007, BTND from time to time sold restaurant assets, including the underlying real property resulting in the closing of the stores located on the respective properties, and BTND has closed two other stores upon the expiration of the leaseholds on which they were located.

In December 2018, we closed a store located in Richmond Indiana which was open for only 18 months.

Burger Time Restaurants

At our Burger Time restaurants, we seek to give our customers “more good food for their money” and to deliver it “hot ‘n fresh.”

At our Burger Time restaurants, we seek to give our customers more good food for their money and deliver it “hot ‘n fresh.”

Our Burger Time restaurants feature a wide variety of juicy, flame-broiled burgers that we refer to as “Bigger Burgers” because they are made with approximately 25% more meat and are larger in diameter than the typical quarter-pound burger offerings served by our competitors.

Our burgers are custom made to our specifications by our supplier, with no fillers, only beef and salt.

Each burger is prepared to a customer’s individual order and is served hot and fresh.

Each burger is prepared to a customer’s order and is served hot and fresh.

Burger favorites include a mushroom Swiss burger, a jalapeno burger, and a full-pound burger to satisfy the heartiest appetite.

Other entrees items include chicken sandwiches, pulled pork sandwiches and chicken chunks.

Our burgers and sandwiches are served on fresh buns and are topped with generous helpings of top-tier condiments.

Other entrees include chicken sandwiches, pulled pork sandwiches, and chicken chunks.

Our burgers and sandwiches are served on fresh buns and are topped generously with top-tier condiments.

We offer an array of traditional and signature sides, many of which have evolved into regional favorites, such as large cut battered onion rings, cheese curds, fried pickle spears, and chicken fries.

We also offer soft drinks and other reasonably priced food and beverage items.

From time to time, we offer specialty sandwiches and wraps at similar price points.

In addition, we offer specialty sandwiches and wraps at similar price points from time to time.

Our limited menu is designed to deliver quality across all products, a high taste profile, and speedy delivery.

Our objective is to serve customers within 60 seconds of their arrival during the peak day parts of lunch and dinner and within 3 minutes at other times.

We can achieve this based on our single and double drive-thru format and on our integrated restaurant design and equipment lay-out that allows us to deliver exceptional food with fast service times.

We can achieve this based on our single and double drive-thru format and our integrated restaurant design and equipment layout to deliver exceptional food with fast service times.

Our restaurants have a computerized point-of-sale system which displays each item ordered on a monitor viewed by food and drink preparers.

This enables the preparers to begin filling an order before the order is completed and totaled, thereby increasing the speed of service to the customer and the number of sales per hour.

One of our key operating strategies is to minimize inventory and storage requirements, mandating frequent deliveries, which ensures that our food is always fresh.

Our restaurants are generally open from 10 am to 10 pm seven days a week, for lunch, dinner and late-night snacks and meals.

We also have recently introduced on-line ordering through our website with curbside delivery.

We believe that our restaurants appeal to a broad spectrum of consumers, but we cater to consumers who appreciate the size and variety of our burgers, the value for the money proposition offered by our bigger burgers and the speed and efficiency offered by our single and double drive-thru windows.

One of our key operating strategies is to manage inventory and storage requirements with frequent deliveries, ensuring that our food is always fresh.

Subject to seasonal and local conditions, our restaurants are generally open seven days a week from 10 am to 10 pm for lunch, dinner, and late-night snacks and meals.

We also have recently introduced online ordering through our website with curbside delivery.

We believe that our restaurants appeal to a broad spectrum of consumers., We cater to consumers who appreciate the size and variety of our burgers, the value for the money proposition offered by our bigger burgers, and the speed and efficiency offered by our single and double drive-thru windows.

The table below provides basic information about each of our restaurants.

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BTND DQ, LLC (3)

Paul, Minnesota

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BTND MO, LLC (5)

Property is leased from a third party.

Land is leased from a third party.

Dairy Queen franchise.

Restaurant operations are 99% owned by BTND, LLC and 1% owned by current restaurant manager.

Restaurant operations are 99% owned by BTND, LLC, and 1% owned by the current restaurant manager.

Restaurant operations closed in December 2018.

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We own the real estate on which all but one of our ten operating restaurants are situated.

We lease the property on which one of our Sioux Falls, South Dakota restaurants is situated.

The Sioux Falls location is leased on a month-to-month basis, for which we pay monthly rent of $1,600 to a third party.

All our owned properties are subject to mortgages secured by our real and personal property.

At the end of fiscal 2020, we had approximately $3.2 million in outstanding mortgage notes payable on our owned locations.

Interest on most of the notes is fixed at 4.75%, two of our notes have a fixed rate of 5.50%.

One of the notes has an adjustable rate based on the five-year Treasury Note rate in 2021, with a floor of 4.00%.

In addition to being secured by the restaurants and other property at the sites, each note is also personally guaranteed by Gary Copperud, our Chief Executive Officer.

Our restaurants are in commercial and mixed-use zoning districts, where our target customers work, which positions the restaurants for lunch and dinner visits.

We lease the property on which one of our Sioux Falls, South Dakota restaurants is located.

The Sioux Falls location is leased on a month-to-month basis, for which we pay a monthly rent of $1,600 to a third party.

All of our owned properties are subject to mortgages secured by our real and personal property.

On June 27, 2021, we refinanced most of our existing mortgage debt, which bore interest at 4.75%.

As of January 2, 2022, we had $3,027,971 in contractual obligations relating to amounts due under mortgages on the real property on which our stores are situated.

Our monthly required payment is approximately $22,700.

Under the terms of the refinanced mortgage debt, our nominal interest cost is 3.45% fixed for the next ten years.

In addition to being secured by the restaurants and other property at the sites, each mortgage note is also personally guaranteed by Gary Copperud, our Chief Executive Officer.

Our restaurants are in commercial and mixed-use zoning districts near where our target customers work and live positioning the restaurants for lunch and dinner visits.

Burger Time Restaurant Design

Our Burger Time units are free-standing facilities with single or double drive-thru capability and walk-up service windows.

The menu, store layout and equipment are designed to work together to allow us to offer exceptional food with fast service times.

This integrated design allows for maximum food output with minimal labor.

Burger Time stores have a highly visible, distinctive look that is intended to appeal to customers of all ages.

The menu, store layout, and equipment are designed to work together to offer exceptional food with rapid service times.

This integrated design seeks to maximize food output with minimal labor.

Burger Time stores have a visible, distinctive look intended to appeal to customers of all ages.

Historically, Burger Time stores have ranged from 600 to 1000 sq.

Regardless of its size, each restaurant is designed for maximum financial and operational efficiency, with only four employees required to effectively staff a store.

Regardless of its size, each restaurant is designed for maximum financial and operational efficiency, with only four employees required to staff a store effectively.

As a result of their small size, our restaurants can be constructed on as little as 15,000 square feet of land.

Because of the small size of the structure, our restaurants generally require a smaller capital investment and have lower occupancy and operating costs per restaurant than traditional quick-service competitors.

The size of the facility also permits somewhat greater flexibility with respect to the selection of prospective sites for restaurants.

Our restaurants generally require a smaller capital investment and have lower occupancy and operating costs per restaurant than traditional quick-service competitors.

The size of the facility also permits greater flexibility for selecting prospective sites for restaurants.

Our Burger Time design encompasses a red and white structure and features a single or double drive-thru.

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Our design and color scheme are intended to convey a message of “clean and fast” to the passing motorist.

Most of our restaurants do not provide an interior dining area but offer parking and a patio for outdoor eating.

Each restaurant employs twelve to sixteen employees, including a manager, and an assistant manager.

Work shifts are staggered and vary in length of time to ensure superior customer service during our busiest times.

We are focused on customer service and we seek to staff our stores with personnel who are friendly, and customer focused.

We have enjoyed a long relationship with many of the managers of our restaurants, several of whom have been with Burger Time more than seven years.

We will seek to establish similar relationships with the managers joining us in the future.

Our highly experienced managers train new assistant managers in all facets of a restaurant’s operations.

Other personnel can be trained in a matter of days.

Our manager training stresses food quality;

fast, friendly customer service;

Our restaurants do not provide an interior dining area but offer parking and a patio for outdoor eating.

Each restaurant employs eight to sixteen employees, including a manager and an assistant manager.

Work shifts are staggered and vary in time to ensure superior customer service during our busiest times.

We are focused on customer service, and we seek to staff our stores with friendly and customer-focused personnel.

We have enjoyed a long relationship with many of the managers of our restaurants, several of whom have been with Burger Time for more than seven years.

We will seek to establish similar relationships with the managers who join us in the future.

Our experienced managers train new assistant managers in all facets of a restaurant’s operations.

Other personnel are trained in a matter of days.

Our manager training stresses food quality, fast, friendly customer service;

restaurant cleanliness;

and proper management operations of a quick service restaurant.

and proper quick-service restaurant management operations.

We also focus on food safety and sanitation, employment laws and regulations, and systems to control food and labor costs.

All managers and assistants are required to obtain the required food safety (HACCP) training and obtain the Certification applicable to their location.

All managers and assistant managers are required to obtain food safety (HACCP) training and obtain the Certification applicable to their location.

Our managers and assistant managers are full-time employees.

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Most other staff members are part-time employees.

Our future growth and success are highly dependent upon our ability to attract, develop and retain qualified restaurant management and hourly staff members, which may be challenging.

Our future growth and success depend on our ability to attract, develop and retain qualified restaurant management and hourly staff members, which may be challenging.

Restaurant Reporting

Each restaurant has a computerized point-of-sale system monitored by the management of the restaurant.

Each restaurant has a computerized point-of-sale system monitored by the restaurant’s management.

With this system, managers can monitor sales, labor, customer counts, and other pertinent information.

This information allows a manager to better control labor utilization, inventories, and operating costs.

Information is reported up to our corporate staff where it is analyzed to maximize cost efficiencies in food and labor costs and inventories and customer counts on a weekly basis and profit and loss statements and balance sheets on a monthly basis.

The general manager of each restaurant reports directly to a Director of Operations who in turn reports to our Chief Operating Officer, who oversees all aspects of restaurant operations including kitchen operations, restaurant facility management, new restaurant openings and the roll-out of key operational initiatives.

All our restaurants prepare detailed monthly operating budgets and compare their actual results to their budgets.

Information is reported up to our corporate staff.

It is analyzed to maximize cost efficiencies in food and labor costs, inventories and customer counts weekly, and profit and loss statements and balance sheets monthly.

The general manager of each restaurant reports directly to a Director of Operations, who reports to our Chief Operating Officer, who oversees all aspects of restaurant operations, including kitchen operations, restaurant facility management, new restaurant openings, and the roll-out of key operational initiatives.

Purchasing and Distribution

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Sysco distributes these supplies to our restaurants on a frequent and routine basis.

Typically, our inventory of supplies is never more than $5,000 at any restaurant.

This ensures that our food is consistently fresh and frees cash flow for other purposes.

Our agreement with Sysco expires on May 30, 2021.

We have customarily entered into a new agreement with Sysco every two years.

Either party may terminate the agreement after the initial year with 180 days’ notice or in the event of a material breach that is not cured within 60 days.

The agreement may be terminated by Sysco in the event that we fail to pay any amounts owed, or if, in Sysco’s sole judgment, either our financial position deteriorates materially, or Sysco becomes aware of circumstances that would materially impact our ability to meet our financial obligations.

We are party to a five-year exclusive beverage service agreement under which we have agreed for most locations to purchase our beverages, other than coffee, tea or milk, from Pepsi-Cola Bottling of Fargo., through December 21, 2025.

Under this agreement, Pepsi provides to us economic incentives for being an exclusive supplier and provides beverage-dispensing equipment free of charge.

Typically, our inventory of food and supplies usually does not exceed $10,000 at any individual restaurant.

These procedures ensure that our food is consistently fresh and frees cash flow for other purposes.

Our agreement with Sysco expires on May 30, 2022, and will automatically be extended for additional one-year terms unless terminated by either party.

Either party may terminate the agreement with 180 days’ notice or in the event of a material breach that is not cured within 60 days.

In addition, Sysco may terminate the contract if we fail to pay any amounts owed, or if, in Sysco’s sole judgment, either our financial position deteriorates materially, or Sysco becomes aware of circumstances that would materially impact our ability to meet our financial obligations.

We are party to a five-year exclusive beverage service agreement.

We have agreed for Burger Time locations to purchase our beverages, other than coffee, tea, and milk, from PepsiCo, including its affiliated bottlers, through December 21, 2025.

Under this agreement, PepsiCo provides economic incentives for being an exclusive supplier and provides beverage-dispensing equipment free of charge.

Either party may terminate the agreement in the event of a material breach that is not cured within 30 days.

Beef is our largest product cost item and is expected to remain such for the foreseeable future.

Fluctuations in supply and prices can significantly impact our financial results.

Beef is our most significant product cost item and is expected to remain such for the foreseeable future.

As a result, fluctuations in supply and prices can significantly impact our financial results.

Marketing and Advertising

Our marketing efforts for Burger Time are intended to convey the principles that we believe attract our core customers – we provide our patrons with more good food for their money by offering them “a bigger burger,” and we give it to them “hot ‘n fresh.”

To date, our marketing and advertising spend has been allocated to advertisements in newspapers and radio in the geographic areas in which our restaurants are located.

To date, our marketing and advertising spend have been principally allocated to social media with limited advertisements in newspapers and radio in the geographic areas in which our restaurants are located.

In addition, we have employed product discount coupons, live remote broadcasts, customer contests, and direct mailings.

We also utilize marketing incentives from our suppliers whenever possible.

We recently introduced an on-line ordering capability and curbside delivery program through our website, and we expect to develop an increased emphasis on direct data base marketing supplemented by social media tools, such as Facebook, to promote our brand and local stores.

We recently introduced an online ordering capability and curbside delivery program through our website.

We expect to emphasize direct database marketing supplemented by social media tools to promote our brand and local stores.

Collectively, however, our marketing-related expenditures have historically comprised less than 1% of our net revenues.

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We further expect that as we open new restaurants in existing geographic areas, we will be able to take advantage of operating and marketing efficiencies resulting from the “clustering” of our restaurants.

We expect to develop and deploy a more sophisticated marketing campaign, including an expanded social media presence, intended to build consumer brand awareness of our restaurants.

We expect to develop and deploy a more sophisticated marketing campaign, including an expanded social media presence, to build consumer brand awareness of our restaurants.

Dairy Queen Franchise

In October 2015, we acquired a 99% ownership interest in a Dairy Queen franchise in Ham Lake, Minnesota.

The remaining 1% ownership interest in the franchise is owned by the General Manager of the location who possesses certain Dairy Queen qualifications and whose ownership is required under the operating agreement with the franchisor.

Because we are a franchisee, we are party to a franchise agreement with Dairy Queen that, among other things, restricts our menu offerings at this location to the established Dairy Queen menu and severely limits our flexibility in the operating model we may employ at this location.

Specifically, we are prohibited from selling any Burger Time items at this franchise and we may not market this restaurant as a part of our Burger Time family.

We have no plans at this time to enter into any other franchise agreements with Dairy Queen or any other national chain of restaurants, as we believe our profitable future can best be realized by expanding the Burger Time brand or by acquiring either restaurant business assets or another restaurant chain.

However, should we become aware of another attractive opportunity to assume control of a franchise, we may consider it.

The franchise’s remaining 1% ownership interest is held by the General Manager of the location, who possesses specific Dairy Queen qualifications and whose ownership is required under the operating agreement with the franchisor.

Because we are a franchisee, we are party to a franchise agreement with Dairy Queen that, among other things, restricts our menu offerings at this location to the established Dairy Queen menu and limits our flexibility in the operating model we may employ at this location.

Expressly, we are prohibited from selling any non-Dairy Queen-approved items at this franchise location, and we may not market this restaurant as a part of Burger Time.

However, we may consider it if we become aware of an attractive opportunity to assume control of a Dairy Queen or other franchise restaurant.

Burger Time Restaurant Economic Model

Our restaurant economic model is based on three principles:

Our Burger Time restaurant economic model is based on three principles:

a low capital investment, low conversion and incremental expenses, and lean and disciplined operating efficiencies.

For example, in the case of our Burger Time locations, because we do not offer interior seating, our restaurant footprint is small, generally around 650 sq.

ft., which can be situated on a parcel of real estate as small as 15,000 sq.

ft (approximately 0.344 acres), which includes sufficient space for parking and outdoor seating.

While some of our newer restaurants have been larger, enabling us to offer some limited in-store seating, our basic model remains the same and our real estate costs, whether we purchase or lease, remain relatively low.

Operationally, we take several steps to maintain efficiency, including maintaining inventory of no more than approximately $5,000 per store at any given time (which also has the advantage of allowing for frequent deliveries of fresh food).

For example, in the case of our Burger Time locations, because we do not offer interior seating, our restaurant footprint is small, generally around 650 square feet, which can be situated on a parcel of real estate as small as 15,000 sq.

(approximately 0.344 acres), which includes sufficient space for parking and outdoor seating.

While some of our newer restaurants have been larger, enabling us to offer some limited in-store seating, our basic model remains the same.

As a result, our real estate costs remain relatively low whether we purchase or lease.

Operationally, we take steps to maintain efficiency, including maintaining inventory of approximately $10,000 per store at any given time (which also has the advantage of allowing for frequent deliveries of fresh food).

Our Burger Time restaurant investment model targets a total cash investment of between $325,000 and $535,000 or an average of $430,000.

Real estate and finance costs vary materially by location but, assuming the average investment figure applies, the amount allocated to the purchase of real estate would be approximately $225,000.

Real estate and finance costs vary materially by location but, assuming the average investment figure applies, the amount allocated to purchasing real estate would be approximately $225,000.

Costs to develop a new Burger Time location can fluctuate significantly, based on the number and timing of restaurant openings and the specific expenses incurred for each restaurant.

Based on our experience, we believe that our new restaurants may require six to nine months after opening, or more, to achieve their targeted restaurant-level sales and operating margin due to cost of sales and labor inefficiencies, especially with respect to restaurants that we open in new geographic areas.

We have limited experience opening new restaurants;

however, based upon our experience the initial 2-3 months shows a strong “honeymoon” effect as patrons try a new location.

As is common in the restaurant industry, following the initial honeymoon period, we see sales stabilize at a lower level as we attract regular repeat customers with the goal of growing the base of customers reaching targeted sales levels in six to nine months and continue to grow in the future periods.

If we open restaurants in new and untested markets, achieving targeted sales may take longer since the local population will not be familiar with our brand and it will take time to build brand awareness.

How quickly new restaurants achieve their targeted sales and operating margin depends on many factors, including the level of consumer familiarity with our brand, as well as the availability of experienced managers and other staff.

However, every restaurant has a unique opening sales pattern, and this pattern is difficult to predict.

As a result, any number of restaurant openings in any single fiscal quarter, along with their associated opening expenses, could have a significant impact on our consolidated results of operations for that period.

We believe that by a restaurant’s second full year of operations, we can achieve an annualized cash-on-cash return of approximately 30% of our investment, although there is no assurance that this target will be met.

We determine the annualized cash-on-cash return based upon the free cash flow generated by the unit after all expenses including required capital improvement, compared to the net cash invested after deducting and mortgage financing secured before or after the unit is opened.

This is the targeted return calculated based upon our new unit investment analysis and is based upon limited experience in opening new stores and there is no assurance the targeted returns will be achieved.

“Cash-on-cash return” is calculated based on the restaurant-level earnings before interest, taxes, and depreciation and amortization (EBITDA), and is based upon the net equity investment by the Company in relation to EBITDA on an annualized basis.

Our acquisition criteria seek to achieve a return in excess of the 30% target;

however, as a result of the many risks and uncertainties surrounding an acquisition, there is no assurance this return will be achieved.

Growth Strategy

We are seeking to increase value for our shareholders in the foodservice industry.

We expect to pursue the acquisition of multi-unit restaurant concepts and individual restaurant properties at attractive multiples of earnings.

Once acquired, we will operate the business or businesses with a shared central management organization.

Assuming we are successful in acquiring an operating business, following the acquisition, we expect to pursue a growth plan to both expand the number of locations and to increase comparable store sales and profits.

One possible growth strategy comprises the acquisition of operating assets and a subsequent franchise rollout of the acquired business, which management may conclude is an appropriate growth plan.

Management of a franchise business will expose the Company to additional risks that we do not currently face.

Our business plan is to grow through acquisitions in the foodservice industry.

In addition, we may develop additional Burger Time locations through the acquisition and conversion of existing properties.

We also expect to identify and complete acquisitions of existing restaurant units and multi-unit chains which could be operated and expanded through the addition of new locations.

The financing we received from the 2018 Private Placement did not provide sufficient capital to undertake the development of new Burger Time locations or complete a significant restaurant acquisition.

Recently, we have been reviewing potential acquisitions that will allow us to leverage our existing infrastructure with established profitable locations as we seek a high return on our invested capital;

however, we do not have any specific acquisitions planned.

Any such acquisition likely will require raising additional capital to complete the purchase and to grow the business.

We will seek to acquire one or more existing restaurants and/or restaurant chains, including concepts that feature menu options that differ from the menu items we offer at Burger Time.

Restaurant businesses become available for acquisition frequently and we believe that we may be able to purchase either individual properties or multi-unit businesses at prices providing an attractive return on our investment.

Our strategy is to acquire restaurant concepts and individual restaurant properties at attractive earnings multiples.

Though we do not currently plan to do so, we may develop additional Burger Time locations under certain circumstances by acquiring and converting existing properties.

Other key elements of our growth strategy encompass increasing same-store sales and introducing a campaign to boost brand awareness.

As we develop and extend our business into new food concepts and geographic areas, we expect to pursue strategies that will leverage our multiple brands, capacity, and reach, which may include:

introducing dual concept locations that allow for two or more of our brands to operate in a single space and share a single kitchen and staff, to enhance our return on investment;

advancing aggressive third-party national branded and local delivery services;

entering into local and regional product licensing agreements that allow for the sale in third-party retail establishments of popular products that we offer at our restaurants;

employing extensive use of direct database marketing, including social media, to drive business to all concepts under our control.

As a public company, we may be presented with and would evaluate any opportunities to become a reverse merger candidate in the restaurant industry, whereby a significantly larger private restaurant chain seeks to avail itself of our public company status by merging with our business.

Expansion Through Acquisitions

We intend to make strategic and opportunistic acquisitions that provide an entrance into targeted restaurant segments and geographic areas.

Restaurant businesses become available for acquisition frequently.

We believe that we may purchase either individual restaurant properties or multi-unit businesses at prices that provide an attractive return on our investment.

We may acquire operating assets where a franchise program is the focus of the acquired foodservice business.

We intend to follow a disciplined strategy of evaluating acquisition opportunities to ensure and enable the accretive and efficient acquisition and integration of additional restaurant concepts.

Successful execution of our acquisition strategy will allow us to diversify our operations both into other dining concepts and geographic locations.

This strategy may include one or more restaurants that lease locations from a third party as opposed to owning the real property on which the stores are located.

This approach would result in a change to our historical core business model which was to own the real estate on which our restaurants operate.

This approach may prove to be riskier to our business and less appealing to investors and potential sources of funding.

In all cases, implementation of our growth strategy is contingent upon the availability of adequate financing to fund both the acquisition and our expansion, of which we cannot be assured.

Expand Our Restaurant Base Through Acquisitions

The acquisition of an existing restaurant chain or individual restaurants combined with new restaurant development is expected to be the key driver of our growth strategy.

We believe that there are numerous opportunities to acquire and open new restaurants in existing and new geographic areas.

Initially, we plan to develop new restaurants in some of our existing markets to take advantage of operational and financial efficiencies.

This approach can provide specific economic benefits including lower supply and distribution costs, improved marketing efficiencies and increased brand awareness.

From time to time, we may close restaurants based on operating metrics or other factors.

We have closed only one restaurant since 2011 (Richmond, Indiana opened in 2017 and closed in 2018) and do not anticipate closing any restaurants in 2020 or in the foreseeable future thereafter.

There is no guarantee that we will be able to increase the overall number of our restaurants.

We may be unsuccessful in expanding within our existing markets or into new markets for a variety of reasons, including competition for customers, sites, employees, licenses and financing.

Increase Comparable Restaurant Sales

We believe that acquisitions of restaurants relative to our comparable restaurant base will be our primary driver of growth and increased revenue.

However, we are considering ways to improve sales and restaurant performance.

We expect to develop a more aggressive on-line presence including a mobile app which could be downloaded by customers and used to drive immediate customer visits to our locations.

In addition, we will continue to create and offer seasonal and limited-time specialties to keep our menu fresh and our customers interested.

We may require additional capital for such purposes, and we cannot be certain that such capital will be available on terms acceptable to us or at all.

In evaluating potential acquisitions, we may consider the following characteristics, among others that management considers relevant to each opportunity:

the value proposition offered by acquisition targets when comparing the purchase price to the potential return on our investment;

established, recognized brands within their geographic footprint;

steady cash flow;

track records of long-term operating performance;

sustainable operating results;

geographic diversification;

growth potential.

Assuming we successfully acquire new businesses, we will operate the business or businesses with a shared central management organization.

Following the acquisition, we expect to pursue a growth plan to expand the number of locations and increase comparable store sales and profits, as described below.

We anticipate that by leveraging our management services platform, we will be able to achieve post-acquisition cost benefits by reducing the corporate overhead of the acquired business.

If we acquire one or more restaurant chains or individual units near each other, we believe the concentration of operations will provide economic synergies with respect to management functions, marketing, and advertising, supply chain assistance, staff training, and operational oversight.

Future Development of Additional Burger Time Restaurants

We may, in certain circumstances, consider developing an additional Burger Time location.

Conditions which might give rise to developing additional Burger Time locations include the opportunity to acquire and convert a property that previously had operated as a fast-food establishment at a highly attractive price in a location that fits naturally within Burger Time’s geographic footprint so that we may share service expenses, including advertising costs.

If we elect to open additional Burger Time restaurants, we expect that the development of these restaurants will, based on our experience, require a minimum of six to nine months after opening to achieve the targeted restaurant-level sales and operating margins.

If we were to open a Burger Time restaurant in new and untested markets, achieving targeted sales may take longer since the local population will not be familiar with our brand and building brand awareness takes time.

However, every restaurant has a unique opening sales pattern, which is difficult to predict.

Increase Same-Store Sales

Same-store sales growth reflects the change in year-over-year sales for the comparable store base.

We intend to deploy a multi-faceted same-store sales growth strategy to optimize restaurant performance.

We will apply techniques proven in the restaurant industry to increase same-store sales at our Burger Time restaurants and our acquired properties and develop new approaches that reflect our corporate character and restaurant composition.

We expect to utilize customer feedback and analyze sales data to introduce, test, and hone existing and new menu items.

In addition, we will investigate using public relations and experiential marketing to engage customers.

We expect our strategies to increase same-store sales will evolve as we acquire new restaurant concepts in new markets.

Increase Brand Awareness

Our loyal customer base and following is now entering a third generation of Burger Time devotees.

In order to develop and enhance brand awareness, we intend to update and expand our web presence.

We expect to create a complete web-based program designed around mobile usage, including introducing a web- based loyalty program.

We will deploy internet advertising to match specific menu items targeted to specific demographic groups.

Increasing brand awareness is important to the growth of our Company.

We will develop and implement forward-looking branding strategies for our Burger Time concept and any acquired businesses.

We will seek to leverage social media and employ targeted digital advertising to expand the reach of our brands and drive traffic to our stores.

In addition, we intend to develop mobile applications that will allow consumers to find restaurants, order online and receive special offers.

We will deploy cross-over ads with radio and social media interacting with each other.

We intend to develop social media campaigns in other markets.

We may require additional capital for such purposes, and we cannot be certain that such capital will be available on terms acceptable to us or at all.

We expect our branding initiatives to evolve as we consummate acquisitions of restaurant concepts that appeal to distinct consumer markets in differing geographic areas.

Trademarks and Service Marks

We have registered our trademarks “It’s Burger Time” and “Hot ‘n Now” with the United States Patent and Trademark Office.

We believe that our trademarks and service marks have value to us and are important to our marketing efforts.

We may develop additional marks in the future.

We have registered “It’s Burger Time” and “Hot ‘n Now” with the United States Patent and Trademark Office.

Our trademarks and service marks are valuable to us and essential to our marketing efforts.

We may develop additional trademarks in the future.

Our policy is to pursue registration of our marks whenever possible and to oppose vigorously any infringement of its marks.

The restaurant industry is highly competitive and is dominated by major chains that possess substantially greater financial and other resources than we have.

The industry is affected by changes in geographic competition, changes in the public’s eating habits and preferences, local and national economic conditions affecting consumer spending habits, population trends and local traffic patterns.

Key elements of competition in our industry are the price, quality and value of food products offered;

The restaurant industry is highly competitive and is dominated by significant chains that possess substantially greater financial and other resources than we have.

The industry is affected by geographic competition changes;

the public’s eating habits and preferences, local and national economic conditions that impact consumer spending, population trends, and local traffic patterns.

The industry’s critical elements of competition are the price, quality, and value of food products offered;

quality and speed of service;

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and attractiveness of facilities.

We compete primarily based on value of food (portion size), price, food quality and speed of service.

A significant change in pricing or other marketing strategies by one or more of our competitors could have an adverse impact on our sales, earnings and growth.

We compete primarily based on the value of food (portion size), price, food quality, and speed of service.

A significant change in pricing or other marketing strategies by one or more of our competitors could adversely impact our sales, earnings, and growth.

Our competition includes a variety of national and regional fast-food chains and locally-owned restaurants that offer carry-out, dine-in, delivery, and catering services, many of which have achieved significant brand and product recognition and engage in extensive advertising and promotional programs.

Our competition in the geographic areas in which operate includes McDonalds, Burger King, Carl’s Jr.

Our competition in the geographic areas in which we operate includes McDonald’s, Burger King, Carl’s Jr., and Wendy’s.

Seasonal factors and the timing of holidays cause our revenue to fluctuate from quarter to quarter.

Our revenue per restaurant is typically slightly lower in the first and fourth quarters due to the impact of cold weather at our upper Midwest locations.

Our revenue per Burger Time is typically slightly lower in the first and fourth quarters due to the impact of cold weather at our upper Midwest locations.

Adverse weather conditions may also affect customer traffic, especially in the first and fourth quarters, when customers do not use our outdoor seating areas, which impacts the use of these areas and may adversely affect our revenue.

Future acquisitions may have a different seasonal pattern than our Burger Time restaurants.

As of January 2, 2022, the Company had three members of its senior corporate personnel.

Each of the Burger Time restaurants and the Dairy Queen franchise has both a manager, who is a full-time, salaried employee, and an assistant manager or supervisor and a varying number of restaurant staff, all of whom are hourly employees.

Each of the Burger Time restaurants and the Dairy Queen franchise has a manager, a full-time, salaried employee, an assistant manager or supervisor, and a varying number of restaurant staff, all of whom are hourly employees.

As of January 2, 2022, we had approximately 107 employees, of which 17 were full-time, and 90 were part-time.

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Risk Factors.

As a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and Item 10(f)(1) of Regulation S-K, the Company has elected to comply with certain scaled disclosure reporting obligations, and therefore is not required to provide the information required by this item.

As a smaller reporting company, as defined by Rule 12b-2 of the Securities Act of 1934, as amended, (the “Exchange Act”) and Item 10(f)(1) of Regulation S-K, the Company has elected to comply with certain scaled disclosure reporting obligations and is not required to provide the information required by this item.

Unresolved Staff Comments.

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 1. Business