What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-31 compared with 2024-04-01 · 64 added, 68 removed, 109 unchanged (55% of the section changed)

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Our fiscal year is 52/53 weeks long, ending on the Sunday closest to December 31.

The 52-week budgetary 2023 ended on December 31, 2023, and the 52-week fiscal 2022 ended on January 1, 2023.

The 52-week fiscal year 2024 ended on December 29, 2024, and the 52-week fiscal year 2023 ended on December 31, 2023.

As of December 29, 2024, including our partially owned Bagger Dave’s business, we owned and operated seventeen restaurants comprising the following:

Seven Burger Time (Net of one unit closed in February 2024), fast-food restaurants and one Dairy Queen franchise (“BTND”);

Seven Burger Time (Net of one unit closed in January 2025) fast-food restaurants (“BTND”);

Village Bier Garten is a German-themed restaurant, bar, and entertainment venue in Cocoa, Florida.

(“VBG”) which was closed January 2, 2025:

Keegan’s Seafood Grille in Indian Rocks Beach, Florida (“Keegan’s”);

Pie In The Sky Coffee and Bakery in Woods Hole, Massachusetts (“PIE”);

Schnitzel Haus in Hobe Sound, Florida (Schnitzel”);

Unconsolidated affiliate Bagger Dave’s Burger Tavern, Inc., 39.6% owned and operates six Bagger Dave’s restaurants in Michigan, Ohio, and Indiana (“BDVB”).

Burger Time opened its first restaurant in Fargo, North Dakota, in 1987.

Burger Time restaurants feature a traditional grilled hamburger and other affordable foods such as chicken sandwiches, pulled pork sandwiches, sides, and soft drinks.

Burger Time restaurants feature traditional grilled hamburgers, other affordable foods, and soft drinks.

Burger Time’s operating principles include (i) offering bigger burgers and more value for the money;

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(iii) providing fast service by way of single and double drive-thru designs and a point-of-sale system that expedites the ordering and preparation process, and (iv) great tasting and quality food made fresh to order at a fair price

Our primary strategy is to serve the drive-thru and take-out segment of the quick-service restaurant industry.

The average customer transaction at our Burger Time restaurants increased by approximately 30% in fiscal 2023 compared to 2022 and currently is about $16.90.

This recent increase is principally because of the menu price increases implemented in 2021 and 2022.

A 2022 price increase of approximately 10% on our popular “Deal of the Day” significantly increased our check average.

We implemented an additional menu price increase in September 2022 and regularly monitor market prices to remain competitive.

The average customer transaction at Burger Time restaurants in the year decreased slightly in 2024 compared to 2023 and is currently about $14.50.

We are constantly reviewing menu prices to maintain gross margins during recent periods of accelerating inflation.

Many factors influence our sales trends.

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Our acquisitions have allowed us to diversify our operations into new restaurant segments and new geographic regions, reducing our dependency on the financial performance of our Burger Time restaurants.

During the 2022 fiscal year, we acquired three operating restaurants and own a 39.6% interest in BDVB, an operator of six casual restaurants.

We expect to consider and evaluate additional acquisition opportunities in the future.

Keegan’s Seafood Grille, acquired in March 2022, has served customers in the Indian Rocks Beach and Clearwater, Florida markets for over 35 years.

Keegan’s is primarily a dine-in restaurant offering a variety of traditional fresh seafood items for lunch and dinner and a selection of beer and wine.

In May 2022, we acquired the assets and business operations of the iconic Pie In The Sky Coffee Restaurant and Bakery.

PIE is adjacent to the ferry terminal in Woods Hole, Massachusetts.

PIE has operated in the same location for over thirty years, offering a range of breakfast and lunch options, freshly roasted coffee, and branded merchandise serving locals and tourists.

In August 2022, we purchased the assets of Van Stephan Village Bier Garten, a full-service bar and restaurant in Cocoa, Florida.

We have rebranded the restaurant Village Bier Garten.

The restaurant features a German-themed menu;

specialty imported European beers and regular entertainment.

In June 2022, we acquired common stock representing initially 41.2%, now 39.6% ownership of publicly held Dave’s Burger Tavern, Inc., the owner and operator of six Bagger Dave’s restaurants, a casual restaurant and bar concept.

In 2024, we acquired the Schnitzel Haus restaurant, and in 2022, we purchased three operating restaurants and now own a 39.6% interest in BDVB, an operator of six casual restaurants.

In May of 2024, we purchased the Schnitzel Hause restaurant.

We may consider and evaluate additional acquisition opportunities in the future.

Due to the underperformance of our Village Bier Garten restaurant relative to our expectations, we made the decision early in 2025 to close the business.

We own 39.6% of the publicly held Dave’s Burger Tavern, Inc., the owner and operator of six Bagger Dave’s restaurants, a casual restaurant and bar concept.

Bagger Dave’s provides an inviting, entertaining atmosphere specializing in burgers, hand-cut fries, craft beer, milkshakes, salads, pizza, and other items.

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Wayne, Indiana, and one location in Centerville, Ohio.

In January 2025, Bagger Dave’s closed a unit in Chesterfield, Michigan.

We are currently exploring the sale of all of Bagger Dave’s restaurant locations.

Material Trends and Uncertainties

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Current trends include difficulties attracting food service workers and rapid inflation in the cost of input items.

Recent trends also include the rapidly changing area of technology and food delivery.

Recent trends also include the rapidly changing areas of technology and food delivery.

The major companies in the restaurant industry have rapidly adopted and developed smartphone and mobile delivery applications, have aggressively expanded drive-through operations, and developed loyalty programs and database marketing supported by a robust technology platform.

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Food costs have increased over the last two years, and we expect to see continued inflationary pressure during 2024.

Beef and egg costs continued to increase in 2023 and we expect cost to continue to be volatile in 2024.

Beef and egg costs continued to increase in 2024, and we expect costs to continue to be volatile in 2024.

Given the competitive nature of the restaurant industry, it may be challenging to raise menu prices to fully cover cost increases.

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We must develop and retain quality employees.

Although moderating since March 2020, representing a return to normalcy, COVID-19 and its variants adversely affected workforces, customers, economies, and financial markets globally, disrupting the US economy’s normal flow.

Our stores, with some exceptions, generally remained open for drive-through business through the peak of the pandemic.

However, many businesses have experienced a disruption of operations.

More recently, food service businesses, including ours, have faced challenges in hiring workers.

Labor shortages have resulted in some store curtailment of operating hours, and these closures may become more acute as market participants compete to attract employees.

We cannot determine the future effects of any public health matters on our operations and financial results.

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These price increases may not be sufficient to mitigate higher costs, and further increases may negatively impact consumer behavior.

Result of operations for the 52 weeks ending December 31, 2023, compared to the 52 weeks ending January 1, 2023.

Results of operations for the 52 weeks ending December 29, 2024, compared to the 52 weeks ending December 31, 2024.

The following table sets forth, for the years indicated, our Consolidated Statements of Operations expressed as a percentage of total revenues.

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52 weeks ended,

January 1, 2023

December 31, 2023

COSTS AND EXPENSES

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Depreciation and amortization

Impairment of assets

General and administrative

Gain on sale of assets

Gain on sale of asset

Total costs and expenses

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UNREALIZED GAIN (LOSS) ON MARKETABLE SECURITIES

REALIZED GAIN ON MARKETABLE SECURITIES

INTEREST EXPENSE

INTEREST AND DIVIDEND INCOME

OTHER INCOME (EXPENSE)

EQUITY IN AFFILIATE LOSS

INCOME TAX BENEFIT

NET INCOME (LOSS)

EQUITY IN LOSS OF AFFILIATE

INCOME TAX (EXPENSE) BENEFIT

$ (2,311,208 )

Net Revenues:

Net sales for 2024 increased $746,819, or 5.3%, to $14,823,472 from $14,076,653 in 2023.

The sales increase resulted from a full year of revenue from the 2022 restaurant acquisitions.

Restaurants acquired in 2022 contributed approximately $7.2 million in sales in 2023 and $5.6 million in 2022.

The BTND business experienced a sales increase of $157,000.

Same-store sales at BTND for stores open at year-end increased by approximately 2.2%.

Schnitzel Haus, acquired in May 2024, contributed $710,000 in sales to the overall increase in revenue.

Also contributing to the overall sales increase was an increase of approximately 7% at BTND locations, offsetting the effects of closing a location in Sioux Falls, South Dakota, early in the year and the conversion of the Ham Lake franchise unit to Burger Time, resulted in two-month closure of the location.

PIE also contributed to the sales increase during the year, with a 19% increase in sales in 2024.

For BTND locations open at year-end, 2024 restaurant sales ranged from a low of $567,000 to a high of $1,176,000.

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Restaurant Operating Costs:

In 2023, restaurant operating costs (which refer to all the costs associated with operating our restaurants but do not include general and administrative expenses and depreciation and amortization) increased to 93.9% of restaurant sales from 86.5% in 2022.

In 2024, restaurant operating costs (which refer to all the costs associated with operating our restaurants but do not include general and administrative expenses and depreciation, amortization, and restaurant impairment charges) increased to 95.1% of restaurant sales from 93.9% in 2023.

This increase was due primarily to continued price inflation on input costs, including food and labor, and the matters discussed in the “Cost of Sales,” “Labor Costs,” and “Occupancy and Other Operating Cost” sections below.

The impact of cost increases and the addition of three non-BTND restaurants during the year may be detailed as follows:

Restaurant operating costs for the period ended January 1, 2023

The impact of cost increases and the addition, including non-BTND restaurants during the year, may be detailed as follows:

Restaurant operating costs for the period ended December 31, 2023

Increase in food and paper costs

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Increase in occupancy and operating cost

Restaurant operating costs for the periods ended December 31, 2023

Restaurant operating costs for the period ended December 29, 2024

Costs of Sales - food and paper:

Cost of sales - food and paper - for 2023 increased to 39.4% of restaurant sales from 38.5% of restaurant sales in 2022.

The increase results from the inclusion of a full year of VBG and Keegan’s results, which operate at a lower gross profit.

The increase also reflects the net result of price increases during the year offset by a moderating inflationary cost environment where we saw a slight rise in beef, paper and lower flour, bacon and egg costs.

Because of its coffee-focused menu, PIE has significantly lower food and paper costs than BTND and Keegan’s.

In 2023, labor and benefits costs increased to 38.8% of restaurant sales from 32.7% 2022.

The cost of food and paper sales for 2024 decreased to 37.8% of restaurant sales from 39.8% in 2023.

The decrease is the net result of menu price increases at all locations during the year, offset by a moderate inflationary cost environment, where we saw a slight rise in beef and paper and lower costs for some other items.

Because of its coffee-focused menu, PIE has significantly lower food and paper costs than our other restaurants.

In 2024, labor and benefits costs increased to 41.3% of restaurant sales from 38.8% in 2023.

The increase results from higher wages for hourly employees and managers in all of our markets and an unfavorable utilization of the fixed portion of labor costs.

Also, PIE and Keegan’s businesses run at higher labor costs than BTND.

We benefit from minimal turnover in unit restaurant management.

Also, PIE and Keegan’s businesses run higher labor costs than BTND.

In addition, we added a senior culinary person at PIE to focus on new menu development.

Payroll costs are semi-variable, meaning that they do not decrease proportionally to decreases in revenue;

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Occupancy and Other Operating Costs:

For 2023, occupancy and other costs increased to 15.3% of sales or $2,154,611 compared to $1,928,308 or 15.3% of restaurant sales in 2022.

For 2024, occupancy and other costs increased to 16.0% of sales, or $2,355,806, compared to $2,154,611, or 15.3% of restaurant sales in 2023, principally as a result of the addition of Schnitzel Haus as a leased location during the year.

Depreciation and Amortization Costs:

For 2024, depreciation and amortization costs increased 24.1%, or $144,320, to $742,860 (5.0% of sales) from $598,540 (4.3% of sales) in 2023.

Depreciation and amortization costs increased principally due to a full year of depreciation expense for the three restaurants purchased during 2023 for approximately $2.4 million and capital additions in the last two years, including major parking lot repairs and significant replacement of HVAC equipment at several locations.

These capital additions offset the decrease in depreciation and amortization resulting from a substantial amount of our equipment reaching a fully depreciated status.

Depreciation and amortization costs increased as a result of significant capital additions during the year, including the purchase of Schnitzel and the replacement of some hurricane-damaged property at Keegan’s.

General and Administrative Costs

General and administrative costs in 2023 increased 1%, or $16,926, to $1,650,755 (11.7% of sales) from $1,633,829 (13.0% of sales) in 2022.

General and administrative costs in 2024 declined as a percentage of sales with an overall increase of 2.5%, or $40,649, to $1,691,404 (11.4% of sales) from $1,650,755 (11.7% of sales) in 2023.

Income (loss) from Operations:

The loss from operations was $1,072,589 in 2023 compared to operating loss of $391,164 in 2022.

The change in income from operations in 2023 compared to 2022 was primarily due to the matters discussed in the “Net Revenues,” “General and Administrative Costs,” and “Restaurant Operating Costs” sections above.

The loss from operations was $1,832,108 in 2024 compared to a loss from operations of $1,072,589 in 2023.

A significant portion of the increase in the loss was the result of the impairment charge related to the continuing poor results at VBG, leading to the decision to close the location in 2025 as a result of recording an impairment charge of $371,872, which is included in costs and expenses.

PIE profitability declined because costs increased faster than menu prices.

PIE also invested in additional staffing and culinary leadership, focusing on broadening the menu to increase business in the afternoons and evenings.

The change in income from operations in 2024 compared to 2023 reflects a $250,000 gain on the sale of a trademark asset and was also due to the matters discussed in the “Net Revenues,” “General and Administrative Costs,” and “Restaurant Operating Costs” sections above.

Interest expense:

In 2023, our interest expense decreased $17,158 to $97,608 (.7% of restaurant sales) from $114,766 (.9% of restaurant sales) in 2022 as a result of schedule amortization reducing the loan balance.

In 2024, our interest expense increased $2,298 to $99,906 (0.7% of restaurant sales) from $97,608 (0.7% of restaurant sales) in 2023 due to additional margin interest costs offset by schedule amortization reducing loan balances, resulting in a lower interest cost.

Interest and Dividends and Other Income:

Interest and Dividend income was $300,923 in 2023 resulting from generally rising interest rates.

Other income of $103,848 in 2023 includes the reversal of a 2022 fiscal year $100,000 accrual for property taxes on the St.

Louis property.

Interest and dividend income was $178,279 in 2024, a decline from $300,923 in 2023, due to a lower average cash and investment balance in 2024, when more short-term assets were invested in non-dividend or interest-earning investments.

Net Income (loss):

The net loss was $2,311,208 in 2024 compared to a loss of $887,368 in 2023.

The change in 2023 from 2022 was primarily attributable to the matters discussed in the “Net Revenues,” “Restaurant Operating Costs,” “General and Administrative Costs,” and “Other Income” sections.

The increase in the net loss in 2024 from 2023 reflects the impact of an increase in the share of loss from Bagger Dave’s to $415,085 from $347,081 in 2023.

The impact of fully reserving for deferred tax benefits resulted in a $206,000 income tax provision in the year.

The increase in the loss from 2023 also reflects the $371,872 impairment charge related to VBG.

The net loss was also attributable to the matters discussed in the “Net Revenues,” “Restaurant Operating Costs,” “General and Administrative Costs,” and “Other Income” sections.

Restaurant-level EBITDA :

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Gain on sale of assets

Impairment of restaurant asset

General and administrative, corporate-level expenses

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For the 52 weeks ending December 29, 2024, we recorded an after-tax loss of $2,311,208.

At that time, we had $6,692,506 in cash and marketable securities and a net working capital of $5,724,483.

At December 29, 2024, we had $4,270,970 in cash and marketable securities and a net working capital of $3,556,469.

Our primary requirements for liquidity are to fund our working capital needs, capital expenditures, and general corporate needs, as well as to invest in or acquire businesses that are synergistic with our business.

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Working capital deficits may be incurred in the future.

Our liquidity and cash flows sources are operating cash flows and cash and cash equivalents and marketable securities on hand.

Our liquidity and cash flow sources are cash and cash equivalents and marketable securities on hand.

We have used available cash to make acquisitions, service debt, and maintain our stores.

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Cash Flows Provided by Operating Activities

Operating cash flow in 2023 was negative $258,787 compared to a positive $211,798 in 2022, representing a decline in cash flow from operations from $594,316 in 2022.

The operating cash flow in 2024 was negative $723,505 compared to negative $258,787 in 2023, representing a decline in cash flow from operations of $464,719 in 2024.

Cash Flows Used in Investing Activities

In 2023, on a net basis we sold or held to maturity marketable securities, including $4.9 million in short-term U.S.

Treasury Bills.

The Company used cash of approximately $500,000 in capital improvements at it restaurants and received $496,000 in cash from the sale of one of its locations.

In 2024, we acquired the Schnitzel Haus restaurant for $943,000.

In 2023, on a net basis, we sold marketable securities.

The Company used cash of approximately $495,000 in capital improvements at its restaurants.

Proceeds from the sale of trademark assets were $250,000, and we lent $120,000 to NGI Corporation, a related party, in 2024.

Cash Flows from Financing Activities

Cash flow from financing activities reflects a reduction of $675,471 in broker margin borrowing, $250,525 used to purchase shares of the Company’s common stock held in treasury and principal payments on long-term debt.

Cash flow from financing activities reflects a reduction of $440,849.

In 2024, broker margin borrowing of $115,899 was repaid.

Additionally, we spent $142,794 purchasing treasury shares, and $182,156 was used for long-term debt principal payments.

Contractual Obligations

As of December 31, 2023, we had $4,269,505 in contractual obligations, including $1,815,948 in contractual commitments relating to leases on restaurants acquired in 2022.

As of December 29, 2024, we had $4,048,155 in contractual obligations, including long-term debt and future lease liabilities.

Our monthly required payments total approximately $50,000.

Quantitative and Qualitative Disclosures About Market Risk.

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

Financial Statements and Supplementary Data.

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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