Flanigan's Enterprises(BDL) - 2022 Q4 - Annual Report

Operations and Expansion - As of October 1, 2022, Flanigan's operates 30 units, an increase from 27 units in 2021, including 8 restaurants, 7 package liquor stores, and 10 limited partnership managed restaurants[11]. - The company opened a new stand-alone package liquor store in Hollywood, Florida, replacing one that was destroyed by fire[21]. - Flanigan's has expanded its limited partnership owned restaurants, with 10 units managed as of 2022, up from 8 in 2021[12]. - The company plans to construct a new stand-alone restaurant in Hollywood, Florida, to replace a restaurant destroyed by fire, but it is not expected to be operational during fiscal year 2023[26]. - The company opened a new limited partnership owned restaurant in Sunrise, Florida during fiscal year 2022 and is developing another in Miramar, expected to open in February 2023[106]. - The limited partnership owned restaurant at 14301 West Sunrise Boulevard opened in March 2022, and another is expected to open in February 2023[13]. Sales and Revenue - Food sales account for approximately 78.8% of total restaurant sales, while bar sales represent about 21.2%[17]. - The company has entered into purchase agreements for approximately $10.4 million and $6.8 million of baby back ribs for 2022 and 2023, respectively, with a decrease in cost anticipated for 2023[46]. - Menu price increases were implemented to target a 2.38% and 3.34% annual increase in food revenues and a 7.80% increase in bar revenues, respectively[79]. - The company manages "The Whale's Rib" restaurant and generated $400,000 in revenue from management services for both fiscal years ended October 1, 2022, and October 2, 2021[41]. Franchise and Licensing - Flanigan's has not entered into any new franchise arrangements since 1986 and does not anticipate doing so in the foreseeable future[22]. - The company operates five franchised restaurants, all under the "Flanigan's Seafood Bar and Grill" service mark[27]. - Franchisees of package liquor stores pay a royalty of approximately 1% of gross sales, plus an advertising fee of 1.5% to 3% of gross sales[23]. - Franchisees pay a royalty of approximately 3% of gross sales and an advertising fee of 1.5% to 3% of gross sales depending on actual advertising costs[28]. Financial Performance and Compliance - The company is in compliance with financial covenants on loans totaling approximately $23.27 million as of October 1, 2022[72]. - The company has received approximately $3.98 million in loans under the Paycheck Protection Program, which were fully forgiven in fiscal year 2022[69]. - The company anticipates continuing to form limited partnerships to raise funds for new restaurant operations under its service marks[29]. - The company is subject to various federal, state, and local regulations, including licensing for the sale of alcoholic beverages[52]. Labor and Employment - As of fiscal year-end 2022, the company employed 1,766 persons, with 1,627 working in restaurants, and none represented by collective bargaining organizations[62]. - The minimum wage in Florida is currently $11.00 per hour, increasing by $1.00 annually until it reaches $15.00 per hour in 2027, impacting labor costs significantly[90]. - The company has invested in staff training and career advancement opportunities to retain qualified personnel in a competitive labor market[59]. - Labor shortages and increased labor costs could negatively impact the company's ability to deliver a satisfactory dining experience[112]. Risk Management and Cybersecurity - The company maintains a high-speed connection for data transfer and has a backup system to mitigate business interruptions[49]. - Cybersecurity measures include encryption and tokenization for credit card transactions, ensuring no credit card data is stored internally[51]. - The company requires cybersecurity awareness training for all staff members with access to cyber systems[51]. - Cyber risk insurance coverage is maintained to reduce the company's risk profile[51]. Market Challenges - The COVID-19 pandemic has caused significant disruptions to operations and may continue to adversely affect restaurant operations and financial results[85]. - The company faces intense competition in the restaurant and package liquor store industry, which could hinder revenue and profitability growth[96]. - Rising healthcare costs and unpredictable medical claims trends could materially affect financial performance[92]. - The company is unable to contract for extended periods for certain commodities, leading to potential supply and cost fluctuations due to inflation[104]. Regulatory Environment - The company is subject to various governmental regulations that could impact operations and financial performance if not complied with[120]. - The implementation of the Affordable Care Act may significantly increase labor costs and impose additional administrative expenses on the company[133]. - Compliance with various employment and immigration regulations could lead to substantial expenses and potential liabilities from non-compliance claims[135]. - Increased regulatory focus on nutrition and food practices may lead to higher expenses and changes in customer buying habits, adversely affecting sales[141].