UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Commission File Number: 333-23323333-233233

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☐☒ Yes     ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes     ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging"emerging growth company”company" in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes     ☒ No

At May 12, 2020,18, 2021, there were 8,095,0044,047,502 shares of common stock outstanding.

CAUTIONIONARYCAUTIONARY STATEMENT REGARDING RISKS

AND UNCERTAINTIES THAT MAY AFFECT FUTURE RESULTS

Forward-Looking Information

This quarterly report contains forward-looking statements about the business, financial condition and prospects of BT Brands, Inc. and its wholly owned subsidiaries (together, the “Company”). Forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995, can be identified by the use of forward-looking terminology such as “believes,” “projects,” “expects,” “may,” “estimates,” “should,” “plans,” “targets,” “intends,” “could,” “would,” “anticipates,” “potential,” “confident,” “optimistic” or the negative thereof, or other variations thereon, or comparable terminology, or by discussions of strategy, objectives, estimates, guidance, expectations and future plans. Forward-looking statements can also be identified by the fact these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends or results. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties.

While the Company believes the expectations reflected in forward-looking statements are reasonable, there can be no assurances such expectations will prove to be accurate. Security holders are cautioned such forward-looking statements involve risks and uncertainties. Certain factors may cause results to differ materially from those anticipated by the forward-looking statements made in this quarterly report. Such factors may include, without limitation, the risks, uncertainties and regulatory developments (1) related to the COVID-19 pandemic, which include risks and uncertainties related to the current unknown duration of the COVID-19 pandemic, the impact of governmental regulations that have been, and may in the future be, imposed in response to the pandemic including regulations which could adversely affect the Company’s ability to continue to operate as an “essential business,” potential changes in consumer behavior and dining patterns, which could impact patronage at the Company’s restaurants, the potential effects of government stimulus packages, the deterioration in the economic conditions in the United States, which potentially could have an impact on discretionary consumer spending and (2) those discussed and described in the Company’s 20192020 annual report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on April 15, 2020.March 11, 2021. Many of these risks and uncertainties are beyond the ability of the Company to control, nor can the Company predict, in many cases, all of the risks and uncertainties that could cause its actual results to differ materially from those indicated by the forward-looking statements. The forward-looking statements contained in this quarterly report speak only as of the date of this quarterly report, and the Company expressly disclaims any obligation or undertaking to report any updates or revisions to any such statement to reflect any change in the Company’s expectations or any change in events, conditions or circumstances on which any such statement is based, except as required by law.

TABLE OF CONTENTS

PART I —- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BT BRANDS, INC. AND SUBSIDIARYSUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

See Notes to Condensed Consolidated Financial Statements (unaudited)

BT BRANDS, INC. AND SUBSIDIARYSUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

See Notes to Condensed Consolidated Financial Statements (Unaudited)

BT BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT EQUITY (DEFICIT)

(Unaudited)

See Notes to Condensed Consolidated Financial Statements (Unaudited)

BT BRANDS, INC. AND SUBSIDIARYSUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

See Notes to Condensed Consolidated Financial Statements (Unaudited)

BT BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 –- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of BT Brands, Inc., and its subsidiaries.subsidiaries (the “Company”, “we”, “our”, “us”, or “BT Brands”) and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. All intercompany accounts and transactions have been eliminated in consolidation. These interim condensed consolidated financial statementsconsolidation and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and on a basis consistent in all material respects with the accounting policies for the fiscal year ended December 29, 2019.January 3, 2021. In our opinion, all adjustments, which are normal and recurring in nature, necessary for a fair presentation of our financial position and results of operation have been included. Operating results for interim periods are not necessarily indicative of the results that may be expected for a full fiscal year.

The accompanying Condensed Consolidated Balance Sheet as of March 29, 2020April 4, 2021 does not include all of the disclosures required by GAAP. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements as of December 29, 2019January 3, 2021 and the related notes thereto included in the Company’s Form 10-K for the fiscal year ended December 29, 2019.January 3, 2021.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.estimates, and the differences could be material.

Reverse Merger TransactionThe Company

BT Brands, Inc. (the “Company”) was incorporated as Hartmax of NY Inc. on January 19, 2016 with the objective of acquiring an operating entity. Effective on July 30, 2018, the Company acquired 100% of the ownership BTND, LLC. in exchange for common stock in the Company through a Share Exchange Agreement (“Share Exchange”) with BTND, LLC (“BTND”), and its Members. Following the Share Exchange, BTND became a wholly owned subsidiary of the Company for reporting purposes under GAAP.

Business

The Company currently operates company-owned fast-food restaurants called Burger Time. The Company also operates one unit in Minnesota as a franchisee of International Dairy Queen. The Company operates three Burger Time locations in Minnesota, four in North Dakota, and two in South Dakota. The Company closed a store in Richmond, Indiana during the year,2018 which is listed for sale, resulting insale. There were a total of ten operating restaurants at March 29, 2020. The Company owns a restaurant property in St. Louis, Missouri currently held for sale.on April 4, 2021.

The Company’s Dairy Queen store is operated pursuant to the terms of a franchise agreement with International Dairy Queen. The Company is required to pay regular royalty and advertising payments to the franchisor and to remain in compliance with the terms of the franchise agreement.

Fiscal Year Period

The Company’s fiscal year is a 52/53-week year, ending on the Sunday closest to December 31. Most years consist of four 13-week accounting periods comprising the 52-week year. All references to years in this report refer to the 13-week periods in the respective fiscal year periods. Fiscal 20202021 is a 53-week52-week year ending January 3, 2021.

2, 2022.

Cash

For purposes of reporting cash and cash flows, cash is net of outstanding checks and includes, amounts on deposit at banks a money market mutual fund holding, and deposits in transit.

Receivables

Receivables consistsconsist mainly of rebates due from a primary vendor.

Inventory

Inventory consists of food, beverages and supplies and is stated at lower of cost (first-in, first-out method) or net realizable value.

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives which range from three to thirty years.

The Company reviews long-lived assets to determine if the carrying value of these assets may not be recoverable based on estimated cash flows. Assets are reviewed at the lowest level for which cash flows can be identified, which is at the restaurant level. In determining future cash flows, significant estimates are made by the Company with respect to future operating results of each restaurant over its remaining life. If such assets are considered impaired, the impairment to be recognized is measured by the amount by which the carrying value of the assets exceeds the fair value of the assets.

Assets Held for Sale

From time-to-time the Company may sell an existing operating unit or may close an operating unit and list the property for sale. A property in the St. Louis area is currently listedwas written-off in 2020 and certain signage originally purchased for sale. Also,use in that location has been used in other locations. In September of 2018 the Company closed an operating Burger Time unit in Richmond, Indiana and the Richmond property is listed for sale. In the second quarter of fiscal 2019 it was concluded to record a charge of $93,488 for impairment of the value of the Richmond location.location and in the second quarter of 2020 an additional $100,000 impairment charge was recorded. The Company believes the Richmond property will be sold at or above its current carrying cost of assets held for sale.

Income Taxes

We accountprovide for income taxes under (Accounting Standards Codification (ASC), 740), Accounting for Income Taxes. ASC 740 using an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the liability method, whereby deferreddifferences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. Deferred tax asset and liability account balances are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value. The deferred tax assets are reviewed periodically for recoverability and valuation allowances are adjusted, as necessary.

The Company has a net operating loss carry-forward from the prior year and incurred additional net operating losses during the periods ended March 29, 2020 and March 31, 2019. These losses resulted in an increase in the related deferred tax assets; however, full valuation allowances were made which reduced these deferred tax assets to zero; therefore, no income tax provision or benefit was recognized for the periods ending March 29, 2020 and March 31, 2019 resulting in an effective income tax rate of 0% for both periods.

As of April 4, 2021, the Company estimates a current tax provision at the statutory rates of approximately 27.5%

The Company currently has no accrued interest or penalties relating to any income tax obligations. The Company currently has no federal or state examinations in progress, nor has it had any federal or state tax examinations since its inception and all periods since inception remain open for examination.

Per Common Share Amounts

Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income or (loss) per share is computed by dividing net income or loss by the weighted average number of shares of common stock outstanding during the period. Diluted net income per share is computed by dividing net income by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period. Common stock equivalents are excluded from the computation of diluted net loss per share becauseincome (loss) if their effect would be anti-dilutive. There were no potentially dilutive shares outstanding as of the periods ending in 20202021 and 2019,2020, as the strike price for warrants outstanding was above the fair market price of the underlying stock in both periods.

Other Assets

Other assets principally isare the allocated fair value of the acquired Dairy Queen franchise agreement related to the Company’s location in Ham Lake, Minnesota, andwhich is being amortized over an estimated useful life of 14 years.

Liquidity and Capital Resources

The consolidated financial statements have been prepared on a going concern basis. For the 13 weeks ended March 29, 2020,April 4, 2021, the Company incurred a net lossearned an after-tax profit of  $116,244. On March 29, 2020,$134,924. At April 4, 2021, the Company had $310,134$1,460,098 in cash, and a working capital deficit of $535,201 an increase$296,321, a decrease of $66,875$75,372 from January 3, 2021.

As efforts to vaccinate the year-end deficit of $468,326. On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (‘Covid-19”)U.S population progress, Covid-19 continues to a global pandemic. Covid-19 is having ahave significant adverse impact on the United States economy. At this time, itIt is impossibledifficult to predict either the near-term effects or the ultimate impact of the Covid-19 pandemic or the impact of governmental responses on the Company’s operating results and financial condition as the situation is rapidly evolving.condition.

A cash flow forecast for the next 12 months prepared by management has been adjusted to reflect recent offers by banks, in the wake of the COVID-19 Pandemic, including the Company’s principal lenders, Northview Bank and Bremer Bank, to abate all loan payments for the period from March through May of 2020. In May 2020, the Company received pandemic-related loans oftotaling $487,900, and of that amount, $460,400 was borrowed under the Small Business Administration PayrollAdministration’s Paycheck Protection Program and assuming certain conditions are met, theseunder the terms of the program the loans may be forgiven.were forgiven in 2020. In May 2020, the Company also borrowed $27,500 at no interest under the Minnesota Small Business Emergency Loan Program. The Company expects to have sufficient cash assets to meet its obligations for at least a year from the issuance of these consolidated financial statements. No adjustments have been made relating to recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company not continue as a going concern.

NOTE 2 – PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at end of the respective fiscal years:

Depreciation expense for the 13-week periods in 2020 and 2019 was $44,395 and $58,810, respectively.

NOTE 2 - PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at:

Depreciation expense for the 13-week periods in 2021 and 2020 was $54,269 and $44,395, respectively.

NOTE 3 –- ACCRUED EXPENSES

Accrued expenses consisted of the following at the dates:at:

NOTE 4 –- LONG TERM DEBT

The Company had the following long termCompany’s long-term debt obligationsis as of:follows:

In the first quarter of fiscal 2020, as a result of the many uncertainties surrounding the economy during the COVID-19 response, two of the Company’s mortgage lenders agreed to suspend current payments for a period of three months. The loans will continue to accrue interest at the stated rate, which included in the principal outstanding, and the suspended payments will be treated as balloon-payments due at the end of the mortgage term.

NOTE 5 –- RELATED PARTY TRANSACTIONS

BTND Trading

BTND Trading is an entity separate from the Company owned by certain significant shareholders of the Company, from time-to-time BTND Trading has advanced funds to the Company. In 2020 no payments have been made on this note and during the first quarter BTND Trading advanced an additional $50,000 to the Company which amount has been added to the current portion long-term debt as it is anticipated this advance will be repaid before the end of the year.

Next Gen Ice

In 2019, the Company made a series ofcash advances in the form of investments into Next Gen Ice, Inc. (NGI) in the form of Series C Notes totaling $179,000. In the first quartera principal amount of 2020 the Company advanced an additional $28,000 to NGI and the $28,000 advance was repaid following the end of the quarter, in April 2020.$179,000 (“Notes”). The Company’s CEO, Gary Copperud, is Chairman of the Board of Directors of NGI and the Company’s Chief Operating Officer, Kenneth Brimmer, is also a member of the Board of Directors of NGI and is currently servingserves as Chief Financial Officer of NGI on a part-time contract basis. Mr. Copperud, and a limited liability companiescompany controlled by him together own approximately 55%34% of the outstanding equity of NGI. The Series COn March 2, 2020, the Notes, were originally due on March 3, 2020. On March 3, 2020, the Companymodified and NGI entered into a Loan Modification and Extension Agreement pursuant to which the Company agreed to extend the maturity date of the NGI Notesextended to August 31, 2020. In considerationAs part of the extension of the term of the NGI Notes: (i) NGI granted toNote modification, the Company a security interest in all of NGI’s assets, (ii) issued to the Company a warrant entitling it to purchasereceived 179,000 shares of common stock in Next Gen Ice from the founders of NGI representing approximately 2% of NGI shares outstanding. The Company also holds warrants to purchase 358,000 shares of common stock at a price of $1.00 per share at any time through March 31, 2023,2023. The common stock and (iii)common stock purchase warrants received by the foundersCompany were recorded at a value determined by the Company of $75,000. This amount was also recorded at a discount to the note receivable and was recognized as interest income over the extended term of the Notes. The Company has determined that its investment in NGI including Mr. Copperud agreed to transferdoes not have a readily determinable market value and therefore is carried at the cost determined by the Company at the time the shares and warrants were received. The Notes were repaid in August 2020, with interest, and currently there are no outstanding amounts due to the Company 179,000 common shares offrom NGI.

NOTE 6 –- CONTINGENCIES

In the course of its business, the Company may be a party to claims and legal or regulatory actions arising from the conduct of its business. The Company is not aware of any significant asserted or potential claims which could impact its financial position

NOTE 7 – Covid-19 AND EMERGENCY LOAN RELIEF

On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (‘Covid-19”) a global pandemic. Covid-19 has had a significant adverse impact on the United States economy. While we have experienced some product shortages and some labor shortages, we have continued to operate all of our locations on a drive-through basis only with some limited hours and closing access to both the walk-up window and any indoor seating. Indoor seating is only available in our Dairy Queen and one other location. At this time, it is impossible to predict the ultimate impact of the Covid-19 pandemic on the Company’s operating results and financial condition as the situation and regulations surrounding government response to the pandemic are constantly changing.

On May 1, 2020, the Company received funding in connection with “Small Business Loans” under the federal Paycheck Protection Program provided in Section 7(a) of the Small Business Act of 1953, as amended by the Coronavirus Aid, Relief and Economic Security Act, as amended from time to time (the “PPP”). Pursuant to the terms of the Promissory Notes dated May 1, 2020, by BTND and BTNDDQ, L.L.C. in favor of Northview Bank. BTND borrowed $418,900 original principal amount, and BTNDDQ, L.L.C. borrowed $41,500 original principal amount. Both PPP loans were funded on May 1, 2020. The PPP Loans bear interest at 1% per annum and mature in two years from the date of disbursement of funds. Interest and principal payments under the PPP Loans will be deferred for a period of six months. Under certain circumstances, all or a portion of the PPP Loans may be forgiven, however, there can be no assurance that any portion of the PPP Loans will be forgiven and that BTND and BTNDDQ, L.L.C. would not be required to repay the PPP Loans in full. The PPP Loan contains certain covenants which, among other things, restrict the borrower’s use of the proceeds of the PPP Loan to the payment of payroll costs, interest on mortgage obligations, rent obligations and utility expenses, require compliance with all other loans or other agreements with any creditor of the borrower, to the extent that a default under any loan or other agreement would materially affect the borrower’s ability to repay the PPP Loan and limit the ability of the borrower to make certain changes to its ownership structure.

On April 29, 2020, BTNDDQ, L.L.C. also borrowed $27,500 at no interest under the Minnesota Small Business Emergency Loan Program from Central Minnesota Development Corporation. This loan is interest free and under certain conditions up to 50% of the loan may be forgiven, BTNDDQ, L.L.C., initially, is required to make 18 monthly payments of $458.33 beginning December 15, 2020, following the initial 18 months, in the event the note does not qualify for loan forgiveness, it will be repaid in equal installments over an additional 36 months.position.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

The following discussion of financial condition, results of operations, liquidity and capital resources of BT Brands, Inc. and its wholly-owned subsidiaries (together, the “Company”) should be read in conjunction with the Company’s condensed consolidated financial statements and accompanying notes included under Part I, Item 1 of this quarterly report on Form 10-Q, as well as with the audited consolidated financial statements and accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s annual report on Form 10-K for the year ended December 29, 2019.January 3, 2021.

OverviewIntroduction

We own and operate ten fast food restaurants, including nine Burger Time restaurants and one Dairy Queen restaurant, all of which are in the North Central region of the United States. Our Burger Time restaurants feature a wide variety of burgers and other affordably priced foods such as chicken sandwiches, pulled pork sandwiches, sides and soft drinks. Our Dairy Queen restaurant offers the established Dairy Queen menu consisting of burgers, chicken, sides, ice cream and other desserts, and a wide array of beverages. Our revenues are derived from the sale of food and beverages at our restaurants.

Our Burger Time operating principles include: (i) offering bigger burgers and more value for the money; (ii) offering a limited menu to permit attention to quality and speed of preparation; (iii) providing fast service by way of single and double drive-thru designs and a point-of-sale system that expedites the ordering and preparation process; and (iv) great tasting quality food made fresh to order at a fair price. Our primary strategy is to serve the drive-thru and take-out segment of the quick-service restaurant industry.

Operationally, we take several steps to maintain efficiency, including maintaining inventory of no more than approximately $5,000 to $10,000 per store at any given time (which also has the advantage of allowing for frequent deliveries of fresh food).

Our Burger Time investment model targets an average total cash investment of between $325,000 and $535,000. Real estate and finance costs may vary materially by location but, assuming the average investment figure applies, the amount allocated to the purchase of real estate would be approximately $225,000. These costs can fluctuate significantly, based on the number and timing of restaurant openings and the specific expenses incurred for each restaurant.

Our average customer transaction increased by approximately 4% in the fiscal 2020 compared to 2019 principally because of the price increase implemented in the middle of 2020. Our sales trends are influenced by many factors and the environment remains challenging for smaller restaurant chains as competition from the major fast-food hamburger-focused business is intense.

BusinessMaterial Trends - Effects of COVID-19and Uncertainties

In March 2020, the World Health Organization declared the novel strain of coronavirus (“COVID-19”)There are industry trends which may have a global pandemic. This contagious virus, which has continued to spread, has adversely affected workforces, customers, economies and financial markets globally. It has also disrupted the normal operations of many businesses, including ours. In response to this outbreak, many state and local authorities have mandated the temporary closure of non-essential businesses and dine-in restaurant activity. While we have experienced some product shortages, for now, we have continued to operate all ofsignificant adverse effect on our locations on a drive-through basis only eliminating accessbusiness. These trends principally relate to the walk-up service windowrapidly changing area of technology and any indoor seating which is only available at our Dairy Queen locationfood delivery. The major companies in the restaurant industry have rapidly adopted and one other location. Also, most of our locationsdeveloped applications for the smart phone and mobile delivery, have outdoor picnic table seating for use in nicer summer weather,aggressively expanded drive-through operations and in, most cases,have developed loyalty programs and data base marketing supported by a robust technology platform. We expect these dining areas have been closed. At this time, it is impossible to predict the near-term effects or the ultimate impact of the Covid-19 pandemic on the Company’s operating results and financial condition as the situation and regulations surrounding government response to the pandemic are constantly changing. As a result of the many uncertainties potentially threatening our abilitytrends to continue as restaurants aggressively complete for customers. Further, the major QSR’s have been increasingly willing to strategically discount prices through promotions such as a going concern.

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law on March 27, 2020, providing provisions aid small businesses through programs administered by the Small Business Administration (“SBA”)“dollar menu”. The CARES Act includes, among other things, provisions relating to payroll tax credits and deferrals, net operating loss carryback periods, alternative minimum tax credits and technical corrections to tax depreciation methods for qualified improvement property. We are currently evaluating the impact of the provisions of the CARES Act. The CARES Act also established a Paycheck Protection Program (“PPP”), whereby certain small businesses are eligible for a loan to fund payroll expenses, rent, and related costs. The loan may be forgiven if the funds are used for payroll and other qualified expenses. Given the absence of any funding alternatives, the Company applied for and was granted loans totaling $460,400 under the United States Small Business Administration’s Payroll Protection Program. The Company expects to useexpect these funds to meet payroll expenses. The Company’s BTNDDQ, L.L.C. subsidiary also received a $27,500 loan from a State of Minnesota Small Business Emergency Loan Program.significant trends will continue.

The cost of food has increased over the last two years; however, we expect to see some inflationary pressure in 2021. Beef costs were stable in 2020 following an increase of approximately 5% in 2019. Given the competitive nature of the fast-food burger restaurant industry, it may be difficult to raise menu prices to fully cover future cost increases. During 2020, a significant increase in business volume contributed to improved profit margins. Additional margin improvements may have to be made through operational improvements, equipment advances and increased volumes to help offset any food cost increases, due to the competitive state of the restaurant industry.

Labor will continue to be a critical factor in the foreseeable future. In most areas where we operate our restaurants, there historically has been a shortage of suitable labor. This has resulted in higher wages as the competition for employees intensifies, not only in the restaurant industry, but in practically all retail and service industries. It is crucial for the Company to develop and maintain programs to attract and retain quality employees.

Increases in the federally and state mandated minimum wage may also impact our operations. While details have not been determined the initial proposal by the Biden Administration includes a proposal to increase the minimum wage to $15 per hour. In North Dakota, the minimum wage is set at the federally mandated minimum wage of $7.25 per hour and the rates are annually adjusted to reflect any increase in cost of living. South Dakota has established a minimum wage of $9.10 per hour which is annually adjusted to increase with the cost of living. Minnesota’s minimum-wage rate for small employers, such as us, is $8.04 per hour. Our hourly employees earn a wage of on average of approximately $12 to $13 per hour. An increase in the minimum wage to $15 per hour would adversely impact our profit margins.

In March 2020, the World Health Organization declared coronavirus COVID-19 a global pandemic. A health pandemic is a disease outbreak that spreads rapidly and widely by infection and affects many individuals in an area or population at the same time. This contagious disease outbreak, which increases and decreases in intensity, and any related adverse public health developments, has adversely affected workforces, customers, economies, and financial markets globally, potentially leading to an economic downturn. Our stores have remained open for drive-through business. The response to COVID-19 has disrupted the normal operations of many businesses, including ours.  More recently, food service businesses, including ours, have faced challenges in attracting and hiring workers and it is possible the labor shortages may become more acute in the busier summer months.

Most states, including Minnesota and North Dakota, have limited or banned public gatherings to halt or delay the spread of disease. Under these emergency orders, essential services have remained open, including, but not limited to gas stations, pharmacies, grocery stores, food banks, convenience stores, take-out and delivery restaurants, banks, hospitals, and laundromats. Under the directions limiting public gatherings, regulators have generally allowed drive-through restaurant services to remain open. To date, our restaurants have remained open although we have curtailed hours at some stores and have experienced temporary restaurant closures while locations have been cleaned and employees tested. Thus far, we have been able to reopen after two or three days. Local, regional or national governments may, at any time, implement directives that further limit or order our business to close or take other measures intended to mitigate the spread of disease. Further, customers may choose to remain in self-imposed isolation and avoid public gathering places.

While a program to vaccinate a majority of Americans is currently in progress, it is not possible for us to predict the duration or magnitude of the effects of the outbreak and its impact on our business or results of operations at this time. The conditions may influence restaurant customer traffic and our ability to adequately staff our restaurants, receive deliveries on a timely basis or perform functions at the corporate level. Further, such conditions could impact the availability of the menu items we offer and the ability of suppliers to deliver such products. We also may be adversely affected if jurisdictions in which we have restaurants impose mandatory closures, seek voluntary closures or impose restrictions on operations. Even if such measures are not implemented, the perceived risk of infection or significant health risk may adversely affect our business.

Growth Strategy and Outlook

We are focused on growing our business and building value for our shareholders. We are seeking to increase value for our shareholders in the foodservice industry. We expect to pursue the acquisition of multi-unit restaurant concepts and individual restaurant properties at attractive multiples of earnings. Once acquired, we will operate the business or businesses with a shared central management organization. Assuming we are successful in acquiring an operating business, following the acquisition, we expect to pursue growth strategies to both expand the number of locations and to increase comparable store sales and profits.

Our business plan is to grow through acquisitions in the foodservice industry. In addition, we may develop additional Burger Time locations through the acquisition and conversion of existing properties. We also expect to identify and complete acquisitions of existing restaurant units and multi-unit chains which could be operated and expanded through the addition of new locations.

Our growth strategy is predicated upon (i) building or acquiring new restaurants, (ii) growing comparable restaurant sales and profits, and (iii) quickly and cost-effectively scaling our growth while leveraging our corporate services.

We believe that we will have opportunities to acquire new restaurant businesses. We intend to follow a disciplined strategy of evaluating acquisition opportunities to determine the operations are in markets meeting our demographic, real estate and investment criteria. Our ability to successfully evaluate an acquisition opportunity and to understand the competitive landscape of a new market will be critical in making a successful acquisition. Additionally, our ability to identify, recruit and hire both salaried and hourly staff will impact our ability to expand as will changes in the legal environment, including increases to the minimum wage, which could impact our ability to expand into certain areas. Further, we believe that there has been an oversaturation of restaurants in certain areas which could decrease the number of markets that we believe will be attractive to expand into. Even if we can acquire restaurants, the new restaurants, and our Company, will be subject to various risks, some of which, including factors impacting our customers, such as declining economic conditions, are entirely out of our control. We will seek to quickly and cost-effectively scale our growth by leveraging our general and administrative costs.

Our ability to acquire or open new restaurants is predicated on the availability of capital for such purposes. We cannot be certain that capital will be available to us on acceptable terms if at all.

Results of Operations for the Thirteen Weeks Ended April 4, 2021 and the Thirteen Weeks Ended March 29, 2020

The following table sets forth, for the fiscal periods indicated, our Condensed Statements of Operations expressed as percentage of total revenues. Percentages below may not reconcile because of rounding.