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10-K

form10k-25146_bdl.htm

10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the fiscal year ended October 3, 2020

For the transition period from ____________

to ____________

Commission File Number 001-06836

FLANIGAN'S ENTERPRISES, INC.

(Exact name of registrant as specified in its

charter)

(State or Other Jurisdiction of (I.R.S. Employer

Incorporation or Organization) Identification Number)

(Address of Principal Executive Offices) (Zip Code)

(954) 377-1961

(Registrant's Telephone Number, Including Area

Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading symbol(s) Name of each exchange on which registered

Common Stock, $0.10 par value BDL NYSE AMERICAN

Securities registered pursuant to Section 12(g)

of the Act: None

Indicate by check mark if the registrant is

a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐

No ☒

Indicate by check mark if the registrant is

not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐

No ☒

Indicate by check mark whether the registrant

(1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding

12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing

requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant

has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405

of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant

is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions

of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2

of the Exchange Act. (Check one):

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☐

Smaller reporting company ☒ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant

has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided

pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company

(as defined in Rule 12b-2 of the Act).

Yes ☐ No ☒

As of March 28, 2020, the last business day

of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the voting stock held by

non-affiliates of the registrant was $9,608,000 (based on the closing price of the common stock as reported on the NYSE AMERICAN

of $11.31 per share).

There were 1,858,647 shares of the Registrant's

Common Stock, $0.10 par value, outstanding as of January 15, 2021.

DOCUMENTS INCORPORATED BY REFERENCE

Information required by Part III (Items 10,

11, 12, 13 and 14) hereof is incorporated by reference to portions of the Registrant’s Proxy Statement for the 2021 Annual

Meeting of Shareholders which will be filed with the Securities and Exchange Commission no later than 120 days after the end of

the registrant’s fiscal year covered by this report.

FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

PART I

Item 1 Business 1

Item 1A Risk Factors 14

Item 1B Unresolved Staff Comments 28

Item 2 Properties 28

Item 3 Legal Proceedings 36

Item 4 Mine Safety Disclosures 36

PART II

Item 6 Selected Financial Data 37

Item 7A Quantitative and Qualitative Disclosures About Market Risk 50

Item 8 Financial Statements and Supplementary Data 51

Item 9A Controls and Procedures 51

Item 9B Other Information 52

PART III

Item 10 Directors, Executive Officers and Corporate Governance 52

Item 11 Executive Compensation 52

Item 14 Principal Accounting Fees and Services 53

Table of Contents

PART IV

Item 15 Exhibits and Financial Statement Schedules 53

SIGNATURES 58

EXHIBIT INDEX

LIST XBRL DOCUMENTS

Table of Contents

As used in this Annual Report on Form 10-K,

the terms “we,” “us,” “our,” the “Company” and “Flanigan’s” mean

Flanigan's Enterprises, Inc. and its subsidiaries (unless the context indicates a different meaning).

CAUTIONARY NOTE REGARDING FORWARD-LOOKING

STATEMENTS

This annual report, including,

without limitation, statements under the heading “Management’s Discussion and Analysis of Financial Condition and Results

of Operations,” includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended

(“Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”).

These forward-looking statements can be identified by the use of forward-looking terminology, including the words “believes,”

“estimates,” “anticipates,” “expects,” “intends,” “plans,” “may,”

“will,” “potential,” “projects,” “predicts,” “continue,” or “should,”

or, in each case, their negative or other variations or comparable terminology. There can be no assurance that actual results will

not materially differ from expectations. Such statements include, but are not limited to, any statements relating to the future

effects of the COVID 19 pandemic, the general expansion of our business, and other statements which are not statements of current

or historical facts.

The forward-looking statements

contained in this annual report are based on our current expectations and beliefs concerning future developments and their potential

effects on us. Future developments affecting us may not be those that we have anticipated. These forward-looking statements involve

a number of risks, uncertainties (some of which are beyond our control) and other assumptions that may cause actual results or

performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties

include, but are not limited to, those factors described under the heading “Risk Factors.” Should one or more of these

risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects

from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements,

whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

These risks and others described under “Risk Factors” may not be exhaustive.

By their nature, forward-looking

statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur

in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results

of operations, financial condition and liquidity, and developments in the industry in which we operate may differ materially from

those made in or suggested by the forward-looking statements contained in this annual report. In addition, even if our results

or operations, financial condition and liquidity, and developments in the industry in which we operate are consistent with the

forward-looking statements contained in this annual report, those results or developments may not be indicative of results or developments

in subsequent periods.

iii

Table of Contents

PART I

ITEM 1. BUSINESS

General

As of October 3, 2020,

Flanigan’s Enterprises, Inc., a Florida corporation, together with its subsidiaries (“we”, “our”,

“ours” and “us” as the context requires), (i) operates 27 units, consisting of restaurants, package liquor

stores and combination restaurants/package liquor stores that we either own or have operational control over and partial ownership

in; and (ii) franchises an additional five units, consisting of two restaurants (one of which we operate) and three combination

restaurants/package liquor stores. 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 October 3, 2020 and as compared to September 28, 2019. With the exception of “The Whale’s Rib”,

a restaurant we operate but do not own, all of the restaurants operate under our service mark “Flanigan’s Seafood Bar

and Grill” and all of the package liquor stores operate under our service marks “Big Daddy’s Liquors” or

“Big Daddy’s Wine & Liquors.”

TYPES OF UNITS FISCAL YEAR 2020 FISCAL YEAR 2019

Company-Owned:

Combination package liquor store and restaurant 3 3 (1)

Restaurant only 7 7

Package liquor store only 7 6 (2)

Company Managed Restaurants Only:

Limited partnerships 8 8

Franchise 1 1

Unrelated Third Party 1 1

TOTAL – Company-Owned/Operated Units 27 26

Franchised Units 5 5 (3)

____________________

Notes:

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Impact of COVID-19

In March 2020, a novel

strain of coronavirus was declared a global pandemic and a National Public Health Emergency. The novel coronavirus pandemic and

related “shelter-in-place” orders and other governmental mandates relating thereto (collectively, “COVID-19”)

adversely affected and will, in all likelihood continue to adversely affect, our restaurant operations and financial results for

the foreseeable future. Due to COVID-19, from mid-March 2020 through mid-May 2020, we ceased all dining and bar services at all

of our restaurants, limiting service to take-out and delivery only of food, and implemented reduced hours at our retail package

liquor stores. From mid-May 2020 through the beginning of July 2020, there was a gradual elimination of restrictions on our restaurant

operations, permitting us to, among other things, provide dining for outdoor seating patrons with appropriate social distancing

and provide dining for indoor patrons at up to 50% capacity (depending on the location of the restaurant), but with no bar service

and increased operating hours at our package liquor stores. From the beginning of July 2020 through the beginning of September

2020, we ceased dine-in service at all of our Miami-Dade County, Florida restaurants, (two Company-owned and six limited partnership

owned restaurants). Since the beginning of September 2020, we have been offering both food and bar options at all of our restaurants,

including those located in Miami-Dade County, Florida, with appropriate social distancing and dine-in

service at up to 100% capacity, including outdoor dining.

Due to COVID-19, we implemented

(i) certain cost cutting measures including material layoffs at our restaurants and reduced corporate personnel salaries; and (ii)

a number of changes to our operations such as the establishment of an in-house delivery service and an adjustment to our traditional

staffing model to meet customer demand. We have been in regular contact with our suppliers and while to date we have not experienced

significant disruptions in our supply chain, we could see future disruptions should the impacts of COVID-19 extend for a considerable

amount of time. To support our employees, we have implemented work from home support, increased sanitization of high touch, high

traffic areas in our restaurants, retail package liquor stores and corporate offices, provided personal protective equipment for

our employees and increased the frequency of personal hygiene practices. From March 29, 2020 through May 9, 2020, the salaries

of all our non-executive corporate office personnel were reduced by 20%, the base salaries of our Chief Operating Officer and Chief

Financial Officer were each reduced by 50% and our Chief Executive Officer waived his base salary, representing salary savings

of approximately $135,000 during this period. Our employee headcount as of fiscal year end 2020 was 1,804 persons reduced from

1,870 persons as of our fiscal year end 2019.

In addition and also

due to COVID-19, we did not make any quarterly distributions to our limited partners for the quarter ended March 31, 2020.

For each of the quarters ended June 30, 2020 and September 30, 2020, we made quarterly distributions to our limited partners

equal to one-half (1⁄2) of the amounts that would have been distributed for the quarter ended March 31, 2020.

During the third

quarter of fiscal year end 2020, the United States government passed a $2.0 trillion Coronavirus Aid, Relief and Economic

Security Act (“CARES Act”) designed primarily to help keep businesses running during and after the COVID-19

pandemic. The CARES Act included provisions for certain deductions and tax credits, filing deadline extensions, filing

payment deadlines and making available certain grant money to assist businesses. This CARES ACT allowed us to take advantage

of credits, deferments, and deductions, and loans from an unrelated third party lender pursuant to the Paycheck Protection

Program (“PPP Loans”) (described below) during the third quarter of our fiscal year 2020. As a result, during the third and

fourth quarter of 2020, we reversed certain of our cost cutting measures, including (i) reinstating employees laid off at our

restaurants in anticipation of resuming dine-in service, (ii)restoring corporate personnel and executive salaries and (iii)

paying prior salary reductions.

We do not believe COVID-19

has had a material adverse effect on our access to supplies or labor, although there can be no assurance that there will not be

a significant adverse impact on our supply chain or access to labor in the future. We are actively monitoring our food suppliers

to assess how they are managing their operations to mitigate supply flow and food safety risks. To ensure we mitigate potential

supply availability risk, we are building additional inventory back stock levels when appropriate and we have also identified alternative

supply sources in key product categories including but not limited to food, sanitation and safety supplies.

Table of Contents

Additional information

regarding the impact of COVID-19 on our business and the CARES Act is set forth within this Part I, Part II Item 1A. Risk Factors,

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Item 8. Financial Statements

and Supplementary Data, Notes to the Consolidated Financial Statements.

History and Development of Our Business

We were incorporated in

Florida in 1959 and commenced operating as a chain of small cocktail lounges and package liquor stores throughout South Florida.

By 1970, we had established a chain of "Big Daddy's" lounges and package liquor stores between Vero Beach and Homestead,

Florida. From 1970 to 1979, we expanded our package liquor store and lounge operations throughout Florida and opened clubs in five

other "Sun Belt" states. In 1975, we discontinued most of our package store operations in Florida except in the South

Florida areas of Miami-Dade, Broward, Palm Beach and Monroe Counties. In 1982, we expanded our club operations into the Philadelphia,

Pennsylvania area as general partner of several limited partnerships we organized. In March 1985, we began franchising package

liquor stores and lounges in the South Florida area. See Note 13 to the consolidated financial statements and the discussion of

franchised units on page 4.

During our fiscal year

1987, we began renovating our lounges to provide full restaurant food service, and subsequently renovated and added food service

to most of our lounges. Food sales currently represent approximately 81.1% and bar sales approximately 18.9% of our total restaurant

sales.

Our package liquor stores

emphasize high volume business by providing customers with a wide variety of brand name and private label merchandise at discount

prices. Our restaurants offer alcoholic beverages and full food service with abundant portions and reasonable prices, served in

a relaxed, friendly and casual atmosphere.

We conduct our operations

directly and through a number of limited partnerships and wholly owned subsidiaries, all of which are listed below. Our subsidiaries

and the limited partnerships, (except for the limited partnership, where we are not the general partner, which owns and operates

our franchised restaurant in Fort Lauderdale, Florida) are reported on a consolidated basis.

Entity State Of Organization Percentage Owned

Flanigan’s Management Services, Inc. Florida 100

Flanigan’s Enterprises, Inc. of Georgia Georgia 100

Flanigan’s Enterprises, Inc. of Pa. Pennsylvania 100

Flanigan’s Enterprises of N. Miami, Inc. Florida 100

CIC Investors #13, Limited Partnership Florida 45

CIC Investors #50, Limited Partnership Florida 24

CIC Investors #55, Limited Partnership Florida 49

CIC Investors #60, Limited Partnership Florida 46

CIC Investors #65, Limited Partnership Florida 28

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CIC Investors #70, Limited Partnership Florida 41

CIC Investors #80, Limited Partnership Florida 27

CIC Investors #85, Limited Partnership Florida 100

CIC Investors #90, Limited Partnership Florida 5

Josar Investments, LLC Florida 100

Flanigan’s Calusa Center, LLC Florida 100

Flanigan’s Fish Company, LLC Florida 51

Package Liquor Store Operations

Our package liquor stores

emphasize high volume business by providing customers with a wide selection of brand name and private label liquors, beers and

wines while offering competitive pricing by meeting the published sales prices of our competitors. We provide sales training to

our package liquor store personnel. The stores are open for business seven days a week from 9:00-10:00 a.m. to 9:00-10:00 p.m.,

depending upon demand and local law. Most of our units have "night windows" with extended evening hours.

Company-Owned Package

Liquor Stores. We own and operate nine package liquor stores in the South Florida area under the name “Big Daddy’s

Liquors”, two of which are jointly operated with restaurants we own.

Franchised Package Liquor

Stores. We currently franchise three package liquor stores, all in the South Florida area, all of which are operated under

the name “Big Daddy’s Liquors”. Of the three franchised package liquor stores, two are jointly operated with

our franchisee’s restaurant operations and one is operated in a freestanding building adjacent to the franchisee’s

restaurant operation. Two of the three remaining franchised package liquor stores are franchised to members of the family of our

Chairman of the Board, officers and/or directors. We have not entered into a franchise arrangement for either a package liquor

store, restaurant or combination package liquor store/restaurant since 1986 and do not anticipate that we will do so in the foreseeable

future.

Generally, a franchise

agreement with our franchisees for the operation of a package liquor store runs for the balance of the term of the franchisee’s

lease for the business premises, extended by the franchisee’s continued occupancy of the business premises thereafter, whether

by lease or ownership. In exchange for our providing management and related services to the franchisee and our granting the right

to the franchisee to use our service mark, “Big Daddy’s Liquors”, franchisees of package liquor stores pay us

weekly in arrears, (i) a royalty equal to approximately 1% of gross sales; plus (ii) an amount for advertising equal to between

1-1/2% to 3% of gross sales generated at the stores depending upon our actual advertising costs.

Restaurant Operations

Our restaurants provide

a neighborhood casual, standardized dining experience, typical of casual restaurant chains. The interior decor of the restaurants

is nautical with numerous fishing and boating pictures and decorations. The restaurants are designed to permit minor modifications

without significant capital expenditures. However, from time to time we are required to redesign and refurbish the restaurants

at significant cost. Drink prices may vary between locations to meet local conditions. Food prices are substantially standardized

for all restaurants. The restaurants' hours of operation are from 11:00 a.m. to 1:00-5:00 a.m. depending upon demand and local

law.

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Company-Owned Restaurants.

We own and operate nine restaurants all under our service mark “Flanigan’s Seafood Bar and Grill” two of which

are jointly operated with package liquor stores we own. One additional combination package liquor store and restaurant located

at 2505 N. University Drive, Hollywood, Florida (Store #19) has been closed since October 2018 due to fire damage.

Franchised Restaurants.

We franchise five restaurants, all of which operate under our service mark “Flanigan’s Seafood Bar and Grill”,

two of which operate as a restaurant only, two of which operate jointly with a franchisee operated “Big Daddy’s Liquors”

package liquor store and one of which operates adjacent to a “Big Daddy’s Liquors” package liquor store.

Generally, a franchise

agreement with our franchisees for the operation of a restaurant runs for the balance of the term of the franchisee’s lease

for the business premises, extended by the franchisee’s continued occupancy of the business premises thereafter, whether

by lease or ownership. In exchange for our providing management and related services to the franchisee and our granting the right

to the franchisee to use our service mark, “Flanigan’s Seafood Bar and Grill”, our franchisees pay us weekly

in arrears, (i) a royalty equal to approximately 3% of gross sales; plus (ii) an amount for advertising equal to between 1-1/2%

to 3% of gross sales from the restaurants depending upon our actual advertising costs.

For accounting purposes,

we do not consolidate the revenue and expenses of our franchisees’ operations with our revenue and expenses. Franchise royalties

we receive are “earned” when sales are made by franchisees.

Restaurants Owned by Affiliated Limited Partnerships

We have invested along

with others, (some of whom are or are affiliated with our officers and directors), in nine limited partnerships which currently

own and operate nine South Florida based restaurants under our service mark “Flanigan’s Seafood Bar and Grill”.

In addition to being a limited partner in these limited partnerships, we are the sole general partner of eight of these limited

partnerships and manage and control the operations of these restaurants. We are only a limited partner in the limited partnership

which owns and operates the restaurant located in Fort Lauderdale, Florida. We are currently developing a “Flanigan’s

Seafood Bar and Grill” restaurant in Sunrise, Florida which will be owned by a limited partnership using the same or substantially

similar financial arrangement and of which we will be the sole general partner and may invest as a limited partner.

Generally, the terms of

the limited partnership agreements provide that until the investors’ cash investment in a limited partnership (including

any cash invested by us) is returned in full, (available cash is distributed to the investors pro-rata based on ownership interest),

the limited partnership distributes to the investors annually out of available cash from the operation of the restaurant, as a

return of capital, 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

(1⁄2) to us as a management fee and one-half (1⁄2) to the investors, (including us), pro-rata based on the investors’

investment, as a return of capital. Once all of the investors, (including us), have received, in full, amounts equal to their cash

invested, an annual management fee becomes payable to us equal to one-half (1⁄2) of cash available to be distributed, with

the other one-half (1⁄2) of available cash distributed to the investors (including us), as a profit distribution, pro-rata

based on the investors’ investment. As of October 3, 2020, all eight (8) limited partnerships where we are the general partner

and are eligible to receive a management fee, have returned to their respective investors all cash invested and we receive an annual

management fee equal to one-half (1⁄2) of the cash available for distribution by these limited partnerships. In addition to

our receipt of distributable amounts from the limited partnerships, we receive a fee equal to 3% of gross sales for use of our

“Flanigan’s Seafood Bar and Grill” service mark, which use is authorized while we act as general partner only.

This 3% fee is “earned” when sales are made by the limited partnerships and is paid weekly, in arrears. Whether we

will have any additional restaurants under development in the future will be dependent, among other things, on market conditions

and our ability to raise capital. We anticipate that we will continue to form limited partnerships to raise funds to own and operate

restaurants under our service mark “Flanigan’s Seafood Bar and Grill” using the same or substantially similar

financial arrangements.

Table of Contents

Below is information on

the nine limited partnerships which own and operate “Flanigan’s Seafood Bar and Grill” restaurants:

Surfside, Florida

We are the sole general

partner and a 46% limited partner in this limited partnership which has owned and operated a restaurant in Surfside, Florida under

our “Flanigan’s Seafood Bar and Grill” service mark since March 6, 1998. 33.3% of the remaining limited partnership

interest is owned by persons who are either our officers, directors or their family members. This limited partnership has returned

to its investors all of their initial cash invested and we receive an annual management fee equal to one-half (1⁄2) of the

cash available for distribution by this limited partnership.

Kendall, Florida

We are the sole general

partner and a 41% limited partner in this limited partnership which has owned and operated a restaurant in Kendall, Florida under

our “Flanigan’s Seafood Bar and Grill” service mark since April 4, 2000. 28.3% of the remaining limited partnership

interest is owned by persons who are either our officers, directors or their family members. This limited partnership has returned

to its investors all of their initial cash invested and we receive an annual management fee equal to one-half (1⁄2) of the

cash available for distribution by this limited partnership.

West Miami, Florida

We are the sole general

partner and a 27% limited partner in this limited partnership which has owned and operated a restaurant in West Miami, Florida

under our “Flanigan’s Seafood Bar and Grill” service mark since October 11, 2001. 32.7% of the remaining limited

partnership interest is owned by persons who are either our officers, directors or their family members. This limited partnership

has returned to its investors all of their initial cash invested and we receive an annual management fee equal to one-half (1⁄2)

of the cash available for distribution by this limited partnership.

Wellington, Florida

We are the sole general

partner and a 28% limited partner in this limited partnership which has owned and operated a restaurant in Wellington, Florida

under our “Flanigan’s Seafood Bar and Grill” service mark since May 27, 2005. 22.4% of the remaining limited

partnership interest is owned by persons who are either our officers, directors or their family members. This limited partnership

has returned to its investors all of their initial cash invested and we receive an annual management fee equal to one-half (1/2)

of the cash available for distribution by this limited partnership.

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Pinecrest, Florida

We are the sole general

partner and 45% limited partner in this limited partnership which has owned and operated a restaurant in Pinecrest, Florida under

our “Flanigan’s Seafood Bar and Grill” service mark since August 14, 2006. 20.2% of the remaining limited partnership

interest is owned by persons who are either our officers, directors or their family members. This limited partnership has returned

to its investors all of their initial cash invested and we receive an annual management fee equal to one-half (1⁄2) of the

cash available for distribution by this limited partnership.

Pembroke Pines, Florida

We are the sole general

partner and a 24% limited partner in this limited partnership which has owned and operated a restaurant in Pembroke Pines, Florida

under our “Flanigan’s Seafood Bar and Grill” service mark since October 29, 2007. 23.8% of the remaining limited

partnership interest is owned by persons who are either our officers, directors or their family members. This limited partnership

has returned to its investors all of their initial cash invested and we receive an annual management fee equal to one-half (1⁄2)

of the cash available for distribution by this limited partnership.

Davie, Florida

We are the sole general

partner and a 49% limited partner in this limited partnership which has owned and operated a restaurant in Davie, Florida under

our “Flanigan’s Seafood Bar and Grill” service mark since July 28, 2008. 12.3% of the remaining limited partnership

interest is owned by persons who are either our officers, directors or their family members. This limited partnership has returned

to its investors all of their initial cash invested and we receive an annual management fee equal to one-half (1⁄2) of the

cash available for distribution by this limited partnership.

Miami, Florida

We are the sole general

partner and a 5% limited partner in this limited partnership which has owned and operated a restaurant in Miami, Florida under

our “Flanigan’s Seafood Bar and Grill” service mark since December 27, 2012. 26.8% of the remaining limited partnership

interest is owned by persons who are either our officers, directors or their family members. This limited partnership has returned

to its investors all of their initial cash invested and we receive an annual management fee equal to one-half (1⁄2) of the

cash available for distribution by this limited partnership.

Sunrise, Florida

During the second quarter of our

fiscal year 2019, we entered into a Lease Agreement (the “Sunrise Lease Agreement”) with a non-affiliated third party

to rent approximately 6,900 square feet of commercial space in Sunrise, Florida where, subject to certain conditions, we anticipate

opening a new restaurant location under our “Flanigan’s Seafood Bar and Grill” service mark. During the third

quarter of our fiscal year 2019, we assigned the Sunrise Lease Agreement to a newly formed limited partnership in which we currently

are (i) the sole general partner; and (ii) our wholly owned subsidiary is the sole limited partner. While there can be no assurances

that we will be successful in doing so, we intend to sell limited partnership interests to third parties as well as affiliates

of the Company in order to raise net proceeds, in the amount of $5,000,000, which proceeds will be used to renovate this potential

restaurant location. We anticipate that the new restaurant location’s ownership and operating structure will be substantially

similar to that of our other restaurants owned by limited partnerships.

Fort Lauderdale, Florida

A corporation owned by

one of our board members acts as sole general partner of a limited partnership which has owned and operated a restaurant in Fort

Lauderdale, Florida under our “Flanigan’s Seafood Bar and Grill” service mark since April 1, 1997. We have a

25% limited partnership interest in this limited partnership. 31.9% of the remaining limited partnership interest is owned by persons

who are either our officers, directors or their family members. This limited partnership has returned to its investors all cash

invested, but since we are not the general partner of this limited partnership, we do not receive an annual management fee. We

have a franchise arrangement with this limited partnership and for accounting purposes, we do not consolidate the operations of

this limited partnership into our operations.

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Management Agreement for “The Whale’s Rib”

Restaurant

Since January 2006, we

have managed “The Whale’s Rib”, a casual dining restaurant located in Deerfield Beach, Florida, pursuant to a

management agreement. We paid $500,000 in exchange for our rights to manage this restaurant. The restaurant is owned by a third

party unaffiliated with us. In exchange for providing management, bookkeeping and related services, we receive one-half (1⁄2)

of the net profit, if any, from the operation of the restaurant. For our fiscal years ended October 3, 2020 and September 28, 2019,

we generated $150,000 and $375,000 of revenue, respectively from providing these management services.

Operations and Management

We emphasize systematic

operations and control of all package liquor stores and restaurants regardless of whether we own, franchise or manage the unit.

Each unit has its own manager who is responsible for monitoring inventory levels, supervising sales personnel, food preparation

and service in restaurants and generally assuring that the unit is managed in accordance with our guidelines and procedures. We

have in effect an incentive cash bonus program for our managers and salespersons based upon various performance criteria. Our operations

are supervised by supervisors, who visit units to provide on-site management and support. There are three supervisors responsible

for package liquor store operations and five supervisors responsible for restaurant operations.

All of our managers and

salespersons receive extensive training in sales techniques. We arrange for independent third parties, or "shoppers",

to inspect each unit in order to evaluate the unit's operations, including the handling of cash transactions.

Purchasing and Inventory

The package liquor business

requires a constant substantial capital investment in inventory in the units. Our inventory consists primarily of liquor and wine

products and as such, does not become excessive or obsolete that would require identifying and recording of the same. Liquor inventory

purchased can normally be returned only if defective or broken.

All of our purchases of

liquor inventory are made through our purchasing department from our corporate headquarters. The major portion of inventory is

purchased under individual purchase orders with licensed wholesalers and distributors who deliver the merchandise within one or

two days of the placing of an order. Frequently there is only one wholesaler in the immediate marketing area with an exclusive

distributorship of certain liquor product lines. Substantially all of our liquor inventory is shipped by the wholesalers or distributors

directly to our stores. We significantly increase our inventory prior to Christmas, New Year's Eve and other holidays. Under Florida

law, we are required to pay for our liquor purchases within ten days of delivery.

Negotiations with food

suppliers are conducted by our purchasing department at our corporate headquarters. We believe this ensures that the best quality

and prices will be available to each restaurant. Orders for food products are prepared by each restaurant's kitchen manager and

reviewed by the restaurant's general manager before orders are placed. Food is delivered by the supplier directly to each restaurant.

Orders are placed several times a week to ensure product freshness. Food inventory is primarily paid for monthly.

Government Regulation

Our operations are subject

to various federal, state and local laws affecting our business. In particular, our operations are subject to regulation by federal

agencies and to licensing and regulation by state and local health, sanitation, alcoholic beverage control, safety and fire department

agencies in the state or municipality where our units are located.

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Alcoholic beverage control

regulations require each of our restaurants and package liquor stores to obtain a license to sell alcoholic beverages from a state

authority and in certain locations, county and municipal authorities.

In Florida, where all of

our restaurants and package liquor stores are located, most of our liquor licenses are issued on a "quota license" basis.

Quota licenses are issued on the basis of a population count established from time to time under the latest applicable census.

Because the total number of liquor licenses available under a quota license system is limited and restrictions are placed upon

their transfer, the licenses have purchase and resale value based upon supply and demand in the particular areas in which they

are issued. The quota licenses held by us allow the sale of liquor for on and off premises consumption. The other liquor licenses

held by us or limited partnerships of which we are the general partner, are restaurant liquor licenses, which do not have quota

restrictions or purchase or resale value. A restaurant liquor license is issued to every applicant who meets all of the state and

local licensing requirements, including, but not limited to zoning and minimum restaurant size, seating and menu. The restaurant

liquor licenses held by us allow the sale of liquor for on premises consumption only.

All licenses must be renewed

annually and may be revoked or suspended for cause at any time. Suspension or revocation may result from violation by the licensee

or its employees of any federal, state or local law regulation pertaining to alcoholic beverage control. Alcoholic beverage control

regulations relate to numerous aspects of the daily operations of our units, including, minimum age of patrons and employees, hours

of operations, advertising, wholesale purchasing, inventory control, handling, storage and dispensing of alcoholic beverages, internal

control and accounting.

As the sale of alcoholic

beverages constitutes a large share of our revenue, the failure to receive or retain, or a delay in obtaining a liquor license

in a particular location could adversely affect our operations in that location and could impair our ability to obtain licenses

elsewhere.

During our fiscal years

2020 and 2019, no significant pending matters have been initiated concerning any of our licenses which might be expected to result

in a revocation of a liquor license or other significant actions against us.

We are subject to “dram-shop”

statutes due to our restaurant operations. These statutes generally provide a person injured by an intoxicated person the right

to recover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated individual. We carry liquor

liability coverage as part of our existing comprehensive general liability insurance, which we believe is consistent with coverage

carried by other entities in the restaurant industry. Although we are covered by insurance, a judgment against us under a dram-shop

statute in excess of our liability coverage could have a material adverse effect on us.

Our operations are also

subject to federal and state laws governing such matters as wages, working conditions, citizenship requirements and overtime. Significant

numbers of hourly personnel at our restaurants are paid at rates related to the federal or Florida minimum wage, whichever is higher,

and accordingly, increases in the minimum wage will increase labor costs. We are also subject to the Americans with Disability

Act of 1990 (ADA), which, among other things, may require certain renovations to our restaurants to meet federally mandated requirements.

The cost of any such renovations is not expected to materially affect us.

We are not aware of any

statute, ordinance, rule or regulation under present consideration which would significantly limit or restrict our business as

now conducted. However, in view of the number of jurisdictions in which we conduct business, and the highly regulated nature of

the liquor business, there can be no assurance that additional limitations may not be imposed in the future, even though none are

presently anticipated.

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