FLANIGAN'S ENTERPRISES, INC. CAUTIONARY NOTE REGARDING LOOKING FORWARD STATEMENTS
Reported financial results may not be indicative of the financial results of
future periods. All non-historical information contained in the following
discussion constitutes forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Words such as "anticipates, appears, expects, trends, intends, hopes,
plans, believes, seeks, estimates, may, will," and variations of these words or
similar expressions are intended to identify forward-looking statements. These
statements are not guarantees of future performance and involve a number of
risks and uncertainties, including but not limited to the effect of the novel
coronavirus pandemic and related "shelter-in-place" orders and other
governmental mandates ("COVID 19"), customer demand and competitive conditions.
Factors that could cause actual results to differ materially are included in,
but not limited to, those identified in the "Management's Discussion and
Analysis of Financial Condition and Results of Operations," in our periodic
reports, including our Annual Report on Form 10-K for the fiscal year ended
October 2, 2021 . We undertake no obligation to publicly release the results of
any revisions to these forward-looking statements that may reflect events or
circumstances after the date of this report.
OVERVIEW
As of April 2, 2022 , Flanigan's Enterprises, Inc. , a Florida corporation,
together with its subsidiaries ("we", "our", "ours" and "us" as the context
requires), (i) operates 28 units, consisting of restaurants, package liquor
stores and combination restaurants/package liquor stores that we either own or
have operational control over and partial ownership in; and (ii) franchises an
additional five units, consisting of two restaurants (one of which we operate)
and three combination restaurants/package liquor stores. The table below
provides information concerning the type (i.e. restaurant, package liquor store
or combination restaurant/package liquor store) and ownership of the units (i.e.
whether (i) we own 100% of the unit; (ii) the unit is owned by a limited
partnership of which we are the sole general partner and/or have invested in; or
(iii) the unit is franchised by us), as of April 2, 2022 and as compared to
October 2, 2021 and April 3, 2021 . With the exception of "The Whale's Rib", a
restaurant we operate but do not own, all of the restaurants operate under our
service marks "Flanigan's Seafood Bar and Grill " or "Flanigan's" and all of the
package liquor stores operate under our service marks "Big Daddy's Liquors" or
"Big Daddy's Wine & Liquors".
17
Index
Types of Units April 2, 2022 October 2, 2021 April 3, 2021
Company Owned:Combination package and restaurant 3 3 3
(1)
Restaurant only 7 7 7 Package store only 7 7 7 Company Operated Restaurants Only: Limited Partnerships 10 8 8 (2) Franchise 1 1 1 Unrelated Third Party 1 1 1 Total Company Owned/Operated Units 29 27 27 Franchised Units 5 5 5 (3) Notes: (1) During the first quarter of our fiscal year 2019, our combination package liquor store and restaurant located at2505 N. University Drive ,Hollywood, Florida (Store #19) was damaged by a fire which has caused it to be closed since the first quarter of our fiscal year 2019. Store #19 remains closed throughApril 2, 2022 . (2) During the second quarter of our fiscal year 2022, our limited partnership owned restaurant located at14301 West Sunrise Boulevard ,Sunrise, Florida (Store #85) opened for business (the "2022Sunrise Restaurant "). Our limited partnership owned restaurant located at11225 Miramar Parkway #250,Miramar, Florida (Store #25) is expected to open for business in October, 2022 (the "2022 Miramar Restuarant").
(3) We operate a restaurant for one (1) franchisee. This unit is included in the table both as a franchised restaurant, as well as a restaurant operated by us.
Franchise Financial Arrangement: 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 " or "Flanigan's" and "Big Daddy's Liquors" or "Big Daddy's Wine & 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 store sales and 3% of gross restaurant sales; and (ii) make advertising expenditures equal to between 1.5% to 3% of all gross sales, as defined, based upon our actual advertising costs allocated between stores, pro-rata, based
upon gross sales. Limited Partnership Financial Arrangement: We manage and control the operations of all restaurants owned by limited partnerships, except theFort Lauderdale, Florida restaurant which is owned by a related franchisee. Accordingly, the results of operations of all limited partnership owned restaurants, except theFort Lauderdale, Florida restaurant are consolidated into our operations for accounting purposes. The results of operations of theFort Lauderdale, Florida restaurant are accounted for by us utilizing the equity method of accounting. In general, until the investors' cash investment in a limited partnership (including any cash invested by us and our affiliates) is returned in full, the limited partnership distributes to the investors annually out of available cash from the operation of the restaurant up to 25% of the cash invested in the limited partnership, with no management fee paid to us. Any available cash in excess of the 25% of the cash invested in the limited partnership distributed to the investors annually, is paid one-half (½) to us as a management fee, with the balance distributed to the investors. Once the investors in the limited partnership have received, in full, amounts equal to their cash invested, an annual management fee is payable to us equal to one-half (½) of cash available to the limited partnership, with the other one half (½) of available cash distributed to the investors (including us and our affiliates). As ofApril 2, 2022 , all limited partnerships, with the exception of the 2022Sunrise Restaurant and the 2022Miramar Restaurant , have returned all cash invested and we receive an annual management fee equal to one-half (½) of the cash available for distribution by the limited partnership. In addition to receipt of distributable amounts from the limited partnerships, we receive a fee equal to 3% of gross sales for use of the service mark "Flanigan's Seafood Bar and Grill " or "Flanigan's". 18 Index RESULTS OF OPERATIONS (1)
-----------------------Thirteen Weeks Ended-----------------------
April 2, 2022 April 3, 2021
Amount Amount
(In thousands) Percent (In thousands) Percent
Restaurant food sales $ 24,775 62.58 $ 20,689 61.63
Restaurant bar sales 6,669 16.84 5,050 15.04
Package store sales 8,148 20.58 7,830 23.33 Total Sales $ 39,592 100.00 $ 33,569 100.00
Franchise related revenues 478 422
Rental income 199 226
Other operating income 61 140
Total Revenue $ 40,330 $ 34,357
-----------------------Twenty Six Weeks Ended-----------------------
April 2, 2022 April 3, 2021
Amount Amount
(In thousands) Percent (In thousands) PercentRestaurant food sales $ 46,980 61.56 $ 39,017 60.63 Restaurant bar sales 12,676 16.61 9,493 14.75 Package store sales 16,659 21.83 15,841 24.62 Total Sales $ 76,315 100.00 $ 64,351 100.00 Franchise related revenues 924 808 Rental income 398 413 Other operating income 96 165 Total Revenue $ 77,733 $ 65,737
(1) While included in the figures presented for the thirteen and twenty six weeks
ended
Restaurant which opened for business on
material effect on our results for these periods. The 2022
is expected to open for business in October, 2022.
Comparison of Thirteen Weeks Ended
Revenues.Total revenue for the thirteen weeks endedApril 2, 2022 increased$5,973,000 or 17.39% to$40,330,000 from$34,357,000 for the thirteen weeks endedApril 3, 2021 due primarily to increased package liquor store and restaurant sales, increased menu prices and the comparatively less adverse effects of COVID-19 on our operations during the thirteen weeks endedApril 2, 2022 as compared with the thirteen weeks endedApril 3, 2021 . EffectiveOctober 3, 2021 and then effectiveDecember 19, 2021 we increased menu prices for our food offerings to target an increase to our food revenues of approximately 2.38% and 3.34% annually, respectively, to offset higher food costs and higher overall expenses and effectiveDecember 12, 2021 we increased menu prices for our bar offerings to target an increase to our bar revenues of approximately 7.80% annually, (collectively the "Recent Price Increases"). Prior to these increases, we previously raised menu prices in the third quarter of our fiscal year 2021. We expect that the new package liquor store located at7990 Davie Road Extension,Hollywood, Florida will open for business during our fiscal year 2022 and we expect to generate revenue from it. We do not anticipate that the restaurant located at2505 N. University Drive ,Hollywood, Florida , which has been closed since October, 2018 due to a fire (the "Hollywood restaurant") or the 2022Miramar Restaurant will open for business during our fiscal year 2022 and accordingly we do not expect to generate any revenue from them. 19 Index
Restaurant Food Sales. Restaurant revenue generated from the sale of food, including non-alcoholic beverages, at restaurants totaled$24,775,000 for the thirteen weeks endedApril 2, 2022 as compared to$20,689,000 for the thirteen weeks endedApril 3, 2021 . The increase in restaurant food sales for the thirteen weeks endedApril 2, 2022 as compared to restaurant food sales during the thirteen weeks endedApril 3, 2021 is attributable to menu price increases and the comparatively greater adverse effects of COVID-19 on our operations during the thirteen weeks endedApril 3, 2021 as compared with the thirteen weeks endedApril 2, 2022 . Comparable weekly restaurant food sales (for restaurants open for all of the thirteen weeks endedApril 2, 2022 andApril 3, 2021 respectively, which consists of nine restaurants owned by us, (excluding Store #19 which was closed for the thirteen weeks endedApril 2, 2022 andApril 3, 2021 due to a fire onOctober 2, 2018 ) and eight restaurants owned by affiliated limited partnerships, (excluding Store #85 which opened for business during the second quarter of our fiscal year 2022)) was$1,802,000 and$1,578,000 for the thirteen weeks endedApril 2, 2022 andApril 3, 2021 , respectively, an increase of 14.20%. Comparable weekly restaurant food sales for Company owned restaurants only was$887,000 and$786,000 for the thirteen weeks endedApril 2, 2022 andApril 3, 2021 , respectively, an increase of 12.85%. Comparable weekly restaurant food sales for affiliated limited partnership owned restaurants only, (excluding Store #85 which opened for business during the second quarter of our fiscal year 2022), was$915,000 and$792,000 for the thirteen weeks endedApril 2, 2022 andApril 3, 2021 respectively, an increase of 15.53%. Restaurant Bar Sales. Restaurant revenue generated from the sale of alcoholic beverages at restaurants totaled$6,669,000 for the thirteen weeks endedApril 2, 2022 as compared to$5,050,000 for the thirteen weeks endedApril 3, 2021 . The increase in restaurant bar sales during the thirteen weeks endedApril 2, 2022 is primarily due to the Recent Price Increases and the comparatively more adverse effects of COVID-19 on our operations during the thirteen weeks endedApril 3, 2021 as compared with the thirteen weeks endedApril 2, 2022 . Comparable weekly restaurant bar sales (for restaurants open for all of the thirteen weeks endedApril 2, 2022 andApril 3 . 2021 respectively, which consists of nine restaurants owned by us, (excluding Store #19 which was closed for the thirteen weeks endedApril 2 . 2022 andApril 3, 2021 due to a fire onOctober 2, 2018 ), and eight restaurants owned by affiliated limited partnerships, (excluding Store #85 which opened for business during the second quarter of our fiscal year 2022)) was$509,000 for the thirteen weeks endedApril 2, 2022 and$389,000 for the thirteen weeks ended April, an increase of 30.85%. Comparable weekly restaurant bar sales for Company owned restaurants only was$225,000 and$166,000 for the thirteen weeks endedApril 2, 2022 andApril 3, 2021 , respectively, an increase of 35.54%. Comparable weekly restaurant bar sales for affiliated limited partnership owned restaurants only was$284,000 and$223,000 for the thirteen weeks endedApril 2, 2022 andApril 3, 2021 respectively, an increase of 27.35%. Package Store Sales. Revenue generated from sales of liquor and related items at package liquor stores totaled$8,148,000 for the thirteen weeks endedApril 2, 2022 as compared to$7,830,000 for the thirteen weeks endedApril 3, 2021 , an increase of$318,000 . This increase was primarily due to increased package liquor store traffic due to what appears to be continued increased demand for package liquor store products resulting from COVID-19. The weekly average of same store package liquor store sales, which includes nine (9) Company-owned package liquor stores, (excluding Store #19, which was closed for the thirteen weeks endedApril 2, 2022 andApril 3, 2021 due to a fire onOctober 2, 2018 ), was$644,000 and$602,000 for the thirteen weeks endedApril 2, 2022 andApril 3, 2021 respectively, an increase of 6.98 %. 20 Index
Operating Costs and Expenses. Operating costs and expenses, (consisting of cost of merchandise sold, payroll and related costs, occupancy costs and selling, general and administrative expenses), for the thirteen weeks endedApril 2, 2022 increased$6,916,000 or 21.91% to$38,480,000 from$31,564,000 for the thirteen weeks endedApril 3, 2021 . The increase was primarily due to payroll and an expected general increase in food costs, 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 2022. Operating costs and expenses increased as a percentage of total revenue to approximately 95.41% in the second quarter of our fiscal year 2022 from 91.87% in the second quarter of our fiscal year 2021.
Gross Profit. Gross profit is calculated by subtracting the cost of merchandise sold from sales.
Restaurant Food Sales and Bar Sales. Gross profit for food and bar sales for the thirteen weeks endedApril 2, 2022 increased to$20,070,000 from$17,277,000 for the thirteen weeks endedApril 2, 2022 . 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 63.83% for the thirteen weeks endedApril 2, 2022 and 67.12% for the thirteen weeks endedApril 3, 2021 . Gross profit margin for restaurant food and bar sales decreased during the second quarter of our fiscal year 2022 when compared to the second quarter of our fiscal year 2021 due to higher food costs, partially offset by, among other things, the Recent Price Increases.
Package Store Sales. Gross profit for package store sales for the thirteen weeks endedApril 2, 2022 increased to$2,279,000 from$2,162,000 for the thirteen weeks endedApril 3, 2021 , due primarily to increased package liquor store traffic which we believe is due to what appears to be continued increased demand caused by COVID-19. Our gross profit margin, (calculated as gross profit reflected as a percentage of package liquor store sales), for package store sales was 27.97% for the thirteen weeks endedApril 2, 2022 and 27.61% for the thirteen weeks endedApril 3, 2021 . Payroll and Related Costs. Payroll and related costs for the thirteen weeks endedApril 2, 2022 increased$1,567,000 or 14.98% to$12,031,000 from$10,464,000 for the thirteen weeks endedApril 3, 2021 . Payroll and related costs for the thirteen weeks endedApril 2, 2022 were higher due primarily to higher costs for employees such as cooks. Payroll and related costs as a percentage of total revenue was 29.83% in the thirteen weeks endedApril 2, 2022 and 30.46% of total revenue in the thirteen weeks endedApril 3, 2021 . Occupancy Costs. Occupancy costs (consisting of percentage rent, common area maintenance, repairs, real property taxes, amortization of leasehold purchases and rent expense associated with operating lease liabilities under ASC 842) for the thirteen weeks endedApril 2, 2022 increased$113,000 or 7.05% to$1,715,000 from$1,602,000 for the thirteen weeks endedApril 3, 2021 . The increase in occupancy costs was primarily due to the commencement of rent for our retail package liquor store which we are developing located at11225 Miramar Parkway , #245,Miramar, Florida (Store #24) and our restaurant location which we are developing located at 11225Miramar parkway , #250,Miramar, Florida (Store #25) during the second quarter of our fiscal year 2022, partially offset by the elimination of rent for our restaurant location located at14301 West Sunrise Boulevard ,Sunrise, Florida (Store #85), the real property and improvements of which we purchased onMarch 2, 2021 . Selling, General and Administrative Expenses.Selling, general and administrative expenses (consisting of general corporate expenses, including but not limited to advertising, insurance, professional costs, clerical and administrative overhead) for the thirteen weeks endedApril 2, 2022 increased$2,123,000 or 39.55% to$7,491,000 from$5,368,000 for the thirteen weeks endedApril 3, 2021 . Selling, general and administrative expenses increased as a percentage of total revenue in the thirteen weeks endedApril 2, 2022 to 18.57% as compared to 15.62% in the thirteen weeks endedApril 3, 2021 , due primarily to the payment by the Company of pre-opening expenses in the amount of$856,000 for its limited partnership owning the new restaurant inSunrise, Florida (Store #85) due to delays in the development of the new restaurant, including delays caused by COVID-19 and increases in expenses across all categories.. We anticipate that our selling, general and administrative expenses as a percentage of total revenue will increase throughout the balance of our fiscal year 2022 due primarily to increases across all categories. 21 Index Depreciation and Amortization. Depreciation and amortization expense for the thirteen weeks endedApril 2, 2022 decreased$45,000 or 5.91% to$717,000 from$762,000 from the thirteen weeks endedApril 3, 2021 . As a percentage of total revenue, depreciation and amortization expense was 1.78% of revenue in the thirteen weeks endedApril 2, 2022 and 2.22% of revenue in the thirteen weeks endedApril 3, 2021 .
Interest Expense, Net. Interest expense, net, for the thirteen weeks endedApril 2, 2022 decreased$71,000 to$177,000 from$248,000 for the thirteen weeks endedApril 3 . 2021. Interest expense, net, decreased for the thirteen weeks endedApril 2, 2022 due to the forgiveness of principal and all accrued interest on the borrowing by certain of our limited partnerships of an additional$3.35 million of 2nd PPP Loans during the first quarter of our fiscal year 2022, partially offset by interest on (i) our borrowing of$2,200,000 during the second quarter of our fiscal year 2021 from an unrelated third party lender used to finance our purchase of the real property and improvements located at14301 West Sunrise Boulevard ,Sunrise, Florida (Store #85) (the "$2.2 Million Borrowing") and (ii) our borrowing of$4,300,000 during the third quarter of our fiscal year 2021 from an unrelated third party lender to re-finance our mortgage loan of our property located at13105 - 13205 Biscayne Boulevard ,North Miami, Florida (Store #20).
Income Taxes. Income tax for the thirteen weeks ended
Net Income. Net income for the thirteen weeks endedApril 2, 2022 decreased$4,349,000 or 76.41% to$1,343,000 from$5,692,000 for the thirteen weeks endedApril 3, 2021 due primarily to the relatively greater income attributable to the forgiveness of debt of certain of our PPP Loans during the thirteen weeks endedApril 3, 2021 , as compared to the income attributable to the forgiveness of debt of certain of our other PPP Loans during the thirteen weeks endedApril 2, 2022 and higher food costs and overall increased expenses during the thirteen weeks endedApril 2, 2022 , partially offset by increased revenue at our retail package liquor stores and restaurants during the thirteen weeks endedApril 2, 2022 and the Recent Price Increases. As a percentage of revenue, net income for the thirteen weeks endedApril 2, 2022 is 3.33%, as compared to 16.57% in the thirteen weeks endedApril 3, 2021 . Net Income Attributable toFlanigan's Enterprises, Inc. Stockholders. Net income attributable to stockholders for the thirteen weeks endedApril 2, 2022 decreased$791,000 or 32.27% to$1,660,000 from$2,451,000 for the thirteen weeks endedApril 3, 2021 due primarily to the relatively greater income attributable to the forgiveness of debt of certain of our PPP Loans during the thirteen weeks endedApril 3, 2021 , as compared to the income attributable to the forgiveness of debt of certain of our other PPP Loans during the thirteen weeks endedApril 2, 2022 and higher food costs and overall increased expenses during the thirteen weeks endedApril 2, 2022 , partially offset by increased revenue at our retail package liquor stores and restaurants during the thirteen weeks endedApril 2, 2022 and the Recent Price Increases. During the thirteen weeks endedApril 2, 2022 , due to losses attributable to the 2022Sunrise Restaurant and a lesser extent the 2022Miramar Restaurant , there was a loss attributable to the noncontrolling interests as compared to a gain for the thirteen weeks endedApril 3, 2021 which contributes to the net income attributable toFlanigan's Enterprises, Inc. Stockholders for the thirteen weeks endedApril 2, 2022 . As a percentage of revenue, net income attributable to stockholders for the thirteen weeks endedApril 2, 2022 is 4.12%, as compared to 7.13% for the thirteen weeks endedApril 3, 2021 .
Comparison of Twenty-Six Weeks Ended
Revenues.Total revenue for the twenty-six weeks endedApril 2, 2022 increased$11,996,000 or 18.25% to$77,733,000 from$65,737,000 for the twenty-six weeks endedApril 3, 2021 due primarily to increased package liquor store and restaurant sales, the Recent Price Increases and the comparatively less adverse effects of COVID-19 on our operations during the twenty-six weeks endedApril 2, 2022 as compared with the twenty-six weeks endedApril 3, 2021 . 22 Index
Restaurant Food Sales. Restaurant revenue generated from the sale of food, including non-alcoholic beverages, at restaurants totaled$46,980,000 for the twenty-six weeks endedApril 2, 2022 as compared to$39,017,000 for the twenty-six weeks endedApril 3, 2021 . The increase in restaurant food sales for the twenty-six weeks endedApril 2, 2022 as compared to restaurant food sales during the twenty-six weeks endedApril 3, 2021 is attributable to the Recent Price Increases and the comparatively more adverse effects of COVID-19 on our operations during the twenty-six weeks endedApril 3, 2021 as compared with the twenty-six weeks endedApril 2, 2022 . Comparable weekly restaurant food sales (for restaurants open for all of the twenty-six weeks endedApril 2, 2022 andApril 3, 2021 respectively, which consists of nine restaurants owned by us, (excluding Store #19 which was closed for the twenty-six weeks endedApril 2, 2022 andApril 3, 2021 due to a fire onOctober 2, 2018 ) and eight restaurants owned by affiliated limited partnerships, (excluding Store #85 which opened for business during the second quarter of our fiscal year 2022)) was$1,775,000 and$1,489,000 for the twenty-six weeks endedApril 2, 2022 andApril 3, 2021 , respectively, an increase of 19.21%. Comparable weekly restaurant food sales for Company owned restaurants only was$872,000 and$733,000 for the twenty-six weeks endedApril 2, 2022 andApril 3, 2021 , respectively, an increase of 18.96%. Comparable weekly restaurant food sales for affiliated limited partnership owned restaurants only, (excluding Store #85 which opened for business during the second quarter of our fiscal year 2022), was$903,000 and$756,000 for the twenty-six weeks endedApril 2, 2022 andApril 3, 2021 respectively, an increase of 19.44%. Restaurant Bar Sales. Restaurant revenue generated from the sale of alcoholic beverages at restaurants totaled$12,676,000 for the twenty-six weeks endedApril 2, 2022 as compared to$9,493,000 for the twenty-six weeks endedApril 3, 2021 . The increase in restaurant bar sales during the twenty-six weeks endedApril 2, 2022 is primarily due to the Recent Price Increases and the comparatively greater adverse effects of COVID-19 on our operations during the twenty-six weeks endedApril 3, 2021 as compared with the twenty-six weeks endedApril 2, 2022 . Comparable weekly restaurant bar sales (for restaurants open for all of the thirteen weeks endedApril 2, 2022 andApril 3 . 2021 respectively, which consists of nine restaurants owned by us, (excluding Store #19 which was closed for the thirteen weeks endedApril 2 . 2022 andApril 3, 2021 due to a fire onOctober 2, 2018 ), and eight restaurants owned by affiliated limited partnerships, (excluding Store #85 which opened for business during the second quarter of our fiscal year 2022)) was$485,000 for the thirteen weeks endedApril 2, 2022 and$365,000 for the thirteen weeks ended April, an increase of 32.88%. Comparable weekly restaurant bar sales for Company owned restaurants only was$214,000 and$153,000 for the twenty-six weeks endedApril 2, 2022 andApril 3, 2021 , respectively, an increase of 39.87%. Comparable weekly restaurant bar sales for affiliated limited partnership owned restaurants only was$271,000 and$212,000 for the twenty-six weeks endedApril 2, 2022 andApril 3, 2021 respectively, an increase of 27.83%. Package Store Sales. Revenue generated from sales of liquor and related items at package liquor stores totaled$16,658,000 for the twenty-six weeks endedApril 2, 2022 as compared to$15,841,000 for the twenty-six weeks endedApril 3, 2021 , an increase of$818,000 . This increase was primarily due to increased package liquor store traffic due to what appears to be continued increased demand for package liquor store products resulting from COVID-19. The weekly average of same store package liquor store sales, which includes nine (9) Company-owned package liquor stores, (excluding Store #19, which was closed for the twenty-six weeks endedApril 2, 2022 andApril 3, 2021 due to a fire onOctober 2, 2018 ), was$649,000 and$609,000 for the twenty-six weeks endedApril 2, 2022 andApril 3, 2021 respectively, an increase of 6.57 %. Operating Costs and Expenses. Operating costs and expenses, (consisting of cost of merchandise sold, payroll and related costs, occupancy costs and selling, general and administrative expenses), for the twenty-six weeks endedApril 2, 2022 increased$13,444,000 or 21.80% to$75,118,000 from$61,674,000 for the twenty-six weeks endedApril 3, 2021 . The increase was primarily due to payroll and an expected general increase in food costs, 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 2022. Operating costs and expenses increased as a percentage of total revenue to approximately 96.64% in the twenty-six weeks endedApril 2, 2022 from 93.82% in the twenty-six weeks endedApril 3, 2021 . 23 Index
Gross Profit. Gross profit is calculated by subtracting the cost of merchandise sold from sales.
Restaurant Food Sales and Bar Sales. Gross profit for food and bar sales for the twenty-six weeks endedApril 2, 2022 increased to$37,949,000 from$32,526,000 for the twenty-six weeks endedApril 3, 2021 . 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 63.61% for the twenty-six weeks endedApril 2, 2022 and 67.05% for the twenty-six weeks endedApril 3, 2021 . Gross profit margin for restaurant food and bar sales decreased during the twenty-six weeks endedApril 2, 2022 when compared to the twenty-six weeks endedApril 3, 2021 due to higher food costs, partially offset by, among other things, the Recent Price Increases. Package Store Sales. Gross profit for package store sales for the twenty-six weeks endedApril 2, 2022 increased to$4,450,000 from$4,322,000 for the twenty-six weeks endedApril 3, 2021 , due primarily to increased package liquor store traffic which we believe is due to what appears to be continued increased demand caused by COVID-19. Our gross profit margin, (calculated as gross profit reflected as a percentage of package liquor store sales), for package store sales was 26.71% for the twenty-six weeks endedApril 2, 2022 and 27.28% for the twenty-six weeks endedApril 3, 2021 . Payroll and Related Costs. Payroll and related costs for the twenty-six weeks endedApril 2, 2022 increased$4,340,000 or 21.78% to$24,267,000 from$19,927,000 for the twenty-six weeks endedApril 3, 2021 . Payroll and related costs for the twenty-six weeks endedApril 2, 2022 were higher due primarily higher costs for employees such as cooks. Payroll and related costs as a percentage of total revenue was 31.22% in the twenty-six weeks endedApril 2, 2022 and 30.31% of total revenue in the twenty-six weeks endedApril 3, 2021 . Occupancy Costs. Occupancy costs (consisting of percentage rent, common area maintenance, repairs, real property taxes, amortization of leasehold purchases and rent expense associated with operating lease liabilities under ASC 842) for the twenty-six weeks endedApril 2, 2022 increased$5,000 or 0.15% to$3,413,000 from$3,408,000 for the twenty-six weeks endedApril 3, 2021 . The increase in occupancy costs was primarily due to the commencement of rent for our retail package liquor store which we are developing located at11225 Miramar Parkway , #245,Miramar, Florida (Store #24) and our restaurant location which we are developing located at 11225Miramar parkway , #250,Miramar, Florida (Store #25) during the second quarter of our fiscal year 2022, partially offset by the elimination of rent for our restaurant location located at14301 West Sunrise Boulevard ,Sunrise, Florida (Store #85), the real property and improvements of which we purchased onMarch 2, 2021 . Selling, General and Administrative Expenses.Selling, general and administrative expenses (consisting of general corporate expenses, including but not limited to advertising, insurance, professional costs, clerical and administrative overhead) for the twenty-six weeks endedApril 2, 2022 increased$2,686,000 or 24.79% to$13,522,000 from$10,836,000 for the twenty-six weeks endedApril 3, 2021 due primarily to the payment by the Company of pre-opening expenses in the amount of$856,000 for its limited partnership owning the new restaurant inSunrise, Florida (Store #85) due to delays in the development of the new restaurant, including delays caused by COVID-19 and increases in expenses across all categories. Selling, general and administrative expenses increased as a percentage of total revenue in the twenty-six weeks endedApril 2, 2022 to 17.40% as compared to 16.48% in the twenty-six weeks endedApril 3, 2021 . We anticipate that our selling, general and administrative expenses as a percentage of total revenue will increase throughout the balance of our fiscal year 2022 due primarily to increases across all categories. 24 Index Depreciation and Amortization. Depreciation and amortization expense for the twenty-six weeks endedApril 2, 2022 decreased$136,000 or 8.85% to$1,400,000 from$1,536,000 from the twenty-six weeks endedApril 3, 2021 . As a percentage of total revenue, depreciation and amortization expense was 1.80% of revenue in the twenty-six weeks endedApril 2, 2022 and 2.34% of revenue in the twenty-six weeks endedApril 3, 2021 . Interest Expense, Net. Interest expense, net, for the twenty-six weeks endedApril 2, 2022 decreased$157,000 to$370,000 from$527,000 for the twenty-six weeks endedApril 3, 2021 . Interest expense, net, decreased for the twenty-six weeks endedApril 2, 2022 due to the forgiveness of principal and all accrued interest on the borrowing by certain of our limited partnerships of an additional$3.35 million related to the 2nd PPP Loans during the first quarter of our fiscal year 2022, partially offset by interest on (i) our borrowing of$2,200,000 during the second quarter of our fiscal year 2021 from an unrelated third party lender used to finance our purchase of the real property and improvements located at14301 West Sunrise Boulevard ,Sunrise, Florida (Store #85) (the "$2.2 Million Borrowing") and (ii) our borrowing of$4,300,000 during the third quarter of our fiscal year 2021 from an unrelated third party lender to re-finance our mortgage loan of our property located at13105 - 13205 Biscayne Boulevard ,North Miami, Florida (Store #20). Income Taxes. Income tax for the twenty-six weeks endedApril 2, 2022 was an expense of$500,000 , as compared to an expense of$529,000 for the twenty-six weeks endedApril 3, 2021 . Net Income. Net income for the twenty-six weeks endedApril 2, 2022 decreased$1,443,000 or 21.46% to$5,281,000 from$6,724,000 for the twenty-six weeks endedApril 3, 2021 due primarily to the relatively greater income attributable to the forgiveness of debt of certain of our PPP Loans during the twenty-six weeks endedApril 3, 2021 as compared to the income attributable to the forgiveness of debt of certain of our 2nd PPP Loans during the twenty-six weeks endedApril 2, 2022 and higher food costs and overall increased expenses during the twenty-six weeks endedApril 2, 2022 , partially offset by increased revenue at our retail package liquor stores and restaurants during the twenty-six weeks endedApril 2, 2022 and the Recent Price Increases. As a percentage of revenue, net income for the twenty-six weeks endedApril 2, 2022 is 6.79%, as compared to 10.23% in the twenty-six weeks endedApril 3, 2021 . Net Income Attributable toFlanigan's Enterprises, Inc. Stockholders. Net income attributable to stockholders for the twenty-six weeks endedApril 2, 2022 decreased$7,000 or 0.22% to$3,224,000 from$3,231,000 for the twenty-six weeks endedApril 3, 2021 due primarily to increased revenue at our retail package liquor stores and restaurants during the twenty-six weeks endedApril 2, 2022 and the Recent Price Increases, partially offset by higher food costs and overall expenses. During the twenty-six weeks endedApril 2, 2022 , due to losses attributable to the 2022Sunrise Restaurant and a lesser extent the 2022Miramar Restaurant , there was less of a gain attributable to the noncontrolling interests as compared to a gain for the twenty-six weeks endedApril 3, 2021 which contributes to the net income attributable toFlanigan's Enterprises, Inc. Stockholders for the twenty-six weeks endedApril 2, 2022 . As a percentage of revenue, net income attributable to stockholders for the thirteen weeks endedApril 2, 2022 is 4.15%, as compared to 4.92% for the twenty-six weeks endedApril 3, 2021 .
As new restaurants open, our income from operations will be adversely affected due to our obligation to advance pre-opening costs, including but not limited to pre-opening rent for the new locations. During the twenty-six weeks endedApril 2, 2022 , we opened one new restaurant location inSunrise, Florida for business as a new "Flanigan's" and a second new restaurant location inMiramar, Florida in the development stage, to house a new "Flanigan's". Rent for the new restaurant location inMiramar, Florida commenced during the second quarter
of
our fiscal year 2022.
25
Index
Menu Price Increases and Trends
During the twenty-six weeks endedApril 2, 2022 , we increased menu prices for our food offerings (effectiveOctober 3, 2021 andDecember 19, 2021 , respectively) to target an aggregate increase to our food revenues of approximately 8.83% annually and we increased menu prices for our bar offerings (effectiveDecember 12, 2021 ) to target an increase to our bar revenues of approximately 7.80% annually to offset higher food and liquor costs and higher overall expenses. Prior to these increases, we previously raised menu prices in the third quarter of our fiscal year 2021. COVID-19 has and will continue to materially and adversely affect our restaurant business for what may be a prolonged period of time. This damage and disruption has resulted from events and factors that were impossible for us to predict and are beyond our control. As a result, COVID-19 has materially adversely affected our results of operations for our fiscal year 2021, as well as the twenty-six weeks endedApril 2, 2022 and will, in all likelihood, impact our results of operations, liquidity and/or financial condition throughout our fiscal year 2022. The extent to which our restaurant business may be adversely impacted and its effect on our operations, liquidity and/or financial condition cannot be accurately predicted.
Liquidity and Capital Resources
We fund our operations through cash from operations and borrowings from third parties. As ofApril 2, 2022 , we had cash of approximately$40,666,000 , an increase of$7,990,000 from our cash balance of$32,676,000 as ofOctober 2, 2021 . During the twenty-six weeks endedApril 2, 2022 , we generated proceeds from the closing of the sale, in a private offering, of limited partnership interests in (i)CIC Investors #85, Ltd., the limited partnership which owns and operates the 2022Sunrise Restaurant , of$5,000,000 , of which we invested$370,000 and (ii)CIC Investors #25, Ltd., the limited partnership which owns and is developing the "Flanigan's" restaurant located at11225 Miramar Parkway , Suite 250,Miramar, Florida 33025 of$4,000,000 . Capital raised from private investors in the private offerings is credited to sale of noncontrolling interests in our Statements of Stockholders' Equity. During the second quarter of our fiscal year 2021, certain of the entities owning the limited partnership stores (the "LP's"), as well as the store we manage but do not own (the "Managed Store ") (collectively, the "Borrowers"), applied for and received loans from an unrelated third party lender (the "Lender") pursuant to the Paycheck Protection Program (the "PPP") under the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") enactedMarch 27, 2020 , in the aggregate principal amount of approximately$3.98 million (the "2nd PPP Loans"), of which approximately: (i)$3.46 million was loaned to six (6) of the LP's; and (ii)$0.52 million was loaned to theManaged Store . During first quarter of our fiscal year 2022, we applied for forgiveness for all PPP Loans, including theManaged Store , and as ofApril 2, 2022 , the entire amount of principal and accrued interest was forgiven under the 2nd PPP Loans. During the third quarter of our fiscal year 2021, we generated net proceeds of$2.8 million from the re-finance of our mortgage loan encumbering the real property and improvements located at13105 - 13205 Biscayne Boulevard ,North Miami, Florida where ourFlanigan's Seafood Bar and Grill restaurant and Big Daddy's Liquors retail package liquor store operate (Store #20) with an unrelated third-party lender, increasing the principal amount borrowed from$1.5 million to$4.3 million . During the second quarter of our fiscal year 2021, we closed on the purchase of the real property and improvements located at14301 West Sunrise Boulevard ,Sunrise, Florida where we are developing a "Flanigan's Seafood Bar and Grill " restaurant (Store #85) for$4,800,000 . We financed this acquisition with a loan from an unrelated third-party lender in the principal amount of$2.2 million and paid cash for the balance. During the first quarter of our fiscal year 2021, we closed on the purchase of the real property and improvements located at5450 N. State Road 7,North Lauderdale, Florida where we operate a combination "Flanigan's Seafood Bar and Grill " restaurant and "Big Daddy's Liquors" package liquor store (Store #40) and paid$1,200,000 cash at closing. Notwithstanding the negative effects of COVID 19 on our operations, we believe that our current cash availability from our cash on hand, positive cash flow from operations and borrowed funds will be sufficient to fund our operations and planned capital expenditures for at least the next twelve months. 26 Index Cash Flows
The following table is a summary of our cash flows for the twenty-six weeks
ended
---------Twenty-Six Weeks Ended--------
April 2, 2022 April 3, 2021 (in Thousands)
Net cash provided by operating activities $ 7,225 $ 7,092 Net cash provided by (used in) investing activities (4,574 ) (5,493 ) Net cash provided by (used in) financing activities 5,339 1,107 Net Increase in Cash and Cash Equivalents 7,990 2,706 Cash and Cash Equivalents, Beginning 32,676 29,922 Cash and Cash Equivalents, Ending $
40,666 $ 32,628 During the twenty-six weeks endedApril 2, 2022 , our Board of Directors declared a cash dividend of$1.00 per share to shareholders of record onMarch 31, 2022 and payable onApril 19, 2022 . During the twenty-six weeks endedApril 3, 2021 , we did not declare or pay a cash dividend on our capital stock. Any future determination to pay cash dividends will be at our Board's discretion and will depend upon our financial condition, operating results, capital requirements and such other factors as our Board deems relevant. Capital Expenditures In addition to using cash for our operating expenses, we use cash to fund the development and construction of new restaurants and to fund capitalized property improvements for our existing restaurants. During the twenty-six weeks endedApril 2, 2022 , we acquired property and equipment and construction in progress of$4,111,000 , (of which$353,000 was deposits recorded in other assets as ofOctober 2, 2021 and$331,000 was construction in progress in accounts payable), including$717,000 for renovations to three (3) existing limited partnership owned restaurants and$82,000 (1) Company owned restaurants. During the twenty-six weeks endedApril 3, 2021 , we acquired property, plant and equipment and construction in progress of$7,251,000 , (of which$58,000 was for the purchase of a vehicle for debt; of which$2,200,000 was for the purchase of real property for debt;$14,000 was deposits recorded in other assets and$18,000 was purchase deposits transferred to construction in process as ofOctober 3, 2020 ), which amount included$23,000 for the renovation to one (1) existing limited partnership restaurants and$364,000 for renovations to five (5) Company owned restaurants. All of our owned units require periodic refurbishing in order to remain competitive. We anticipate the cost of this refurbishment in our fiscal year 2022 will be approximately$1,000,000 , excluding construction/renovations to Store #19 (our combination package liquor store and restaurant which is being rebuilt due to damages caused by a fire), Store #85 (ourSunrise, Florida restaurant location opened for business during the twenty-six weeks endedApril 2, 2022 ), Store #24 (ourMiramar, Florida package store location in development) and Store #25 (ourMiramar, Florida restaurant location in development), which funds will be provided from operations, subject to reimbursement of all or a part of the cost of construction/renovations through the proceeds generated from the closing of the private offerings for the limited partnerships which own
Store #85 and Store #25.
27
Index
Long Term Debt
As of April 2, 2022 , we had long term debt of $18,787,000 , as compared to
$22,115,000 as of October 2, 2021 . Our long term debt decreased as of April 2,
2022 as compared to October 2, 2021 due to the forgiveness of all principal and
accrued interest of the 2nd PPP Loans, partially offset by $1,861,000 for
financed insurance premiums, less any payments made on account thereof. As of
April 2, 2022 , we are in compliance with the covenants of all loans with our
lender.
As of April 2, 2022 , the aggregate principal balance owed from the financing of
our property and general liability insurance policies is $1,527,000 , excluding
coverage for our franchises, (of approximately $408,000 ), which are not included
in our consolidated financial statements.
Construction Contracts
(a) 7990 Davie Road Extension,
During the third quarter of our fiscal year 2019, we entered into an agreement with a third party unaffiliated general contractor for site work at this location totaling$1,618,000 , (i) to connect the real property where this restaurant operated (Store #19) to city sewer and (ii) to construct a new building on the adjacent parcel of real property for the operation of a package liquor store. Through the twenty-six weeks endedApril 2, 2022 , we agreed to change orders to the agreement for additional construction services increasing the total contract price by$624,000 to$2,242,000 , of which$1,951,000 of the total amount obligated has been paid throughApril 2, 2022 and an additional$-0 - has been paid subsequent to the end of the twenty-six weeks of endedApril 2, 2022 through the date of filing this quarterly report. (b)2505 N. 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 at this location totaling$2,515,000 , of which$226,000 has been paid subsequent to the end of the second quarter of our fiscal year 2022 through the date of filing of this quarterly report.
(c) 14301 W. Sunrise Boulevard,
During the fourth quarter of our fiscal year 2020, we entered into an agreement with a third party unaffiliated general contractor for interior renovations at this location totaling$1,236,000 and through the second quarter our fiscal year 2022 we agreed to change orders to the agreement for additional interior renovations increasing the total contract price by$215,000 to$1,451,000 , which has been paid in full by the end of the second quarter of our fiscal year 2022.
(d)
("Flanigan's")
During the first quarter of our fiscal year 2022, we entered into an agreement with a third party unaffiliated general contractor for interior renovations at this location totaling$1,421,000 , of which$-0 - has been paid throughApril 2, 2022 and$180,000 has been paid subsequent to the end of the twenty-six weeks endedApril 2, 2022 through the date of filing of this quarterly report.
(e)
During the first quarter of our fiscal year 2022, we entered into an agreement with a third party unaffiliated general contractor for interior renovations at this location totaling$317,000 , of which$93,000 has been paid throughApril 2, 2022 and$-0 - has been paid subsequent to the end of the twenty-six weeks endedApril 2, 2022 through the date of filing of this quarterly report. 28 Index Purchase Commitments In order to ensure adequate supply of baby back ribs for our restaurants for calendar year 2022, onOctober 4, 2021 , we entered into a purchase agreement with our current rib supplier, whereby we agreed to purchase approximately$10,414,000 of baby back ribs during calendar year 2022 from this vendor at market cost. Our purchase agreement provides for the purchase of 2.25 & DownBaby Back Ribs , at a monthly cost of the average market price per pound of
the prior 4 weeks.
While we anticipate purchasing all of our rib supply from this vendor, we believe there are several other alternative vendors available, if needed.
Working Capital The table below summarizes the current assets, current liabilities, and working capital as of our fiscal quarter endedApril 2, 2022 and our fiscal year endedOctober 2, 2021 . Item April 2, 2022 Oct. 2, 2021 (in Thousands) Current Assets$ 49,576 $ 39,790 Current Liabilities 26,380 20,223 Working Capital$ 23,196 $ 19,567
Our working capital increased during our fiscal quarter endedApril 2, 2022 from our working capital as ofOctober 2, 2021 primarily due to capital raises of two (2) limited partnership offerings totaling$8,595,000 . While there can be no assurance due to, among other things, unanticipated expenses or unanticipated decline in revenues, or both, we believe that our cash on hand, positive cash flow from operations and borrowed funds will adequately fund operations, debt reductions and planned capital expenditures throughout our fiscal year 2022.
Off-Balance Sheet Arrangements
We do not have off-balance sheet arrangements.
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.
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