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 endedOctober 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. OVERVIEW As ofJuly 3, 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 ofJuly 3, 2021 and as compared toJune 27, 2020 . 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 July 3, October 3, 2020 June 27, 2020 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 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 at
(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 third 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. 19 Index 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 (4) 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 ofJuly 3, 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-----------------------
July 3, 2021 June 27, 2020 Amount Amount (In thousands) Percent (In thousands) Percent Restaurant food sales$ 23,484 63.16$ 14,514 62.44 Restaurant bar sales 5,617 15.10 1,630 7.01 Package store sales 8,082 21.74 7,099 30.55 Total Sales$ 37,183 100.00$ 23,243 100.00 Franchise related revenues 444 278 Rental income 250 151 Other operating income (Loss) 58 (9 ) Total Revenue$ 37,935 $ 23,663 20 Index
-----------------------Thirty-Nine Weeks Ended-----------------------
July 3, 2021 June 27, 2020 Amount Amount (In thousands) Percent (In thousands) Percent
Restaurant food sales $ 62,501 61.56$ 51,469 61.91 Restaurant bar sales 15,110 14.88 12,836 15.44 Package store sales 23,923 23.56 18,833 22.65 Total Sales $ 101,534 100.00$ 83,138 100.00 Franchise related revenues 1,252 945 Rental income 663 554 Other operating income 223 95 Total Revenue $ 103,672$ 84,732
Comparison of Thirteen Weeks Ended
Revenues.Total revenue for the thirteen weeks endedJuly 3, 2021 increased$14,272,000 or 60.31% to$37,935,000 from$23,663,000 for the thirteen weeks endedJune 27, 2020 due primarily to increased package liquor store and restaurant sales, increased menu prices and the comparatively more adverse effects of COVID-19 on our operations during the thirteen weeks endedJune 27, 2020 as compared with the thirteen weeks endedJuly 3, 2021 . EffectiveDecember 6, 2020 and then effectiveApril 11, 2021 we increased menu prices for our food offerings to target an increase to our food revenues of approximately 2.45% and 4.60% annually, respectively, to offset higher food costs and higher overall expenses. EffectiveNovember 29, 2020 we increased menu prices for our bar offerings to target an increase to our bar revenues of approximately 1.83% annually. 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 onOctober 2, 2018 and accordingly do not expect to generate any revenue from it. Restaurant Food Sales. Restaurant revenue generated from the sale of food, including non-alcoholic beverages, at restaurants totaled$23,484,000 for the thirteen weeks endedJuly 3, 2021 as compared to$14,514,000 for the thirteen weeks endedJune 27, 2020 . The increase in restaurant food sales for the thirteen weeks endedJuly 3, 2021 as compared to restaurant food sales during the thirteen weeks endedJune 27, 2020 is attributable to menu price increases and the comparatively more adverse effects of COVID-19 on our operations during the thirteen weeks endedJune 27, 2020 as compared with the thirteen weeks endedJuly 3, 2021 . Comparable weekly restaurant food sales (for restaurants open for all of the thirteen weeks endedJuly 3, 2021 andJune 27, 2020 respectively, which consists of nine restaurants owned by us, (excluding Store #19 which was closed for the thirteen weeks endedJuly 3, 2021 andJune 27, 2020 due to a fire onOctober 2, 2018 ) and eight restaurants owned by affiliated limited partnerships) was$1,789,000 and$1,112,000 for the thirteen weeks endedJuly 3, 2021 andJune 27, 2020 , respectively, an increase of 60.88%. Comparable weekly restaurant food sales for Company owned restaurants only was$893,000 and$547,000 for the thirteen weeks endedJuly 3, 2021 andJune 27, 2020 respectively, an increase of 63.25%. Comparable weekly restaurant food sales for affiliated limited partnership owned restaurants only was$896,000 and$565,000 for the thirteen weeks endedJuly 3, 2021 andJune 27, 2020 respectively, an increase of 58.58%. Restaurant Bar Sales. Restaurant revenue generated from the sale of alcoholic beverages at restaurants totaled$5,617,000 for the thirteen weeks endedJuly 3, 2021 as compared to$1,630,000 for the thirteen weeks endedJune 27, 2020 . The increase in restaurant bar sales during the thirteen weeks endedJuly 3, 2021 is primarily due to the comparatively more adverse effects of COVID-19 on our operations during the thirteen weeks endedJune 27, 2020 as compared with the thirteen weeks endedJuly 3, 2021 , offset by the 2021 Price Increases and 2020 Price Increases. Comparable weekly restaurant bar sales (for restaurants open for all of the thirteen weeks endedJuly 3, 2021 andJune 27, 2020 respectively, which consists of nine restaurants owned by us, (excluding Store #19 which was closed for the thirteen weeks endedJuly 3, 2021 andJune 27, 2020 due to a fire onOctober 2, 2018 ), and eight restaurants owned by affiliated limited partnerships) was$432,000 for the thirteen weeks endedJuly 3, 2021 and$125,000 for the thirteen weeks endedJune 27, 2020 , an increase of 245.60%. Comparable weekly restaurant bar sales for Company owned restaurants only was$188,000 and$50,000 for the thirteen weeks endedJuly 3, 2021 andJune 27, 2020 respectively, an increase of 276.00%. Comparable weekly restaurant bar sales for affiliated limited partnership owned restaurants only was$244,000 and$75,000 for the thirteen weeks endedJuly 3, 2021 andJune 27, 2020 respectively, an increase of 225.33%. 21 Index Package Store Sales. Revenue generated from sales of liquor and related items at package liquor stores totaled$8,082,000 for the thirteen weeks endedJuly 3, 2021 as compared to$7,099,000 for the thirteen weeks endedJune 27, 2020 , an increase of$983,000 . 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 endedJuly 3, 2021 andJune 27, 2020 due to a fire onOctober 2, 2018 , but includes Store #45, which opened for business onOctober 10, 2019 ), was$622,000 and$546,000 for the thirteen weeks endedJuly 3, 2021 andJune 27, 2020 respectively, an increase of 13.92%. 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 endedJuly 3, 2021 increased$10,931,000 or 44.81% to$35,326,000 from$24,395,000 for the thirteen weeks endedJune 27, 2020 . The increase was primarily due to payroll and 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 revenue to approximately 93.12% in the third quarter of our fiscal year 2021 from 103.09% in the third quarter of our fiscal year 2020.
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 endedJuly 3, 2021 increased to$19,137,000 from$10,756,000 for the thirteen weeks endedJune 27, 2020 . 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 65.76% for the thirteen weeks endedJuly 3, 2021 and 66.63% for the thirteen weeks endedJune 27, 2020 . Gross profit margin for restaurant food and bar sales decreased during the third quarter of our fiscal year 2021 when compared to the third quarter of our fiscal year 2020 due to higher food costs, offset among other things by the menu price increases. Package Store Sales. Gross profit for package store sales for the thirteen weeks endedJuly 3, 2021 increased to$2,171,000 from$1,856,000 for the thirteen weeks endedJune 27, 2020 , 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 26.86% for the thirteen weeks endedJuly 3, 2021 and 26.14% for the thirteen weeks endedJune 27, 2020 . Payroll and Related Costs. Payroll and related costs for the thirteen weeks endedJuly 3, 2021 increased$4,635,000 or 58.57% to$12,548,000 from$7,913,000 for the thirteen weeks endedJune 27, 2020 . Payroll and related costs for the thirteen weeks endedJuly 3, 2021 were higher due primarily to increased performance bonuses, increased hours and higher costs for employees such as cooks. Payroll and related costs as a percentage of total revenue was 33.08% in the thirteen weeks endedJuly 3, 2021 and 33.44% of total revenue in the thirteen weeks endedJune 27, 2020 . 22 Index 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 endedJuly 3, 2021 increased$6,000 or 0.36% to$1,651,000 from$1,645,000 for the thirteen weeks endedJune 27, 2020 . The limited increase in occupancy costs was primarily due to the termination of rent for our combination retail package liquor store and restaurant located at5450 N. State Road 7,North Lauderdale, Florida (Store #40), the real property and improvements of which we purchased onDecember 31, 2020 and the elimination of occupancy costs due to the elimination of rent for our restaurant location which we are developing located at14301 West Sunrise Boulevard ,Sunrise, Florida (Store #85), the real property and improvements of which we purchased onMarch 2, 2021 . We anticipate that our occupancy costs will decrease throughout the balance of our fiscal year 2021 for the same reason. 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 endedJuly 3, 2021 increased$1,046,000 or 24.87% to$5,252,000 from$4,206,000 for the thirteen weeks endedJune 27, 2020 . Selling, general and administrative expenses decreased as a percentage of total revenue in the thirteen weeks endedJuly 3, 2021 to 13.84% as compared to 17.77% in the thirteen weeks endedJune 27, 2020 . We anticipate that our selling, general and administrative expenses as a percentage of total revenue will decrease throughout the balance of our fiscal year 2021 due primarily to increases in total revenue when compared to the balance of our fiscal year 2020. Depreciation and Amortization. Depreciation and amortization expense for the thirteen weeks endedJuly 3, 2021 decreased$38,000 or 4.70% to$770,000 from$808,000 from the thirteen weeks endedJune 27, 2020 . As a percentage of total revenue, depreciation and amortization expense was 2.03% of revenue in the thirteen weeks endedJuly 3, 2021 and 3.41% of revenue in the thirteen weeks endedJune 27, 2020 .
Interest Expense, Net. Interest expense, net, for the thirteen weeks endedJuly 3, 2021 increased$14,000 to$210,000 from$196,000 for the thirteen weeks endedJune 27, 2020 . Interest expense, net, increased for the thirteen weeks endedJuly 3, 2021 due to interest on 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 the borrowing by six of our limited partnerships of an additional approximately$3.35 million of 2nd PPP Loans during the second quarter of our fiscal year 2021. Interest expense, net, will increase throughout the balance of our fiscal year 2021 due to (i) the$2.2 Million Borrowing; (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); and (iii) the borrowing by certain of our limited partnerships of an additional$3.35 million of 2nd PPP Loans during the second quarter of our fiscal year 2021,
if not forgiven. Income Taxes. Income tax for the thirteen weeks endedJuly 3, 2021 was an expense of$475,000 , as compared to a benefit of$53,000 for the thirteen weeks endedJune 27, 2020 . Income tax for the third quarter of our fiscal year 2021 was not affected by the forgiveness of debt of certain of the PPP Loans, pursuant to the terms of the PPP Loans. Net Income (Loss). Net income for the thirteen weeks endedJuly 3, 2021 increased$9,284,000 or 1,075.78% to$8,421,000 from a loss of$863,000 for the thirteen weeks endedJune 27, 2020 due primarily to the forgiveness of debt of certain of the PPP Loans and increased revenue at our retail package liquor stores and restaurants, offset by higher food costs and overall expenses. As a percentage of revenue, net income for the thirteen weeks endedJuly 3, 2021 is 22.20%, as compared to (3.65%) in the thirteen weeks endedJune 27, 2020 . 23 Index Net Income (Loss) Attributable to Stockholders.Net income attributable to stockholders for the thirteen weeks endedJuly 3, 2021 increased$7,654,000 or 1,682.20% to$7,199,000 from a loss of$455,000 for the thirteen weeks endedJune 27, 2020 due primarily to the forgiveness of debt of certain of the PPP Loans and increased revenue at our retail package liquor stores and restaurants, offset by higher food costs and overall expenses. As a percentage of revenue, net income attributable to stockholders for the third quarter of our fiscal year 2021 is 18.98%, as compared to (1.92%) in the third quarter of our fiscal year 2020.
Comparison of Thirty-Nine Weeks Ended
Revenues.Total revenue for the thirty-nine weeks endedJuly 3, 2021 increased$18,940,000 or 22.35% to$103,672,000 from$84,732,000 for the thirty-nine endedJune 27, 2020 due primarily to increased package liquor store and restaurant sales, increased menu prices and the comparatively more adverse effects of COVID-19 on our operations during the thirty-nine weeks endedJune 27, 2020 as compared with the thirty-nine weeks endedJuly 3, 2021 . 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 onOctober 2, 2018 and accordingly do not expect to generate any revenue from it. Restaurant Food Sales. Restaurant revenue generated from the sale of food, including non-alcoholic beverages, at restaurants totaled$62,501,000 for the thirty-nine weeks endedJuly 3, 2021 as compared to$51,469,000 for the thirty-nine weeks endedJune 27, 2020 . The increase in restaurant food sales for the thirty-nine weeks endedJuly 3, 2021 as compared to restaurant food sales during the thirty-nine endedJune 27, 2020 is attributable to menu price increases and the comparatively more adverse effects of COVID-19 on our operations during the thirty-nine weeks endedJune 27, 2020 as compared with the thirty-nine weeks endedJuly 3, 2021 . Comparable weekly restaurant food sales (for restaurants open for the thirty-nine weeks endedJuly 3, 2021 andJune 27, 2020 respectively, which consists of nine restaurants owned by us, (excluding Store #19 which was closed for the thirty-nine weeks endedJuly 3, 2021 andJune 27, 2020 respectively, due to a fire onOctober 2, 2018 ) and eight restaurants owned by affiliated limited partnerships) was$1,590,000 and$1,310,000 for the thirty-nine weeks endedJuly 3, 2021 andJune 27, 2020 respectively, an increase of 21.37%. Comparable weekly restaurant food sales for Company owned restaurants only was$787,000 and$660,000 for the thirty-nine weeks endedJuly 3, 2021 andJune 27, 2020 respectively, an increase of 19.24%. Comparable weekly restaurant food sales for affiliated limited partnership owned restaurants only was$803,000 and$650,000 for the thirty-nine weeks endedJuly 3, 2021 andJune 27, 2020 respectively, an increase of 23.54%. Restaurant Bar Sales. Restaurant revenue generated from the sale of alcoholic beverages at restaurants totaled$15,110,00 for the thirty-nine weeks endedJuly 3, 2021 as compared to$12,836,000 for the thirty-nine weeks endedJune 27, 2020 . The increase in restaurant bar sales during the thirty-nine weeks endedJuly 3, 2021 is primarily due to menu price increases, offset by the comparatively more adverse effects of COVID-19 on our operations during the thirty-nine weeks endedJune 27, 2020 as compared with the thirty-nine weeks endedJuly 3, 2021 . Comparable weekly restaurant bar sales (for restaurants open for the thirty-nine weeks endedJuly 3, 2021 andJune 27, 2020 , which consists of nine restaurants owned by us, (excluding Store #19 which was closed for the thirty-nine weeks endedJuly 3, 2021 andJune 27, 2020 due to a fire onOctober 2, 2018 ), and eight restaurants owned by affiliated limited partnerships) was$387,000 for the thirty-nine weeks endedJuly 3, 2021 and$329,000 for the thirty-nine weeks endedJune 27, 2020 respectively, an increase of 17.63%. Comparable weekly restaurant bar sales for Company owned restaurants only was$165,000 and$149,000 for the thirty-nine weeks endedJuly 3, 2021 andJune 27, 2020 , respectively, an increase of 10.74%. Comparable weekly restaurant bar sales for affiliated limited partnership owned restaurants only was$222,000 and$180,000 for the thirty-nine weeks endedJuly 3, 2021 andJune 27, 2020 , respectively, an increase of 23.33%. 24 Index Package Store Sales. Revenue generated from sales of liquor and related items at package liquor stores totaled$23,923,000 for the thirty-nine weeks endedJuly 3, 2021 as compared to$18,833,000 for the thirty-nine weeks endedJune 27, 2020 , an increase of$5,090,000 . This increase was primarily due to increased package liquor store traffic due to what appears to be continued increased demand for package store products caused by 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 thirty-nine weeks endedJuly 3, 2021 andJune 27, 2020 respectively due to a fire onOctober 2, 2018 , but includes Store #45, which opened for business onOctober 10, 2019 ), was$613,000 and$483,000 for the thirty-nine weeks endedJuly 3, 2021 andJune 27, 2020 respectively, an increase of 26.92%. 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 thirty-nine weeks endedJuly 3, 2021 increased$14,284,000 or 17.27% to$97,000,000 from$82,716,000 for the thirty-nine weeks endedJune 27, 2020 . The increase was primarily due to payroll and 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 revenue to approximately 93.56% in the thirty-nine weeks endedJuly 3, 2021 from 97.62% in the thirty-nine weeks endedJune 27, 2020 .
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 thirty-nine weeks endedJuly 3, 2021 increased to$51,663,000 from$42,593,000 for the thirty-nine weeks endedJune 27, 2020 . 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 66.57% for the thirty-nine weeks endedJuly 3, 2021 and 66.24% for the thirty-nine weeks endedJune 27, 2020 . Gross profit margin for restaurant food and bar sales increased during the thirty-nine weeks endedJuly 3, 2021 when compared to the thirty-nine weeks endedJune 27, 2020 due to, among other things, menu price increases and the comparatively more adverse effects of COVID-19 on our operations during the thirty-nine weeks endedJune 27, 2020 as compared with the thirty-nine weeks endedJuly 3, 2021 , offset by higher food costs. Package Store Sales. Gross profit for package liquor store sales for the thirty-nine weeks endedJuly 3, 2021 increased to$6,493,000 from$5,125,000 for the thirty-nine weeks endedJune 27, 2020 , due primarily to increased package liquor store traffic which we believe is due to what appears to be continues increased demand for package store products 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 27.14% for the thirty-nine weeks endedJuly 3, 2021 and 27.21% for the thirty-nine weeks endedJune 27, 2020 . Payroll and Related Costs. Payroll and related costs for the thirty-nine weeks endedJuly 3, 2021 increased$5,893,000 or 22.17% to$32,475,000 from$26,582,000 for the thirty-nine weeks endedJune 27, 2020 . Payroll and related costs for the thirty-nine weeks endedJuly 3, 2021 were higher due primarily to increased performance bonuses, increased hours and higher costs for employees such as cooks. Payroll and related costs as a percentage of total revenue was 31.32% in the thirty-nine weeks endedJuly 3, 2021 and 31.37% of total revenue in the thirty-nine weeks endedJune 27, 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 thirty-nine weeks endedJuly 3, 2021 decreased$296,000 or 5.53% to$5,059,000 from$5,355,000 for the thirty-nine weeks endedJune 27, 2020 . The decrease in occupancy costs was primarily due to the termination of rent for our combination retail package liquor store and restaurant located at5450 N. State Road 7,North Lauderdale, Florida (Store #40), the real property and improvements of which we purchased onDecember 31, 2020 and the elimination of occupancy costs due to the elimination of rent for our restaurant location which we are developing located at14301 West Sunrise Boulevard ,Sunrise, Florida (Store #85), the real property and improvements of which we purchased onMarch 2, 2021 . We anticipate that our occupancy costs will decrease throughout the balance of our fiscal year 2021. 25 Index 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 thirty-nine weeks endedJuly 3, 2021 increased$729,000 or 4.75% to$16,088,000 from$15,359,000 for the thirty-nine weeks endedJune 27, 2020 . Selling, general and administrative expenses decreased as a percentage of total revenue in the thirty-nine weeks endedJuly 3, 2021 to 15.52% as compared to 18.13% in the thirty-nine weeks endedJune 27, 2020 . We anticipate that our selling, general and administrative expenses will decrease as a percentage of total revenue throughout the balance of our fiscal year 2021 due primarily to increases in total revenue when compared to the balance of our fiscal year 2020. Depreciation and Amortization. Depreciation and amortization expense for the thirty-nine weeks endedJuly 3, 2021 decreased$135,000 or 5.53% to$2,306,000 from$2,441,000 from the thirty-nine weeks endedJune 27, 2020 . As a percentage of total revenue, depreciation and amortization expense was 2.22% of revenue in the thirty-nine weeks endedJuly 3, 2021 and 2.88% of revenue in the thirty-nine weeks endedJune 27, 2020 . Interest Expense, Net. Interest expense, net, for the thirty-nine weeks endedJuly 3, 2021 increased$139,000 to$737,000 from$598,000 for the thirty-nine weeks endedJune 27, 2020 . Interest expense, net, increased for the thirty-nine weeks endedJuly 3, 2021 due to (i) the$2.2 Million Borrowing; and (ii) the borrowing by six of our limited partnerships of an additional approximately$3.35 million of 2nd PPP Loans, both of which borrowings occurred during the second quarter of our fiscal year 2021. Interest expense, net, will increase throughout the balance of our fiscal year 2021 due to (i) the$2.2 Million Borrowing; (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); and (iii) the borrowing by certain of our limited partnerships of an additional$3.35 million of 2ndPPP Loans during the second quarter of our fiscal year 2021, if not forgiven. Income Taxes. Income tax for the thirty-nine weeks endedJuly 3, 2021 was an expense of$1,004,000 , as compared to a benefit of$23,000 for the thirty-nine weeks endedJune 27, 2020 . Income tax for the thirty-nine weeks endedJuly 3, 2021 was not affected by the forgiveness of debt of certain of the PPP Loans, pursuant to the terms of the PPP Loans. Net Income. Net income for the thirty-nine weeks endedJuly 3, 2021 increased$13,667,000 or 924.70% to$15,145,000 from$1,478,000 for the thirty-nine weeks endedJune 27, 2020 due primarily to the forgiveness of debt of certain of the PPP Loans and increased revenue at our retail package liquor stores and restaurants, offset by higher food costs and overall expenses. As a percentage of revenue, net income for the thirty-nine weeks endedJuly 3, 2021 is 14.61%, as compared to 1.74% in the thirty-nine weeks endedJune 27, 2020 . Net Income Attributable to Stockholders.Net income attributable to stockholders for the thirty-nine weeks endedJuly 3, 2021 increased$9,743,000 or 1,418.20% to$10,430,000 from$687,000 for the thirty-nine weeks endedJune 27, 2020 due primarily to the forgiveness of debt of certain of the PPP Loans and increased revenue at our retail package liquor stores and restaurants, offset by higher food costs and overall expenses. As a percentage of revenue, net income attributable to stockholders for the thirty-nine weeks endedJuly 3, 2021 is 10.06%, as compared to 0.81% for the thirty-nine weeks endedJune 27, 2020 .
26 Index
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 thirteen weeks endedJuly 3, 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.
Menu Price Increases and Trends
During the third quarter of our fiscal year 2021, we increased menu prices for our food offerings (effectiveApril 11, 2021 ) to target an increase to our food revenues of approximately 4.60% annually to offset higher food costs and higher overall expenses. 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. 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 the thirteen weeks endedJuly 3, 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 ofJuly 3, 2021 , we had cash of approximately$31,953,000 , an increase of$2,031,000 from our cash balance of$29,922,000 as ofOctober 3, 2020 . 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. 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 second quarter of our fiscal year 2021, we applied for forgiveness for all PPP Loans, including Franchisees and theManaged Store . As ofJuly 3, 2021 , the entire amount of principal and accrued interest was forgiven under the PPP Loans. During the first quarter of our fiscal year 2020, our wholly owned subsidiary, Flanigan'sCalusa 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 . 27 Index
During the second quarter of our fiscal year 2021, 6 of the entities owning limited partnership stores (the "LP's") and the store we manage but do not own (the "Managed Store ") (collectively, the "Borrowers"), applied for and received net amounts of approximately$3.98 million from the 2nd PPP Loans, of which approximately: (i)$3.35 million was loaned to 6 of the LP's ; and (ii)$0.63 million was loaned to theManaged Store . 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 thirty-nine weeks
ended
---------Thirty-Nine Weeks Ended--------
July 3, 2021 June 27, 2020 (in Thousands) Net cash provided by operating activities $ 11,523 $ 7,437 Net cash used in investing activities (8,374 ) (2,448 ) Net cash provided by (used in) financing activities (1,118 ) 11,821 Net Increase in Cash and Cash Equivalents 2,031 16,810 Cash and Cash Equivalents, Beginning 29,922 13,672 Cash and Cash Equivalents, Ending $ 31,953 $ 30,482
During the thirty-nine weeks endedJuly 3, 2021 , we did not declare or pay a cash dividend on our capital stock. During the thirty-nine weeks endedJune 27, 2020 , due to the negative effects of COVID 19 on our operations, our Board of Directors cancelled a previously declared cash dividend of$.30 per share to shareholders of record onMarch 20, 2020 and payable onApril 3, 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. 28 Index 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 thirty-nine weeks endedJuly 3, 2021 , we acquired property, plant and equipment and construction in progress of$9,683,000 , (of which$58,000 was for the purchase of a motor vehicle;$2,200,000 was for the purchase of real property;$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$35,000 for the renovation to two (2) existing limited partnership restaurants and$70,000 for renovations to two (2) Company owned restaurants. During the thirty-nine weeks endedJune 27, 2020 , we acquired property, plant and equipment and construction in progress of$2,171,000 , (of which$96,000 was deposits recorded in other assets and$2,000 was purchase deposits transferred to construction in process as ofSeptember 28, 2019 ), which amount included$263,000 for the renovation to two (2) existing limited partnership restaurants and$429,000 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 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 of
As ofJuly 3, 2021 , the aggregate principal balance owed from the financing of our property and general liability insurance policies, including the financing of our directors and officers liability insurance policy, but excluding coverage for our franchises, (of approximately$226,000 ), which are not included in our consolidated financial statements is$798,000 . Construction Contracts
a.
During the third quarter of our fiscal year 2019, we entered into an agreement with an unaffiliated third party 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, second and third quarters of our fiscal year 2021, we agreed to change orders to the agreement for additional construction services increasing the total contract price by$490,000 to$2,107,000 , of which$767,000 of the total amount obligated has been paid throughJuly 3, 2021 and an additional$194,000 has been paid subsequent to the end of the third quarter of our fiscal year 2021. 29 Index
b.
During the third quarter of our fiscal year 2019, we also entered into an agreement with an unaffiliated third party 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$131,000 has been paid throughJuly 3, 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 and during the third quarter of our fiscal year 2021 we agreed to change orders to the agreement for additional interior renovations increasing the total contract price by$131,000 to$1,367,000 , of which$820,000 has been paid throughJuly 3, 2021 and an additional$101,000 has been paid subsequent to the end of the third quarter of our fiscal year 2021.
c.
During the fourth quarter of our fiscal year 2019, we entered into a Lease Agreement with a non-affiliated third party for the lease of a restaurant location in a shopping center at11225 Miramar Parkway , #250,Miramar, Florida 33024 (Store #25). The shopping center is currently in the developmental stage and the Lease Agreement is still contingent upon our receipt of delivery of the leased premises byAugust 28, 2021 . During the second quarter of our fiscal year 2021, we entered into an Architectural Professional Services Agreement with a third-party unaffiliated architect for design and development services for this new location (Store #25) for a total contract price of$73,850 , which total amount has been paid in full throughJuly 3, 2021 .
d.
During the fourth quarter of our fiscal year 2019, we entered into a Lease Agreement with a non-affiliated third party for the lease of a retail package liquor store location in a shopping center at11225 Miramar Parkway , #245,Miramar, Florida 33024 (Store #24). The shopping center is currently in the developmental stage and the Lease Agreement is still contingent upon our receipt of delivery of the leased premises byAugust 28, 2021 . During the second quarter of our fiscal year 2021, we entered into an Architectural Professional Services Agreement with a third-party unaffiliated architect for design and development services for this new location (Store #24) for a total contract price of$18,650 , which total amount has been paid in full throughJuly 3, 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 at a fixed cost. Subsequent to the end of the third quarter of our fiscal year 2021, we agreed to increase the fixed cost of the remaining baby back ribs for our calendar year 2021 by approximately$408,000 to ensure adequate supply for our restaurants during calendar year
2022. 30 Index
While we anticipate purchasing all of our rib supply from this vendor, we believe there are several other alternative vendors available, if needed.
Working Capital The table below summarizes the current assets, current liabilities, and working capital for our fiscal quarters endedJuly 3, 2021 ,June 27, 2020 and our fiscal year endedOctober 3, 2020 . Item July 3, 2021 June 27, 2020 Oct. 3, 2020 (in Thousands) Current Assets$ 39,768 $ 37,288 $ 36,508 Current Liabilities 20,796 21,164 25,362 Working Capital$ 18,972 $ 16,124 $ 11,146
Our working capital increased during our fiscal quarter endedJuly 3, 2021 from our working capital for our fiscal quarter endedJune 27, 2020 and our working capital as ofOctober 3, 2020 due to our receipt of$3.35 million from the
2nd PPP Loans. 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 for the next twelve months.
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. 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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