UNITED STATES


SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10K


10-K

x
ýANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended October 3, 2009


September 29, 2012

OR


¨oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) of theOF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________



Commission File Number I-6836


Flanigan's Enterprises, Inc.
(Exact name of registrant as specified in its charter)


1-6836

FLANIGAN'S ENTERPRISES, INC.

(Exact name of registrant as specified in its charter)

Florida59-0877638
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)Identification Number)
 
(I.R.S. Employer
Identification No.)


5059 N.E. 18th Avenue, Fort Lauderdale, FLFlorida33334
(Address of principal executive offices)(Zip Code)Code

Registrant's telephone number, including area code,(954) 377-1961

(954) 377-1961

(Registrant's telephone number, including area code)

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


Common Stock, $.10 Par ValueNYSE AMEX
Title of each class
Name of each exchange
on which registered


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¨o Noxý


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¨o Noxý

1

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. Yesxý No¨o


Indicate by check mark whether the registrant has submitted electronically and posted on its Webcorporate web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).Yes¨ý No¨o


Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.¨o


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 Securities Exchange Act of 1934.  (Check one):


Act.

Large accelerated filer¨o      Accelerated filer¨o      Non-accelerated filer¨o      Smaller reporting companyxý

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes¨ oNoxý


The aggregate market value of the voting stock held by non-affiliates of the registrant was $3,221,000$6,005,000 as of March 28, 2009,31, 2012, the last business day of the registrant’s most recently completed second fiscal quarter. Thequarter, based on the closing price per shareof the common stock as reported on March 28, 2009 was $4.04.


the NYSE AMEX of $7.47.

There were 1,861,9331,860,247 shares of the Registrant's Common Stock, $0.10 par value, outstanding as of January 4, 2010.



December 28, 2012.

DOCUMENTS INCORPORATED BY REFERENCE


Information required by Part III (Items 10, 11, 12, 13 and 14) is incorporated by reference to portions of the Registrant’s Proxy Statement for the 20102013 Annual Meeting of Shareholders which will be filed with the Securities and Exchange Commission by February 1, 2010.


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January 24, 2013.

FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES


TABLE OF CONTENTS

PART I.
  
  
Item 1Business  5 
  
Item 11ARisk Factors18

 
BusinessItem 1B
5Unresolved Staff Comments25
   
Item 1A2Properties
Risk Factors
1925
  
Item 1B
Unresolved Staff Comments
26
Item 2
Properties
26
Item 3
Legal Proceedings
31
Item 4
Submission of Matters to a Vote of Security Holders
32
  
PART II  
  
PART II
Item 5
Market for Registrant’s  Common Equity, Related Stockholder Matters and Issuer  Purchases of Equity Securities.
32
  
Item 6Selected Financial Data. 34
  
Item 6
Selected Financial Data.
33
Item 7
Management’s Discussion and Analysis of Financial Condition and Results of Operation.
34
  
Item 7A
Quantitative and Qualitative Disclosures About Market RiskRisk.
45
.Item 8Financial Statements and Supplementary Data.46
  
Item 8
Financial Statements and Supplementary Data.
47
Item 9
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
46
Item 9AControls and Procedures.46
Item 9B.Other Information47 
PART III.
Item 10Directors, Executive Officers and Corporate Governance47
  
Item 11Executive Compensation48
  
Item 9A(T)12Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters48
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Table of Contents
Item 13Certain Relationships and Related Transactions, and Director  Independence.48
 
ControlsItem 14
Principal Accounting  Fees and Procedures.Services4748
   
Item 9B.
Other InformationPART IV
48
  
   
PART III.
Item 15
Item 10
Directors, Executive OfficersExhibits and Corporate Governance
Financial Statement Schedules.		48
   
Item 11
Executive CompensationSIGNATURES
48

3

Item 12
Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters
48
  
Item 13
Certain Relationships and Related Transactions, and Director Independence.CERTIFICATIONS
49
  
Item 14
Principal Accounting Fees and Services
49
PART IV
Item 15
Exhibits and Financial Statement Schedules.
49
SIGNATURES
CERTIFICATIONS

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).


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4
Table of Contents

PART I

Item 1. Business


When used in this report, the words "anticipate", "believe", "estimate", “will”, “intend” and “expect” and similar expressions identify forward-looking statements. Forward-looking statements in this report include, but are not limited to, those relating to the general expansion of the Company'sour business. Although we believe that our plans, intentions and expectations reflected in these forward-looking statements are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved. We undertake no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this annual report on Form 10-K.


General


At October 3, 2009,September 29, 2012, we (i) operated 2324 units, (excluding the adult entertainment club referenced in (ii) below), 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; (ii) own but do not operate one adult entertainment club; and (iii) franchise an additional sixfive units, consisting of two restaurants (one of which we operate) and fourthree 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, 2009September 29, 2012 and as compared to September 27, 2008.October 1, 2011. 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 mark “Big Daddy’s Liquors”.

 FISCALFISCAL 
 YEARYEARNOTE
 20122011NUMBER
TYPES OF UNITS   
Company Owned:   
Combination package liquor   
store and restaurant44 
Restaurant only55 
Package liquor store only55 
    
Company Managed   
Restaurants Only:   
Limited partnerships88 
Franchise11 
Unrelated Third Party11 
    
Company Owned Club:11
TOTAL - Company   
Owned/Operated Units:2525 
    
FRANCHISED - units55(1)(2)

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FISCAL YEAR 2009
  
FISCAL YEAR 2008
  NOTE NUMBER 
TYPES OF UNITS         
Company Owned:
         
Combination package liquor store and restaurant  4   4    
Restaurant only  3   3   (1) 
Package liquor store only  5   5     
             
Company Managed Restaurants Only:
            
Limited partnerships  9   9   (2) 
Franchise  1   1     
Unrelated Third Party  1   1     
             
Company Owned Club:
  1   1     
TOTAL - Company            
Owned/Operated Units:  24   24     
             
FRANCHISED - units  6   6   (1) (3) 


Notes:


(1)  Subsequent to our 2009 fiscal year end, we purchased from a franchisee the operating restaurant assets of the franchised restaurant located in Boca Raton, Florida and accordingly, the restaurant converted from a franchised unit to a company owned restaurant.


(2)  Includes a restaurant located in Davie, Florida which is owned by a limited partnership in which we are the sole general partner and own 48% of the limited partnership interest and commenced operating on July 28, 2008.

(3) We operate a restaurant for one (1) franchisee. This unit is included in the table both as a franchised restaurant, as well as a restaurant operated by us.

(2) During the fourth quarter of our fiscal year ended September 29, 2012, with our consent, a franchised package store ceased operations in order to accommodate expanded restaurant operations at the location.

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 8 to the consolidated financial statements and the discussion of franchised units on page 8.


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%78.8% and bar sales approximately 19%21.2% 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.

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ENTITY
STATE OF
ORGANIZATION
PERCENTAGE
OWNED
                         ENTITYORGANIZATIONOWNED
   
Flanigan’s Management Services, Inc.Florida100
Flanigan’s Enterprises, Inc. of GeorgiaGeorgia100
Flanigan’s Enterprises, Inc. of Pa.Pennsylvania100
Flanigan’s Enterprises of N. Miami, Inc.Florida100
CIC Investors #13, Limited PartnershipFlorida  40
CIC Investors #50, Limited PartnershipFlorida  17
18
CIC Investors #55, Limited PartnershipFlorida  48
CIC Investors #60, Limited PartnershipFlorida  45
CIC Investors #65, Limited PartnershipFlorida  28
CIC Investors #70, Limited PartnershipFlorida  41
CIC Investors #75, Limited Partnership Florida  13
CIC Investors #80, Limited PartnershipFlorida  27
CIC Investors #90, Limited PartnershipFlorida    27
5
CIC Investors #95, Limited PartnershipFlorida  30
Josar Investments, LLCFlorida100
Flanigan’s Calusa Center, LLCFlorida100

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, beer and wines while offering competitive pricing by meeting the published sales prices of our competitors. We provide extensive sales training to our package liquor store personnel. The stores are open for business six or seven days a week from 9:00-10:00 a.m. to 9:00-10:00 p.m., depending upon demand and local law. Approximately half of the Company'sour 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”, four of which are jointly operated with restaurants we own.


Franchised Package Liquor Stores. We currently franchise fourthree package liquor stores, all in the South Florida area, all of which are operated under the name “Big Daddy’s Liquors” and are jointly operated with our franchisee’s restaurant operations. ThreeDuring the fourth quarter of the fourour fiscal year ended 2012, a franchised package liquor stores



the family of our Chairman of the Board, officers and/or directors, with our consent, ceased operations in order to permit expanded operations of the jointly operated restaurant at the location. 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.

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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.


Company Owned Restaurants. We own and operate sevennine restaurants all under our service mark “Flanigan’s Seafood Bar and Grill” four of which are jointly operated with package liquor stores we own.


Franchised Restaurants. We franchise sixfive restaurants, all of which operate under our service mark “Flanigan’s Seafood Bar and Grill”, two of which operate as a restaurant only and fourthree of which operate jointly with a franchisee operated “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.

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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 with others, (some of whom are or are affiliated with our officers and directors), in teneight limited partnerships which currently own and operate teneight South Florida based restaurants under our service mark “Flanigan’s Seafood Bar and Grill”. We have also invested with others, (some of whom are or are affiliated with our officers and directors), in one limited partnership which currently owns and is renovating a location in Miami, Florida to operate a new restaurant 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 all of these limited partnerships and manage and control the operations of the restaurants, except for the restaurant located in Fort Lauderdale, Florida where we only hold a limited partnership interest.


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, 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 (½) 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 (½) of cash available to be distributed, with the other one half (½) of available cash distributed to the investors (including us), as a profit distribution, pro-rata based on the investors’ investment. As of October 3, 2009,September 29, 2012, limited partnerships owning three (3) restaurants, (Surfside, Florida, Kendall, Florida and West Miami, Florida locations), 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 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. Although we have no restaurantsThe restaurant under development and whetherin Miami, Florida uses the same financial arrangement. Whether we will have any additional restaurants under development in the future will be dependant,dependent, among other things, on market conditions and our ability to raise capital, wecapital. 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 arrangement.arrangements.

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Below is information on the tennine limited partnerships which own and operate “Flanigan’s Seafood Bar and Grill” restaurants:


Pinecrest, Florida

We are the sole general partner and 40% 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.  15.0% of the remaining limited partnership interest is owned by persons who are either our officers, directors or their family members.  As of the end of our fiscal year 2009, this limited partnership has returned to


its investors approximately 34% of their initial cash invested, increased from approximately 18% as of our fiscal year ended 2008.

Fort Lauderdale, Florida

A corporation, owned by one of our directors, 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.  58.8% 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 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.

Surfside, Florida


We are the sole general partner and a 45% 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. 34.9% 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 of their initial cash invested and wereceive an annual management fee equal to one-half (½) 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. 29.7% 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 wereceive an annual management fee equal to one-half (½) 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. 34.1% 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 wereceive an annual management fee equal to one-half (½) of the cash available for distribution by this limited partnership.



Weston, Florida


We are the sole general partner and a 30% limited partner in this limited partnership which has owned and operated a restaurant in Weston, Florida under our “Flanigan’s Seafood Bar and Grill” service mark since January 20, 2003. 35.1% of the remaining limited partnership interest is owned by persons who are either our officers, directors or their family members. As of the end of our fiscal year 2009,2012, this limited partnership has returned to its investors approximately 73.75%81.25% of their initial cash invested. During our fiscal year 2009,2012, no distributions were made to limited partners as this limited partnership had limited positive cash flow generated by this restaurant. The limited cash flow was primarily attributable to increased competition, which we expect to continue into our fiscal year 2010.


Stuart, Florida

We are the sole general partner and 13% limited partner in this limited partnership which has owned and operated a restaurant in a Howard Johnson’s Hotel in Stuart, Florida under our “Flanigan’s Seafood Bar and Grill” service mark since January 11, 2004. 31.0% of the remaining limited partnership interest is owned by persons who are either our officers, directors or their family members.  As of the end of our fiscal year 2009, this limited partnership has returned to its investors approximately 22.5% of their initial cash invested.  During our fiscal years 2009 and 2008, no distributions were made to limited partners as this limited partnership had a net gain of $1,000 and a net loss of $8,000 from the operation of the restaurant during the fiscal years 2009 and 2008, respectively, before depreciation and amortization, and owed the Company $241,000 and $216,000, as of the end of our fiscal years 2009 and 2008, respectively, in advances made to meet operating losses.  As of October 3, 2009, the amounts this limited partnership owes to us have been offset with an allowance for doubtful accounts, in the amount of $241,000, on our balance sheet and is offset by an eliminating entry in consolidation in accordance with ASC 810 regarding accounting for consolidation.

On October 1, 2009, the limited partnership operating the Stuart, Florida restaurant was served with a copy of a complaint, arising out of foreclosure proceedings commenced against the limited partnership’s landlord.  The limited partnership was named in and served with the complaint because it is the tenant on the property which is the subject of the foreclosure proceedings.  As of October 3, 2009, due to the limited partnership’s inability to re-negotiate its three year renewal option, it leases the property on a month-to-month term. We do not know what the outcome of these foreclosure proceedings will be or what impact it will have on the limited partnership, but thus far no request has been made to have the limited partnership vacate the premises.  If the limited partnership were required to vacate the Stuart, Florida premises, it would have a material adverse effect on its operations.  No assurance can be given that the limited partnership would be able to locate a suitable replacement location at reasonable rates and terms, if at all.


2013.

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. 25.7% of the remaining limited partnership interest is owned by persons who are either our officers, directors or their family members. As of the end of our fiscal year 2009,2012, this limited partnership has returned to its investors approximately 42%56% of their initial cash invested, increased from approximately 41%52% as of the end of our fiscal year 2008.2011.

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Pinecrest, Florida

We are the sole general partner and 40% 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. 15.0% of the remaining limited partnership interest is owned by persons who are either our officers, directors or their family members. As of the end of our fiscal year 2012, this limited partnership has returned to its investors approximately 80% of their initial cash invested, increased from approximately 65% as of our fiscal year ended 2011.

Pembroke Pines, Florida

We are the sole general partner and an 18% 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. 17.9% of the remaining limited partnership interest is owned by persons who are either our officers, directors or their family members. As of the end of our fiscal year 2012, this limited partnership has returned to its investors approximately 41.0% of their initial cash invested, increased from approximately 32.0% as of the end of our fiscal year 2011.

Davie, Florida


We are the sole general partner and a 48% 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. 9.7% of the remaining limited partnership interest is owned by persons who are either our officers, directors or their family members. As of the end of our fiscal year 2009,2012, this limited partnership has returned to its investors approximately 7.0%27.5% of their initial cash invested.


Pembroke Pines,invested, increased from approximately 19.5% as of the end of our fiscal year 2011.

Fort Lauderdale, Florida


We are the

A corporation, owned by one of our board members, acts as sole general partner andof a 17% limited partner in this limited partnership which has owned and operated a restaurant in Pembroke Pines,Fort Lauderdale, Florida under our “Flanigan’s Seafood Bar and Grill” service mark since October 29, 2007.  17.9%April 1, 1997. We have a 25% limited partnership interest in this limited partnership. 60.1% of the remaining limited partnership interest is owned by persons who are either our officers, directors or their family members. As of the end of our fiscal year 2009, thisThis limited partnership has returned to its investors approximately 11.0%all cash invested, but since we are not the general partner of their initial cash invested. Asthis limited partnership, we do notreceive 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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Investment in Limited Partnership

During the endsecond quarter of our fiscal year 2008, no cash had been distributed2012, a limited partnership in which (i) we are the sole general partner; and (ii) we and a wholly owned subsidiary were the sole limited partners, acquired personal property assets and a leasehold interest of a non-affiliated restaurant operation located in Miami, Florida for $155,000 for the purpose of establishing a new restaurant. During the third quarter of our fiscal year 2012, the limited partnership completed its private offering of limited partnership interests, raising funds to investors.


renovate this new restaurant location using our limited partnership model. We advanced the purchase price to the limited partnership and through the closing of the private offering advanced an additional $196,000 for expenses of the limited partnership. $105,000 of the amounts advanced by us to the limited partnership were allocated to pay for our equity interest in the limited partnership, (which equity interests were purchased at the same price and upon the same terms as other equity investors), and the excess amounts advanced by us, ($246,000), were reimbursed by the limited partnership without interest from the proceeds of the limited partnership’s private offering. 24.3% of the remaining limited partnership interest is owned by persons who are either our officers, directors or their family members. The limited partnership owned restaurant in Miami, Florida opened for business as a "Flanigan's Seafood Bar and Grill" restaurant on December 27, 2012.

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 (½) of the net profit, if any, from the operation of the restaurant. The term of the management agreement, which commenced January 9, 2006, is for ten (10) years, with four (4) five (5) year renewal options in favor of the owner of the restaurant.  For our fiscal years ended September 29, 2012 and October 3, 2009 and September 27, 2008,1, 2011, we generated $185,000$320,000 and $150,000$250,000 of revenue, respectively, from providing these management services. As of October 3, 2009,September 29, 2012, we have generated revenue in excess of the aggregate amount of $603,000 since the effective datepurchase price of the management agreement on January 9, 2006.



agreement.

Adult Entertainment Club


We own, but do not operate, an adult entertainment nightclub located in Atlanta, Georgia which operates under the name “Mardi Gras”. We have a management agreement with an unaffiliated third party to manage the club. Under our management agreement, the unaffiliated third party management firm is obligated to pay us an annual amount, paid monthly, equal to the greater of $150,000 or ten (10%) percent of gross sales from the club, offset by one-half (1/2) of any rental increases, provided our fees will never be less than $150,000 per year.For our fiscal years ended September 29, 2012 and October 3, 2009 and September 27, 2008,1, 2011, we generated $170,000$157,000 and $238,000$161,000 of revenue, respectively, from the operation of the club.

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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 area supervisors. Each area supervisor supervises the operations of the units within his or her territory and visits those units to provide on-site management and support. There are five area supervisors responsible for package liquor store, restaurant and club operations in specific geographic districts.


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.

During the first quarter of our fiscal year 2009, the package liquor stores we own and those owned by our franchisees began using a new point of sale computer system.  The cost of this new point of sale computer system, including hand-held, wireless scanners but excluding surveillance camera system, was approximately $287,000, all of which has been paid.  We are currently installing the surveillance camera system in all of our owned package liquor stores and those owned by our franchisees, which we estimate will be fully installed by the end of our fiscal year 2010 and cost an additional $118,000, in the aggregate.  As of October 3, 2009, surveillance camera systems have been installed in two of our package liquor stores at a cost of approximately $26,000, which has been paid.

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.

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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.


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. In Florida, 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 and no 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.



In the State of Georgia, where our adult entertainment club is located, licensed establishments also do not have quota restrictions for on-premises consumption and such licenses are issued to any applicant who meets all of the state and local licensing requirements based upon extensive license application filings and investigations of the applicant.


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 and collection of state alcoholic beverage taxes.


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 20092012 and 2008,2011, 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.

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We are subject to “dram-shop” statutes due to our restaurant operations and club ownership. 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.



General Liability Insurance


We have general liability insurance which incorporates a semi-self-insured plan under which we assume the full risk of the first $50,000 of exposure per occurrence, while the limited partnerships assume the full risk of the first $10,000 of exposure per occurrence. Our insurance carrier is responsible for $1,000,000 coverage per occurrence above our self-insured deductible, up to a maximum aggregate of $2,000,000 per year. During our fiscal year 20082012 and again in fiscal year 20092013 we were able to purchase excess liability insurance at a reasonable premium, whereby our excess insurance carrier is responsible for $6,000,000 coverage above our primary general liability insurance coverage. With the exception of one (1) limited partnership which has higher general liability insurance coverage to comply with the terms of its lease for the business premises, we are un-insured against liability claims in excess of $7,000,000 per occurrence and in the aggregate.


Our general policy is to settle only those legitimate and reasonable claims asserted and to aggressively defend and go to trial, if necessary, on frivolous and unreasonable claims. We have established a select group of defense attorneys which we use in conjunction with this program. Under our current liability insurance policy, any expense incurred by us in defending a claim, including adjusters and attorney's fees, are a part of our $50,000 or $10,000, as applicable, self-insured retention.retentions.

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In accordance with accounting guidance, we accrue for any self-insured liability by recognizing costs when it is probable that a covered liability has been incurred and the costscost can be reasonably estimated. Accordingly, our annual self-insurance costs may be subject to adjustment from previous estimates as facts and circumstances change. Our self-insured accruals are included in the accompanying consolidated balance sheets in the caption "Accounts payable and accrued expenses". A significant unfavorable judgment or settlement against us in excess of our liability insurance coverage could have a materially adverse effect on the Company.


Property Insurance; Windstorm Insurance; Deductibles


For the policy year commencing December 30, 2009,2012, our property insurance will be the secondthird year of our two (2)three (3) year property insurance policy with our insurance carrier, including coverage for properties leased by us and our consolidated limited partnerships, and will provide for full insurance coverage for property losses, including those caused by windstorm, such as a hurricane. For property losses caused by windstorm, the property insurance will have fixed deductibles of 5% per location, per occurrence. For all other property losses, the property insurance will have deductibles of $10,000 per location, per occurrence. Our insurance expense for the policy year commencing December 30, 2009,2012, including insurance coverage for our consolidated limited partnerships, will be approximately equal to our insurance expense for the policy year ending December 30, 2008, ($294,000), adjusted by changes we made to our insurable values.  Our insurance expense for the policy year which commenced December 30, 2008, including insurance coverage for our consolidated limited partnerships,2011, ($294,000), decreased by approximately $140,000, (32%), fromas our three (3) year property insurance policy does not provide for premium rate increases during the policy year which commenced December 30, 2007, due primarily to decreases in premium rates for windstorm insurance coverage.



term.

Competition and the Company's Market


The liquor and hospitality industries are highly competitive and are often affected by changes in taste and entertainment trends among the public, by local, national and economic conditions affecting spending habits, and by population and traffic patterns. We believe that the principal means of competition among package liquor stores is price and that, in general, the principal means of competition among restaurants include the location, type and quality of facilities and the type, quality and price of beverage and food served.


Our package liquor stores compete directly or indirectly with local retailers and discount "superstores". Due to the competitive nature of the liquor industry in South Florida, we have had to adjust our pricing to stay competitive, including meeting all competitors’ advertisements. Such practices will continue in the package liquor business. We believe that we have a competitive position in our market because of widespread consumer recognition of the "Big Daddy's Liqours"Liquors" name.


Our restaurants compete directly or indirectly with many well-established competitors, both nationally and locally owned. Due to the competitive nature of the hospitality industry, we have had to limitlimited our menu price increases, while offeringbut during the fourth quarter of our fiscal year 2011 and the third quarter of our fiscal year 2012, higher food costs and higher overall expenses left us with no alternative but to raise our menu prices. During the second quarter of our fiscal year 2012, we also raised our restaurant bar prices. We continue to offer our customers our customary quality and quantity of beverage and food served, all at a reasonable price. We believe that we have a competitive position in our market because of widespread consumer recognition of the "Flanigan’s Seafood Bar and Grill" name.

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We have many well-established competitors, both nationally and locally owned, with substantially greater financial resources and a longer history of operations than we do. Their resources and market presence may provide advantages in marketing, purchasing and negotiating leases. We compete with other restaurant and retail establishments for sites and finding management personnel.


Our business is subject to seasonal effects, including that liquor purchases tend to increase during the holiday seasons.


Trade Names


We operate our package liquor stores and restaurants under two service marks; "Big Daddy's Liquors" and "Flanigan's Seafood Bar and Grill", both of which are federally registered trademarks owned by us. Our right to the use of the "Big Daddy's" service mark is set forth under a consent decree of a Federal Court entered into by us in settlement of federal trademark litigation. The consent decree and the settlement agreement allow us to continue to use and to expand our use of the "Big Daddy's” service mark in connection with our package liquor sales in Florida, while restricting future liquor sales in Florida under the "Big Daddy's" name by the other party who has a federally registered service mark for "Big Daddy's" use in the restaurant business. The Federal Court retained jurisdiction to enforce the consent decree. We have acquired registered Federal trademarks on the



principal register for our "Flanigan's" and “Flanigan’s Seafood Bar and Grill” service marks.

The standard symbolic trademark associated with our facilities and operations is the bearded face and head of "Big Daddy" which is predominantly displayed at all "Flanigan's" facilities and all "Big Daddy's" facilities throughout the country. The face comprising this trademark is that of the Company’s founder, Joseph "Big Daddy" Flanigan, and is a federally registered trademark owned by us.


Employees


As of our fiscal year end 2009,2012, we employed 9031,109 persons, of which 688893 were full-time and 215216 were part-time. Of these, 4035 were employed at our corporate offices in administrative capacities and 58 were employed in maintenance. Of the remaining employees, 3935 were employed in package liquor stores and 8191,031 in restaurants.


None of our employees are represented by collective bargaining organizations. We consider our labor relations to be favorable.


EXECUTIVE OFFICERS
       
Name Positions and Offices Currently Held Age Office or Position Held Since
       
James G. Flanigan Chairman of the Board of Directors, Chief Executive Officer and President 45 (1)
       
August Bucci Chief Operating Officer and Executive Vice President 65 2002
       
Jeffrey D. Kastner Chief Financial Officer General Counsel and Secretary 56 (2)
       
Jean Picard Vice President of Package Liquor Store Operations 71 2002

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EXECUTIVE OFFICERS
    
 Positions and Offices Office or Position
      NameCurrently HeldAgeHeld Since
    
James G. FlaniganChairman of the Board of Directors, Chief Executive Officer and President48(1)
    
August BucciChief Operating Officer and Executive Vice President682002
    
Jeffrey D. KastnerChief Financial Officer, General Counsel and Secretary59(2)
    
Jean PicardVice President of Package Liquor Store  Operations742002

(1)Chairman of the Board of Directors, Chief Executive Officer since 2005; President since 2002.

(2)Chief Financial Officer since 2004; Secretary since 1995; and General Counsel since 1982.


our Board of Directors since 2001, died on December 26, 2012. Mike Roberts served on our Audit Committee, Independence Committee and Corporate Governance and Nominating Committee.

Flanigan’s 401(k) Plan


Effective July 1, 2004, we began sponsoring a 401(k) retirement plan covering substantially all employees who meet certain eligibility requirements. Employees may contribute elective deferrals to the plan up to amounts allowed under the Internal Revenue Code. We are not required to contribute to the plan but may make discretionary profit sharing and/or matching contributions. During our fiscal years ended September 29, 2012 and October 3, 2009 and September 27, 2008,1, 2011, the Board of Directors approved discretionary matching contributions totaling $NONE$23,000 and $30,000,$24,000, respectively.


Subsequent Events

(a)Purchase of Real Property, (Hollywood, FL.):

During the fourth quarter of our fiscal year 2009 we contracted and then subsequent to our fiscal year 2009, we closed on the purchase of the real property and building where our combination restaurant and package liquor store located at 2505 N. University Drive, Hollywood, Florida, (Store #19), operates.  We paid $1,350,000 for this property, $850,000 of which we borrowed from an unaffiliated third party, pursuant to a first mortgage.  The mortgage note bears interest at the rate of eight and one-half (8½%) percent per annum, is amortized over fifteen (15) years with equal monthly payments of principal and interest, each in the amount of $8,300.00, with the entire principal balance and all accrued interest due in eight (8) years.

(b)Purchase of Operating Assets from Franchisee (Boca Raton, Fl.)

Subsequent to our fiscal year 2009, we purchased from our franchisee, the operating assets of the franchised restaurant located at 45 S. Federal Highway, Boca Raton, Palm Beach County, Florida for an aggregate purchase price of $245,000 and on October 18, 2009 this restaurant began operating as a Company-owned restaurant. The lease at this location expires on April 30, 2011.  Our franchisee was unsuccessful in obtaining an extension of the lease term.  There can be no assurance that the lease term will be extended or that we will find a suitable replacement location at reasonable rates, if at all.

Environmental Matters

We are not aware of any federal, state or local environmental laws or regulations that will materially affect our earnings or competitive position or result in material capital expenditures. However, we cannot predict the effect of possible future environmental legislation or regulations on our operations.

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tem Item 1A      Risk Factors


An investment in our common stock involves a high degree of risk. These risks should be considered carefully with the uncertainties described below, and all other information included in this Annual Report on Form 10-K, before deciding whether to purchase our common stock. Additional risks and uncertainties not currently known to management or that management currently deems immaterial may also become important factors that may harm our business, financial condition or results orof operations. The occurrence of any of the following risks could harm our business, financial condition and results of operations. The trading price of our common stock could decline due to any of these risks and uncertainties and you may lose part or all of your investment.


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Certain statements in this report contain forward-looking information. In general, forward-looking statements include estimates of future revenues, cash flow, capital expenditures, or other financial items and assumptions underlying any of the foregoing. Forward-looking statements reflect management’s current expectations regarding future events and use words such as “anticipate”, “believe”, “expect”, “may”, “will” and other similar terminology. These statements speak only as of the date they were made and involve a number of risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Several factors, many beyond our control, could cause actual results to differ materially from management’s expectations.


Continued High Unemployment, Instability in the Housing Market, High Energy and Food Costs and General Economic Uncertainty could result in a Decline in Consumer Discretionary Spending that would Materially Affect our Financial Performance.

Dining out is a discretionary expense. Factors May Adversely Affect Results Of Operations


The disruption experiencedthat affect consumer behavior and spending for restaurant dining, such as changes in general economic conditions (including national, regional and local economic conditions), discretionary spending patterns, employment levels, instability in the United Stateshousing market, and global credit markets during the second half of calendar year 2008high energy and which continued into calendar year 2009 has adversely affected disposable consumer income and consumer confidence.  Prolonged negative changes in domestic and global economic conditions or disruptions of either or both of the financial and credit marketsfood costs may have had a material adverse effect on our results of operations, financial conditionus. Leading economic indicators, such as unemployment and liquidity.  During theconsumer confidence, remain volatile and may not show meaningful improvement in our fiscal year ended October 3, 2009, we accessed the credit markets and applied for financing to purchase the real property and improvements of two (2) locations, upon one (1) of which we operate a combination package liquor store and restaurant and upon the other we operate a restaurant.  We also accessed the credit markets to extend the maturity date of our line of credit.  While the impact of the current crisis made it more difficult to obtain financing, we were able to procure financing but at a higher cost and upon less favorable terms than in the past.  From an operating standpoint, the current financial crisis has resulted in reduced customer traffic in some or all of our restaurants and/or package liquor stores, reduced revenues and profitability, increased costs and imposed practical limits on our menu pricing.  A continued decline in same store restaurant revenues and/or profitability may result in a deterioration of2013. If economic conditions worsen, our financial position.

performance could be adversely affected.

Intense Competition In The Restaurant And Package Liquor Store Industry Could Prevent Us From Increasing Or Sustaining Our Revenues And Profitability.


The restaurant and package liquor store industry is intensely competitive with respect to food quality, price-value relationships, ambiance, service and location and many restaurants and package liquor stores compete with us at each of our locations. There are a number of well-established competitors with substantially greater financial, marketing, personnel and other resources than ours, and many of our competitors are well established in the markets where we have restaurants and/or stores where we intend to locate restaurants. Additionally, other companies may develop restaurants and/or stores that operate with similar concepts.


Any inability to successfully compete with the other restaurants and/or stores in our markets will prevent us from increasing or sustaining our revenues and profitability and will result in a material adverse effect on



our business, financial condition, results of operations or cash flows. We may also need to modify or refine elements of our business to evolve our concepts in order to compete with popular new restaurant formats or store concepts that may develop in the future. There can be no assurance that we will be successful in implementing these modifications or that these modifications will not reduce our profitability.

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New Information Or Attitudes Regarding Diet And Health Could Result In Changes In Regulations And Consumer Eating Habits That Could Adversely Affect Our Revenues.


Regulations and consumer eating habits may change as a result of new information or attitudes regarding diet and health. These changes may include regulations that impact the ingredients and nutritional content of our menu items at our restaurants. For example, a number of states, counties and cities are enacting menu labeling laws requiring multi-unit restaurant operators to make certain nutritional information available to guests or restrict the sales of certain types of ingredients in restaurants. The success of our restaurant operations is dependent, in part, upon our ability to effectively respond to changes in consumer health and disclosure regulations and to adapt our menu offerings to trends in eating habits. If consumer health regulations or consumer eating habits change significantly, we may be required to modify or delete certain menu items. To the extent we are unable to respond with appropriate changes to our menu offerings, it could materially affect customer demand and have an adverse impact on our revenues.


Adverse Public Or Medical Opinions About Health Effects Of Consuming Our Products As Well As Negative Publicity About Us, Our Restaurants And/Or Package Liquor Stores And About Others Across The Food And Liquor Industry Supply Chain, Whether Or Not Accurate, Could Negatively Affect Us.


Restaurant operators have received more scrutiny from regulators and health organizations in recent years relating to the health effects of consuming certain products. An unfavorable report on the products we use in our menu, the size of our portions or the consumption of those items could influence the demand for our offerings. In addition, adverse publicity or news reports, whether or not accurate, of food quality issues, illness, injury, health concerns, or operating issues stemming from a single restaurant, a limited number of restaurants, restaurants operated by others or generally in the food supply chain could be damaging to the restaurant industry overall and specifically harm our reputation. A decrease in guest traffic as a result of these types of health concerns or negative publicity could materially harm our results of operations.



Our Inability To Successfully And Sufficiently Raise Menu Prices Could Result In A Decline In Profitability.


We utilize menu price increases to help offset cost increases, including increased cost for commodities, minimum wages, employee benefits, insurance arrangements, construction, utilities and other key operating costs. If our selection and amount of menu price increases are not accepted by consumers and reduce guest traffic, or are insufficient to counter increased costs, our financial results could be negatively affected. However, we have not experienced any adverse affects from our recent menu price increases.

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Fluctuations In Commodity Prices And Availability Of Commodities Including Pork, Beef, Fish, Poultry And Dairy Could Affect

Increases in food costs, raw materials and other supplies and services may have a material adverse impact on our financial performance.

Our Business


A significant componentoperating margins depend on, among other things, our ability to anticipate and react to changes in the costs of key operating resources, including food and beverage costs, utilities and other supplies and services. We attempt to negotiate short-term and long-term agreements for our principal commodity, supply and equipment requirements, depending on market conditions and expected demand. However, we are currently unable to contract for extended periods of time for certain of our costs are relatedcommodities. Consequently, these commodities can be subject to food commodities including pork, beef, fish, poultryunforeseen supply and dairy products.  If there is a substantial increase in prices for these products and we are unablecost fluctuations due to offset the increases withfactors such as changes in menu prices,demand patterns, increases in the cost of key inputs, fuel costs, weather and other market conditions outside of our resultscontrol. Dairy costs can also fluctuate due to government regulation. Our suppliers also may be affected by higher costs to produce and transport commodities used in our restaurants, higher minimum wage and benefit costs, and other expenses that they pass through to their customers, which could be negatively affected.
result in higher costs for goods and services supplied to us.

Our Business Could Be Materially Adversely Affected If We Are Unable To Expand In A Timely And Profitable Manner


To grow successfully, we must open new restaurants on a timely and profitable basis. We have experienced delays in restaurant openings from time to time and may experience delays in the future. During our fiscal year 2009,2012 we have one new restaurant under development which opened for business on December 27, 2012. During our fiscal year 2011, we did not open any new restaurants, nor dodid we have any new restaurants under development.  During our fiscal year 2008, due to delays in the permitting process and construction, the Davie, Florida restaurant was opened after substantial delays.  Increases in labor and building material costs increased the cost of planned renovations to the Davie, Florida restaurant by approximately $1,000,000.


Our ability to open and profitably operate restaurants and/or package liquor stores is subject to various risks such as identification and availability of suitable and economically viable locations, the negotiation of acceptable leases or the purchase terms of existing locations, the availability of limited partner investors or other means to raise capital, the need to obtain all required governmental permits (including zoning approvals) on a timely basis, the need to comply with other regulatory requirements, the availability of necessary contractors and subcontractors, the availability of construction materials and labor, the ability to meet construction schedules and budgets, variations in labor and building material costs, changes in weather or other acts of God that could result in construction delays and adversely affect the results of one or more restaurants and/or package liquor stores for an indeterminate amount of time. If we are unable to successfully manage these risks, we will face increased costs and lower than anticipated revenues which will materially adversely affect our business, financial condition, operating results and cash flow.


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Changes In Customer Preferences For Casual Dining Styles Could Adversely Affect Financial Performance


Changing customer preferences, tastes and dietary habits can adversely impact our business and financial performance. We offer a large variety of entrees, side dishes and desserts and itsour continued success depends, in part, on the popularity of our cuisine and casual style of dining. A change from this dining style may have an adverse effect on our business.

Our Success Depends Substantially on the Value of our Brands and our Reputation for Offering Guests a Satisfactory Experience.

We believe we have built a reasonably strong reputation for the predictability of our menu items, as part of the experience that guests enjoy in our restaurants. We believe we must protect and grow the value of our brands to continue to be successful in the future. Any incident that erodes consumer trust in or affinity for our brands could be harmful to us. If consumers perceive or experience a reduction in food quality, service or ambiance, or in any way believe we failed to deliver a consistently positive experience, our brand value could suffer.

Labor Shortages, An Increase In Labor Costs, Or Inability To Attract Employees Could Harm Our Business


Our employees are essential to our operations and our ability to deliver an enjoyable dining experience to our customers. If we are unable to attract and retain enough qualified restaurant and/or package liquor store personnel at a reasonable cost, and if they do not deliver an enjoyable dining experience, our results may be negatively affected. Additionally, competition for qualified employees could require us to pay higher wages, which could result in higher labor costs.


Increases In Employee Minimum Wages By The Federal Or State Government Could Adversely Affect Business


Certain of our Company employees are paid wages that relate to federal and state minimum wage rates. Increases in the minimum wage rates, such as annual cost of living increases in the State of Florida minimum wage, may significantly increase our labor costs. In addition, since our business is labor-intensive, shortages in the labor pool or other inflationary pressure could increase labor costs, which could harm our financial performance.


Due To Our Geographic Locations, Restaurants Are Subject To Climate Conditions That Could Affect Operations


All but one (1) of our restaurants and package liquor stores are located in South Florida, with the remaining restaurant located in Central Florida. During hurricane season, (June 1st through November 30th each year), our restaurants and/or package liquor stores may face harsh weather associated with hurricanes and tropical storms. These harsh weather conditions may make it more difficult for customers to visit our restaurants and package liquor stores, or may necessitate the closure of the stores and restaurants for a period of time. If customers are unable to visit our restaurants and/or package liquor stores, our sales and operating results may be negatively affected.


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Due To Our Geographic Locations, We May Not Be Able To Acquire Windstorm Insurance Coverage Or Adequate Windstorm Insurance Coverage At A Reasonable Rate


Due to the anticipated active hurricane seasons in South Florida in the future, we may not be able to acquire windstorm insurance coverage for our restaurant and package liquor store locations on a year-to-year basis or may not be able to get adequate windstorm insurance coverage at reasonable rates. If we are unable to obtain windstorm insurance coverage or adequate windstorm insurance coverage at reasonable rates, then we will be self-insured for all or a part of the exposure for damages caused by a hurricane impacting South Florida,which may have a material adverse effect upon our financial condition and/or results of operations.


Inability To Attract And Retain Customers Could Affect Results Of Operations


We take pride in our ability to attract and retain customers, however, if we do not deliver an enjoyable dining experience for our customers, they may not return and results may be negatively affected.


Failure To Comply With Governmental Regulations Could Harm Our Business And Our Reputation.


We are subject to regulation by federal agencies and regulation by state and local health, sanitation, building, zoning, safety, fire and other departments relating to the development and operation of restaurants. These regulations include matters relating to:


 ●the environment;
 ●building construction;
 ●zoning requirements;
 ●the preparation and sale of food and alcoholic beverages; and
 ●employment.

Our facilities are licensed and subject to regulation under state and local fire, health and safety codes. The construction and remodeling of restaurants will be subject to compliance with applicable zoning, land use and environmental regulations. We may not be able to obtain necessary licenses or other approvals on a cost-effective and timely basis in order to construct and develop restaurants in the future.

Various federal and state labor laws govern our operations and our relationship with our employees, minimum wage, overtime, working conditions, fringe benefit and work authorization requirements. In particular, we are subject to federal immigration regulations. Given the location of many of our restaurants, even if we operate those restaurants in strict compliance with federal immigration requirements, our employees may not all meet federal work authorization or residency requirements, which could lead to disruptions in our work force.


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Our business can be adversely affected by negative publicity resulting from, among other things, complaints or litigation alleging poor food quality, food-borne illness or other health concerns or operating issues stemming from one or a limited number of restaurants. Unfavorable publicity could negatively impact public perception of our brands.


We are required to comply with the alcohol licensing requirements of the federal government, states and municipalities where our restaurants are located. Alcoholic beverage control regulations require applications to state authorities and, in certain locations, county and municipal authorities for a license and permit to sell alcoholic beverages. Typically, licenses must be renewed annually and may be revoked or suspended for cause at any time. Alcoholic beverage control regulations relate to numerous aspects of the daily operations of the restaurants, including minimum age of guests and employees, hours of operation, advertising, wholesale purchasing, inventory control and handling and storage and dispensing of alcoholic beverages. If we fail to comply with federal, state or local regulations, our licenses may be revoked and we may be forced to terminate the sale of alcoholic beverages at one or more of our restaurants.

The Federal Americans with Disabilities Act (the “ADA”) prohibits discrimination on the basis of disability in public accommodations and employment. We are required to comply with the ADA and regulations relating to accommodating the needs of disabled persons in connection with the construction of new facilities and with significant renovations of existing facilities.

Failure to comply with these and other regulations could negatively impact our reputation and could have an adverse effect on our business, financial condition, results of operations or cash flows.


We May Face Liability Under Dram Shop Statutes


Our sale of alcoholic beverages subjects us to “dram shop” statutes. These statutes allow an injured person to recover damages from an establishment that served alcoholic beverages to an intoxicated person. If we receive a judgment substantially in excess of our insurance coverage, or if we fail to maintain our insurance coverage, our business, financial condition, operating results or cash flows could be materially and adversely affected. We currently have notwo “dram shop” claims.claims, which we are defending vigorously. See “Item 1. Business—Government Regulation” for a discussion of the regulations with which we must comply.

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We May Face Instances Of Food Borne Illness


In years past, several nationally known restaurants experienced outbreaks of food poisoning believed to be caused by E.coli contained in fresh spinach, which is not included in any of the items on our menu, Asian and European countries experienced outbreaks of avian flu and incidents of “mad cow” disease have occurred in Canadian and U.S. cattle herds. These problems, other food-borne illnesses (such as, hepatitis A, trichinosis or salmonella) and injuries caused by food tampering have in the past, and could



in the future, adversely affect the price and availability of affected ingredients and cause changes in consumer preference. As a result, our sales could decline.

Instances of food-borne illnesses, real or perceived, whether at our restaurants or those of our competitors, could also result in negative publicity about us or the restaurant industry, which could adversely affect sales. If we react to negative publicity by changing our menu or other key aspects of the dining experience we offer, we may lose customers who do not accept those changes, and may not be able to attract enough new customers to produce the revenue needed to make our restaurants profitable. If our guests become ill from food-borne illnesses, we could be forced to temporarily close some restaurants. A decrease in guest traffic as a result of health concerns or negative publicity, or as a result of a change in our menu or dining experience or a temporary closure of any of our restaurants, could materially harm our business.


If We Are Unable To Protect Our Customers’ Credit Card Data, We Could Be Exposed To Data Loss, Litigation, And Liability, And Our Reputation Could Be Significantly Harmed.

In connection with credit card sales, we transmit confidential credit card information by way of secure private retail networks. Although we use private networks, third parties may have the technology or know-how to breach the security of the customer information transmitted in connection with credit card sales, and our security measures and those of our technology vendors may not effectively prohibit others from obtaining improper access to this information. If a person is able to circumvent these security measures, he or she could destroy or steal valuable information or disrupt our operations. Any security breach could expose us to risks of data loss, litigation, and liability, and could seriously disrupt our operations and any resulting negative publicity could significantly harm our reputation.

Item 1B.1B. Unresolved Staff Comments


As a Smaller Reporting Company as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item 1B.

I

tem Item 2. Properties


Our operations are conducted primarily on leased property with the exception of (i) a 10,000 square foot stand-alone building located in Fort Lauderdale, Florida that we purchased in December, 1999, which since April, 2001 has housed our corporate headquarters; (ii) a 4,600 square foot stand-alone building located in Hallandale, Florida that we purchased in July, 2006 and which since that timeSeptember, 1968 has housed our Hallandale, Florida Company-owned combination restaurant and package liquor store (Store #31); (iii) a 4,120 square foot stand-alone building in Hollywood, Florida we constructed in November, 2003, upon real property we acquired in September, 2001 pursuant to a 25 year ground lease interest, (a portion of this building is leased to an unaffiliated third party), and which since November, 2003 has housed our Hollywood, Florida Company-owned package liquor store (Store #4); and (iv) a 4,500 square foot stand-alone building located in Hollywood, Florida that we purchased in October, 2009 subsequent to the end of our fiscal year 2009,and which since that timeMarch, 1972 has housed our Hollywood, Florida Company-owned combination restaurant and package liquor store (Store #19); (v) a 4,600 square foot stand-alone building located in Fort Lauderdale, Florida that we purchased in August, 2010 and which since December, 1968 has housed our Fort Lauderdale, Florida Company-owned restaurant (Store #22); (vi) a 5,100 square foot stand-alone building in North Miami, Florida that we purchased in November, 2010 and which since July, 1968 has housed our North Miami, Florida Company-owned combination restaurant and package store (Store #20); and (vii) a 23,678 square foot two building shopping center in Miami, Florida that we purchased in November, 2011, one building, approximately 18,828 square feet, is leased to twelve unaffiliated third parties and a second stand-alone building, approximately 4,850 square feet, which since April, 2000 has housed our Kendall, Florida based restaurant, which is owned by our affiliated limited partnership (Store #70).

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Table of Contents

All of our units require periodic refurbishing in order to remain competitive. We have budgeted $565,000$850,000 for our refurbishing program for fiscal year 2010.2013. See Item 7, "Liquidity and Capital Resources" for discussion of the amounts spent in fiscal year 2009.


2012.

The following table summarizes information related to the properties upon which our operations are conducted:


 Square Franchised/ 
Name and Location      FootageSeatsOwned byLease Terms
     
Big Daddy's Liquors #41,978N/ACompany3/1/02 to 2/28/27
Flanigan's Enterprises   and Options to
Inc. (6)   2/28/47
7003 Taft Street    
Hollywood, FL    
     
Big Daddy's Liquors #71,450N/ACompany11/1/00 to 10/31/13
Flanigan's Enterprises,   and Annual Options
Inc.   to 10/31/15
1550 W. 84th Street    
Hialeah, FL    
     
Big Daddy's Liquors #81,942N/ACompany5/1/99 to 4/30/14
Flanigan's Enterprises, Inc    
959 State Road 84    
Fort Lauderdale, FL    
     
Flanigan’s Seafood4,300130Company1/1/10 to 12/31/14
Bar and Grill #9   Options to 12/31/24
Flanigan’s Enterprises,    
Inc.    
1550 W. 84th Street    
Hialeah, FL    

26

Name and Location 
Square
Footage
 Seats 
Franchised/
Owned by
 Lease Terms
         
Big Daddy's Liquors #4
Flanigan's Enterprises
Inc. (6)
7003 Taft Street
Hollywood, FL
 1,978 N/A Company 
3/1/02 to 2/28/27
and Options to
2/28/47
         
Big Daddy's Liquors #7
Flanigan's Enterprises,
Inc.
1550 W. 84th Street
Hialeah, FL
 1,450 N/A Company 
11/1/00 to 10/31/10
and Annual Options
to 10/31/15
         
Big Daddy's Liquors #8
Flanigan's Enterprises, Inc
959 State Road 84
Fort Lauderdale, FL
 1,942 N/A Company 5/1/99 to 4/30/14
         
Flanigan’s Seafood
Bar and Grill #9
Flanigan’s Enterprises,
Inc.
1550 W. 84th Street
Hialeah, FL
 4,300 130 Company 
10/1/71 to 12/31/09
New lease 1/1/10
to 12/31/14
Options to
12/31/24
         
Flanigan's Legends
Seafood Bar and Grill #11
11 Corporation (1)
330 Southern Blvd.
W. Palm Beach, FL
 5,000 150 Franchise 
1/4/00 to 1/3/20
Option to 1/3/25
         
Flanigan's Seafood
Bar and Grill #12
Flanigan’s Enterprises,
Inc.
2405 Tenth Ave. North
Lake Worth, FL
 5,000 180 Company 
11/15/92 to
11/15/10
         
Flanigan's Seafood
Bar and Grill #14
Big Daddy's #14, Inc. (1)(2)(5)
2041 NE Second St.
Deerfield Beach, FL
 3,320 90 Franchise 
6/1/79 to 6/1/14
Option to 6/1/19
         
Flanigan’s Seafood
Bar and Grill #15
CIC Investors #15 Ltd.(1)(2)
1479 E. Commercial Blvd.
Ft. Lauderdale, FL
 4,000 90 
Franchise/
Limited
Partnership
 
1/1/09 to 8/11/11
Options to 12/31/24


Name and Location 
Square
Footage
 Seats 
Franchised/
Owned by
 Lease Terms
         
Flanigan's Seafood
Bar and Grill #18
Twenty Seven Birds
Corp. (1)(2)
2721 Bird Avenue
Miami, FL
 4,300 100 Franchise 
2/15/72 to 12/31/10
Options to
12/31/20
         
Flanigan’s Seafood
Bar and Grill #19
Flanigan’s Enterprises
Inc. (10)
2505 N. University Dr.
Hollywood, FL
 4,500 160 Company 
Company-Owned since
October, 2009
         
Flanigan's Seafood
Bar and Grill #20
Flanigan's Enterprises
Inc.
13205 Biscayne Blvd.
North Miami, FL
 5,100 140 Company 
7/15/68 to 12/31/10
Annual options
until the Company
fails to exercise
Additional Lease
5/1/69 to 12/31/10
Annual options
until the Company
fails to exercise
         
Flanigan's Seafood
Bar and Grill #22
Flanigan's Enterprises
Inc.
2600 W. Davie Blvd.
Ft. Lauderdale, FL
 4,100 200 Company 
12/16/68 to
12/31/10
Options to 12/31/20
Option to purchase
         
Flanigan's Seafood
Bar and Grill #31
Flanigan's Enterprises
Inc. (7)
4 N. Federal Highway
Hallandale, FL
 4,600 150 Company Company Owned
         
Flanigan's Guppy's
Seafood Bar and Grill #33
Guppies, Inc. (1)(2)
45 S. Federal Highway
Boca Raton, FL
 4,620 130 
Company
owned since
October, 2009
 11/1/03 to 4/30/11
         
Big Daddy's Liquors #34
Flanigan's Enterprises,
Inc.
9494 Harding Ave.
Surfside, FL
 3,000 N/A Company 
5/29/97 to 5/28/12
Option to 5/28/17


Name and Location 
Square
Footage
 Seats 
Franchised/
Owned by
 Lease Terms
         
Flanigan's Seafood
Bar and Grill #40,
Flanigan's Enterprises,
Inc.
5450 N. State Road 7
N. Lauderdale, FL
 4,600 140 Company 
4/1/71 to 12/31/10
Option to 12/31/15
         
Piranha Pat's #43
BD 43 Corporation (1)(2)
2500 E. Atlantic Blvd.
Pompano Beach, FL
 4,500 90 Franchise 
12/1/72 to 11/30/12
Option to 11/30/22
         
Big Daddy's Liquors #47
Flanigan's Enterprises,
Inc. (3)
8600 Biscayne Blvd.
Miami, FL
 6,000 N/A Company 
12/21/68 to 1/1/20
Options to 1/1/50
         
Flanigan’s Seafood
Bar and Grill #13,
CIC Investors #13, Ltd.
11415 S. Dixie Highway
Pinecrest, FL
 8,000 200 
Limited
Partnership
 
06/01/91 to 5/31/11
Options to 5/31/21
         
Flanigan’s Seafood
Bar and Grill #50,
CIC investors #50, Ltd.
17185 Pines Boulevard
Pembroke Pines, FL
 4,000 200 
Limited
Partnership
 
10/24/06 to 10/23/11
Options to 10/23/26
         
Flanigan’s Seafood
Bar and Grill #55
CIC Investors #55, Ltd.(8)
2190 S. University Drive
Davie, Florida
 5,900 200 
Limited
Partnership
 
1/5/07 to 12/31/21
Options to 12/31/31
         
Flanigan's Seafood
Bar and Grill #60
CIC Investors #60 Ltd.
9516 Harding Avenue
Surfside, FL
 6,800 200 
Limited
Partnership
 8/1/97 to 12/31/11
         
Flanigan’s Seafood
Bar and Grill #65
CIC Investors #65, Ltd.
2335 State Road 7,Suite 100
Wellington, FL
 6,128 200 
Limited
Partnership
 
5/01/05 to 6/30/15
Options to 3/31/25


Name and Location 
Square
Footage
 Seats 
Franchised/
Owned by
 Lease Terms
         
Flanigan's Seafood
Bar and Grill #70
CIC Investors #70 Ltd.
12790 SW 88 St
Kendall, FL
 4,850 161 
Limited
Partnership
 
4/1/00 to 3/31/15
Options to 3/31/30
         
Flanigan’s Seafood
Bar and Grill #75
CIC Investors # 75 Ltd.
950 S. Federal Highway
Stuart, FL
 7,000 200 
Limited
Partnership
 Month to Month
         
Flanigan's Seafood
Bar and Grill #80
CIC Investors #80 Ltd.
8695 N.W. 12th St
Miami, FL
 5,000 165 
Limited
Partnership
 
6/15/01 to 12/14/19
Options to 12/14/39
         
Flanigan's Seafood
Bar and Grill #95
CIC Investors #95 Ltd.
2460 Weston Road
Weston, FL
 5,700 235 
Limited
Partnership
 
7/29/01 to 7/28/17
Options to 7/28/32
         
Mardi Gras
Flanigan’s Enterprises,
Inc., #600 (4) (9)
Powers Ferry Landing
Atlanta, GA
 10,000 400 Company 
4/30/06 to 4/30/16
Option to 4/30/26

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 Square Franchised/ 
Name and LocationFootageSeatsOwned byLease Terms
     
Flanigan's Legends5,000150Franchise1/4/00 to 1/3/20
Seafood Bar and Grill #11   Option to 1/3/25
11 Corporation (1)    
330 Southern Blvd.    
W. Palm Beach, FL    
     
Flanigan's Seafood5,000180Company11/15/92 to
Bar and Grill #12   11/15/13
Flanigan’s Enterprises, Inc.   Option to 11/15/16
2405 Tenth Ave. North    
Lake Worth, FL    
     
Flanigan's Seafood3,32090Franchise6/1/79 to 6/1/14
Bar and Grill #14   Option to 6/1/19
Big Daddy's #14, Inc. (1)(2)(5)    
2041 NE Second St.    
Deerfield Beach, FL    
     
Flanigan’s Seafood4,00090Franchise/1/1/09 to 8/31/16
Bar and Grill #15  LimitedOptions to 12/31/24
CIC Investors #15 Ltd.(1)  Partnership 
1479 E. Commercial Blvd.    
Ft. Lauderdale, FL    
     
Flanigan's Seafood4,300100Franchise2/15/72 to 12/31/15
Bar and Grill #18   Option to 12/31/20
Twenty Seven Birds    
Corp. (1)(2)    
2721 Bird Avenue    
Miami, FL    
     
Flanigan’s Seafood4,500160CompanyCompany-Owned
Bar and Grill #19    
Flanigan’s Enterprises,    
Inc.    
2505 N. University Dr.    
Hollywood, FL    
     
Flanigan's Seafood5,100140CompanyCompany-Owned
Bar and Grill #20   Parking Lease
Flanigan's Enterprises   5/1/69 to 12/31/12
Inc. (8)   Annual options
13205 Biscayne Blvd.   until the Company
North Miami, FL   fails to exercise
     
Flanigan's Seafood4,100200CompanyCompany-Owned
Bar and Grill #22    
Flanigan's Enterprises,    
Inc.    
2600 W. Davie Blvd.    

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Table of Contents

 Square Franchised/ 
Name and LocationFootageSeatsOwned byLease Terms
     
Ft. Lauderdale, FL    
     
Flanigan's Seafood4,600150CompanyCompany Owned
Bar and Grill #31    
Flanigan's Enterprises, Inc.    
4 N. Federal Highway    
Hallandale, FL    
     
Flanigan's Seafood Bar4,620130Company10/1/10 to 5/31/20
and Grill #33    
Flanigan’s Enterprises, Inc.    
45 S. Federal Highway    
Boca Raton, FL    
     
Big Daddy's Liquors #343,000N/ACompany5/29/97 to 5/28/17
Flanigan's Enterprises, Inc.   Options to 5/28/27
9494 Harding Ave.    
Surfside, FL    
     
Flanigan's Seafood4,600140Company4/1/71 to 12/31/15
Bar and Grill #40,    
Flanigan's Enterprises, Inc.    
5450 N. State Road 7    
N. Lauderdale, FL    
     
Piranha Pat's #434,50090Franchise12/1/72 to 11/30/17
BD 43 Corporation (1)(2)   Option to 11/30/22
2500 E. Atlantic Blvd.    
Pompano Beach, FL    
     
Big Daddy's Liquors #476,000N/ACompany12/21/68 to 1/1/20
Flanigan's Enterprises,   Options to 1/1/50
Inc. (3)    
8600 Biscayne Blvd.    
Miami, FL    
     
Flanigan’s Seafood8,000       200  Limited06/01/11 to 5/31/16
Bar and Grill #13,  Partnership Option to 5/31/21
CIC Investors #13, Ltd.    
11415 S. Dixie Highway    
Pinecrest, FL    
     
Flanigan’s Seafood4,000200Limited   10/24/06 to 10/23/16
Bar and Grill #50,  Partnership Options to 10/23/26
CIC investors #50, Ltd.    
17185 Pines Boulevard    
Pembroke Pines, FL    
     
Flanigan’s Seafood5,900200Limited1/5/07 to 12/31/21
Bar and Grill #55  Partnership Options to 12/31/31

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Table of Contents

 Square Franchised/ 
Name and LocationFootageSeatsOwned byLease Terms
     
CIC Investors #55, Ltd.    
2190 S. University Drive    
Davie, Florida    
     
Flanigan's Seafood6,800200Limited8/1/97 to 12/31/21
Bar and Grill #60  Partnership 
CIC Investors #60 Ltd.    
9516 Harding Avenue    
Surfside, FL    
     
Flanigan’s Seafood6,128200Limited5/01/05 to 6/30/15
Bar and Grill #65  PartnershipOptions to 3/31/25
CIC Investors #65, Ltd.    
2335 State Road 7, Suite 100    
Wellington, FL    
     
Flanigan's Seafood4,850161Limited4/1/00 to 3/31/15
Bar and Grill #70  PartnershipOptions to 3/31/30
CIC Investors #70 Ltd.    
12790 SW 88 St    
Miami, FL    
     
Flanigan’s Seafood7,000200Company5/1/10 to 4/30/13
Bar and Grill #75 (9)   Option to 4/30/16
Flanigan’s Enterprises, Inc.    
950 S. Federal Highway    
Stuart, FL    
     
Flanigan's Seafood5,000165Limited6/15/01 to 12/14/19
Bar and Grill #80  PartnershipOptions to 12/14/39
CIC Investors #80 Ltd.    
8695 N.W. 12th St    
Miami, FL    
     
Flanigan's Seafood4,300200Limited4/1/11 to 3/31/26
Bar and Grill #90 (11)  PartnershipOption to 3/31/31
CIC Investors #90 Ltd.    
9857 S.W. 40th Street    
Miami, FL    
     
Flanigan's Seafood5,700235Limited7/29/01 to 7/28/17
Bar and Grill #95  PartnershipOptions to 7/28/32
CIC Investors #95 Ltd.    
2460 Weston Road    
Weston, FL    
     
Mardi Gras10,000400Company4/30/06 to 4/30/16
Flanigan’s Enterprises,   Option to 4/30/26
Inc., #600 (4)(7)    
Powers Ferry Landing    

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SquareFranchised/
Name and Location    FootageSeatsOwned byLease Terms
Atlanta, GA
Flanigan’s Calusa28,000 sq. ft.shopping centerCompany owned
Center, LLC (10)  
12750 – 12790 S.W. 88th Street
Miami, Florida

(1)Franchised by Company.

(2)Lease assigned to franchisee.

(3)In 1974, we sold and assigned the underlying ground lease to unaffiliated third parties and simultaneously subleased it back. As of October 3, 2009,September 29, 2012, we have purchased from the unaffiliated third parties and own 52% of the underlying ground lease and our sublease agreement. As a result, we pay all rent due under the ground lease, but only 48% of the rent due under the sublease agreement.

(4)Location managed by an unaffiliated third party.

(5)Effective December 1, 1998, we purchased the Management Agreement to operate the franchised restaurant for the franchisee.

(6)Ground lease executed by us on September 25, 2001. We constructed a 4,120 square foot building, of which 1,978 square feet is used by us for the operation of a package liquor store and the other 2,142 square


feet is subleased to an unaffiliated third party as retail space. The package liquor store opened for business on November 17, 2003.

(7)During the fourth quarter of our fiscal year 2006, we purchased the real property and an assignment of a ground lease of this location pursuant to an option to purchase contained in the Sublease Agreement. During our fiscal year 2007, we purchased the real property subject to the ground lease.

(8)Restaurant opened for business on July 28, 2008.

(9)(7)During the third quarter of our fiscal year 2006, our lease for this location expired. The unaffiliated third party entered into a new lease for the business premises effective May 1, 2006 and as of that date, we no longer have responsibility to pay any amounts under the lease.

(10)(8)During the first quarter of our fiscal year 2011, we closed on the purchase of the real property and building at this location.

(9)During the fourth quarter of our fiscal year 2009,2011, we entered into a contract forpurchased the operating assets of this restaurant from our limited partnership.

(10)During the first quarter of our fiscal year 2012, our wholly owned subsidiary, Flanigan’s Calusa Center, LLC, closed on the purchase of the real propertytwo building shopping center in Miami, Florida, which consists of one building which is leased to twelve unaffiliated third parties and a second stand-alone building of this location and closed where our limited partnership ownedrestaurant located at 12790 SW 88th Street, Miami, Florida, (Store #70), operates.

(11)Restaurant opened for business on the purchase subsequent to the end of our fiscal year 2009.December 27, 2012.

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Recent Purchase of Real Property

Miami, Florida

During the first quarter of our fiscal year 2012, we, through anew wholly owned subsidiary, (Flanigan’s Calusa Center, LLC, a Florida limited liability company), closed on the purchase of a two building shopping center in Miami, Florida, which consists of one building which is leased to twelve unaffiliated third parties and a second stand-alone building where our limited partnership ownedrestaurant located at 12790 SW 88th Street, Miami, Florida,(Store #70), operates. We paid $6,140,000 for this property, $4,500,000 of which we borrowed from a non-affiliated third party lender, pursuant to a first mortgage, (the “$4.5M Mortgage Loan”), which we guaranteed. The $4.5M Mortgage Loan is in the original principal amount of $4,500,000 and bears interest at a variable rate. We entered into an interest rate swap agreement to hedge the interest rate risk as to $3,750,000 of the principal amount, (the “$3.75M Hedged Amount”), which fixed the interest rate as to that portion of the principal amount of the $4.5M Mortgage Loan at 4.51% per annum throughout the term of the loan. The $4.5M Mortgage Loan is amortized over twenty (20) years, with our current monthly payment of principal and interest as to the $3.75M Hedged Amount, each in the amount of $23,700 and with our current monthly payment of principal and interest as to that portion of the principal amount not fixed by the interest rate swap agreement, ($750,000), payable at a variable interest rate of LIBOR - 1 Month plus 2.25%, (2.46% as of November 30, 2012). The entire principal balance and all accrued but unpaid interest is due on December 1, 2019.

Recent Extension of Existing Lease for Existing Location

Surfside, Florida

During the first quarter of our fiscal year 2012, we exercised the final five (5) year renewal option for the package liquor store which we own located at 9494 Harding Avenue, Surfside, Florida, (Store #34), and simultaneously received two additional five year renewal options for us to further extend the term of the lease. The renewal terms under the options to renew, if we exercise the same, are the same as the existing lease, including that the annual rent will be subject to a fixed increase at the start of each renewal option exercised.

Subsequent Events

Purchase of Real Property, (N. Miami, FL.):

Subsequent to the end of our fiscal year 2012, we closed on the purchase of the two parcels of property adjacent to the Company owned property where our combination package liquor store and restaurantlocated at 13205 Biscayne Boulevard, North Miami, Florida, (Store #20) operates. We lease the first parcel of property for non-exclusive parking. Each parcel of property includes a building of approximately 2,600 square feet, but the building on the property directly adjacent to our property will be demolished for the construction of a parking lot. We will offer the second building for lease. We paid $2,900,000 for this property, $1,950,000 of which is financed by the seller. The mortgage bears interest at the rate of 7.5% annually and is amortized over twenty (20) years, with our monthly payment of principal and interest totaling $15,700. The entire principal balance and all accrued but unpaid interest is due on December 31, 2022.

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Line of Credit

Subsequent to the end of our fiscal year 2012, we were in the process of finalizing a $500,000 line of credit from a non affiliated third party lender, (the “Line of Credit”), to insure that we have adequate working capital and cash reserves after the purchase of thetwo parcels of property adjacent to the Company owned property where our combination package liquor store and restaurantlocated at 13205 Biscayne Boulevard, North Miami, Florida, (Store #20) operates. The Line of Credit bears interest at the floating rate of prime plus 1%. The entire principal balance and all accrued but unpaid interest is due in four months. We granted our lender a security interest in substantially all of our assets as collateral to secure our repayment obligations under our Line of Credit.

Item 3. Legal Proceedings.


From time to time, we are a defendant in litigation arising in the ordinary course of our business, including claims resulting from “slip and fall” accidents, claims under federal and state laws governing access to public accommodations, employment-related claims and claims from guests alleging illness, injury or other food quality, health or operational concerns. To date, none of this litigation, some of which is covered by insurance, has had a material effect on us.


We own the building where our corporate offices are located.  On April 16, 2001, we filed suit against the owner of the adjacent shopping center to determine our right to non-exclusive parking in the shopping center.  During fiscal year 2007, the appellate court affirmed and upon re-hearing, again affirmed the granting of a summary judgment in favor of the shopping center.  The seller from whom we purchased the building was named as a defendant in the lawsuit by the owner of the adjacent shopping center and we filed and served a cross-complaint against the seller.  During the fourth quarter of our fiscal year 2009, the seller was awarded reimbursement of its attorneys’ fees and costs in the amount of $109,000 and we filed our motion for re-consideration of a part of such award.  As of October 3, 2009, we have not paid the award of attorneys’ fees and costs, although we have accrued the same, nor has there been a hearing scheduled on our motion for re-consideration of a portion of the award.  During the second quarter of our fiscal year 2009, the seller filed suit against us for malicious prosecution.  We deny the allegations and are vigorously defending against the allegations.

During fiscal year 2007, we and the limited partnership which owns the restaurant in Pinecrest, Florida filed suit against the limited partnership’s landlord.  We are the sole general partner and a 40% limited partner in this


limited partnership.  We are seeking to recover the cost of structural repairs to the business premises we paid, as we believe these structural repairs were the landlord’s responsibility under the lease.  The lawsuit, in addition to attempting to recover the amounts expended by us for structural repairs is also attempting to recover the rent paid by the limited partnership while the repairs were occurring.  The claim also includes a request by the limited partnership for the court to determine if the limited partnership has the exclusive right to the use of the pylon sign in front of the business premises.  The landlord filed its answer to the complaint denying liability for structural repairs to the business premises, denying any obligation to reimburse the limited partnership for any rent paid while structural repairs occurred and denying the limited partnership’s right to use the pylon sign.  The lawsuit is in the discovery stage, but is scheduled for trial during the second quarter of our fiscal year 2010.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

PART II

Item 5.5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.


Our common stock is traded on the NYSE/AMEX under the symbol “BDL”. The following table sets forth the high and low sales prices of a share of our common stock for the periods specified as reported by the NYSE/AMEX:

Fiscal Year 2011 High  Low 
First Quarter     (October 3, 2010  - January 1, 2011) $8.92  $6.59 
Second Quarter    (January 2, 2011 – April 2, 2011) $9.02  $7.56 
Third Quarter      (April 3, 2011 – July 2, 2011) $9.46  $7.27 
Fourth Quarter     (July 3, 2011 – October 1, 2011) $7.90  $6.48 
 
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Fiscal Year 2008 High  Low 
       
First Quarter (September 30, 2007 - December 29, 2007) $9.75  $7.65 
Second Quarter (December 30, 2007 – March 29, 2008) $9.90  $6.56 
Third Quarter (March 30, 2008 – June 27, 2008) $8.54  $6.35 
Fourth Quarter (June 28, 2008 – September 27, 2008) $6.85  $5.09 
         
Fiscal Year 2009        
First Quarter (September 28, 2008 - December 27, 2008) $6.10  $2.75 
Second Quarter (December 28, 2008 – March 28, 2009) $4.69  $2.87 
Third Quarter (March 29, 2009 – June 27, 2009) $6.42  $4.00 
Fourth Quarter (June 28, 2009 – October 3, 2009) $5.94  $4.95 

        
Fiscal Year 2012        
First Quarter     (October 2, 2011  - December 31, 2011) $8.25  $6.74 
Second Quarter     (January 1, 2012 – March 31, 2012) $8.91  $6.42 
Third Quarter      (April 1, 2012 – June 30, 2012) $8.25  $7.15 
Fourth Quarter     (July 1, 2012 – September 29, 2012) $8.25  $7.25 

Holders


As of the close of business on December 31, 2009,28, 2012, there were approximately 331309 holders of record of our common stock.



Dividend Policy


We did not declare or pay any cash dividends on our capital stock in our fiscal years 2009 or 2008 and do not intendyear 2012. During our fiscal year 2011, our Board declared a cash dividend of 10 cents per share which was paid on January 18, 2011 to pay any cash dividends with respect to our common stock in the foreseeable future.  We currently intend to retain any earnings for use in the operationshareholders of our business and to fund future growth.record on January 7, 2011. Any future determination to pay cash dividends will be at our board’sBoard’s discretion and will depend upon our financial condition, operating results, capital requirements and such other factors as our boardBoard deems relevant.


Equity Compensation Plan Information


The following table sets forth information at October 3, 2009September 29, 2012 regarding compensation plans under which our equity securities are authorized for issuance:


Number of securities to be issued uponWeighted-averageNumber of securities
exercise ofexercise price ofremaining available for
outstanding options,outstanding options,future issuance under
warrants, restrictedwarrants, restrictedequity compensation
Plan categorystock and rightsstock and rightsPlans
         
Plan categoryNumber of securities to be issued upon exercise of outstanding options, warrants, restricted stock and rightsWeighted-average exercise price of outstanding options, warrants, restricted stock and rightsNumber of securities remaining available for future issuance under equity compensation plans
Equity compensation plans approved by security holders  ---—  $--—   40,000
 
Equity compensation plans not approved by security holders  —  $---—   — 
Total  ---—  $---—   40,000 

Issuer Repurchases of Equity Securities


Pursuant to a discretionary plan approved by the Board of Directors at its meeting on May 17, 2007, the Board of Directors authorized management to purchase up to 100,000 shares of our common stock. During ourSince the Board’s 2007 authorization, we have purchased an aggregate of 32,986 shares, of which 800 shares were purchased by us in fiscal year end 2009,2012. As of September 29, 2012, we purchased a total of 21,400 shares. During the fourth quarter of our fiscal year 2009, we did notstill have authority to purchase any67,014 shares of our common stock pursuant to aunder the discretionary plan approved by the Board of Directors at its meeting on May 17, 2007.Directors.

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Item 6. Selected Financial Data


As a Smaller Reporting Company as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item 6.



Item 7.7. Management's Discussion and Analysis of Financial Condition and Results of Operations.


Except for the historical information contained herein, the following discussion contains forward-looking statements that are subject to known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from those expressed or implied by such forward-looking statements. We discuss such risks, uncertainties and other factors throughout this report and specifically under the captions “Risk Factors”. In addition, the following discussion and analysis should be read in conjunction with the 20092012 Consolidated Financial Statements and the related Notes to Consolidated Financial Statements included elsewhere in this report.


Overview


Financial Information Concerning Industry Segments


Our business is conducted principally in two segments: the restaurant segment and the package liquor store segment. Financial information broken into these two principal industry segments for the two fiscal years ended September 29, 2012 and October 3, 2009 and September 27, 20081, 2011 is set forth in the consolidated financial statements which are attached hereto.


General


At October 3, 2009,September 29, 2012, we (i) operated 2324 units, (excluding the adult entertainment club referenced in (ii) below), 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; (ii) own but do not operate one adult entertainment club; and (iii) franchise an additional sixfive units, consisting of two restaurants, (one of which we operate), and fourthree combination restaurants/package liquor stores.


Franchised Units. 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 (five(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 liquor 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.

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Affiliated Limited Partnership Owned Units. We manage and control the operations of the teneight restaurants owned by limited partnerships, except the Fort Lauderdale, Florida restaurant which is managed and controlled by a related franchisee. We currently have one restaurant under development in Miami, Florida which will result in us operating the restaurant as general partner. This new restaurant opened for business on December 27, 2012. Accordingly, the results of operations of all limited partnership owned restaurants, except the Fort Lauderdale, Florida restaurant are consolidated with our results of operations for accounting purposes. The



results of operations of the Fort Lauderdale, Florida restaurant are accounted for by us utilizing the equity method.

Results of Operations            
             
REVENUES (in thousands):            
  Fifty Two  Fifty Two 
  Weeks Ended  Weeks Ended 
  Sept. 29, 2012  Oct. 1, 2011 
Sales                
                 
Restaurant, food $48,943   64.9%  $45,951   64.8% 
Restaurant, bar  13,255   17.6%   11,814   16.7% 
Package goods  13,214   17.5%   13,141   18.5% 
Total  75,412   100.0%   70,906   100.0% 
                 
Franchise related revenues  1,133       1,023     
Owner’s fee  157       161     
Other operating income  158       219     
Rental income  475       —     
Total Revenues $77,335      $72,309     

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Results of Operations

THE FISCAL YEAR ENDING OCTOBER 3, 2009 WAS A FIFTY THREE WEEK FISCAL YEAR WHILE THE FISCAL YEAR ENDING SEPTEMBER 27, 2008 WAS A FIFTY TWO WEEK FISCAL YEAR. THE EXTRA WEEK IN THE FISCAL YEAR 2009 CONTRIBUTED TO INCREASES IN REVENUES AND EXPENSES FOR THE FISCAL YEAR AS COMPARED TO REVENUES AND EXPENSES FOR THE FISCAL YEAR 2008, WITH THE EXCEPTION OF THE WEEKLY AVERAGE OF SAME STORE SALES.

REVENUES (in thousands): 
  
Fifty Three Weeks Ended Oct. 3, 2009
  
Fifty Two Weeks Ended Sept. 27, 2008
 
       
Sales            
             
Restaurant, food $42,794   65.2% $40,906   65.2%
                 
Restaurant, bar  10,185   15.5%  9,494   15.1%
                 
Package goods  12,632   19.3%  12,317   19.7%
                 
Total  65,611   100.0%  62,717   100.0%
                 
Franchise revenues  1,126       1,066     
                 
Owner’s fee  170       238     
                 
Other operating income  153       188     
                 
Total Revenues $67,060      $64,209     


Comparison of Fiscal Years Ended September 29, 2012 and October 3, 2009 and September 27, 2008


1, 2011

Revenues. Total revenue for our fiscal year 20092012 increased $2,851,000 $5,026,000 or 4.44%6.95% to $67,060,000$77,335,000 from $64,209,000$72,309,000 for our fiscal year 2008.  This increase resulted from the2011.The increase in sales during fiscal year 2009 from the Davie, Florida limited partnership owned restaurant of $3,025,000 which opened for business on July 28, 2008, offset by a decline in same store restaurant food and bar sales ($190,000).  The Davie, Florida restaurant generated $3,843,000 oftotal revenue during our fiscal year 2009 and $818,000 of revenue during our fiscal year 2008.  Without giving effect2012 was primarily due to the increased revenue generated from the Davie, Florida restaurant, ($3,025,000), total revenue for our fiscal year 2009 would have decreased $174,000 or 0.27% to $64,035,000 from $64,209,000 for our fiscal year 2008.


Restaurant Food Sales.  Restaurant revenue generated from the sale of food at our restaurants caused by our increasing our menu prices during the fourth quarter of our fiscal year 2011 and the third quarter of our fiscal year 2012 and revenue generated from the sale of alcoholic beverages at restaurants caused by our increasing our bar liquor prices during the third quarter of our fiscal year 2012.

Restaurant Food Sales. Restaurant revenue generated from the sale of food, including non-alcoholic beverages, at restaurants totaled $42,794,000$48,943,000 for our fiscal year 20092012 as compared to $40,906,000$45,951,000 for our fiscal year 2008. This increase in restaurant food sales resulted from sales from the Davie, Florida restaurant, which generated $3,175,000 of revenue from the sale of food during our fiscal year 2009, as compared to $662,000 of revenue from the sale of food during our fiscal year 2008. Without giving effect to the increased revenue generated from the Davie, Florida restaurant ($2,513,000) from the sale of food during our fiscal year 2009, restaurant revenue generated from the sale of food during our fiscal year 2009 would have decreased $625,000 or 1.53% to $40,281,000 from $40,906,000 for our fiscal year 2008. The decrease in restaurant food sales is primarily a result of the current financial crises which has reduced customers in some of our restaurants, increased sales of our $4.99 lunch specials and in general, changed menu items purchased by our customers to lesser priced menu items.2011. Comparable weekly restaurant food sales (for restaurants open for all of our fiscal years 20092012 and 2008,2011, which consists of seveneight restaurants owned by us and eight restaurants owned by affiliated limited partnerships) was $701,000$911,000 and $709,000$853,000 for our fiscal years 20092012 and 2008,2011, respectively, a decreasean increase of 1.13%6.80%. Comparable weekly restaurant food sales for Company owned restaurants only was $307,000$405,000 and $317,000$370,000 for our fiscal years 20092012 and 2008,2011, respectively, a decreasean increase of 3.15%9.46%. Comparable weekly restaurant food sales for affiliated limited partnership owned restaurants only was $394,000$506,000 and $392,000$483,000 for our fiscal years 20092012 and 2008,2011, respectively, an increase of 0.51%4.76%. We anticipate thatThe increase in restaurant revenue generated from the sale of food sales will increase throughat restaurants was primarily caused by our increasing menu prices during the fourth quarter of our fiscal year 2010 primarily because2011 and the third quarter of the restaurant food sales of our Boca Raton, Florida restaurant purchased by us from a franchisee in October, 2009 will be includable in our fiscal year 2010 revenue.  However, we anticipate that our same store restaurant food sales will decline in our fiscal year 2010 and accordingly, any increase in revenue derived from including the restaurant food sales from the Boca Raton restaurant will be offset by a decline in same store sales.


2012.

Restaurant Bar Sales. Restaurant revenue generated from the sale of alcoholic beverages at restaurants totaled $10,185,000$13,255,000 for our fiscal year 20092012 as compared to $9,494,000$11,814,000 for our fiscal year 2008. This increase of $691,000 in restaurant bar sales is due to sales from the Davie, Florida, restaurant.  The Davie, Florida restaurant generated $668,000 of revenues from restaurant bar sales during our fiscal year 2009 as compared to revenues of $154,000 from restaurant bar sales during our fiscal year 2008.  Without giving effect to the increased revenue generated from the Davie, Florida restaurant ($514,000) from restaurant bar sales during our fiscal year 2009, revenue generated from restaurant bar sales during our fiscal year 2009 would



have increased $177,000 or 1.86% to $9,671,000 from $9,494,000 for our fiscal year 2008.2011. Comparable weekly restaurant bar sales (for restaurants open for all of our fiscal years 20092012 and 2008,2011, which consists of seveneight restaurants owned by us and eight restaurants owned by affiliated limited partnerships) was $171,000$247,000 and $167,000$220,000 for our fiscal years 20092012 and 2008,2011, respectively, an increase of 2.40%12.27%. Comparable weekly restaurant bar sales for Company owned restaurants only was $74,000$105,000 and $72,000$94,000 for our fiscal years 20092012 and 2008,2011, respectively, an increase of 2.78%11.70%. Comparable weekly restaurant bar sales for affiliated limited partnership owned restaurants only was $97,000$142,000 and $95,000$126,000 for our fiscal years 20092012 and 2008,2011, respectively, an increase of 2.11%12.70%. We anticipate thatThe increase in restaurant revenue generated from the sale of alcoholic beverages at restaurants was primarily caused by our increasing our bar sales will increase throughliquor prices during the third quarter of our fiscal year 2010 primarily because of the restaurant bar sales from our recently acquired Boca Raton, Florida restaurant from a franchisee, as well as an increase in same store restaurant bar sales because of a new promotion, (half price drinks from 9:00 p.m. to closing, a slow period of time for business for most of our restaurants), instituted subsequent to our fiscal year 2009.

2012.

Package Liquor Store Sales. Revenue generated from sales of liquor and related items at package liquor stores totaled $12,632,000$13,214,000 for our fiscal year 20092012 as compared to $12,317,000$13,141,000 for our fiscal year 2008,2011, an increase of $315,000$73,000 or 2.56%, primarily due to the 53rd week during our fiscal year 2009.0.56%. The weekly average of same store package liquor store sales, which includes all nine (9) Company owned package liquor stores, was $238,000$254,000 for our fiscal year 20082012 as compared to $237,000$253,000 for our fiscal year 2008, an increase of 0.42%.  Package liquor store sales are expected to remain stable through our fiscal year 2010.2011.

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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 our fiscal year 20092012 increased $2,404,000$4,582,000 or 3.86%6.62% to $64,613,000$73,764,000 from $62,209,000$69,182,000 for our fiscal year 2008. 2011.The increase was primarily due to expensesthe costs related to our new restaurant location in Miami, Florida acquired by a limited partnership during the operationsecond quarter of our fiscal year 2012 and opened for business on December 27, 2012, the Davie,shopping center in Miami, Florida restaurantacquired during the first quarter of approximately $3,706,000our fiscal year 2012 andto a lesser extent aan expected general increase in food costs, including an increase in the cost of poultry, offset by a decrease in repairs and maintenance to our units and actions taken by management to reduce and/or control costs and expenses .  expenses.We anticipate that our operating costs and expenses will continue to increase through our fiscal year 2010 due primarily to2013 for the operating costs and expenses associated with our recently acquired Boca Raton restaurant location from a franchisee and among other things, an expected general increase in food costs, offset by a decrease in the cost of ribs.same reasons. Operating costs and expenses decreased slightly as a percentage of total sales to approximately 96.35%95.38% in our fiscal year 20092012 from 96.89%95.68% in our fiscal year 2008.2011.


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 our fiscal year 20092012 increased to $34,792,000$40,059,000 from $33,368,000$37,857,000 for our fiscal year 2008.2011. 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 65.67%64.41% for our fiscal year 20092012 and 66.21%65.54% for our fiscal year 2008.  This decrease in gross profit for restaurant and bar sales for our fiscal year 2009 was primarily due to an increase in food costs, primarily our cost of ribs and poultry.



2011. We anticipate that our gross profit for restaurant food and bar sales will decrease during our fiscal year 20102013 due to a decrease inhigher food costs, including our gross profit for restaurant bar sales due primarily to the new promotion, (half price drinks from 9:00 p.m. to closing, a slow periodcost of time for business for most of our restaurants), instituted subsequent to our fiscal year end 2009,poultry, offset by a decrease in theour cost of ribs during calendar year 2010.

2013.

Package Liquor Store Sales. Gross profit for package liquor store sales for our fiscal year 2009 increased2012 decreased to $3,937,000$4,102,000 from $3,661,000$4,381,000 for our fiscal year 2008.2011. Our gross profit margin (calculated as gross profit reflected as a percentage of package liquor store sales) for package liquor store sales was 31.17%31.04% for our fiscal year 20092012 and 29.72%33.34% for our fiscal year 2008.2011. The increase decrease in our gross profit margin, (1.45%), was primarily due to our continued purchase of "close out" and inventory reduction merchandise from wholesalers.  We anticipate the gross profit margin for package liquor store sales to remain constant throughoutduring our fiscal year 2010.


2012 (-2.30%) was due to our inability to purchase “close out” and inventory reduction merchandise from wholesalers which we were able to obtain during the first and second quarters of our fiscal year 2011. We anticipate that our gross profit margin for package liquor store sales will stabilize during our fiscal year 2013.

Payroll and Related Costs. Payroll and related costs for our fiscal year 20092012 increased $611,000$1,642,000 or 3.20%7.56% to $19,676,000$23,354,000 from $19,065,000$21,712,000 for our fiscal year 2008. This increase is2011due primarily attributable to the payroll and related costs of the Davie, Florida restaurant of approximately $1,163,000 and the annualan increase in the Florida minimum wage (4.92%), which was effective January 1, 2009, offset by a reduction of our store level management.2012, and to increases in payroll taxes, including unemployment taxes. We anticipate that our payroll and related costs will increase throughthroughout our fiscal year 2010,2013 due primarily due to the payroll and related costs and expenses associated with our recently acquired Boca Ratonthe new restaurant location fromin Miami, Florida acquired by a franchisee.  limited partnership during the second quarter of our fiscal year 2012 and opened for business on December 27, 2012.Payroll and related costs as a percentage of total sales was 29.34%30.20% in our fiscal year 20092012 and 29.69%30.03% of total sales in our fiscal year 2008.  This decrease as a percentage of sales was primarily due to a reduction of our store level management.2011.


Occupancy Costs. Occupancy costs (consisting of rent, common area maintenance, repairs, real property taxes and amortization of leasehold interests) for our fiscal year 20092012 increased $18,000$64,000 or 0.45%1.48% to $3,995,000$4,328,000 from $3,977,000$4,264,000 for our fiscal year 2008. We anticipate that our2011.Our occupancy costs will increase throughincreased primarily due to increasing percentage rents at various locations and due to rental payments for the new restaurant location in Miami, Florida acquired by a limited partnership, which commenced January 27, 2012, partially offset bythe elimination of rent from a limited partnership owned restaurant located in the shopping center in Miami, Florida which we purchased during the first quarter of our fiscal year 2010, primarily due to the occupancy cost associated with our recently acquired Boca Raton restaurant location from a franchisee, offset by2012 and the elimination of rent paid for our combination restaurant and package liquor store located at 2505 N. University Drive, Hollywood,13205 Biscayne Boulevard, North Miami, Florida, (store # 19), the real property and building of which we purchased subsequent to our fiscal year 2009 and a decrease induring the rent paid for our restaurant located at 1550 W. 84th Street, Hialeah, Florida (Store #9), at the start of the secondfirst quarter of our fiscal year 2010.2011. We anticipate that our occupancy costs will remain stable throughout our fiscal year 2013 asrental payments for the new restaurant location in Miami, Florida, will be offset by the reduction in rental payments as a result of our purchase of the building on November 30, 2011 where Store #70 is located.

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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 our fiscal year 20092012 increased $581,000$293,000 or 4.31%2.02% to $14,060,000$14,831,000 from $13,479,000$14,538,000 for our fiscal year 2008.  This increase is due primarily to the operation of the Davie, Florida restaurant, increased advertising expense and an overall increase in expenses.2011. Selling, general and administrative expenses remained constantdecreased as a percentage of total sales 20.97% in our fiscal year 20092012 to 19.18% as compared to 20.99%20.11% in our fiscal year 2008.2011. We anticipate that our selling, general and administrative expenses will increase throughout our fiscal year 20102013 due primarily to the operationnew restaurant location in Miami, Florida acquired by a limited partnership during the second quarter of our recentlyfiscal year 2012 and opened for business on December 27, 2012, the shopping center acquired Boca Raton restaurant location from a franchiseeduring the first quarter of our fiscal year 2012 and an overall increase in expenses, which will not be offset in their entirety by increased advertising creditsincreases across all categories.

Depreciation and rebates from our food distributor.



Depreciation.Amortization. Depreciation and amortization for our fiscal year 2009 increased $128,0002012 decreased $42,000 or 6.01%1.63% to $2,259,000$2,528,000 from $2,131,000$2,570,000 for our fiscal year 2008.2011. As a percentage of total sales,revenue, depreciation and amortization expense was relatively constant over both periods, representing 3.37%3.27% of revenue for our fiscal year 20092012 and 3.32%3.55% of revenue for our fiscal year 2008.

2011.

Interest Expense, Net. Interest expense for our fiscal year 2009 decreased $59,0002012 increased $191,000 to $436,000$806,000 from $495,000$615,000 for our fiscal year 2008.  This decrease is attributable to a lower variable interest rate on our line of credit2011. Interest expense increased during our fiscal year 2009.2012 primarily due to the interest paid on the $4.5 million mortgage loan, the proceeds of which we used to purchase a shopping center in Miami, Florida and a $1.6 million term loan the proceeds of which were also ultimately used to purchase the shopping center, while permitting us to retain our working capital and cash reserves.


Net Income Attributable to Stockholders. Net income attributable to stockholders for our fiscal year 2009 increased $332,0002012 decreased $36,000 or 31.41%2.48% to $1,389,000$1,413,000 from $1,057,000$1,449,000 for our fiscal year 2008.2011. As a percentage of sales, net income for our fiscal year 20092012 is 2.07%1.83%, as compared to 1.65%2.00% in our fiscal year 2008.  2011. During our fiscal year 2011, we recognized income of $231,000, offset by income tax of $67,000, from the sale of our interest, as guarantor, of a nine (9) year leasehold interest. Without giving effect to the above non-recurring item, our net income attributable to stockholders for our fiscal year 2012 would have increased $128,000 or 9.96% to $1,285,000 for our fiscal year 2011.

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New Limited Partnership Restaurants


We had no

As new restaurants under development during our fiscal year 2009.  The limited partnership owned restaurant located in Davie, Florida opened for business during the fourth quarter of our fiscal year 2008 (July 28, 2008).  While we currently have no new restaurants under development, if we are to open, new restaurants, our income from operations will be adversely affected due to our obligation to fund pre-opening costs, including but not limited to pre-opening rent for the new locations. During our fiscal year 2008,2012, we recognized non-cash pre-opening rent expense in the approximate amount of $6,000 and recognized cash pre-opening rent in the approximate amount of $12,000$83,000 for the Pembroke Pines,Miami, Florida restaurant.restaurant which opened for business on December 27, 2012. During our fiscal year 2008,2011, we also paid and expensed pre-opening rentdid not have a new restaurant location in the approximate amount of $246,000 for the Davie, Florida restaurant, which is the full rent provided in the lease.development stage and did not recognize any pre-opening rent. We are recognizing rent expense on a straight line basis over the term of the lease.


During our fiscal year 2008,2012, the limited partnership restaurant in Davie,Miami, Florida which opened for business on December 27, 2012, reported losses of $632,000$107,000 primarily due to pre-opening costs, thus contributing to a reduction in the operating income for our fiscal year 2008.



During our fiscal year 2011, we did not have a new restaurant location in the development stage and did not recognize any pre-opening costs.

We believe that our current cash on hand, together with our cash availability from our line of credit and expected cash generated from operations will be sufficient to fund our operations and capital expenditures for at least the next twelve months.


Trends


During the next twelve months, we expect continued increases in aggregatethat our restaurant food and bar sales as compared to prior periods primarilywill increase, butgross profit for restaurant food and bar sales willdecrease due to higher food costs, including our recently acquired Boca Raton restaurant location fromcost of poultry, offset by a franchisee, as well as an increasedecrease in same store restaurant bar sales becauseour cost of a new promotion, (50% drinks from 9:00 p.m. to closing), instituted subsequent toribs during calendar year 2013.We anticipate that our fiscal year 2009.  However, we expect same store restaurant food sales to decline over the next twelve month period due primarily to the current domestic and global financial crisis and increased competition.  We expect package liquor store sales and gross profit margin for package liquor store sales will stabilize during our fiscal year 2013. We expect higher food costs and higher overall expenses to remain stable.  Weadversely affect our net income. We also plan to continue our increased advertising to attract and retain our customers against increased competition. With our recent menu price increases, we plan to limit further menu price increases as long as possible, but continue to face increased competition and expect higher food costs and higher overall expenses, which will adversely affect our net income. In December, 2007, we raised menu prices to offset the higher food costs and overall expenses.  Subsequent to the end of our fiscal year 2009, we raised certain of our alcoholic drink prices.  We plan to limit menu price increases as long as possible while maintaining our high quality of food and service and without reducing our food portions.  We have increased our advertising to attract and retain our customers and by offering discounts and promotional gift cards, but are monitoring the impact of such discounts on our gross profit.  We may be required to raise menu prices wherever competitively possible.


Although we

We currently have noa new restaurant in the development westage, which opened for business on December 27, 2012 using our limited partnership ownership model. We continue to search for new locations to open restaurants and thereby expand our business, but we are now looking for locations that will not require an extensive and costly renovation.business. Any new locations will likely be opened using our limited partnership ownership model.


We are not actively searching for locations for the operation of new package liquor stores, but if an appropriate location for a package liquor store becomes available, we will consider it.

Liquidity and Capital Resources


We fund our operations through our cash on hand and positive cash flow from operations and borrowings from our line of credit. operations.As of October 3, 2009,September 29, 2012, we had cash of approximately $4,580,000,$7,221,000, an increase of $1,336,000$2,957,000 from our cash balance of $3,244,000$4,264,000 as of September 27, 2008.October 1, 2011. The increase in cash as of October 3, 2009September 29, 2012 was primarily from our operations due to minimal demand upon oura balance of $1,306,000 of net proceeds from the private sale of limited partnership interests by the affiliated limited partnership which owns the new Miami, Florida restaurant and opened for business on December 27, 2012. Management believes that the Company’s current cash flowavailability from its cash on hand and the expected cash from operations will be sufficient to fund operations and capital expenditures for extraordinary items.


at least the next twelve months.

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Cash Flows

    
  Fiscal Years 
  2009  2008 
  (in thousands) 
Net cash and cash equivalents provided by operating activities $5,217  $4,363 
Net cash and cash equivalents used in investing activities  (1,597)  (3,967)
Net cash and cash equivalents provided by financing activities  (2,284)  625 
Net increase in cash and equivalents  1,336   1,021 
Cash and equivalents, beginning of year  3,244   2,223 
Cash and equivalents, end of year $4,580  $3,244 

  Fiscal Years 
  2012  2011 
  (in thousands) 
Net cash and cash equivalents        
provided by operating activities $6,212  $4,352 
Net cash and cash equivalents        
used in investing activities  (2,030)  (4,172)
Net cash and cash equivalents        
used in financing activities  (1,225)  (2,363)
Net increase (decrease)        
in cash and equivalents  2,957   (2,183)
Cash and equivalents,        
beginning of year  4,264   6,447 
Cash and equivalents,        
end of year $7,221  $4,264 

Capital Expenditures


In addition to using cash for our operating expenses, we use cash to fund the development and construction of new restaurants and secondarily to fund capitalized property improvementimprovements for our existing restaurants. We acquired property and equipment of $1,934,000, (of$7,800,000, (including $6,100,000 of which $292,000 was purchasefinanced and $30,000 of deposits transferred to property and equipment relating to our new pointrecorded in other assets as of sale computer system for our package liquor sales)October 1, 2011), during our fiscal year 2009,2012, including $735,000$507,000 for renovations to one (1) existing Company owned restaurant and three (3) existing Companylimited partnership owned restaurants, as compared to $4,337,000, (ofrestaurants. During our fiscal year 2011, we acquired property and equipment of $4,586,000, (including $122,000 of which $26,000 was financed and $593,000$28,000 of which was purchase deposits transferred to property and equipment)recorded in other assets as of October 1, 2010), during our fiscal year 2008,2011, including $358,000$1,261,000 for renovations to one (1) existing Company owned restaurant. The additions to fixed assets during our fiscal year 2008 included most of the renovations to the business premises of the Davie, Florida restaurant.


All of our owned units require periodic refurbishing in order to remain competitive. The cost of this refurbishment in our fiscal year 20092012 was $735,000.$507,000 for renovations to one (1) existing Company owned restaurant and for renovations to three (3) limited partnership owned restaurants. We anticipate the cost of this refurbishment in our fiscal year 20102013 will be approximately $565,000,$850,000, which funds will be provided from operations.

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Debt


As of the end of our fiscal year 2009,2012, we had debt (including our line of credit), of $6,800,000,$13,418,000, as compared to $6,745,000$8,757,000 as of the end of our fiscal year 2008.



During our fiscal year 2009,September 29, 2012, we changed our primary banking relationship to another unaffiliated financial institution, which includes a new lineare in compliance with the covenants of credit of $2,500,000.  The outstanding balance on our line of credit bears interest at BBA LIBOR 1 month rate, plus 2.25%, (2.4956% as of October 3, 2009), with monthly payments of interest only and the unpaid principal balance and all accrued interest due in full on October 7, 2009.  We granted our lender a security interest in substantially all of our assets and a second mortgage on our corporate offices as collateral to secure our repayment obligations under our credit line.  Subsequent to our fiscal year 2009, the maturity date of our line of credit, (October 7, 2009), was extended until January 7, 2010 while we negotiate a modification of our line of credit arrangementloans with our lender.As of October 3, 2009, the amount outstanding under our secured line of credit was $1,586,000.

We repaid long term debt, including auto loans, financed insurance premiums mortgages and capital lease obligationsmortgages in the amount of $1,063,000$1,859,000 and $808,000$1,350,000 in our fiscal years 20092012 and 2008,2011, respectively.


We refinanced our line of credit during our fiscal year 2009 with our new lender.  During our fiscal year 2009, we borrowed $24,000 on our line of credit.  During our fiscal year 2008, we borrowed $600,000 on our line of credit to pay the balance of the purchase price for our limited partnership units in the limited partnership which owns the Davie, Florida location.

Financed Insurance Premiums


(i) For the policy year beginning December 30, 2008,2010, our property insurance is a two (2)three (3) year policy with our insurance carrier. The two (2)three (3) year property insurance premium is in the amount of $631,000 and$894,000, of which $727,000 is financed in full through an unaffiliated third party lender. The finance agreement earnsprovides that we are obligated to repay the amounts financed, together with interest at the rate of 5.15%4.89% per annum, and is amortized over 2030 months, with monthly payments of principal and interest, each in the amount of $30,000.approximately $25,000. The finance agreement is secured by a security interest in all insurance policies, all unearned premium, return premium, dividend payments and loss payments thereof.


(ii) For the policy year beginning December 30, 2008,2011, our general liability insurance, excluding limited partnerships, is a one (1) year policy with our insurance carriers, including automobile and excess liability coverage. The one (1) year general liability insurance premiums, including automobile and excess liability coverage, total, in the aggregate $249,000 and this amount is$286,000, of which $250,000 was financed in full through the same unaffiliated third party lender. The finance agreement earnsobligated us to repay the amounts financed together with interest at the rate of 4.15%3.19% per annum, and is amortized over 10 months, with monthly payments of principal and interest, each in the amount of $23,000.$25,000. The finance agreement iswas secured by a security interest in all insurance policies, all unearned premium, return premium, dividend payments and loss payments thereof.


(iii) For the policy year beginning December 30, 2008,2011, our general liability insurance for our limited partnerships is a one (1) year policy with our insurance carriers, including excess liability coverage. The one (1) year general liability insurance premiums, including excess liability coverage, total, in the aggregate amount$356,000, of $214,000 and this amount is



which $297,000 was financed in full through the same unaffiliated third party lender. The finance agreement earnsobligated us to repay the amounts financed, together with interest at the rate of 4.05%3.19% per annum, and is amortized over 109 months, with monthly payments of principal and interest, each in the amount of $19,000.$30,000 and was paid in full during the fourth quarter of our fiscal year 2012. The finance agreement iswas secured by a security interestagreement in all insurance policies, all unearned premium, return premium, dividend payments and loss payments thereof.

(iv) For the policy year beginning December 30, 2009,2012, our general liability insurance, excluding limited partnerships, is a one (1) year policy with our insurance carriers, including automobile and excess liability coverage. The one (1) year general liability insurance premiums, including automobile and excess liability coverage, total, in the aggregate $243,000 and this amount$309,000, of which $282,000 is financed in full through the same unaffiliated third party lender. The finance agreement earnsobligates us to repay the amounts financed together with interest at the rate of 2.99%3.29% per annum, and is amortized over 10 months, with monthly payments of principal and interest, each in the amount of $20,000.$29,000. The finance agreement is secured by a security interest in all insurance policies, all unearned premium, return premium, dividend payments and loss payments thereof.

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(v) For the policy year beginning December 30, 2009,2012, our general liability insurance for our limited partnerships is a one (1) year policy with our insurance carriers, including excess liability coverage. The one (1) year general liability insurance premiums, including excess liability coverage, total, in the aggregate $200,000 and this amount$390,000, of which $356,000 is financed in full through the same unaffiliated third party lender. The finance agreement earnsobligates us to repay the amounts financed, together with interest at the rate of 2.99%3.29% per annum, and is amortized over 1110 months, with monthly payments of principal and interest, each in the amount of $13,000.$36,000. The finance agreement is secured by a security interestagreement in all insurance policies, all unearned premium, return premium, dividend payments and loss payments thereof.


As of October 3, 2009,September 29, 2012, the aggregate principal balance owed from the financing of our property and general liability insurance policies is $445,000.


$333,000.

Purchase Commitments


In order to fix the cost and ensure adequate supply of baby back ribs for our restaurants, on October 21, 2009,September 19, 2012, we entered into a purchase agreement with oura new rib supplier, whereby we agreed to purchase approximately $3,200,000$3,800,000 of baby back ribs during calendar year 20102013 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.


Purchase of Limited Partnership Interests


During our fiscal year 2009, we did not purchase any limited partnership interests.   During our fiscal year 2008,2012, we purchased from two separateone limited partners (neither of whom are officers, directorspartner (who is not an officer, director or family membersmember of officers or directors) a limited partnership interestsinterest of varying



amounts (0.13% to 2.67%)0.18% in nine (9)one (1) limited partnershipspartnership which own restaurantsowns a restaurant for an aggregate purchase price of $125,000.

$3,000. During our fiscal year 2011, we purchased from one limited partner (who is not an officer, director or family member of officers or directors) a limited partnership interest of 1.06% in one (1) limited partnership which owns a restaurant for an aggregate purchase price of $17,000.

Working capital


The table below summarizes our current assets, current liabilities and working capital for our fiscal years 20092012 and 2008:2011:

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(in thousands) 
Oct. 3
2009
  
Sept. 27
2008
 
       
Current assets $8,527  $7,083 
         
Current liabilities  6,440   4,735 
         
Working capital  2,087   2,348 

Working

  Sept. 29  Oct. 1 
(in thousands) 2012  2011 
       
Current assets $11,433  $8,293 
         
Current liabilities  8,283   6,473 
         
Working capital  3,150   1,820 

Our working capital as of 0ctober 3, 2009 decreasedSeptember 29, 2012 increased by $261,000 or 11.12%73.13% from working capital as of September 27, 2008.October 1, 2011. Our working capital decreasedincreased during our fiscal year 20092012 from our working capital for our fiscal year ending September 27, 2008ended October 1, 2011 primarily due to the re-classificationnet funds ($1,306,000) remaining from the private sale of our line of credit,limited partnership interests by the affiliated limited partnership which matures on October 7, 2009, as a current liability.  Our prior lender consistently extendedowns the maturity date on our line of credit on a quarterly basis and accordingly, our obligations under our prior line of credit were not recorded as a current liability.


new Miami, Florida restaurant.

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 and positive cash flow from operations will adequately fund operations, debt reductions and planned capital expenditures inthroughout our fiscal year 2010.  Subsequent to the end2013, including payment for a new point of sale system for our fiscal year 2009, we closed on the purchase of the real property and building where our combination restaurant and package liquor store located at 2505 N. University Drive, Hollywood, Florida, (Store #19) operates, expending approximately $525,000 as the cash necessary to close.  We also closed on the purchase of the operating assets of the franchised restaurant located at 45 S. Federal Highway, Boca Raton, Florida, but no funds were required to close on the same due to amounts owed us by the franchisee.  We also anticipate that during our fiscal year 2010, working capital will be affected by the payment of the balance for the purchase of a surveillance camera systemrestaurants ($92,000)415,000).


Off-Balance Sheet Arrangements


We had no off-balance sheet arrangements as of the end of our fiscal year 20092012 or our fiscal year 2008.



2011.

Critical Accounting Policies


Our significant accounting policies are more fully described in Note 1 to our consolidated financial statements located in Item 8 of this Annual Report on Form 10-K. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, and the related disclosures of contingent assets and liabilities. Actual results could differ from those estimates under different assumptions or conditions. We believe that the following critical accounting policies are subject to estimates and judgments used in the preparation of our consolidated financial statements:


Estimated Useful Lives of Property and Equipment


The estimateestimates of useful lives for property and equipment are significant estimates. Expenditures for the leasehold improvements and equipment when a restaurant is first constructed are material. In addition, periodic refurbishing takes place and those expenditures can be material. We estimate the useful life of those assets by considering, among other things, expected use, life of the lease on the building, and warranty period, if applicable. The assets are then depreciated using a straight line method over those estimated lives. These estimated lives are reviewed periodically and adjusted if necessary. Any necessary adjustment to depreciation expense is made in the income statement of the period in which the adjustment is determined to be necessary.

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Consolidation of Limited Partnerships


As of October 3, 2009,September 29, 2012, we operate nine (9)eight (8) restaurants as general partner of the limited partnerships that own the operations of these restaurants. We currently have one restaurant under development in Miami, Florida which will result in us operating the restaurant as general partner. This new restaurant opened for business on December 27, 2012. Additionally, we expect that any expansion which takes place in opening additional new restaurants will also result in us operating the restaurants as general partner. In addition to the general partnership interest we also purchase limited partnership units ranging from 13%5% to 48% of the total units outstanding. As a result of these controlling interests, we consolidate the operations of these limited partnerships with ours despite the fact that we do not own in excess of 50% of the equity interests. All intercompany transactions are eliminated in consolidation. The minoritynoncontrolling interests in the earnings of these limited partnerships are removed from net income and are not included in the calculation of earnings per share.


Income Taxes


FASB ASC Topic 740 –Income Taxes, requires, among other things, recognition of future tax benefits measured at enacted rates attributable to deductible temporary differences between financial statement and income tax bases of assets and liabilities and to tax net operating loss and tip credit



carryforwards to the extent that realization of said benefits is more likely than not. For discussion regarding our carryforwards refer to Note 6 to the consolidated financial statements for our fiscal year 2009.

On September 30, 2007, we adopted the provisions regarding Accounting for Uncertainty in Income Taxes.  As required by these changes, we recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit.  For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.  We applied these changes to tax positions for our fiscal year ending October 3, 2009.  We had no material unrecognized tax benefits and no adjustments to our financial position, results of operations or cash flows were required.  We do not expect that unrecognized tax benefits will increase within the next twelve months.  We recognize accrued interest and penalties related to uncertain tax positions as income tax expense.

2012.

Other Matters


Impact of 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 continue to rise.

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I

temItem 7A. Quantitative and Qualitative Disclosures About Market Risk


We do

As part of our ongoing operations, we are exposed to interest rate fluctuations on our borrowings. As more fully described in Note 9 “Fair Value Measurements of Financial Instruments” to the Consolidated Financial Statements included in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K, we use interest rate swap agreements to manage these risks. These instruments are not ordinarily hold market risk sensitiveused for speculative purposes but are used to modify variable rate obligations into fixed rate obligations.

At September 29, 2012, we had four variable rate debt instruments for trading purposes.  As of October 3, 2009 and September 27, 2008, we held no equity securities.


Interest Rate Risk

At October 3, 2009, of the Company’s debt arrangements, only borrowings under our line of credit bear interest at BBA LIBOR 1 month rate, plus 2.25%.  Increasesoutstanding that are impacted by changes in interest rates may have a material affect upon results of operations, depending uponrates. In July, 2010, we converted the amount outstanding principal balance on our line of credit from time($1,586,000) to time.a term loan (the “Term Loan”) and we also re-financed the mortgage loan encumbering our corporate offices (the “Refinanced Mortgage Loan”). In November, 2011, we financed our purchase of the real property and two building shopping center in Miami, Florida, with a $4,500,000 mortgage loan (the “$4.5M Mortgage Loan”), and received a $1,600,000 term loan (the “$1.6M Term Loan”) the proceeds of which were ultimately used to purchase the shopping center, while permitting us to retain our working capital and cash reserves. As a means of managing our interest rate risk on these debt instruments, we entered into interest rate swap agreements with our unrelated third party lender to convert these variable rate debt obligations to fixed rates. We are currently party to the following four (4) interest rate swap agreements:

(i) One (1) interest rate swap agreement entered into in July, 2010 relates to the Term Loan, (the “Term Loan Swap”), which converts the LIBOR based variable rate interest to a fixed rate. The Term Loan Swap requires us to pay interest for a three (3) year period at a fixed rate of 4.55% on an initial amortizing notional principal amount of $1,586,000, while receiving interest for the same period at the British Bankers Association LIBOR (“LIBOR”), Daily Floating Rate, plus 3.25%, on the same amortizing notional principal amount. Under this method of accounting, at September 29, 2012, we determined that based upon unadjustedquoted prices in active markets for similar assets or liabilities provided by our unrelated third party lender, the fair value of the Term Loan Swap was not significant; and

(ii) The second interest rate swap agreement entered into July, 2010 relates to the Refinanced Mortgage Loan (the “Mortgage Loan Swap”). The Mortgage Loan Swap requires us to pay interest for a seven (7) year period at a fixed rate of 5.11% on an initial amortizing notional principal amount of $935,000, while receiving interest for the same period at LIBOR, Daily Floating Rate, plus 2.25%, on the same amortizing notional principal amount.Under this method of accounting, at September 29, 2012, we determined that based upon unadjustedquoted prices in active markets for similar assets or liabilities provided by our unrelated third party lender, the fair value of the Mortgage Loan Swap was not significant; and

(iii) The third interest rate swap agreement entered into in November, 2011 by our wholly owned subsidiary, Flanigan’s Calusa Center, LLC, relates to the $4.5 Mortgage Loan (the “$4.5M Mortgage Loan Swap”). The $4.5M Mortgage Loan Swap requires us to pay interest for an eight (8) year period at a fixed rate of 4.51% on an initial amortizing notional principal amount of $3,750,000, while receiving interest for the same period at LIBOR – 1 Month, plus 2.25%, on the same amortizing notional principal amount. We determined that at September 29, 2012, the interest rate swap agreement is an effective hedging agreement and the fair value was not material; and

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(iv) The fourth interest rate swap agreement entered into in November, 2011 relates to the $1.6M Term Loan (the “$1.6M Term Loan Swap”). The $1.6M Term Loan Swap requires us to pay interest for a four (4) year period at a fixed rate of 3.43% on an initial amortizing notional principal amount of $1,600,000, while receiving interest for the same period at LIBOR – 1 Month, plus 2.25%, on the same amortizing notional principal amount. We determined that at September 29, 2012, the interest rate swap agreement is an effective hedging agreement and the fair value was not material.

At October 3, 2009,September 29, 2012, our cash resources earn interest at variable rates. Accordingly, our return on these funds is affected by fluctuations in interest rates.

There is no assurance that interest rates will increase or decrease over our next fiscal year or that an increase will not have a material adverse effect on our operations.


Item 8. Financial Statements and Supplementary Data.


Our Financial Statements and supplementary data are on pages F-1 through F-6.


Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures.


None


Item 9A(T).9A. Controls and Procedures.


Evaluation of Disclosure Controls and Procedures


Based on evaluations as of the end of the period covered by this report, our Chief Executive Officer and Chief Financial Officer, with the participation of our management team, have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) to the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) were effective.


Management’s Assessment on Internal Control over Financial Reporting/Limitations on the Effectiveness of Controls and Permitted Omission from Management’s Assessment


Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Management, conductedincluding our Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of the Company's internal controlscontrol over financial reporting.  Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of September 29, 2012, our internal control over financial reporting (as defined in Rule 13a-15(f) promulgated under the Exchange Act) as of October 3, 2009, basedwas effective.

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Limitations on the framework in Internal Control Integrated Framework issued by the CommitteeEffectiveness of Sponsoring Organizations of the Treadway Commission.


Controls and Permitted Omission from Management’s Assessment

Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal controls can only provide reasonable assurance with respect to financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk



that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management, including the Principal Executive and Principal Financial Officers, based on their evaluation of our internal control over financial reporting, have concluded that our internal control over financial reporting was effective as of October 3, 2009.

This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this Annual Report.

Report on Form 10-K.

Changes in Internal Control Over Financial Reporting


During the last fiscal quarter,period covered by this report, we have not made any change to our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


Item 9B.9B. Other Information.


None.


PART III


Item 10. Directors, Executive Officers and Corporate Governance.


The information required by Item 10 is incorporated by reference to our Proxy Statement for our 20102013 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission by February 1, 2010.January 24, 2013.

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Item 11.11. Executive Compensation.


The information required by Item 11 is incorporated by reference to our Proxy Statement for our 20102013 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission by February 1, 2010.

January 24, 2013.

Item 12.12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.


The information required by Item 12 is incorporated by reference to our Proxy Statement for our 20102013 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission by February 1, 2010.



January 24, 2013.

Item 13.13. Certain Relationships and Related Transactions and Director Independence.


The information required by Item 13 is incorporated by reference to our Proxy Statement for our 20102013 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission by February 1, 2010.


January 24, 2013.

Item 14.14. Principal Accountant Fees and Services.


The information required by Item 14 is incorporated by reference to our Proxy Statement for our 20102013 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission by February 1, 2010.


January 24, 2013.

PART IV


Item 15. Exhibits and Financial Statement Schedules.


(a)(1) Financial Statements

(a)(1)Financial Statements

See Item 8, “Financial Statements and Supplementary Data” for Financial Statements included with this Annual Report on Form 10-K.


(a)(2) Financial Statement Schedules

(a)(2)Financial Statement Schedules

All other schedules have been omitted because the required information is not applicable or the information is included in the consolidated financial statements or the Notes thereto.

(a)(3)  Exhibits

(a)(3)Exhibits

The exhibits listed on the accompanying Index to Exhibits are filed as part of this Annual Report.


    Incorporated by Reference  
Exhibit Number Exhibit Description Form Date Number Filed Herewith
2 Plan of Reorganization, Amended Disclosure Statement, Amended Plan of Reorganization, Modification of Amended Plan of Reorganization, SB-2 5/5/87 2  

    Incorporated by Reference  
Exhibit Number Exhibit Description Form Date Number Filed Herewith
2 Plan of Reorganization, Amended Disclosure Statement, Amended Plan of Reorganization, Modification of Amended Plan of Reorganization, Second Modification of Amended Plan of Reorganization, Order Confirming Plan of Reorganization SB-2 5/5/87 2  
   
Second Modification of Amended Plan of Reorganization, Order Confirming Plan of Reorganization48
           
3 Restated Articles of Incorporation, adopted January 9, 1984 10-K 12/29/02 3  
           
10(a)(1) Employment Agreement with Joseph G. Flanigan* DEF14A 1/27/1988 10(a)(1)  
           
10(a)(2) Form of Employment Agreement between Joseph G. Flanigan and the Company (as ratified and amended by the stockholders at the 1988 annual meeting is incorporated herein by reference).* 10-K   10(a)(1)  
           
10(c) Consent Agreement regarding the Company's Trademark Litigation 8-K 4/10/1985 10( c)  
           
10(d) King of Prussia(#850)Partnership Agreement* 8-K 4/10/1985 10(d)  
           
10(o) Management Agreement for Atlanta, Georgia, (#600)* 10-K 10/3/1992 10(o)  
           
10(p) Settlement Agreement with Former Vice Chairman of the Board of Directors (re #5) 10-K 10/3/1992 10(p)  
           
10(q) Hardware Purchase Agreement and Software License Agreement for restaurant point of sale system. 10-KSB 10/2/1993 10(q)  
           
10(a)(3) Key Employee Incentive Stock Option Plan DEF14A 1/26/1994 10(a)(3)  
           
10( r) Limited Partnership Agreement of CIC Investors #13, Ltd,. between Flanigan's Enterprises, Inc., as General Partner and fifty percent owner of the limited partnership, and Hotel Properties, LTD. * 10-KSB 9/30/1995 10(r)  
           
10(s) Form of Franchise Agreement between Flanigan's Enterprises, Inc. and Franchisees.* 10-KSB 9/30/1995 10(s)  
           
10(t) Licensing Agreement between Flanigan's Enterprises, Inc. and James B. Flanigan, dated November 4, 1996, for non-exclusive use of the servicemark "Flanigan's" in the 10-KSB 9/28/1996 10(t)  

CommonwealthTable of Pennsylvania.  *Contents
        
3 Restated Articles of Incorporation,  adopted January 9, 1984 10-K 12/29/02 3  
           
10(a)(1) Employment Agreement with Joseph G. Flanigan* DEF14A 1/27/1988 10(a)(1)  
           
10(a)(2) Form of Employment Agreement between Joseph G. Flanigan and the Company (as ratified and amended by the stockholders at the 1988 annual meeting is incorporated herein by reference).* 10-K   10(a)(1)  
           
10(c) Consent Agreement regarding the Company's Trademark Litigation 8-K 4/10/1985 10( c)  
           
10(d) King of Prussia(#850)Partnership Agreement* 8-K 4/10/1985 10(d)  
           
10(o) Management Agreement for Atlanta, Georgia, (#600)* 10-K 10/3/1992 10(o)  
           
10(p) Settlement Agreement with Former Vice Chairman of the Board of Directors (re #5) 10-K 10/3/1992 10(p)  
           
10(q) Hardware Purchase Agreement and Software License Agreement for restaurant point of sale system. 10-KSB 10/2/1993 10(q)  
           
10(a)(3) Key Employee Incentive Stock Option Plan DEF14A 1/26/1994 10(a)(3)  
           
10( r) Limited Partnership Agreement of CIC Investors #13, Ltd,. between Flanigan's Enterprises, Inc., as General Partner and fifty percent owner of the limited partnership, and Hotel Properties, LTD. * 10-KSB  9/30/1995  10(r)   
           
10(s) Form of Franchise Agreement between Flanigan's Enterprises, Inc. and Franchisees.* 10-KSB 9/30/1995 10(s)  
           
10(t) Licensing Agreement between Flanigan's Enterprises, Inc. and James B. Flanigan, dated November 4, 1996, for non-exclusive use of the servicemark "Flanigan's" in the Commonwealth of Pennsylvania.  * 10-KSB 9/28/1996 10(t)  
   
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10(u) Limited Partnership Agreement of CIC Investors #15 Ltd., dated March 28, 1997, between B.D. 15 Corp. as General Partner and numerous limited partners, including Flanigan's Enterprises, Inc. as a limited partner owning twenty five percent of the limited partnership.  * 10-KSB 9/27/1997 10(u)  
           
10(v) Limited Partnership Agreement of CIC Investors #60 Ltd., dated July 8, 1997, between Flanigan's Enterprises, Inc., as General Partner and numerous limited partners, including Flanigan's Enterprises, Inc. as limited partner owning forty percent of the limited partnership. * 10-KSB 9/27/1997 10(v)  
           
10(w) Stipulated Agreed Order of Dismissal upon Mediation with former franchisee. 10-KSB 9/27/1997 10(w)  
           
10(x) Limited Partnership Agreement of CIC Investors #70, Ltd. dated February 1999 between Flanigan's Enterprises, Inc. as General Partner and numerous limited partners, including Flanigan's Enterprises, Inc. as limited partner owning forty percent of the limited partnership.  * 10-KSB 10/02/1999 10(x)  
           
10(y) Limited Partnership Agreement of CIC Investors #80, Ltd., dated May 2001, between Flanigan's Enterprises, Inc. as General Partner and numerous limited partners, including Flanigan's Enterprises, Inc., as limited partner owning twenty five percent of the limited partnership.  * 10-KSB 9/29/2001 10(y)  
           
10(z) Limited Partnership Agreement of CIC Investors #95, Ltd., dated July 2001, between Flanigan's Enterprises, Inc., as General Partner and numerous limited partners, including Flanigan's Enterprises, Inc. as limited partner owning twenty eight percent of the limited partnership.  * 10-KSB 9/29/2001 10(z)  
           
10(aa) 

Limited Partnership Agreement of CIC Investors #75, Ltd., dated June 17, 2003, between Flanigan’s Enterprises, Inc., as General Partner, and numerous limited partners, including Flanigan’s Enterprises, Inc. as limited partner owning twelve percent of the limited partnership. *

 10-K 9/27/03 10(aa)  


10(bb) Limited Partnership Agreement of CIC Investors #65, Ltd., dated June 24, 2004, between Flanigan’s Enterprises, Inc., as General Partner, and numerous limited partners, including Flanigan’s Enterprises, Inc. as limited partner owning twenty six percent of the limited partnership.  * 10-K 10/2/2004 10(bb)  
   
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10(cc) Amended and Restated Limited Partnership Certificate and Agreement of CIC Investors #13, Ltd., dated March 1, 2006, between Flanigan’s Enterprises, Inc., as General Partner, Flanigan’s Management Services, Inc. and numerous limited partners, including Flanigan’s Enterprises, Inc. as limited partner owning thirty nine percent of the limited partnership.  * 10-K 9/30/2006 10(cc)  
           
10(dd) Limited Partnership Agreement of CIC Investors #50, Ltd., dated October 17, 2006, between Flanigan’s Enterprises, Inc., as General Partner, Flanigan’s Management Services, Inc. and numerous limited partners, including Flanigan’s Enterprises, Inc. as limited partner owning sixteen percent of the limited partnership.  * 10-K 9/29/2007 10(dd)  
           
10(ee) Limited Partnership Agreement of CIC Investors #55, Ltd., dated December 12, 2006, between Flanigan’s Enterprises, Inc., as General Partner, Flanigan’s Management Services, Inc. and numerous limited partners, including Flanigan’s Enterprises, Inc. as limited partner owning forty eight percent of the limited partnership.  * 10-K 9/29/2007 10(ee)  
           
13

 10(ff)

 

Limited Partnership Agreement of CIC Investors #90, Ltd., dated January 18, 2012, between Flanigan’s Enterprises, Inc., as General Partner, Flanigan’s Management Services, Inc. and numerous limited partners, including Flanigan’s Enterprises, Inc. as limited partner owning five percent of the limited partnership. *

 10-K

 9/29/2012

 10(ff)

X

 13

Registrant's Form 10-K constitutes the Annual Report to Shareholders for the fiscal year ended October 3, 2009.September 29, 2012.

       

X

           
21(a) Company's subsidiaries are set forth in this Annual Report on Form 10-K.       X
           
31.1
 Certification Pursuant to Section 302 of Sarbanes-Oxley Act of 2002 of Chief Executive Officer.X 
51
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31.2Certification Pursuant to Section 302 of Sarbanes-Oxley Act of 2002 of Chief Financial Officer.X 
32.1Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Chief Executive Officer.       X
           
31.2
32.2		 Certification Pursuant to 18 U.S.C. Section 3021350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Chief Financial Officer.       X
           
32.1
Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of theX

Sarbanes-Oxley Act of 2002 of Chief Executive Officer.
32.2
Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Chief Financial Officer.X

*Compensatory plan or arrangement.

List of XBRL documents as exhibits 101

SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed

on its behalf by the undersigned thereunto duly authorized.


 Flanigan's Enterprises, Inc.
 Registrant
   
 By:/s/ /s/ JAMES G. FLANIGAN II
  JAMES G. FLANIGAN II
  Chief Executive Officer
  Date: 1/4/201012/28/2012


Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in their capacities and on the dates indicated.



/s/ JAMES G. FLANIGAN II Chairman of the Board,Date: 1/4/201012/28/2012
James G. Flanigan II Chief ExecutorExecutive Officer,
and Director 
    
    
/s/ JEFFREY D. KASTNER Chief Financial OfficerDate: 1/4/201012/28/2012
Jeffrey D. Kastner Secretary and Director 
    
    
52
/s/ MICHAEL ROBERTSDirectorDate: 1/4/2010Table of Contents
MICHAEL ROBERTS   
    
/s/ GERMAINE M. BELL DirectorDate: 1/4/201012/28/2012
Germaine M. Bell
    
    
/s/  BARBARA J. KRONK Director
/s/ BARBARA J. KRONK
Director
Date: 1/4/2010
12/28/2012
Barbara J. Kronk   
    
    
/s/ AUGIE BUCCI Chief Operating OfficerDate: 1/4/201012/28/2012
Augie Bucci and Director 
    
    
/s/ MICHAEL B. FLANIGAN DirectorDate: 1/4/201012/28/2012
Michael B. Flanigan   
    
    
/s/ PATRICK J. FLANIGAN DirectorDate: 1/4/201012/28/2012
Patrick J. Flanigan   
    
    
/s/  CHRISTOPHER O’NEIL DirectorDate: 1/4/201012/28/2012
Christopher O’Neil   

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FLANIGAN’SENTERPRISES,INC. ANDSUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 29, 2012 AND OCTOBER 1, 2011

 

FLANIGAN’SENTERPRISES,INC. ANDSUBSIDIARIES


CONSOLIDATED FINANCIAL STATEMENTS

OCTOBER 3, 2009 AND SEPTEMBER 27, 2008


FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


 PAGE
  
  
  
REPORT OF INDEPENDENT AUDITOR’S REPORTREGISTERED PUBLIC ACCOUNTING FIRMF-1
  
  
CONSOLIDATED FINANCIAL STATEMENTS 
  
Balance SheetsF-2
  
Statements of IncomeF-3
  
Statements of Stockholders’ EquityF-4
  
Statements of Cash FlowsF-5 – F-6
  
Notes to Financial StatementsF-7 - F-29

Table of Contents

REPORT OF INDEPENDENT AUDITOR’S REPORT



REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Flanigan’s Enterprises, Inc.

Fort Lauderdale, Florida



We have audited the accompanying consolidated balance sheets of Flanigan’s Enterprises, Inc. and Subsidiaries as of September 29, 2012 and October 3, 2009 and September 27, 20081, 2011 and the related consolidated statements of income, stockholders’ equity and cash flows for the years then ended. Flanigan’s Enterprises, Inc.’s management is responsible for theseThese consolidated financial statements.statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.


We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Anopinion.An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.


In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Flanigan’s Enterprises, Inc. and Subsidiaries as of September 29, 2012 and October 3, 2009 and September 27, 2008,1, 2011, and the consolidated results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States.

States of America.

Marcum LLP

Fort Lauderdale, FL

December 28, 2012



F-1
MarcumRachlinTable of Contents


a division of Marcum, LLP
Fort Lauderdale, Florida
January 4, 2010

FLANIGAN’SLANIGAN’S EENTERPRISES,NTERPRISES, IINC. ANDSSUBSIDIARIES


CONSOLIDATED BALANCE SHEETS


SEPTEMBER 29, 2012 AND OCTOBER 3, 2009 AND SEPTEMBER 27, 2008


1, 2011

(rounded to the nearest thousandth, except share amounts)



ASSETS 2009  2008 
Current Assets:      
Cash and cash equivalents $4,580,000  $3,244,000 
Prepaid income taxes  332,000   176,000 
Due from franchisees  270,000   351,000 
Other receivables  94,000   123,000 
Inventories  1,933,000   2,168,000 
Prepaid expenses  980,000   778,000 
Deferred tax assets  338,000   243,000 
Total current assets  8,527,000   7,083,000 
         
Property and Equipment, Net  21,240,000   21,601,000 
         
Investment in Limited Partnership  140,000   151,000 
         
Other Assets:        
Liquor licenses, net  345,000   345,000 
Deferred tax assets  830,000   729,000 
Leasehold interests, net  1,644,000   1,880,000 
Other  753,000   1,015,000 
Total other assets  3,572,000   3,969,000 
Total assets $33,479,000  $32,804,000 
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
Current Liabilities:        
Accounts payable and accrued expenses $3,756,000  $4,040,000 
Due to franchisees  372,000   223,000 
Current portion of long-term debt  681,000   419,000 
Line of credit  1,586,000   - 
Deferred revenues  21,000   34,000 
Deferred rent  24,000   19,000 
Total current liabilities  6,440,000   4,735,000 
         
Long-Term Debt, Net of Current Portion  4,533,000   4,764,000 
         
Line of Credit  -   1,562,000 
         
Deferred Rent, Net of Current Portion  206,000   214,000 
         
Minority Interests in Equity of Consolidated Limited Partnerships  7,906,000   8,437,000 
         
Stockholders' Equity:        
Common stock, $.10 par value; 5,000,000 shares authorized;4,197,642 shares issued for the years ended 2009 and 2008  420,000   420,000 
Capital in excess of par value  6,240,000   6,240,000 
Retained earnings  13,777,000   12,388,000 
Treasury stock, at cost, 2,334,709 and 2,313,309 shares for the years ended 2009 and 2008, respectively  (6,043,000)  (5,956,000)
Total stockholders' equity  14,394,000   13,092,000 
Total liabilities and stockholders' equity $33,479,000  $32,804,000 


ASSETS 2012  2011 
Current Assets:        
Cash and cash equivalents $7,221,000  $4,264,000 
Prepaid income taxes  —   219,000 
Other receivables  207,000   152,000 
Inventories  2,516,000   2,185,000 
Prepaid expenses  1,118,000   1,119,000 
Deferred tax assets  371,000   354,000 
Total current assets  11,433,000   8,293,000 
         
Property and Equipment, Net  31,595,000   26,182,000 
         
Investment in Limited Partnership  171,000   140,000 
         
Other Assets:        
Liquor licenses  470,000   470,000 
Deferred tax assets  961,000   908,000 
Leasehold interests, net  1,177,000   1,233,000 
Other  937,000   940,000 
  Total other assets  3,545,000   3,551,000 
  Total assets $46,744,000  $38,166,000 
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
Current Liabilities:        
Accounts payable and accrued expenses $5,265,000  $4,673,000 
Income taxes payable  39,000   — 
Due to franchisees  1,231,000   632,000 
Current portion of long-term debt  1,732,000   1,151,000 
Deferred rent  16,000   17,000 
  Total current liabilities  8,283,000   6,473,000 
         
Long-Term Debt, Net of Current Portion  11,686,000   7,606,000 
         
Deferred Rent, Net of Current Portion  147,000   163,000 
         
Commitments and Contingencies        
         
Equity:        
Flanigan's Enterprises, Inc. stockholders' equity        
Common stock, $.10 par value; 5,000,000 shares authorized; 4,197,642 shares        
issued; 1,860,247 and 1,861,047 outstanding for years ended 2012 and 2011  420,000   420,000 
Capital in excess of par value  6,240,000   6,240,000 
Retained earnings  18,130,000   16,717,000 
Treasury stock, at cost, 2,337,395 and 2,336,595 shares for the years        
ended 2012 and 2011, respectively  (6,061,000)  (6,055,000)
Total Flanigan's Enterprises, Inc. stockholders' equity  18,729,000   17,322,000 
Noncontrolling interests  7,899,000   6,602,000 
  Total equity  26,628,000   23,924,000 
  Total liabilities and equity $46,744,000  $38,166,000 

See notes to consolidated financial statements.


statements

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FLANIGAN’S ENTERPRISES, INC.LANIGAN’SENTERPRISES,INC. AND SUBSIDIARIES

SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME


Years Ended September 29, 2012 and October 3, 2009 and September 27, 2008


1, 2011 

(rounded to the nearest thousandth, except per share amounts)


  2009  2008 
Revenues:      
Restaurant food sales $42,794,000  $40,906,000 
Restaurant beverage sales  10,185,000   9,494,000 
Package goods sales  12,632,000   12,317,000 
Franchise-related revenues  1,126,000   1,066,000 
Owner's fee  170,000   238,000 
Other operating income  153,000   188,000 
   67,060,000   64,209,000 
Costs and Expenses:        
Cost of merchandise sold:        
Restaurants and lounges  18,187,000   17,032,000 
Package goods  8,695,000   8,656,000 
Payroll and related costs  19,676,000   19,065,000 
Occupancy costs  3,995,000   3,977,000 
Selling, general and administrative expenses  14,060,000   13,479,000 
   64,613,000   62,209,000 
         
Income from Operations  2,447,000   2,000,000 
         
Other Income (Expense):        
Interest expense  (436,000)  (495,000)
Interest and other income  232,000   103,000 
   (204,000)  (392,000)
         
Income Before Provision for Income Taxes and  2,243,000   1,608,000 
Minority Interests in Earnings of Consolidated        
Limited Partnerships        
         
Provision for Income Taxes  (227,000)  (564,000)
         
         
Minority interests in earnings of consolidated limited partnerships  (627,000)  13,000 
         
Net Income $1,389,000  $1,057,000 
         
Net Income Per Common Share:        
Basic $0.74  $0.56 
Diluted $0.74  $0.56 
         
Weighted Average Shares and Equivalent Shares Outstanding:        
Basic  1,868,000   1,888,000 
Diluted  1,868,000   1,889,000 


  2012  2011 
Revenues:        
Restaurant food sales $48,943,000  $45,951,000 
Restaurant beverage sales  13,255,000   11,814,000 
Package goods sales  13,214,000   13,141,000 
Franchise-related revenues  1,133,000   1,023,000 
Owner's fee  157,000   161,000 
Other operating income  158,000   219,000 
Rental income  475,000   — 
   77,335,000   72,309,000 
Costs and Expenses:        
Cost of merchandise sold:        
Restaurants and lounges  22,139,000   19,908,000 
Package goods  9,112,000   8,760,000 
Payroll and related costs  23,354,000   21,712,000 
Occupancy costs  4,328,000   4,264,000 
Selling, general and administrative expenses  14,831,000   14,538,000 
   73,764,000   69,182,000 
         
Income from Operations  3,571,000   3,127,000 
         
Other Income (Expense):        
Interest expense  (806,000)  (615,000)
Interest and other income  73,000   367,000 
   (733,000)  (248,000)
         
Income Before Provision for Income Taxes  2,838,000   2,879,000 
         
Provision for Income Taxes  (765,000)  (598,000)
         
Net Income  2,073,000   2,281,000 
         
Less: Net Income Attributable to Noncontrolling Interests  (660,000)  (832,000)
         
Net Income Attributable to Stockholders $1,413,000  $1,449,000 
         
         
         
Net Income Per Common Share:        
Basic and Diluted $0.76  $0.78 
         
Weighted Average Shares and Equivalent Shares Outstanding:        
Basic and Diluted  1,860,231   1,861,103 

See notes to consolidated financial statements.


statements

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FLANIGAN’S ENTERPRISES, INC.LANIGAN’SENTERPRISES,INC. AND SUBSIDIARIES

SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY


YEARS ENDED SEPTEMBER 29, 2012 AND OCTOBER 3, 2009 AND SEPTEMBER 27, 2008



(rounded to nearest thousandth, except share amounts) 
  
  Common Stock  Capital in     Treasury Stock    
        Excess of  Retained          
  Shares  Amount  Par Value  Earnings  Shares  Amount  Total 
                      
Balance, September 29, 2007  4,197,642  $420,000  $6,240,000  $11,331,000   2,306,909  $(5,907,000) $12,084,000 
                             
Year Ended September 27, 2008:                            
Net income  -   -   -   1,057,000   -   -   1,057,000 
Purchase of treasury stock  -   -   -   -   6,400   (49,000)  (49,000)
Balance, September 27, 2008  4,197,642   420,000   6,240,000   12,388,000   2,313,309   (5,956,000)  13,092,000 
                             
Year Ended October 3, 2009:                            
Net income  -   -   -   1,389,000   -   -   1,389,000 
Purchase of treasury stock  -   -   -   -   21,400   (87,000)  (87,000)
Balance, October 3, 2009  4,197,642  $420,000  $ 6,240,000  $ 13,777,000   2,334,709  $ (6,043,000) $ 14,394,000 


1, 2011

(rounded to nearest thousandth, except  share amounts)

 Common Stock  Capital in      Treasury Stock       
         Excess of  Retained          Noncontrolling    
 Shares  Amount  Par Value  Earnings  Shares  Amount  Interests  Total 
Balance, October 2, 2010  4,197,642  $420,000  $6,240,000  $15,456,000   2,335,727  $(6,049,000) $7,456,000  $23,523,000 
                                 
Year Ended October 1, 2011:                                
  Net income  —   —   —   1,449,000   —   —   832,000   2,281,000 
  Purchase of treasury stock  —   —   —   —   868   (6,000)  —  (6,000)
  Distributions to noncontrolling interests  —   —   —   —   —   —   (1,669,000)  (1,669,000)
  Purchase of noncontrolling interests  —   —   —   —   —   —   (17,000)  (17,000)
  Dividends paid  —   —   —   (188,000)  —   —   —   (188,000)
Balance, October 1, 2011  4,197,642   420,000   6,240,000   16,717,000   2,336,595   (6,055,000)  6,602,000   23,924,000 
                                 
Year Ended September 29, 2012:                                
  Net income  —   —   —   1,413,000   —   —   660,000   2,073,000 
  Purchase of treasury stock  —   —   —   —   800   (6,000)  —   (6,000)
  Distributions to noncontrolling interests  —   —   —   —   —   —   (1,255,000)  (1,255,000)
  Contributions by noncontrolling interests  —   —   —   —   —   —   1,895,000   1,895,000 
  Purchase of noncontrolling interests  —   —   —   —   —   —   (3,000)  (3,000) 
Balance, September 29, 2012  4,197,642  $420,000  $6,240,000  $18,130,000   2,337,395  $(6,061,000) $7,899,000  $26,628,000 

See notes to consolidated financial statements.


statements

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FLANIGAN’S ENTERPRISES, INC.LANIGAN’SENTERPRISES,INC. AND SUBSIDIARIES

SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS


YEARS ENDED SEPTEMBER 29, 2012 AND OCTOBER 3, 2009 AND SEPTEMBER 27, 2008


(rounded to nearest thousandth)      
  2009  2008 
Cash Flows from Operating Activities:      
Net income $1,389,000  $1,057,000 
Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities:        
Depreciation and amortization  2,259,000   2,131,000 
Amortization of leasehold interests  210,000   232,000 
Other  83,000   43,000 
Deferred income taxes  (196,000)  (272,000)
Deferred rent  (3,000)  (16,000)
Minority interests in earnings of consolidated limited partnerships  627,000   (13,000)
Income from unconsolidated limited partnership  (1,000)  (21,000)
Recognition of deferred revenues  (13,000)  (11,000)
Changes in operating assets and liabilities:        
(Increase) decrease in:        
Due from franchisees  81,000   384,000 
Other receivables  32,000   30,000 
Prepaid income taxes  (156,000)  (176,000)
Inventories  235,000   (3,000)
Prepaid expenses  655,000   909,000 
Other assets  150,000   135,000 
Increase (decrease) in:        
Accounts payable and accrued expenses  (284,000)  374,000 
Income taxes payable  -   (331,000)
Due to franchisees  149,000   (89,000)
Net cash and cash equivalents provided by operating activities  5,217,000   4,363,000 
         
Cash Flows from Investing Activities:        
Collections on notes and mortgages receivable  16,000   14,000 
Purchase of property and equipment  (1,642,000)  (3,691,000)
Deposit on purchase of fixed assets  (36,000)  (294,000)
Purchase of leasehold interests  -   (27,000)
Proceeds from sale of fixed assets  53,000   19,000 
Distributions from unconsolidated limited partnership  12,000   12,000 
Net cash and cash equivalents used in investing activities  (1,597,000)  (3,967,000)
         
Cash Flows from Financing Activities:        
Payments of long-term debt  (1,063,000)  (808,000)
Proceeds from line of credit  24,000   600,000 
Purchase of minority limited partnership interest  -   (125,000)
Purchase of treasury stock  (87,000)  (49,000)
Distributions to limited partnerships' minority partners  (1,158,000)  (1,018,000)*
Proceeds from limited partnership interests  -   2,025,000 
Net cash and cash equivalents provided by (used in) financing activities  (2,284,000)  625,000 
         
Net Increase in Cash and Cash Equivalents  1,336,000   1,021,000 
         
Cash and Cash Equivalents, Beginning  3,244,000   2,223,000 
         
Cash and Cash Equivalents, Ending $4,580,000  $3,244,000 


1, 2011 

(rounded to nearest thousandth)

  2012  2011 
Cash Flows from Operating Activities:        
Net income $2,073,000  $2,281,000 
Adjustments to reconcile net income to net cash and cash equivalents provided by        
operating activities:        
Depreciation and amortization  2,377,000   2,358,000 
Amortization of leasehold interests  151,000   212,000 
Loss on abandonment of property and equipment  66,000   61,000 
Gain on sale of guaranteed leasehold  —   (231,000)
Deferred income taxes  (70,000)  (42,000)
Deferred rent  (17,000)  (26,000)
Income from unconsolidated limited partnership  (45,000)  (12,000)
Recognition of deferred revenues  —   (7,000)
Changes in operating assets and liabilities:        
(Increase) decrease in:        
Due from franchisees  —   2,000 
Other receivables  (55,000)  33,000 
Prepaid income taxes  219,000   (219,000)
Inventories  (331,000)  (200,000)
Prepaid expenses  422,000   749,000 
Other assets  193,000   (387,000)
Increase (decrease) in:        
Accounts payable and accrued expenses  591,000   66,000 
Income taxes payable  39,000   (269,000)
Due to franchisees  599,000   (17,000)
Net cash and cash equivalents provided by operating activities  6,212,000   4,352,000 
         
Cash Flows from Investing Activities:        
Collections on notes and mortgages receivable  —   8,000 
Purchase of property and equipment  (1,670,000)  (4,436,000)
Deposit on purchase of fixed assets  (315,000)  (36,000)
Proceeds from sale of fixed assets  39,000   66,000 
Proceeds from sale of guaranteed leasehold  —   231,000 
Distributions from unconsolidated limited partnership  14,000   12,000 
Purchase of leasehold interest  (95,000)  — 
Purchase of limited partnership interests  (3,000)  (17,000)
Net cash and cash equivalents used in investing activities  (2,030,000)  (4,172,000)
         
Cash Flows from Financing Activities:        
Payments of long-term debt  (1,859,000)  (1,350,000)
Proceeds from long-term debt  —   850,000 
Dividends paid  —   (188,000)
Purchase of treasury stock  (6,000)  (6,000)
Distributions to noncontrolling interests  (1,255,000)  (1,669,000)
Contributions from noncontrolling interests  1,895,000   — 
Net cash and cash equivalents used in financing activities  (1,225,000)  (2,363,000)
         
Net Increase (Decrease) in Cash and Cash Equivalents  2,957,000   (2,183,000)
         
Cash and Cash Equivalents, Beginning  4,264,000   6,447,000 
        
Cash and Cash Equivalents, Ending $7,221,000  $4,264,000 

See notes to consolidated financial statements.


statements

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FLANIGAN’S ENTERPRISES, INC.LANIGAN’SENTERPRISES,INC. AND SUBSIDIARIES

SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS


(Continued)



(rounded to nearest thousandth)      
  2009  2008 
Supplemental Disclosure of Cash Flow Information:      
Cash paid during the year for:      
Interest $436,000  $495,000 
Income taxes $587,000  $1,432,000 
         
Supplemental Disclosure for Non-Cash Investing and Financing Activities:        
Financing of insurance contracts $1,094,000  $847,000 
Purchase deposits transferred to property and equipment $292,000  $593,000 
        Refinanced line of credit with new lender $  1,562,000  $  - 
Purchase of vehicles in exchange for debt $-  $26,000 

*exclusive of the Company's investment in the limited partnership owning the restaurant in Davie, Florida of $1,850,000 in fiscal year 2008.


(rounded to nearest thousandth) 

  2012  2011 
Supplemental Disclosure of Cash Flow Information:        
Cash paid during the year for:        
Interest $806,000  $615,000 
Income taxes $577,000  $1,128,000 
         
Supplemental Disclosure for Non-Cash Investing and Financing Activities:        
Financing of insurance contracts $421,000  $1,082,000 
Purchase deposits transferred to property and equipment $30,000  $28,000 
Purchase of vehicles in exchange for debt $—  $122,000 
Purchase of property in exchange for debt $6,100,000  $— 

See notes to consolidated financial statements.

statements

F-6
F-6
FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 3, 2009 AND SEPTEMBER 27, 2008


NOTE 1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Capitalization


The Company was incorporated in 1959 and operates in South Florida as a chain of full-service restaurants and package liquor stores. Restaurant food and beverage sales make up the majority of our total revenue.At October 3, 2009,September 29, 2012, we (i) operated 2324 units, (excluding the adult entertainment club referenced in (ii) below), 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; (ii) own but do not operate one adult entertainment club; and (iii) franchise an additional sixfive units, consisting of two restaurants (one of which we operate), and fourthree combination restaurants/package liquor stores. With the exception of one restaurant we operate under the name “The Whale’s Rib”, and in which we do not have an ownership interest, 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 mark “Big Daddy’s Liquors”.


The Company’s Articles of Incorporation, as amended, authorize us to issue and have outstanding at any one time 5,000,000 shares of common stock at a par value of $0.10 per share.


We operate under a 52-53 week year ending the Saturday closest to September 30. Our fiscal year 2009 is comprised of a 53-week periodyears 2012 and our fiscal year 2008 is2011 are each comprised of a 52-week period.


Principles of Consolidation


The consolidated financial statements include the accounts of the Company and our subsidiaries, all of which are wholly owned, and the accounts of the nine limited partnerships in which we act as general partner and have controlling interests. All significant intercompany transactions and balances have been eliminated in consolidation.


Use of Estimates


The consolidated financial statements and related disclosures are prepared in conformity with accounting principles generally accepted in the U.S. We are required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and revenue and expenses during the period reported.  These estimates include assessing the estimated useful lives of tangible assets.assets and the recognition of deferred tax assets and liabilities. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in our consolidated financial statements in the period they are determined to be necessary.  Although these estimates are based on our knowledge of current events and actions we may undertake in the future, they may ultimately differ from actual results.

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Table of Contents

FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Cash and Cash Equivalents


We consider all highly liquid debt instrumentsinvestments with an original maturity of three months or less at the date of purchase to be cash equivalents.


Inventories


Our inventories, which consist primarily of package liquor products, are stated at the lower of average cost or market.


Liquor Licenses


In accordance with the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 350, “Intangibles -Goodwill and Other” (FASB ASC 350), our liquor licenses are indefinite lived assets, which are not being amortized, but are tested annually for impairment (see Note 5).


Property and Equipment


Our property and equipment are stated at cost. We capitalize expenditures for major improvements and depreciation commences when the assets are placed in service. We record depreciation on a straight-line basis over the estimated useful lives of the respective assets. We charge maintenance and repairs, which do not improve or extend the life of the respective assets, to expense as incurred. When we dispose of assets, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in income.


Our estimated useful lives range from three to five years for vehicles, and three to seven years for furniture and equipment. Leasehold improvements are currently being amortized over the shorter of the life of the lease or the life of the asset up to a maximum of 20 years. The building and building improvements of our corporate offices in Fort Lauderdale, Florida andFlorida; our combination restaurant and package liquor storestores in Hallandale, Florida, bothHollywood, Florida and North Miami, Florida; our restaurant in Fort Lauderdale, Florida; and our shopping center in Miami, Florida, all of which we own, are being depreciated over forty years.


Leasehold Interests


Our purchase of an existing restaurant location usually includes a lease to the business premises. As a result, a portion of the purchase price is allocated to the leasehold interest. We capitalize the cost of the leasehold interest and amortization commences upon our assumption of the lease. We amortize leasehold interests on a straight line basis over the remaining term of the lease.

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Table of Contents

FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)

Investment in Limited Partnerships


We use the consolidation method of accounting when we have a controlling interest in other companies and limited partnerships. We use the equity method of accounting when we have an interest between twenty to fifty percent in other companies and limited partnerships, but do not exercise control. Under the equity method, our original investments are recorded at cost and are adjusted for our share of undistributed earnings or losses. All significant intercompany profits are eliminated.


Concentrations of Credit Risk


Financial instruments that potentially subject us to concentrations of credit risk are cash and cash equivalents.


Cash and Cash Equivalents


We maintain deposit balances with financial institutions which balances may, from time to time, exceed the federally insured limits.  Effective October 2008 through December 31, 2013, federally insured limits have been increased from $100,000 towhich are $250,000 for interest bearing deposits.accounts. In addition, effective October 14, 2008from December 31, 2010 through June 30, 2010,December 31, 2012, our financial banking institutions participate in the Temporary Liquidity Guarantee Program, which program provides FDIC coverage on the full balance of non-interest bearing deposits. deposits, but effective January 1, 2013 the balance of our non-interest bearing deposits will no longer receive full FDIC insurance coverage. FDIC insurance coverage on non-interest bearing deposits will be limited to the standard $250,000 maximum deposit insurance amount. At October 3, 2009, September 29, 2012,we have no deposits in excess of federally insured limits. We have not experienced any losses in such accounts.

Major Supplier


Throughout our fiscal years 20092012 and 2008,2011, we purchased substantially all of our food products from one major supplier pursuant to a master distribution agreement which entitled us to receive certain purchase discounts, rebates and advertising allowances. We believe that several other alternative vendors are available, if necessary.


Revenue Recognition

Revenue Recognition

We record revenues from normal recurring sales upon the sale of food and beverages and the sale of package liquor products. We report our sales net of sales tax. Continuing royalties, which are a percentage of net sales of franchised stores, are accrued as income when earned.


Pre-opening Costs

Pre-opening Costs

Our pre-opening costs are those typically associated with the opening of a new restaurant and generally include payroll costs associated with the “new restaurant openers” (a team of select

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Table of Contents

NOTE 1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)

Pre-opening Costs (Continued)

employees who travel to new restaurants to ensure that our high standards for quality are met), rent and promotional costs. We expense pre-opening costs as incurred. During our



FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Pre-opening Costs (Continued)

fiscal year 2009,2012, we reported losses of $107,000 primarily due to pre-opening costs associated with the new limited partnership restaurant in Miami, Florida. During our fiscal year 2011, we had no limited partnership restaurants under development and therefore no limited partnerships reported losses primarily due to pre-opening costs.  During our fiscal year 2008, the limited partnership restaurant in Davie, Florida reported losses of $632,000, primarily due to pre-opening costs.

Advertising Costs


Our advertising costs are expensed as incurred. Advertising costs incurred during our fiscal years ended September 29, 2012 and October 3, 2009 and September 27, 20081, 2011 were approximately $351,000$531,000 and $217,000$318,000 respectively.

General Liability Insurance

We have general liability insurance which incorporates a semi-self-insured plan under which we assume the full risk of the first $50,000 of exposure per occurrence, while the limited partnerships assume the full risk of the first $10,000 of exposure per occurrence. Our insurance carrier is responsible for $1,000,000 coverage per occurrence above our self-insured deductible, up to a maximum aggregate of $2,000,000 per year. During our fiscal years ended September 29, 2012 and October 3, 2009 and September 27, 2008,1, 2011, we were able to purchase excess liability insurance, at a reasonable premium, whereby our excess insurance carrier is responsible for $6,000,000 coverage above our primary general liability insurance coverage. With the exception of one (1) limited partnership which has higher general liability insurance coverage to comply with the terms of its lease for the business premises, we are un-insured against liability claims in excess of $7,000,000 per occurrence and in the aggregate.


Our general policy is to settle only those legitimate and reasonable claims asserted and to aggressively defend and go to trial, if necessary, on frivolous and unreasonable claims. Under our current liability insurance policy, any expense incurred by us in defending a claim, including adjusters and attorney's fees, are a part of our $50,000 or $10,000, as applicable, self-insured retention.


Fair Value of Financial Instruments


The respective carrying value of certain of our on-balance-sheet financial instruments approximated their fair value. These instruments include cash and cash equivalents, note receivable, other receivables, accounts payables, and accrued expenses and debt. We have assumed carrying values to approximate fair values for those financial instruments, which are short-term in nature or are receivable or payable on demand. We estimated the fair value of debt based on current rates offered to us for debt of comparable maturities and similar collateral requirements.

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Table of Contents

NOTE 1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)

Fair Value of Financial Instruments(continued)

In accordance with FASB ASC Topic 820-10-50-1, we utilized a valuation model to determine the fair value of our swap agreements. As the valuation models for the swap agreements were based upon observable inputs, they are classified as Level 2 (see Note 9).

Derivative Instruments

We account for derivative instruments in accordance with FASB ASC Topic 815-10-05-4, “Accounting for Derivative Instruments and Hedging Activities”as amended, which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and hedging activities. In accordance with FASB ASC Topic 815-10-05-4, derivative instruments are recognized as assets or liabilities in the Company’s consolidated balance sheets and are measured at fair value. We recognized all changes in fair value through earnings unless the derivative is determined to be an effective hedge. We currently have two derivatives which we have designated as effective hedges (See Note 9).

Income Taxes


We account for our income taxes using FASB ASC Topic 740, “Income Taxes”, which requires the recognition of deferred tax liabilities and assets for expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.


We adopted the provisions regardingAccounting for Uncertainty in Income Taxes,which require the recognition of a financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. We applied these changes to tax positions for our fiscal yearyears ending September 29, 2012 and October 3, 2009.1, 2011. We had no material unrecognized tax benefits and no adjustments to our financial position, results of operations or cash flows were required. Generally, federal, state and local authorities may examine the Company’s tax returns for three years from the date of filing and the current and prior three years remain subject to examination as of September 29, 2012. We do not expect that unrecognized tax benefits will increase within the next twelve months. We recognize accrued interest and penalitiespenalties related to uncertain tax positions as income tax expense.

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Table of Contents

FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)

Stock-Based Compensation


We follow FASB ASC Topic 718, “Compensation – Stock Compensation” to account for stock-based employee compensation, which generally requires, among other things that all employee share-based compensation be measured using a fair value method and that resulting compensation costs be recognized in the consolidated financial statements. We had no unvested stock options as of January 1, 2006 and granted no stock options subsequent thereto, including our fiscal years 20092012 and 2008,2011, so there is no compensation expense recorded in our consolidated financial statements for our fiscal years 20092012 or 2008.


2011.

Long-Lived Assets


We continually evaluate whether events and circumstances have occurred that may warrant revision of the estimated life of our intangible and other long-lived assets or whether the remaining balance of our intangible and other long-lived assets should be evaluated for possible impairment. If and when such factors, events or circumstances indicate that intangible or other long-lived assets should be evaluated for possible impairment, we will determine the fair value of the asset by making an estimate of expected future cash flows over the remaining lives of the respective assets and compare that fair value with the carrying value of the assets in measuring their recoverability. In determining the expected future cash flows, the assets will be grouped at the lowest level for which there are cash flows, at the individual store level.


Reclassifications

Certain amounts in the prior year consolidated financial statements have been reclassified to conform to the presentation of the 2009 consolidated financial statements, which did not have a material impact on our net income or total assets.

Earnings Per Share


We follow FASB ASC SectionTopic 260 - “Earnings per Share.” This section provides for the calculation of basic and diluted earnings per share. Basic earnings per share includes no dilution and is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share assumes the exercise of options granted if the weighted average market price exceeds the exercise price. Earnings per share are computed by dividing income available to common stockholders by the basic and diluted weighted average number of common shares.



FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recently Adopted and Recently Issued Accounting Pronouncements


Adopted


In June 2009, FASB established the FASB Accounting Standards Codification (“Codification”) to become the source of authoritative U.S. generally accepted

There were no recently adopted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities, except for SEC rules and interpretive releases, which is also authoritative guidance for SEC registrants.  The Codification does not change GAAP, except in limited circumstances, and the content of the Codification carries the same level of GAAP authority.  The GAAP hierarchy has been modified to include only two levels of GAAP:  authoritative and nonauthoritative.  Other than the manner in which the new accounting guidance is referenced, the adoption of these changes did not have a material effect on the Company’s consolidated financial statements.  We adopted the Codification in the fourth quarter ofpronouncements during our fiscal year 2009 and as2012 that had a result, references to legacy GAAP accounting pronouncements inmaterial impact on our consolidated financial statement disclosures have been modifiedstatements.

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NOTE 1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)

Recently Adopted and Recently Issued Accounting Pronouncements (Continued)

Issued

In May 2011, the FASB issued an update to reflect plain English descriptions.

We follow FASB ASC Section 855Topic 820 - “Subsequent Events”, which introducesFair Value Measurements and Disclosures. This update provides guidance on how fair value accounting should be applied where its use is already required or permitted by other standards and does not extend the conceptuse of financial statements being availablefair value accounting. The Company will adopt this guidance effective in fiscal year 2013 as required and does not expect the adoption to be issued and requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date as either the date the financial statements were issued or were available to be issued.  The implementation of this standard did not have a significant impact on our consolidated financial condition, results of operations or cash flows.

Issued

In June 2009, the FASB issued changes to the accounting for determining whether an entity is a variable interest entity and modifies the methods allowed for determining the primary beneficiary of a variable interest entity.  In addition, these changes require ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity and enhanced disclosures related to an enterprise’s involvement in a variable interest entity.  These changes become effective for annual periods beginning after November 15, 2009 and will be adopted by us in our fiscal year 2011.  We are currently evaluating the potential impact, if any, of the adoption of these changes on consolidated results of operations and financial condition.

In March 2008, the FASB issued changes regarding derivatives and hedging to enhance disclosures about an entity’s derivative and hedging activities.  These changes are effective for all financial statements issued in fiscal years and interim periods beginning after November 15, 2008 and early application is encouraged.  These changes also encourage but


FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recently Adopted and Issued Accounting Pronouncements (Continued)

Issued   (Continued)

do not require comparative disclosures for earlier periods at initial adoption.  As we do not currently engage in derivative transactions or hedging activities, we do not anticipate any significant financial statement disclosure impact as a result of our evaluation of these changes.

In December 2007, the FASB issued changes regarding business combinations.  These changes establish principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired.  These changes also establish disclosure requirements to enable the evaluation of the nature and financial effects of the business combination.  These changes are effective for the fiscal years beginning after December 15, 2008 and will be adopted by us in the first quarter of our fiscal year 2010.  This guidance will have an impact on our accounting for any future business acquisitions.

In December 2007, the FASB issued changes regarding consolidation and non-controlling interests in consolidated financial statements.  These changes will change the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests (NCI) and classified as a component of equity.  This new consolidation method will significantly change the accounting for transactions with minority interest holders.  These changes are effective for fiscal years beginning after December 15, 2008 (our fiscal year 2010).  This guidance will have an impact on our consolidated financial statements.

NOTE 2.PROPERTY AND EQUIPMENT

 2009  2008  2012 2011 
           
Furniture and equipment $9,589,000  $9,184,000  $10,269,000  $10,004,000 
Leasehold improvements  19,131,000   18,195,000   18,905,000   18,035,000 
Land and land improvements  5,110,000   5,104,000   12,030,000   8,260,000 
Building and improvements  2,397,000   2,385,000   10,557,000   8,049,000 
Vehicles  688,000   685,000   751,000   726,000 
  36,915,000   35,553,000   52,512,000   45,074,000 
Less accumulated depreciation and amortization  15,675,000   13,952,000   20,917,000   18,892,000 
 $21,240,000  $21,601,000  $31,595,000  $26,182,000 

Depreciation and amortization expense for the fiscal years ended September 29, 2012 and October 3, 2009 and September 27, 20081, 2011 was approximately $2,259,000$2,377,000 and $2,131,000,$2,358,000, respectively.



FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


NOTE 3.LEASEHOLD INTERESTS

 2009  2008  2012 2011 
           
Leasehold interests, at cost $2,912,000  $2,938,000  $3,024,000  $2,929,000 
Less accumulated amortization  1,268,000   1,058,000   1,847,000   1,696,000 
 $1,644,000  $1,880,000  $1,177,000  $1,233,000 

Future leasehold amortization as of October 3, 2009September 29, 2012 is as follows:

    
2013 $134,000 
2014  134,000 
2015  128,000 
2016  122,000 
2017  122,000 
Thereafter  537,000 
  Total $1,177,000 

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2010 $205,000 
2011  205,000 
2012  147,000 
2013  128,000 
2014  128,000 
Thereafter  831,000 
Total $1,644,000 

NOTE 4.INVESTMENTS IN LIMITED PARTNERSHIPS

We have invested with others (some of whom are or are affiliated with our officers and directors), in teneight limited partnerships which own and operate teneight South Florida based restaurants under our service mark “Flanigan’s Seafood Bar and Grill”. We have also invested with others, (some of whom are or are affiliated with our officers and directors), in one limited partnership which owns and renovated a location in Miami, Florida which opened for business under our service mark “Flanigan’s Seafood Bar and Grill” on December 27, 2012.During the fourth quarter of our fiscal year 2011, we purchased from our limited partnership, the operating assets of the restaurant located at 950 S. Federal Highway, Stuart, Martin County, Florida and on July 31, 2011 this restaurant began operating as a Company-owned restaurant.In addition to being alimited partner in these limited partnerships, we are the sole general partner of all of these limited partnerships and manage and control the operations of the restaurants except for the restaurant located in Fort Lauderdale, Florida where we only hold a limited partnership interest.


Generally, the terms of the limited partnership agreements provide that until the investors’ cash investment in a limited partnership (includingincluding any cash invested by us)us is returned in full, 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 (½) to us as a management fee and one-half (1/2) to the investors (including us), prorata based upon 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 (½) of cash available to be distributed, with the other one half (½) of available cash distributed to the investors (including us), as a profit distribution, pro-rata based upon the investors’ investment.


As of October 3, 2009,September 29, 2012, limited partnerships owning three (3) restaurants, (Surfside, Florida, Kendall, Florida and West Miami, Florida locations), 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 our receipt ofdistributable amounts from the limited partnerships, we receive a fee equal to 3% of gross sales for use of our “Flanigan’s Seafood



FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


NOTE 4.
INVESTMENTS IN LIMITED PARTNERSHIPS  (Continued)

Bar and Grill” service mark, which use is authorized only while we act as general partner.This 3% fee is “earned” when sales are made by the limited partnerships and is paid weekly, in arrears.  Although we have no restaurants under development and whether we will have any under developmentThe new restaurant developed 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” usingMiami, Florida uses the same or substantially similar financial arrangement.

Surfside, Florida


We are the sole general partner and a 45% limited partner in this limited partnership which has owned and operated a restaurant in Surfside, Florida under our “Flanigan’s Seafood Bar and

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Table of Contents

NOTE 4.INVESTMENTS IN LIMITED PARTNERSHIPS (Continued)

Surfside, Florida (continued)

Grill” service mark since March 6, 1998. 34.9% 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 of their initial cash invested and wereceive an annual management fee equal to one-half (½) of the cash available for distribution by the limited partnership. This entity is consolidated in the accompanying financial statements.


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. 29.7% 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 wereceive an annual management fee equal to one-half (½) of the cash available for distribution by the limited partnership. This entity is consolidated in the accompanying financial statements.


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. 34.1% 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 wereceive an annual management fee equal to one-half (½) of the cash available for distribution by the limited partnership. This entity is consolidated in the accompanying financial statements.



FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


NOTE 4.
INVESTMENTS IN LIMITED PARTNERSHIPS  (Continued)

Weston, Florida


We are the sole general partner and a 30% limited partner in this limited partnership which has owned and operated a restaurant in Weston, Florida under our “Flanigan’s Seafood Bar and Grill” service mark since January 20, 2003. 35.1% of the remaining limited partnershipinterest is owned by persons who are either our officers, directors or their family members. As of the end of our fiscal year 2009,2012, this limited partnership has returned to its investors approximately 73.75%81.25% of their initial cash invested. During our fiscal year 2009, no distribution were made to limited partners as this limited partnership had limited cash flow generated by this restaurant.  This entity is consolidated in the accompanying financial statements.


Stuart, Florida

We are the sole general partner and a 13% limited partner in this limited partnership which has owned and operated a restaurant in a Howard Johnson’s Hotel in Stuart, Florida under our “Flanigan’s Seafood Bar and Grill” service mark since January 11, 2004. 31.0% of the remaining limited partnership interest is owned by persons who are either our officers, directors or their family members.  As of the end of our fiscal year 2009, this limited partnership has returned to its investors approximately 22.5% of their initial cash invested.

During our fiscal years 2009 and 2008,2012, no distributions were made to limited partners as this limited partnership had a net gain of $1,000 and a net loss of $8,000 from the operation of the restaurant during the fiscal years 2009 and 2008, respectively, before depreciation and amortization, and owed the Company $241,000 and $216,000, as of the end of our fiscal years 2009 and 2008, respectively, in advances made to meet operating losses.  limited positive cash flow generated by this restaurant.This entity is consolidated in the accompanying financial statements and therefore the intercompany transactions are eliminated.  As of October 3, 2009, the amounts this limited partnership owes to us have been offset with an allowance for doubtful accounts, in the amount of $241,000, on our balance sheet and is offset by an eliminating entry in consolidation in accordance with ASC 810 regarding accounting for consolidation.

On October 1, 2009, the limited partnership operating the Stuart, Florida restaurant was served with a copy of a complaint, arising out of foreclosure proceedings commenced against the limited partnership’s landlord.  The limited partnership was named in and served with the complaint because it is the tenant on the property which is the subject of the foreclosure proceedings.  As of October 3, 2009, due to the limited partnership’s inability to re-negotiate its three year renewal option, it leases the property on a month-to-month term. We do not know what the outcome of these foreclosure proceedings will be or what impact it will have on the limited partnership, but thus far no request has been made to have the limited partnership vacate the premises.  If the limited partnership were required to vacate the Stuart, Florida premises, it would have a material adverse effect on its operations.  No assurance can


FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


NOTE 4.
INVESTMENTS IN LIMITED PARTNERSHIPS  (Continued)

Stuart, Florida (Continued)

be given that the limited partnership would be able to locate a suitable replacement location at reasonable rates and terms, if at all.

statements.

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

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NOTE 4.INVESTMENTS IN LIMITED PARTNERSHIPS (Continued)

Wellington, Florida (continued)

Grill” service mark since May 27, 2005. 25.7% of the remaining limited partnership interest is owned by persons who are either our officers, directors or their family members. As of the end of our fiscal year 2009,2012, this limited partnership has returned to its investors approximately 42%56% of their initial cash invested, increased from approximately 41%52% as of the end of our fiscal year 2008.  2011.This entity is consolidated in the accompanying financial statements.


Pinecrest, Florida

Pinecrest, Florida

We are the sole general partner and 40% 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. 15.0% of the remaining limited partnership interest is owned by persons who are either our officers, directors or their family members. As of the end of our fiscal year 2009,2012, this limited partnership has returned to its investors approximately 34%80% of their initial cash invested, increased from approximately 18%65% as of the end of our fiscal year 2008.2011. This entity is consolidated in the accompanying financial statements.


Pembroke Pines, Florida

We are the sole general partner and an 18% 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. 17.9% of the remaining limited partnership interest is owned by persons who are either our officers, directors or their familymembers. As of the end of our fiscal year 2012, this limited partnership has returned to its investors approximately 41.0% of their initial cash invested, increased from approximately 32.0% as of the end of our fiscal year 2011. This entity is consolidated in the accompanying financial statements.

Davie, Florida


We are the sole general partner and a 48% 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. 9.7% of the remaining limited partnership interest is owned by persons who are either our officers, directors or their family members. As of the end of our fiscal year 2009,2012, this limited partnership has returned to its investors approximately 7.0%27.5% of their initial cash invested.invested, increased from approximately 19.5% as of the end of our fiscal year 2011. This entity is consolidated in the accompanying financial statements.

Pembroke Pines, Florida

We are the sole general partner and a 17% 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.  17.9% of the remaining limited partnership interest is owned by persons who are either our officers, directors or their family


FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


NOTE 4.
INVESTMENTS IN LIMITED PARTNERSHIPS  (Continued)

Pembroke Pines, Florida (Continued)

members.  As of the end of our fiscal year 2009, this limited partnership has returned to its investors approximately 11% of their initial cash invested.  As of the end of our fiscal year 2008, no cash had been distributed to investors. This entity is consolidated in the accompanying financial statements.

Fort Lauderdale, Florida


A corporation, owned by onea member of our directors,Board of Directors, 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

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NOTE 4.INVESTMENTS IN LIMITED PARTNERSHIPS (Continued)

Fort Lauderdale, Florida (continued)

partnership interest in this limited partnership. 58.8%60.1% of the remaining limited partnership interest is owned by persons who are either our officers, directors or their family members. We have a franchise arrangement with this limited partnership. For accounting purposes, we do not consolidate the operations of this limited partnership into our operations. This entity is reported using the equity method in the accompanying consolidated financial statements.


The following is a summary of condensed unaudited financial information pertaining to our limited partnership investment in Fort Lauderdale, Florida:

Financial Position: 2009  2008 
Current assets $76,000  $75,000 
Non-current assets  525,000   549,000 
Current liabilities  126,000   87,000 
Non-current liabilities  28,000   44,000 
         
Operating Results:        
Revenues  2,300,000   2,287,000 
Gross profit  1,509,000   1,525,000 
Net income  1,300   86,000 


  2012  2011 
Financial Position:        
Current assets $277,000  $150,000 
Non-current assets  439,000   452,000 
Current liabilities  141,000   152,000 
         
Operating Results:        
Revenues  2,641,000   2,401,000 
Gross profit  1,751,000   1,605,000 
Net income  181,000  50,000

NOTE 5.LIQUOR LICENSES

Liquor licenses, which are indefinite lived assets, are tested for impairment in September of each of our fiscal years. The fair value of liquor licenses at October 3, 2009,September 29, 2012, exceeded the carrying amount; therefore, we recognized no impairment loss. The fair value of the liquor licenses was evaluated by comparing the carrying value to recent sales for similar liquor licenses in the County issued. At September 29, 2012 and October 3, 2009 and September 27, 2008,1, 2011, the total carrying amount of our liquor licenses was approximately $345,000.$470,000. We acquired no liquor licenses in our fiscal year 2009 which required capitalization.

FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
years 2012 or 2011.

NOTE 6.INCOME TAXES

The components of our provision for income taxes for our fiscal years 20092012 and 20082011 are as follows:

  2012  2011 
Current:        
    Federal $660,000  $502,000 
    State  175,000   138,000 
  835,000   640,000 
Deferred:        
    Federal  (63,000)  (36,000)
    State  (7,000)  (6,000)
   (70,000)  (42,000)
  $765,000  $598,000 

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  2009  2008 
Current:      
Federal $331,000  $687,000 
State  92,000   148,000 
Deferred:  423,000   835,000 
Federal  (167,000)  (245,000)
State  (29,000)  (26,000)
   (196,000)  (271,000)
  $227,000  $564,000 

NOTE 6.INCOME TAXES(Continued)

A reconciliation of income tax computed at the statutory federal rate to income tax expense is as follows:

  2009  2008 
       
Tax provision at the statutory rate of 34% $549,000  $563,000 
State income taxes, net of federal income tax  58,000   72,000 
Tax benefit of tip credit generated  (167,000)  (160,000)
Sec. 179 phase out and other permanent items  -   85,000 
Tax effect of consolidation elimination entry  (81,000)  - 
Deferred tax asset true up  (140,000)  - 
Other  8,000   4,000 
  $227,000  $564,000 

  2012  2011 
       
Tax provision at the statutory rate of 34% $741,000  $617,000 
State income taxes, net of federal income tax  94,000   85,000 
FICA tip credit  (227,000)  (200,000)
Tax effect of consolidation elimination entry  —   76,000 
True up adjustment  110,000   — 
Other permanent items  47,000   20,000 
  $765,000  $598,000 

We have deferred tax assets which arise primarily due to depreciation recorded at different rates for tax and book purposes offset by cost basis differences in depreciable assets due to the deferral of the recognition of insurance recoveries on casualty losses for tax purposes, investments in and management fees paid by limited partnerships, accruals for potential uninsured claims, bonuses accrued for book purposes but not paid within two and a half months for tax purposes, the capitalization of certain inventory costs for tax purposes not recognized for financial reporting purposes, the recognition of revenue from gift cards not redeemed within twelve months of issuance, allowances for uncollectable receivables, unfunded limited retirement commitments and tax credit carryforwards generated as a result of the application of alternative minimum taxes.


The components of our deferred tax assets at September 29, 2012 and October 3, 2009 and September 27, 20081, 2011 were as follows:

  2009  2008 
       
Current:      
Reversal of aged payables $27,000  $27,000 
Capitalized inventory costs  20,000   22,000 
Accrued bonuses  135,000   142,000 
Accruals for potential uninsured claims  48,000   43,000 
Gift cards  16,000   9,000 
Allowance for account receivable for consolidated affiliate  92,000   - 
  $338,000  $243,000 
Long-Term:        
Book/tax differences in property and equipment $406,000  $421,000 
Limited partnership investments  403,000   308,000 
Alternative minimum tax carryforward  21,000   - 
  $830,000  $729,000 


FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


  2012  2011 
       
Current:        
  Reversal of aged payables $27,000  $27,000 
  Capitalized inventory costs  25,000   22,000 
  Accrued bonuses  188,000   164,000 
  Accruals for potential uninsured claims  30,000   19,000 
  Gift cards  72,000   48,000 
  Limited partnership management fees  29,000   74,000 
  $371,000  $354,000 
Long-Term:        
  Book/tax differences in property and equipment $540,000  $459,000 
  Limited partnership investments  386,000   418,000 
  Accrued limited retirement  35,000   31,000 
  $961,000  $908,000 

NOTE 7.DEBT

Long-Term Debt

  2012  2011 

 

Mortgage payable to lender, secured by a first mortgage on real property and improvements, bearing interest at BBA LIBOR – 1 Month +2.25%, (2.46% at September 29, 2012), but with $3,750,000 of the principal amount fixed at 4.51% pursuant to a swap agreement, amortized over 20 years, payable in monthly installments of principal and interest of approximately $23,700,and our current monthly payment of principal and interest as to that portion of the principal amount not fixed by the interest rate swap agreement, ($750,000), is payable at BBA LIBOR - 1 month, + 2.25% interest rate, (2.46% as of September 29, 2012). The entire principal balance and all accrued but unpaid interest is due on December 1, 2019.

 $4,331,000   — 
 

  2009  2008 
       
Mortgage payable to bank, secured by land and building, bearing interest at 7.5%; payable in monthly installments of principal and interest of $28,600, maturing in October, 2013. $3,273,000  $3,363,000 
         
Mortgage payable to bank, secured by first mortgage on a building, bearing interest at 7.25%; payable in monthly installments of principal and interest of approximately $8,000, maturing in December, 2013.  936,000   962,000 
         
Mortgage payable, secured by land and building, bearing  interest at 10.0%; payable in monthly installments of principal and interest of $3,949, maturing in May, 2017.  444,000   446,000 
         
Note payable to finance company, secured by vehicle, bearing interest at 9.25%, payable in monthly installments of principal and interest of approximately $4,500 through maturity in July 2010, at which time the unpaid principal of $45,000 becomes due.  80,000   122,000 
         
Financed insurance premiums, secured by all insurance policies, bearing interest between 4.05% and 5.15%, payable in monthly installments of principal and interest in the aggregate amount of $77,000 through November 30, 2008 and $72,000 through November 30, 2009 for general liability insurance.  The monthly installment for the property insurance will remain at $30,000 a month through August 31, 2010.  445,000   231,000 
         
Other  36,000   59,000 
   5,214,000   5,183,000 
Less current portion  681,000   419,000 
  $4,533,000  $4,764,000 


FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


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NOTE 7.Table of Contents

Mortgage payable to lender, secured by a first mortgage on real property and improvements, bearing interest at 7.5% payable in monthly installments of principal and interest of $28,600, with a balloon payment of approximately $2,833,000 in October, 2013.		  2,958,000   3,070,000 
 
Term loan payable to lender, secured by a blanket loan on all Company assets, bearing interest at BBA LIBOR – 1 Month + 2.25%, (2.46% at September 29, 2012), but fixed at 3.43%, pursuant to a swap agreement, payable in monthly installments of principal and interest of approximately $38,000, payable interest only for 3 months and then fully amortized over 45 months, with the final payment due December 1, 2015.
  1,387,000   — 
 
Term loan payable to lender, secured by a blanket lien on all Company assets and a second mortgage on a building, bearing interest at BBA LIBOR +3.25%, (3.46% at September 29, 2012), but fixed at 4.55%, pursuant to a swap agreement, payable in monthly installments of principal and interest of approximately $50,000, fully amortized over 36 months, with the final payment due August, 2013.		  508,000   1,038,000 
 
Mortgage payable to a related third party, secured by first mortgage on real property and improvements, bearing interest at 10%, amortized over 15 years, payable in monthly installments of principal and interest of approximately $10,800, with a balloon payment of approximately $658,000 due in September, 2018.		  939,000   972,000 
 
Mortgage payable to lender, secured by a first mortgage on real property and improvements, bearing interest at BBA LIBOR +2.25%, (2.46% at September 29, 2012), but fixed at 5.11% pursuant to a swap agreement, amortized over 20 years, payable in monthly installments of principal and interest of approximately $4,600, with a balloon payment of approximately $720,000 due in August, 2017.		  879,000   907,000 
 
DEBT  (Continued)
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Long-Term Debt (Continued)


Mortgage payable to unrelated third party, secured by first mortgage on real property and improvements, bearing interest at 8½%, amortized over 15 years, payable in monthly installments of principal and interest of approximately $8,400, with a balloon payment of approximately $528,000 in November, 2017.		  760,000   794,000 
 
Mortgage payable to unrelated third party, secured by first mortgage on real property and improvements, bearing interest at 10.0%; amortized over 30 years, payable in monthly installments of principal and interest of approximately $4,000, with a balloon payment of approximately $413,000 in May, 2017.		  433,000   437,000 
 
Financed insurance premiums, secured by all insurance policies, bearing interest between 2.99% and 4.89%, payable in monthly installments of principal and interest in the aggregate amount of $24,000 a month through June 1, 2013.		  333,000   573,000 
 
Mortgage payable to related third party, secured by first mortgage on real property and improvements, bearing interest at 10%, amortized over 15 years, payable in monthly installments of principal and interest of approximately $9,100, with a balloon payment of approximately $555,000 due in January, 2019.		  806,000   833,000 
         
Other  84,000   133,000 
   13,418,000   8,757,000 
Less current portion  1,732,000   1,151,000 
  $11,686,000  $7,606,000 

Long-term debt at October 3, 2009September 29, 2012 matures as follows:


2010  681,000 
2011  157,000 
2012  154,000 
2013  166,000 
2014  3,632,000 
Thereafter  424,000 
  $5,214,000 

Line

2013  1,732,000 
2014  3,729,000 
2015  828,000 
2016  513,000 
2017  1,541,000 
Thereafter  5,075,000 
  $13,418,000 

As of Credit


During our fiscal year 2009,September 29, 2012, we changed our primary banking relationship to another unaffiliated financial institution, which includes a new lineare in compliance with the covenants of credit of $2,500,000.  The outstanding balance on our line of credit bears interest at BBA LIBOR 1 month rate, plus 2.25%, (2.4956% as of October 3, 2009), with monthly payments of interest only and the unpaid principal balance and all accrued interest due in full on October 7, 2009.  We granted our lender a security interest in substantially all of our assets and a second mortgage on our corporate offices as collateral to secure our repayment obligations under our credit line.  Subsequent to our fiscal year 2009, the maturity date of our line of credit, (October 7, 2009), was extended until January 7, 2010 while we negotiate a modification of our line of credit arrangementloans with our lender.  As of October 3, 2009, the amount outstanding under our secured line of credit was $1,586,000, as compared to $1,562,000 as of September 27, 2008.

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NOTE 8.COMMITMENTS, CONTINGENCIES AND OTHER MATTERS

Legal Matters


We own the building where our corporate offices are located.  On April 16, 2001, we filed suit against the owner of the adjacent shopping center to determine our right to non-exclusive parking in the shopping center.  During fiscal year 2007, the appellate court affirmed and upon re-hearing, again affirmed the granting of a summary judgment in favor of the shopping center.  The seller from whom we purchased the building was named as a defendant in the lawsuit by the owner of the adjacent shopping center and we filed and served a cross-complaint against the seller.  During the fourth quarter of our fiscal year 2009, the seller was awarded reimbursement of its attorneys’ fees and costs in the amount of $109,000 and we filed our motion for re-consideration of a part of such award.  As of October 3, 2009, we have not paid the award of attorneys’ fees and costs, although we have accrued the same, nor has there been a hearing scheduled on our motion for re-consideration of a portion of the award.  During the second quarter of our fiscal year 2009, the seller filed suit against us for malicious prosecution.  We deny the allegations and are vigorously defending against the allegations.


FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


NOTE 8.COMMITMENTS, CONTINGENCIES AND OTHER MATTERS

Legal Matters (Continued)

We are a party to various claims, legal actions and complaints arising in the ordinary course of our business. It is our opinion that all such matters are without merit or involve such amounts that an unfavorable disposition would not have a material adverse effect on our financial position or results of operations.


Leases


We lease a substantial portion of the land and buildings used in our operations under leases with initial terms expiring between 20102013 and 2049. Renewal options are available on many of our leases. Most of our leases are fixed rent agreements. For twoone Company-owned restaurant/package liquor store combination units,unit, lease rentals arerental is subject to sales overrides ranging from 1.75%3% to 4% of annual sales in excess of established amounts. For fouranother Company-owned restaurant, lease rental is subject to sales overrides of 7.3% of annual sales in excess of the base rent paid. For five limited partnership restaurants, lease rentals are subject to sales overrides ranging from 2% to 5.5% of annual sales in excess of the base rent paid. We recognize rent expense on a straight line basis over the term of the lease and percentage rent as incurred.  Certain of our leases are subject to fair market rental appraisals at the time of renewal.  We have the option to purchase the real property which we lease for the operation of our Fort Lauderdale, Florida restaurant.


We have a ground lease for an out parcel in Hollywood, Florida where we constructed a 4,120 square foot stand-alone building, one-half (1/2) of which is used by us for the operation of our Company-owned package liquor store and the other one-half (1/2) of which is subleased to an unrelated third party as retail space. Rent for the retail space commenced January 1, 2005, and we generated $49,000approximately $54,000 and $57,000 of revenue from this source during both our fiscal years ended September 29, 2012 and October 3, 2009 and September 27, 2008.1, 2011, respectively. Total future minimum sublease payments under the non-cancelable sublease are $290,000,$137,000, including Florida sales tax (currently 6%).


Future minimum lease payments, including Florida sales tax (currently 6% to 7%) under our non-cancelable operating leases as of October 3, 2009September 29, 2012 are as follows:

    
2010 $2,308,000 
2011  1,919,000 
2012  1,528,000 
2013  1,451,000 
2014  1,418,000 
Thereafter  4,191,000 
   Total $12,815,000 

2013 $2,642,000 
2014  2,481,000 
2015  2,206,000 
2016  1,840,000 
2017  1,582,000 
Thereafter  4,373,000 
  Total $15,124,000 

Total rent expense for all of our operating leases was approximately $2,725,000$2,922,000 and $2,697,000$2,980,000 in our fiscal years 20092012 and 2008,2011, respectively, and is included in “Occupancy



FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


NOTE 8.
COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)

Leases (Continued)

costs” in our accompanying consolidated statements of income. This total rent expense is comprised of the following:

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Table of Contents
  2009  2008 
       
Minimum Base Rent $2,367,000  $2,301,000 
Contingent Percentage Rent  358,000   396,000 
Total $2,725,000  $2,697,000 

NOTE 8.COMMITMENTS, CONTINGENCIES AND OTHER MATTERS(Continued)

Leases(Continued)

  2012  2011 
       
Minimum Base Rent $2,451,000  $2,537,000 
Contingent Percentage Rent  471,000   443,000 
Total $2,922,000  $2,980,000 

We guarantee various leases for franchisees and stores sold in prior years. During the second quarter of our fiscal year 2011, we sold our interest, as guarantor, of a nine (9) year leasehold interest in premises we do not currently use in our operations to an unrelated third party. The lease for the location was terminated, thereby also terminating our guaranty of the leasehold interest. Remaining rental payments required under these leases total approximately $1,553,000.

$29,000.

We account for such lease guarantees in accordance with FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, including Indirect Guarantees of Indebtedness of Others,” or FIN 45, now included in ASC Topic 460.460, “Guarantees”. Under that standard, we would be required to recognize the fair value orof guarantees issued or modified after December 31, 2002, for non-contingent guarantee obligations, and also a liability for contingent guarantee obligations based on the probability that the guaranteed party will not perform under the contractual terms of the guaranty agreement.

We do not believe it is probable that we will be required to perform under the remaining lease guarantees and therefore, no liability has been accrued in our consolidated financial statements.

Purchase Commitments


Effective October 21, 2009,

In order to fix the cost and ensure adequate supply of baby back ribs for our restaurants during calendar year 2013, on September 19, 2012, we entered into a purchase agreement with oura new rib supplier. The terms of the agreement stipulate thatsupplier, whereby we willagreed to purchase approximately $3,200,000$3,800,000 of baby back ribs during the 2010 calendar yearfrom this vendor at a fixed cost.We contract for the purchase of baby back ribs on an annual basis to fix the cost and ensure adequate supply for the calendar year. We purchaseanticipate purchasing all of our rib supply from this vendor, but we believe that several other alternative vendors are available, if necessary.


Franchise Program


At September 29, 2012 and October 3, 2009 and September 27, 2008,1, 2011, we were the franchisor of sixfive units under franchise agreements. Of the sixfive franchised stores, fourthree are combination restaurant/package liquor stores and two are restaurants.  Fourrestaurants (one of which we operate).During the fourth quarter of our fiscal year ended 2012, a franchised package liquor store located in Deerfield Beach, Florida, franchised to members of the family of our Chairman of the Board, officers and/or directors, with our consent, ceased operations in order to permit expanded operations of the jointly operated restaurant at the location.Three franchised stores are owned and operated by related parties. Under the franchise agreements, we provide guidance, advice and management assistance to the franchisees. In addition and for an additional annual fee of approximately $25,000, we also

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NOTE 8.COMMITMENTS, CONTINGENCIES AND OTHER MATTERS(Continued)

Franchise Program(Continued)

act as fiscal agent for the franchisees whereby we collect all revenues and pay all expenses and distributions. We also, from time to time, advance funds on behalf of the franchisees for the cost of renovations. The resulting amounts receivable from and payable to these franchisees are reflected in the accompanying consolidated balance sheet as either an asset or a liability. We also agree to sponsor and manage cooperative buying groups on behalf of the franchisees for the purchase of inventory. The franchise agreements provide for royalties to us of approximately 3% of gross restaurant sales and 1% of gross package liquor sales. We are not currently offering or accepting new franchises.


Employment Agreement/Bonuses


As of September 29 2012 and October 3, 2009 and September 27, 2008,1, 2011, we had no employment agreements.

Our Board of Directors approved an annual performance bonus, with 14% of the corporate pre-tax net income, plus or minus non-recurring items, but before depreciation and



FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


NOTE 8.
COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)

Employment Agreement/Bonuses  (Continued)

amortization in excess of $650,000 paid to the Chief Executive Officer and 6% paid to other members of management. Bonuses for our fiscal years 20092012 and 20082011 amounted to approximately $459,000$739,000 and $492,000,$647,000, respectively.

Our Board of Directors also approved an annual performance bonus, with 5% of the pre-tax net income before depreciation and amortization from our restaurants in excess of $1,875,000 and our share of the pre-tax net income before depreciation and amortization from the restaurants owned by the limited partnerships paid to the Chief Operating Officer and 5% paid to the Chief Financial Officer. Bonuses for our fiscal years 20092012 and 20082011 amounted to approximately $331,000$460,000 and $357,000,$392,000, respectively.


Our Board of Directors approved an annual performance bonus, with 3% of the pre-tax net income before depreciation and amortization from the package liquor stores paid to the Vice President of Package Operations. Bonuses for our fiscal years 20092012 and 20082011 amounted to approximately $24,000$33,000 and $22,000,$37,000, respectively.


Management Agreements


Atlanta, Georgia


We own, but do not operate, an adult entertainment nightclub located in Atlanta, Georgia which operates under the name “Mardi Gras”. We have a management agreement with an unaffiliated third party to manage the club. Under our management agreement, the unaffiliated third party management firm is obligated to pay us an annual amount, paid monthly, equal to the greater of $150,000 or ten (10%) percent of gross sales from the club, offset by one-half (1/2) of any rental increases, provided our fees will never be less than $150,000 per year. For our fiscal years ended September 29, 2012 and October 3, 2009 and September 27, 2008,1, 2011, we generated $170,000$157,000 and $238,000$161,000 of revenue, respectively, from the operation of the club.

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NOTE 8.COMMITMENTS, CONTINGENCIES AND OTHER MATTERS(Continued)

Management Agreements(Continued)

Deerfield Beach, Florida


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 management agreement is being amortized on a straight line basis over the life of the initial term of the agreement, ten (10) years. As of September 29, 2012 and October 3, 2009 and September 28, 2008,1, 2011, the balance of our management agreement of $312,000$162,000 and $362,000$212,000 was included in other assets in the accompanying consolidated balance sheet. The restaurant is owned by a third party unaffiliated with us. In exchange for providing management, bookkeeping and related services, we receive one-half (½) of the net profit, if any, from the operation of the



FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 8.
COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)

Management Agreements  (Continued)

Deerfield Beach, Florida (Continued)

restaurant.  Theour fiscal year 2011, the term of the management agreement which commencedwas extended through January 9, 2006, is for ten (10) years, with four (4) five (5) year renewal options in favor of the owner of the restaurant.2036. For our fiscal years ended September 29, 2012 and October 3, 2009 and September 27, 2008,1, 2011, we generated $185,000$320,000 and $150,000$250,000 of revenue, respectively, from providing these management services. As of October 3,2009,September 29, 2012, we have generated revenue in excess of the aggregate amount of $603,000 since the effective datepurchase price of the management agreement on January 9, 2006.

agreement.

NOTE 9.FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS

As of September 29, 2012, we have fully adopted FASB (ASC) Topic 820, “Fair Value Measurements and Disclosures”, for financial assets and liabilities and for non-financial assets and liabilities that are recognized or disclosed at fair value on at least an annual basis. Topic 820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurementdate. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, we consider the principal or most advantageous market in which it would transact and consider assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions and risk of non-performance. Topic 820 establishes a fair market hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Topic 820 establishes three levels of inputs that may be used to measure fair value:

Level 1 Inputs – Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 Inputs -- Inputs other than quoted prices included in Level 1 that are either directly or indirectly observable through correlation with market data. These include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and inputs to evaluation models or other pricing methodologies that do not require significant judgment because the inputs used in the model, such as interest rates and volatility, can be corroborated by readily observable market data.

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NOTE 9.FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS(Continued)

Level 3 Inputs -- One or more significant inputs that are unobservable and supported by little or no market activity, and that reflect the use of significant management judgment. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, and significant management judgment or estimation.

Interest Rate Swap Agreements

At September 29, 2012, we had four variable rate debt instruments outstanding that are impacted by changes in interest rates. In July, 2010, we converted the amount outstanding on our line of credit ($1,586,000) to a term loan (the “Term Loan”) and we also re-financed the mortgage loan encumbering our corporate offices (the “Refinanced Mortgage Loan”). In November, 2011, we financed our purchase of the real property and two building shopping center in Miami, Florida, with a $4,500,000 mortgage loan (the “$4.5M Mortgage Loan”), and received a $1,600,000 term loan (the “$1.6M Term Loan”) the proceeds of which were ultimately used to purchase the shopping center, while permitting us to retain our working capital and cash reserves. As a means of managing our interest rate risk on these debt instruments, we entered into interest rate swap agreements with our unrelated third party lender to convert these variable rate debt obligations to fixed rates. We are currently party to the following four (4) interest rate swap agreements:

(i) One (1) interest rate swap agreement entered into in July, 2010 relates to the Term Loan, (the “Term Loan Swap”), which converts the LIBOR based variable rate interest to a fixed rate. The Term Loan Swap requires us to pay interest for a three (3) year period at a fixed rate of 4.55% on an initial amortizing notional principal amount of $1,586,000, while receiving interest for the same period at the British Bankers Association LIBOR (“LIBOR”), Daily Floating Rate, plus 3.25%, on the same amortizing notional principal amount. Under this method of accounting, at September 29, 2012, we determined that based upon unadjustedquoted prices in active markets for similar assets or liabilities provided by our unrelated third party lender, the fair value of the Term Loan Swap was not material; and

(ii) The second interest rate swap agreement entered into July, 2010 relates to the Refinanced Mortgage Loan (the “Mortgage Loan Swap”). The Mortgage Loan Swap requires us to pay interest for a seven (7) year period at a fixed rate of 5.11% on an initial amortizing notional principal amount of $935,000, while receiving interest for the same period at LIBOR, Daily Floating Rate, plus 2.25%, on the same amortizing notional principal amount.Under this method of accounting, at September 29, 2012, we determined that based upon unadjustedquoted prices in active markets for similar assets or liabilities provided by our unrelated third party lender, the fair value of the Mortgage Loan Swap was not material; and

(iii) The third interest rate swap agreement entered into in November, 2011 by our wholly owned subsidiary, Flanigan’s Calusa Center, LLC, relates to the $4.5 Mortgage Loan (the “$4.5M Mortgage Loan Swap”). The $4.5M Mortgage Loan Swap requires us to pay interest for an eight (8) year period at a fixed rate of 4.51% on an initial amortizing notional principal amount of $3,750,000, while receiving interest for the same period at LIBOR – 1 Month, plus

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NOTE 9.FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS(Continued)

2.25%, on the same amortizing notional principal amount. We determined that at September 29, 2012, the interest rate swap agreement is an effective hedging agreement and not material; and

(iv) The fourth interest rate swap agreement entered into in November, 2011 relates to the $1.6M Term Loan (the “$1.6M Term Loan Swap”). The $1.6M Term Loan Swap requires us to pay interest for a four (4) year period at a fixed rate of 3.43% on an initial amortizing notional principal amount of $1,600,000, while receiving interest for the same period at LIBOR – 1 Month, plus 2.25%, on the same amortizing notional principal amount. We determined that at September 29, 2012, the interest rate swap agreement is an effective hedging agreement and not material.

NOTE 10.COMMON STOCK

Treasury Stock


Purchase of Common Shares

Pursuant to a discretionary plan approved by the Board of Directors, during our fiscal year 2009,2012, we purchased 21,400 shares of our common stock for an aggregate purchase price of $87,000.  Of the shares purchased, we purchased 850800 shares of our common stock from the Joseph G. Flanigan Charitable Trust for $4,000a purchase price of $6,000. During our fiscal year 2011, we purchased 868 shares of our common stock for an aggregate purchase price of $6,000. Of the shares purchased, we purchased 800 shares of our common stock from the Joseph G. Flanigan Charitable Trust for $5,500, 18 shares of our common stock were purchased in a private transaction for $100 and 32550 shares of our common stock from an employee for $2,000$400 in an off market transactions,transaction, which reflected an actual per share purchase price which was equal to the average per share market price on the date of purchase.  The balance of our common stock purchased, 20,225 shares, were purchased on the open market for an aggregate purchase price of $81,000.  During our fiscal year 2008, we purchased 6,400 shares of our common stock for an aggregate purchase price of $49,000.  Of the shares purchased, we purchased 1,200 shares of our common stock from the Joseph G. Flanigan Charitable Trust for $9,600 and 2,500 shares of our common stock from an employee for $20,000 in off market transactions, which reflected an actual per share purchase price which was equal to the average per share market price on the date of purchase.  The balance of our common stock purchased, 2,700 shares, was purchased on the open market for an aggregate purchase price of $19,400.


Sale of Common Shares


During our fiscal years 20092012 and 2008,2011, we did not sell any shares of our common stock.



FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


NOTE 9.
COMMON STOCK (Continued)

Stock Options


We granted no options during our fiscal years 20092012 and 2008.2011. We have no options outstanding at October 3, 2009.   During fiscal years ended October 3, 2009 and September 27, 2008, 49,350 and 950 options expired unexercised.


NOTE 10.NET INCOME PER COMMON SHARE

In the fourth quarter of our fiscal year 2008 and until their expiration in the third quarter of our fiscal year 2009, 49,350 options vested and outstanding were anti-dilutive and were not included in the computation of diluted EPS for the fourth quarter of our fiscal year 2008 or the first and second quarters of our fiscal year 2009.

  2009  2008 
       
Basic weighted average shares  1,868,000   1,888,000 
Incremental shares relating to outstanding options   -   1,000 
Diluted weighted average shares  1,868,000   1,889,000 
29, 2012.

NOTE 11.BUSINESS SEGMENTS

We operate principally in two reportable segments –package– package stores and restaurants. The operation of package stores consists of retail liquor sales and related items. Information concerning the revenues and operating income for our fiscal years ended 20092012 and 2008,2011, and identifiable assets for the two reportable segments in which we operate, are shown in the following table. Operating income is total revenue less cost of merchandise sold and operating expenses relative to each segment. In computing operating income, none of the following

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NOTE 11.BUSINESS SEGMENTS(Continued)

items have been included: interest expense, other non-operating income and expense and income taxes. Identifiable assets by segment are those assets that are used in our operations in each segment. Corporate assets are principally cash and real property, improvements, furniture, equipment and vehicles used at our corporate headquarters. We do not have any operations outside of the United States and transactions between restaurants and package liquor stores are not material.

  2012  2011 
Operating Revenues:        
Restaurants $62,198,000  $57,765,000 
Package stores  13,214,000   13,141,000 
Other revenues  1,923,000   1,403,000 
Total operating revenues $77,335,000  $72,309,000 
         
Income from Operations Reconciled to Income before
   Income Taxes and Net Income Attributable to
   Noncontrolling Interests		        
Restaurants $5,269,000  $4,245,000 
Package stores  874,000   1,006,000 
   6,143,000   5,251,000 
Corporate expenses, net of other revenues  (2,572,000)  (2,124,000)
Income from Operations  3,571,000   3,127,000 
Other Income  73,000   231,000 
Net Income Attributable to Noncontrolling Interests  (660,000)  (832,000)
Interest expense, net of interest income  (806,000)  (479,000)
Income Before Income Taxes $2,178,000  $2,047,000 
         
Identifiable Assets:        
Restaurants $22,133,000  $22,543,000 
Package store  4,952,000   4,045,000 
   27,085,000   26,588,000 
Corporate  19,659,000   11,578,000 
Consolidated Totals $46,744,000  $38,166,000 
         
Capital Expenditures:        
Restaurants $1,144,000  $3,563,000 
Package stores  101,000   577,000 
   1,245,000   4,140,000 
Corporate  6,555,000   446,000 
Total Capital Expenditures $7,800,000  $4,586,000 
         
Depreciation and Amortization:        
Restaurants $1,704,000  $1,985,000 
Package stores  388,000   228,000 
   2,092,000   2,213,000 
Corporate  436,000   357,000 
Total Depreciation and Amortization $2,528,000  $2,570,000 

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Operating Revenues: 2009  2008 
Restaurants $52,979,000  $50,400,000 
Package stores  12,632,000   12,317,000 
Other revenues  1,449,000   1,492,000 
Total operating revenues $67,060,000  $64,209,000 
         
Operating Income Reconciled to Income before Income Taxes and Minority Interest in earnings (losses) of Consolidated Limited Partnerships:        
Restaurants $3,695,000  $3,669,000 
Package stores  526,000   491,000 
   4,221,000   4,160,000 
Corporate expenses, net of other revenues  (1,774,000)  (2,160,000)
Operating income  2,447,000   2,000,000 
Equity in net income of limited partnership  1,000   21,000 
Minority interest in (earnings) losses of consolidated limited partnerships  (627,000)  13,000 
Interest expense, net of interest income  (205,000)  (413,000)
Income Before Income Taxes $1,616,000  $1,621,000 
Identifiable Assets:        
Restaurants $19,587,000  $19,699,000 
Package store  3,396,000   3,673,000 
   22,983,000   23,372,000 
Corporate  10,496,000   9,432,000 
Consolidated Totals $33,479,000  $32,804,000 
         
Capital Expenditures:        
Restaurants $1,284,000  $3,825,000 
Package stores  305,000   194,000 
   1,589,000   4,019,000 
Corporate  345,000   318,000 
Total Capital Expenditures $1,934,000  $4,337,000 
         
Depreciation and Amortization:        
Restaurants $1,887,000  $1,759,000 
Package stores  250,000   252,000 
   2,137,000   2,011,000 
Corporate  332,000   352,000 
Total Depreciation and Amortization $2,469,000  $2,363,000 


FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


NOTE 12.QUARTERLY INFORMATION (UNAUDITED)

The following is a summary of our unaudited quarterly results of operations for the quarters in our fiscal years 20092012 and 2008.2011.

  Quarter Ended 
  Dec. 31,
2011		  March 31,
2012		  June 30,
2012		  Sept 29,
2012		 
             
Revenues $18,952,000  $20,618,000  $19,382,000  $18,383,000 
Income from operations  660,000   1,113,000   969,000   829,000 
Net income attributable to stockholders  336,000   509,000   236,000   332,000 
Net income per share –   Basic  0.18   0.27   0.13   0.18 
Net income per share –   Diluted  0.18   0.27   0.13   0.18 
Weighted average common                
  stock outstanding – basic  1,860,752   1,860,057   1,860,057   1,860,057 
Weighted average common                
  stock outstanding – diluted  1,860,752   1,860,057   1,860,057   1,860,057 

  Quarter Ended 
  January 1,
2011		  April 2,
2011		  July 2,
2011		  October 1,
2011		 
             
Revenues $17,788,000  $19,164,000  $18,120,000  $17,237,000 
Income from operations  668,000   1,207,000   822,000   430,000 
Net income attributable to stockholders  350,000   735,000   345,000   19,000 
Net income per share – Basic  0.19   0.39   0.19   0.01 
Net income per share – Diluted  0.19   0.39   0.19   0.01 
Weighted average common 
  stock outstanding – basic		  1,861,699   1,860,912   1,860,907   1,860,616 
Weighted average common                
  stock outstanding – diluted  1,861,699   1,860,912   1,860,907   1,860,616 

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  Quarter Ended 
  
December 27,
2008
  
March 28,
2009
  
June 27,
2009
  
October 3,
2009
 
             
Revenues $16,253,000  $17,757,000  $16,491,000  $16,559,000 
Income from operations  289,000   1,214,000   650,000   294,000 
Net income  172,000   684,000   311,000   222,000 
Net income per share –                
Basic  0.09   0.37   0.17   0.12 
Net income per share –                
Diluted  0.09   0.37   0.17   0.12 
Weighted average common stock outstanding – basic  1,876,681   1,870,690   1,863,007   1,862,743 
Weighted average common stock outstanding – diluted  1,876,681   1,870,690   1,863,007   1,862,743 

  Quarter Ended 
  
December 29,
2007
  
March 29,
2008
  
June 28,
2008
  
September 27,
2008
 
             
Revenues $15,904,000  $16,983,000  $15,765,000  $15,557,000 
Income from operations  180,000   970,000   651,000   199,000 
Net income  185,000   470,000   336,000   66,000 
Net income per share –                
Basic  0.10   0.25   0.18   0.03 
Net income per share –                
Diluted  0.10   0.25   0.18   0.03 
Weighted average common stock outstanding – basic  1,890,372   1,889,121   1,886,077   1,885,274 
                 
Weighted average common stock outstanding – diluted  1,903,300   1,899,992   1,895,378   1,885,573 

Quarterly operating results are not necessarily representative of our operations for a full year for various reasons including the seasonal nature of both the restaurant and package store segments.


NOTE 13.401(k) PLAN

Effective July 2004, we began sponsoring a 401(k) retirement plan covering substantially all employees who meet certain eligibility requirements. Employees may contribute elective deferrals to the plan up to amounts allowed under the Internal Revenue Code. We are not required to contribute to the plan but may make discretionary profit sharing and matching contributions. During our fiscal years 20092012 and 2008,2011, we made discretionary contributions of $NONE$23,000 and $30,000,$24,000, respectively.



FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

NOTE 14.SUBSEQUENT EVENTS

 (a)Purchase of Real Property, (Hollywood,(N. Miami, FL.):

During

Subsequent to the fourth quarterend of our fiscal year 2009 we contracted and then subsequent to our fiscal year 2009,2012, we closed on the purchase of the realtwo parcels of property and buildingadjacent to the Company owned property where our combination restaurant and package liquor store and restaurantlocated at 2505 N. University Drive, Hollywood,13205 Biscayne Boulevard, North Miami, Florida, (Store #19),#20) operates. We lease the first parcel of property for non-exclusive parking. Each parcel of property includes a building of approximately 2,600 square feet, but the building on the property directly adjacent to our property will be demolished for the construction of a parking lot. We will offer the second building for lease. We paid $1,350,000$2,900,000 for this property, $850,000$1,950,000 of which we borrowed from an unaffiliated third party, pursuant to a first mortgage.is financed by the seller. The mortgage amount bears interest at the rate of eight7.5% annually and one-half (8½%) percent per annum, is amortized over fifteen (15)twenty (20) years, with equalour monthly paymentspayment of principal and interest each in the amount of $8,000.00, with thetotaling $15,700. The entire principal balance and all accrued but unpaid interest is due in eight (8) years.  



on December 31, 2022.

 (b)PurchaseLine of Operating Assets from Franchisee (Boca Raton, Fl.)Credit

Subsequent to the end of our fiscal year 2009,2012, we purchasedwere in the process of finalizing on a $500,000 line of credit from our franchisee,a non affiliated third party lender, (the “Line of Credit”), to insure that we have adequate working capital and cash reserves after the operating assetspurchase of the franchisedtwo parcels of property adjacent to the Company owned property where our combination package liquor store and restaurantlocated at 45 S. Federal Highway, Boca Raton, Palm Beach County,13205 Biscayne Boulevard, North Miami, Florida, for an aggregate purchase price(Store #20) operates. The Line of $245,000Credit bears interest at the floating rate of prime plus 1%. The entire principal balance and on October 18, 2009 this restaurant began operatingall accrued but unpaid interest is due in four months. We granted our lender a security interest in substantially all of our assets as a Company-owned restaurant. No funds were requiredcollateral to close this purchase due to amounts owed to us by the franchisee. The lease at this location expires on April 30, 2011.  Our franchisee was unsuccessful in obtaining an extensionsecure our repayment obligations under our Line of the lease term.  There can be no assurance that the lease term will be extended or that we will find a suitable replacement location at reasonable rates, if at all.


Credit.

Subsequent events have been evaluated through January 4, 2010, the date these consolidated financial statements were issued. No events, other than the events described above, required disclosure.

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