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 3, 2020 . 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.
15
Table of Contents
OVERVIEW
As ofJanuary 2, 2021 ,Flanigan's Enterprises, Inc. , aFlorida 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 ofJanuary 2, 2021 and as compared toDecember 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 UnitsJanuary 2, 2021 October 3, 2020 December 28, 2019 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 8 8 8 Franchise 1 1 1 Unrelated Third Party 1 1 1 Total Company Owned/Operated Units 27 27 27 Franchised Units 5 5 5 (2) 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 throughJanuary 2, 2021 .
(2) 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.
InMarch 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. Throughout the first quarter of our fiscal year 2021, in accordance with guidance from health officials, we have offered both indoor and outdoor food and bar options at all of our restaurants, with, among other precautions appropriate social distancing and mask requirements for all customers and employees. 16 Table of Contents 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 " and "Big Daddy's 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 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 ofJanuary 2, 2021 , all limited partnerships 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 ". RESULTS OF OPERATIONS
-----------------------Thirteen Weeks Ended-----------------------
January 2, 2021 December 28, 2019
Amount Amount
(In thousands) Percent (In thousands) Percent
Restaurant food sales $ 18,328 59.54 $ 18,742 61.77
Restaurant bar sales 4,443 14.43 5,891 19.42
Package store sales 8,011 26.03 5,707 18.81
Total Sales $ 30,782 100.00 $ 30,340 100.00
Franchise related revenues 386 360 Rental income 187 194 Other operating income 25 47 Total Revenue$ 31,380 $ 30,941
Comparison of Thirteen Weeks Ended
Revenues. Total revenue for the thirteen weeks endedJanuary 2, 2021 increased$439,000 or 1.42% to$31,380,000 from$30,941,000 for the thirteen weeks endedDecember 28, 2019 due primarily to increased package liquor store sales and increased menu prices, offset by a decrease in restaurant traffic due to COVID-19. EffectiveNovember 29, 2020 we increased menu prices for our bar offerings to target an increase to our bar revenues of approximately 1.83% annually and effectiveDecember 6, 2020 we increased menu prices for our food offerings to target an increase to our food revenues of approximately 2.45% annually to offset higher food costs and higher overall expenses, (the "2020 Prices Increases"). Prior to these increases, we previously raised menu prices in the third quarter of our fiscal year 2019. We expect that Store #19 (2505 N. University Drive ,Hollywood, Florida ) will remain closed during our fiscal year 2021 due to damages caused by a fire inOctober 2018 and accordingly do not expect to generate any revenue from it. 17 Table of Contents
Restaurant Food Sales. Restaurant revenue generated from the sale of food, including non-alcoholic beverages, at restaurants totaled$18,328,000 for the thirteen weeks endedJanuary 2, 2021 as compared to$18,742,000 for the thirteen weeks endedDecember 28, 2019 . The decrease in restaurant food sales for the thirteen weeks endedJanuary 2, 2021 as compared to restaurant food sales during the thirteen weeks endedDecember 28, 2019 is attributable to the negative effects of COVID-19 on our operations, partially offset by the 2020 Price Increases. Comparable weekly restaurant food sales (for restaurants open for all of the first quarter of our fiscal year 2021 and the first quarter of our fiscal year 2020, which consists of nine restaurants owned by us, (excluding Store #19 which was closed for the thirteen weeks endedJanuary 2, 2021 andDecember 28, 2019 due to a fire onOctober 2, 2018 ) and eight restaurants owned by affiliated limited partnerships) was$1,401,000 and$1,432,000 for the thirteen weeks endedJanuary 2, 2021 andDecember 28, 2019 , respectively, a decrease of 2.16%. Comparable weekly restaurant food sales for Company owned restaurants only was$681,000 and$721,000 for the first quarter of our fiscal year 2021 and the first quarter of our fiscal year 2020, respectively, a decrease of 5.55%. Comparable weekly restaurant food sales for affiliated limited partnership owned restaurants only was$720,000 and$711,000 for the first quarter of our fiscal year 2021 and the first quarter of our fiscal year 2020, respectively, an increase of 1.27%. Restaurant Bar Sales. Restaurant revenue generated from the sale of alcoholic beverages at restaurants totaled$4,443,000 for the thirteen weeks endedJanuary 2, 2021 as compared to$5,891,000 for the thirteen weeks endedDecember 28, 2019 . The decrease in restaurant bar sales during the thirteen weeks endedJanuary 2, 2021 is primarily due to the negative effects of COVID-19 on our operations, partially offset by the 2020 Price Increases. Comparable weekly restaurant bar sales (for restaurants open for all of the first quarter of our fiscal year 2021 and the first quarter of our fiscal year 2020, which consists of nine restaurants owned by us, (excluding Store #19 which was closed for the thirteen weeks endedJanuary 2, 2021 andDecember 28, 2019 due to a fire onOctober 2, 2018 ), and eight restaurants owned by affiliated limited partnerships) was$342,000 for the thirteen weeks endedJanuary 2, 2021 and$453,000 for the thirteen weeks endedDecember 28, 2019 , a decrease of 24.50%. Comparable weekly restaurant bar sales for Company owned restaurants only was$141,000 and$207,000 for the first quarter of our fiscal year 2021 and the first quarter of our fiscal year 2020, respectively, a decrease of 31.88%. Comparable weekly restaurant bar sales for affiliated limited partnership owned restaurants only was$201,000 and$246,000 for the first quarter of our fiscal year 2021 and the first quarter of our fiscal year 2020, respectively, a decrease of 18.29%. Package Store Sales. Revenue generated from sales of liquor and related items at package liquor stores totaled$8,011,000 for the thirteen weeks endedJanuary 2, 2021 as compared to$5,707,000 for the thirteen weeks endedDecember 28, 2019 , an increase of$2,304,000 . This increase was primarily due to increased package liquor store traffic due to what appears to be an increased demand for package liquor store products resulting from COVID-19 during the first quarter of our fiscal year 2021 and the fact thatNew Year's Day 2021 occurred during the first quarter of our fiscal year 2021, whileNew Year's Day 2020 occurred during the second quarter of our fiscal year 2020. 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 our fiscal years 2021 and 2020 due to a fire onOctober 2, 2018 , but includes Store #45, which opened for business onOctober 10, 2019 ), was$616,000 and$439,000 for our fiscal years 2021 and 2020 respectively, an increase of 40.32%. 18 Table of Contents 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 endedJanuary 2, 2021 increased$400,000 or 1.34% to$30,110,000 from$29,710,000 for the thirteen weeks endedDecember 28, 2019 . The increase was primarily due to an expected general increase in food costs, 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 2021 for the same reasons. Operating costs and expenses decreased as a percentage of total sales to approximately 95.95% in the first quarter of our fiscal year 2021 from 96.02% in the first quarter of our fiscal year 2020.
Gross Profit. Gross profit is calculated by subtracting the cost of merchandise sold from sales.
Restaurant Food and Bar Sales. Gross profit for food and bar sales for the thirteen weeks endedJanuary 2, 2021 decreased to$15,249,000 from$16,209,000 for the thirteen weeks endedDecember 28, 2019 . 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 66.97% for the thirteen weeks endedJanuary 2, 2021 and 65.80% for the thirteen weeks endedDecember 28, 2019 . Gross profit margin for restaurant food and bar sales increased during the first quarter of our fiscal year 2021 when compared to the first quarter of our fiscal year 2020 due to, among other things, the inclusion of a 10% take-out charge on restaurant food sales and the 2020 Price Increases, offset by the negative effects of COVID-19 on our restaurant operations as well as higher food costs. Package Store Sales. Gross profit for package store sales for the thirteen weeks endedJanuary 2, 2021 increased to$2,160,000 from$1,568,000 for the thirteen weeks endedDecember 28, 2019 , due primarily to increased package liquor store traffic which we believe has been 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 26.96% for the thirteen weeks endedJanuary 2, 2021 and 27.48% for the thirteen weeks endedDecember 28, 2019 . Payroll and Related Costs. Payroll and related costs for the thirteen weeks endedJanuary 2, 2021 decreased$54,000 or 0.57% to$9,463,000 from$9,517,000 for the thirteen weeks endedDecember 28, 2019 . Payroll and related costs for the thirteen weeks endedJanuary 2, 2021 were stable, notwithstanding higher costs for employees such as cooks. Payroll and related costs as a percentage of total sales was 30.16% in the first quarter of our fiscal year 2021 and 30.76% of total sales in the first quarter of our fiscal year 2020. 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 endedJanuary 2, 2021 decreased$51,000 or 2.75% to$1,806,000 from$1,857,000 for the thirteen weeks endedDecember 28, 2019 . We anticipate that our occupancy costs will remain stable throughout the balance of our fiscal year 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 endedJanuary 2, 2021 decreased$305,000 or 5.28% to$5,468,000 from$5,773,000 for the thirteen weeks endedDecember 28, 2019 . Selling, general and administrative expenses decreased as a percentage of total sales in the first quarter of our fiscal year 2021 to 17.42% as compared to 18.66% in the first quarter of our fiscal year 2020. We anticipate that our selling, general and administrative expenses will increase throughout the balance of our fiscal year 2021 due primarily to increases across all categories. Depreciation and Amortization. Depreciation and amortization for the thirteen weeks endedJanuary 2, 2021 decreased$43,000 or 5.26% to$774,000 from$817,000 for the thirteen weeks endedDecember 28, 2019 . As a percentage of total revenue, depreciation expense was 2.47% of revenue for the thirteen weeks endedJanuary 2, 2021 and 2.64% of revenue in the thirteen weeks endedDecember 28, 2019 . 19 Table of Contents Interest Expense, Net.Interest expense, net, for the thirteen weeks endedJanuary 2, 2021 increased$75,000 to$279,000 from$204,000 for the thirteen weeks endedDecember 28, 2019 . Interest expense, net, increased for the thirteen weeks endedJanuary 2, 2021 due to our borrowing of an additional$4.5 million during the first quarter of our fiscal year 2020 on the re-financing by our wholly owned subsidiary, Flanigan'sCalusa Center, LLC , of its mortgage loan with an unrelated third party lender, increasing the principal amount borrowed from$2.72 million to$7.21 million , our borrowing of an additional approximately$10.0 million during the third quarter of our fiscal year 2020 on our PPP Loans and the interest expense from the financed lease. Interest expense, net, will increase throughout the balance of our fiscal year 2021 due to our borrowing of an additional$10.0 million during the third quarter of our fiscal year 2020 on our PPP Loans, if not forgiven. Income Taxes. Income taxes for the thirteen weeks endedJanuary 2, 2021 was a benefit of$4,000 and an expense of$118,000 for the thirteen weeks endedDecember 28, 2019 . Income taxes for the thirteen weeks endedJanuary 2, 2021 was a benefit of$4,000 which represents the net difference in the deferred tax assets plus the current state income tax expense. Net Income. Net income for the thirteen weeks endedJanuary 2, 2021 increased$111,000 or 12.05% to$1,032,000 from$921,000 for the thirteen weeks endedDecember 28, 2019 . Net income for the thirteen weeks endedJanuary 2, 2021 increased when compared to net income for the thirteen weeks endedDecember 28, 2019 primarily due to increased revenue at our retail package liquor stores, the 2020 Price Increases and the fluctuation in the tax provision, offset by the negative effects of COVID-19 on our operations, higher food costs and overall expenses. As a percentage of sales, net income for the thirteen weeks endedJanuary 2, 2021 was 3.29%, as compared to 2.98% for the thirteen weeks endedDecember 28, 2019 . Net Income Attributable to Stockholders. Net income for the thirteen weeks endedJanuary 2, 2021 increased$286,000 or 57.89% to$780,000 from$494,000 for the thirteen weeks endedDecember 28, 2019 . Net income attributable to stockholders for the thirteen weeks endedJanuary 2, 2021 increased when compared to the thirteen weeks endedDecember 28, 2019 primarily due to increased revenue at our retail package liquor stores, the 2020 Price Increases and the fluctuation in the tax provision, offset by the negative effects of COVID-19 on our operations, higher food costs and overall expenses. As a percentage of sales, net income for the thirteen weeks endedJanuary 2, 2021 was 2.49%, as compared to 1.60% for the thirteen weeks endedDecember 28, 2019 .
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 first quarter of our fiscal year 2021, we had one new restaurant location inSunrise, Florida in the development stage. During the fourth quarter of our fiscal year 2019, we entered leases for two spaces adjacent to each other, to house a new "Flanigan's Seafood Bar and Grill " as well as a "Big Daddy's Wine and Liquors" in a shopping center inMiramar, Florida , which shopping center is currently under construction
as well as lease.
Menu Price Increases and Trends
During the first quarter of our fiscal year 2021, we increased menu prices for our bar offerings (effectiveNovember 29, 2020 ) to target an increase to our bar revenues of approximately 1.83% annually and we increased menu prices for our food offerings (effectiveDecember 6, 2020 ) to target an increase to our food revenues of approximately 2.45% annually to offset higher food costs and higher overall expenses. Prior to these increases, we previously raised menu prices in the third quarter of our fiscal year 2019. 20
Table of Contents
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 during the first quarter of our fiscal year 2021 and will, in all likelihood, impact our results of operations, liquidity and/or financial condition throughout the remainder of our fiscal year 2021. 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. We are not actively searching for locations for the operation of new package liquor stores, but during the fourth quarter of our fiscal year 2019, we entered a lease to house a new "Big Daddy's Wine & Liquors" package liquor store in space adjacent to where we are planning a new "Flanigan's Seafood Bar and Grill ", restaurant in a shopping center inMiramar, Florida , which shopping center is currently under construction.
Liquidity and Capital Resources
We fund our operations through cash from operations and borrowings from third parties. As ofJanuary 2, 2021 , we had cash of approximately$31,028,000 , an increase of$1,106,000 from our cash balance of$29,922,000 as ofOctober 3, 2020 . During the first quarter of our fiscal year 2021, we closed on our 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. During the third quarter of our fiscal year 2020, we, certain of the entities owning the limited partnership stores (the "LP's"), franchised stores (the "Franchisees") 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$13.1 million (the "PPP Loans"), of which approximately: (i)$5.9 million was loaned to us; (ii)$4.1 million was loaned to 8 of the LP's; (iii)$2.6 million was loaned to 5 of the Franchisees; and (iv)$0.5 million was loaned to theManaged Store . During the first quarter of our fiscal year 2020, our wholly owned subsidiary,Flanigan's Calusa Center, LLC , re-financed its mortgage loan with an unrelated third party lender, increasing the principal amount borrowed from$2.72 million to$7.21 million . The PPP Loans, which are in the form of Notes issued by each of the Borrowers, mature two years from the date of funding (dates ranging fromMay 5, 2022 toMay 11, 2022 ) and bear interest at a rate of 1.00% per annum, payable monthly commencing approximately twelve months from the date of issuance of the Notes (issuance dates ranging fromApril 30, 2020 toMay 6, 2020 ). The Notes may be prepaid by the applicable Borrower at any time prior to maturity with no prepayment penalties. Proceeds from the PPP Loans are available to the respective Borrower to fund designated expenses, including certain payroll costs, group health care benefits and other permitted expenses, including rent and interest on mortgages and other debt obligations incurred beforeFebruary 15, 2020 . Under the terms of the PPP, up to the entire amount of principal and accrued interest may be forgiven to the extent the proceeds of the PPP Loans are used for qualifying expenses as described in the CARES Act and applicable implementing guidance issued by theU.S. Small Business Administration under the PPP. Subsequent to the end of the first quarter of our fiscal year 2021, we began applying for forgiveness under our PPP Loans. No assurance can be given that the Borrowers will obtain forgiveness of the PPP Loan in whole or in part. With respect to any portion of any of the PPP Loans that is not forgiven under the terms of the PPP, such amounts will be subject to customary provisions for a loan of this type, including customary events of default relating to, among other things, payment defaults, breaches of the provisions of the applicable PPP Note and cross-defaults on any other loan with the Lender or other creditors. 21 Table of Contents 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.
Cash Flows
The following table is a summary of our cash flows for the first thirteen weeks of fiscal years 2021 and 2020.
---------Thirteen Weeks Ended--------
January 2, 2021 December 28, 2019
(in thousands)
Net cash provided by operating activities $ 3,770 $ 3,428 Net cash used in investing activities (1,568 ) (1,296 ) Net cash provided by (used in) financing activities (1,096 ) 3,318 Net Increase in Cash and Cash Equivalents 1,106 5,450 Cash and Cash Equivalents, Beginning 29,922 13,672 Cash and Cash Equivalents, Ending $ 31,028 $ 19,122
We did not declare or pay a cash dividend on our capital stock in the first quarter of our fiscal year 2021 or the first quarter of our fiscal year 2020. 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 generated from operations and borrowings to fund the development and construction of new restaurants and to fund capitalized property improvements for our existing restaurants. During the thirteen weeks endedJanuary 2, 2021 , we acquired property and equipment and construction in progress of$1,105,000 , (of which$11,000 was deposits recorded in other assets and$18,000 was purchase deposits transferred to construction in process as ofOctober 3, 2020 ), including$89,000 for renovations to three (3) Company owned restaurants. During the thirteen weeks endedDecember 28, 2019 , we acquired property and equipment and construction in progress of$933,000 , (of which$29,000 was deposits recorded in other assets and$2,000 was purchase deposits transferred to construction in process as ofSeptember 28, 2019 ), including$295,000 for renovations to two (2) limited partnership owned restaurants and three (3) 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 2021 to be approximately$950,000 , excluding construction/renovations to Store #19 (our combination package liquor store and restaurant which is being rebuilt due to damages caused by a fire) and Store #85 (ourSunrise, Florida restaurant location in development), which funds will be provided from operations. Long Term Debt
As ofJanuary 2, 2021 , we had long term debt of$26,904,000 , as compared to$18,120,000 as ofDecember 28, 2019 , and$26,323,000 as ofOctober 3, 2020 . Our long term debt increased as ofJanuary 2, 2021 as compared toOctober 3, 2020 due to$1,365,000 for financed insurance premiums, less any payments made on account thereof. As ofJanuary 2, 2021 , we are in compliance with the covenants of all loans with our lender. 22 Table of Contents Construction Contracts
a.
During the third quarter of our fiscal year 2019, we entered into an agreement with a third party unaffiliated architect for design and development services totaling$77,000 for the re-build of our restaurant located at2505 N. University Drive ,Hollywood, Florida (Store #19) which has been closed sinceOctober 2018 due to damages caused by a fire, of which$62,000 has been paid. Additionally, 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. During our fiscal year 2020 and the first quarter of our fiscal year 2021, we agreed to change orders to the agreement for additional construction services increasing the total contract price by$140,000 to$1,757,000 , of which$64,000 of the total amount obligated has been paid throughJanuary 2, 2021 and of which$69,000 of the total amount obligated has been paid subsequent toJanuary 2, 2021 and of which$69,000 of the total amount obligated has been paid subsequent toJanuary 2, 2021 .
b.
During the third quarter of our fiscal year 2019, we also entered into an agreement with a third party unaffiliated design group for design and development services of our new location at14301 W. Sunrise Boulevard ,Sunrise, Florida 33323 (Store #85) for a total contract price of$122,000 . During our fiscal year 2020, we agreed upon amendments to the$122,000 Contract for additional design and development services which had the effect of increasing the total contract price by$18,000 to$140,000 , of which$106,000 has been paid throughJanuary 2, 2021 . Additionally, 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 , of which$111,000 has been paid throughJanuary 2, 2021 . Purchase Commitments In order to fix the cost and ensure adequate supply of baby back ribs for our restaurants, onNovember 9, 2020 , we entered into a purchase agreement with our current rib supplier, whereby we agreed to purchase approximately$6,420,000 of baby back ribs during calendar year 2021 from this vendor at a fixed cost.
While we anticipate purchasing all of our rib supply from this vendor, we believe there are several other alternative vendors available, if needed.
Working Capital The table below summarizes the current assets, current liabilities, and working capital for our fiscal quarters endedJanuary 2, 2021 ,December 28, 2019 and our fiscal year endedOctober 3, 2020 . Item Jan. 2, 2021 Dec. 28, 2019 Oct. 3, 2020 (in Thousands) Current Assets$ 38,023 $ 26,709 $ 36,508 Current Liabilities 28,217 17,239 25,362 Working Capital$ 9,806 $ 9,470$ 11,146 23 Table of Contents Our working capital increased during our fiscal quarter endedJanuary 2, 2021 from our working capital for our fiscal quarter endedDecember 28, 2019 due to the cash received from (i) the PPP Loan to us of$5.9 million ; and (ii) the PPP Loans to our eight limited partnerships of$4.1 million . 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 2021.
Off-Balance Sheet Arrangements
The Company does 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. To date, inflation has not had a material impact on our operating results, but this circumstance may change in the future if food and fuel costs rise.
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