| Nature Of Business And Significant Accounting Policies | (1) NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES Nature of business In September 2019 a holding company reorganization was completed in which Famous Dave’s of America, Inc. (“FDA”) became a wholly owned subsidiary of the new parent holding company named BBQ Holdings, Inc. (“BBQ Holdings”). As used in this Form 10-K, “Company”, “we” and “our” refer to BBQ Holdings and its wholly owned subsidiaries. BBQ Holdings was incorporated on March 29, 2019 under the laws of the State of Minnesota, while FDA was incorporated in Minnesota on March 14, 1994. The Company develops, owns and operates restaurants under the name “Famous Dave’s”, “Clark Crew BBQ”, “Granite City Food & Brewery” and “Real Urban Barbecue.” Additionally, the Company franchises restaurants under the name “Famous Dave’s”. As of January 3, 2021, there were 125 Famous Dave’s restaurants operating in 31 states, Canada, and the United Arab Emirates, including 27 Company-owned restaurants and 98 franchise-operated restaurants. In October 2020, the Company signed a 25 -unit development agreement with Bluestone Hospitality Group (“Bluestone”) whereby Bluestone will open Famous Dave’s ghost kitchens and dual restaurant concepts with the Johnny Carino’s Italian brand. The first Clark Crew BBQ restaurant opened in December 2019 in Oklahoma City, Oklahoma. BBQ Holdings has a 20 % ownership in this venture. On March 9, 2020, the Company purchased 18 Granite City Food & Brewery restaurants (“Granite City Acquisition”) in connection with a Chapter 11 bankruptcy filing. On March 16, 2020, the Company purchased one Real Urban Barbecue restaurant located in Vernon Hills, Illinois. In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a pandemic and the United States declared a National Public Health Emergency. As a result, public health measures were taken to minimize exposure to the virus. These measures, some of which are government-mandated, have been implemented globally resulting in a dramatic decrease in economic activity. “Stay-at-home” orders with the exception of conducting certain essential functions, quarantines, travel restrictions and other governmental restrictions to reduce the spread of COVID-19 have had an adverse impact on the Company’s business. In some areas, these restrictions have discouraged or precluded even carry-out orders. Further, the COVID-19 pandemic has precipitated significant job losses and a national economic downturn that typically impacts the demand for restaurant food service. From mid-March through April, all of the Company's restaurants operated on a take-away, mobile pick-up and delivery basis only in order to protect its employees and customers from the spread of the COVID-19 pandemic and to comply with the government mandates. Beginning in May, the Company gradually began opening its restaurants for dine-in at 25% to 50 % capacity pursuant to the regulations of the jurisdictions in which the Company operates. While all but one of the Company-owned restaurants began operating under limited-capacity in-store dining by mid-June 2020, in late October, some locations were required to reduce or eliminate in-store dining due to new COVID restrictions. Although the Company has experienced some recovery from the initial impact of COVID-19, the long-term impact of COVID-19 on the economy and on its business remains uncertain, the duration and scope of which cannot currently be predicted. The Company cannot predict what additional restrictions may be enacted, to what extent it can maintain off-premise sales volumes or if individuals will be comfortable returning to its dining rooms during or following social distancing protocols, and what long-lasting effects the COVID-19 pandemic may have on the restaurants industry as a whole. The extent of the reopening process, along with the potential impact of the COVID-19 pandemic on consumer spending behavior, which may be a function of continued concerns over safety and/or depressed consumer sentiment due to adverse economic conditions, including job losses, will determine the significance of the impact to the Company’s operating results and financial position. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. Management is continually evaluating the impact of this global crisis on its financial condition, liquidity, operations, suppliers, industry, and workforce and will take additional actions as necessary. Management delayed making certain rent payments on its leased properties and continues to negotiate with its landlords. The Company deferred the March through June royalties due from their franchisees and offered a discount on deferred payments remitted prior to June 30, 2020. On April 30, 2020, two of the Company’s wholly-owned operating subsidiaries 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 “Paycheck Protection Program”). Pursuant to the terms of the Business Loan Agreements and Promissory Notes the Company borrowed approximately $13.0 million in the aggregate. Subsequently, two of the Company’s subsidiaries borrowed approximately $921,000 in the aggregate under the above referenced program in May 2020 (see Note 8 Long-term Debt ). The Company was very fortunate to be able to utilize the program for each of its subsidiaries. As a nano-cap public restaurant organization, the Company’s access to capital differs greatly from its larger competitors. The Company requires these funds to retain, recall, and pay its loyal employees. The Covid-19 pandemic led to a government-required shut down of dining rooms, and with the Paycheck Protection Program funds, the Company has been able to continue serving customers. While each state mandates the extent of government restrictions, those restrictions continue to suppress revenues at each of the Company’s stores, thus inhibiting the Company’s ability to build upon its cash position. Should government restrictions increase, the Company’s cash position could be further diminished. After a thorough review and consultation with advisors, pursuant to the guidance provided by Small Business Administration, the Company was able to certify with a high level of confidence that it met the requirements of the loans. The Company continues to monitor the economic impact of the COVID-19 pandemic, as well as mitigating emergency assistance programs, such as the Coronavirus Aid, Relief, and Economic Security Act, on it, its customers, and its vendors. Remote work arrangements have been established for the Company’s employees to the extent possible in order to maintain financial reporting systems. The duration of the disruption on global, national, and local economies cannot be reasonably estimated at this time. Due to the rapid development and fluidity of this situation, the Company cannot determine the ultimate impact that the COVID-19 pandemic will have on the Company’s consolidated financial condition, liquidity, and future results of operations, and therefore any prediction as to the ultimate material adverse impact on the Company’s consolidated financial condition, liquidity, and future results of operations is uncertain. Seasonality The Company’s Famous Dave’s restaurants typically generate higher revenue in the second and third quarters of its fiscal year as a result of seasonal traffic increases and high catering sales experienced during the summer months. The Company’s Granite City restaurants typically generate higher revenue in the second and fourth quarters of its fiscal year as a result of warmer weather and increased patio seating in the second quarter and holiday activity in the fourth quarter. However, due to safety concerns and government regulations related to COVID-19, in fiscal year 2020, the Company was not able to realize the higher revenue from catering sales and holiday events as it has historically. Principles of consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. All inter-company transactions and balances have been eliminated in consolidation. Use of estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires the Company 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 financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates. Financial instruments Due to their short-term nature, the carrying value of the Company’s current financial assets and liabilities approximates their fair value. The fair value of long-term debt approximates the carrying amount based upon the Company’s expected borrowing rate for debt with similar remaining maturities and comparable risk. Segment reporting The Company has Company-owned and franchise-operated restaurants in the United States, Canada and the United Arab Emirates, and operate within the single industry segment of foodservice. Management makes operating decisions on behalf of the BBQ Holdings brand which includes both Company-owned and franchise-operated restaurants. In addition, all operating expenses are reported in total and are not allocated to franchising operations for either external or internal reporting. As a result, the Company has concluded that it has a single reporting segment. Fiscal year The Company’s fiscal year ends on the Sunday nearest to December 31 of each year. The Company’s fiscal year is generally 52 weeks; however, it periodically consists of 53 weeks. The fiscal year ended January 3, 2021 (fiscal 2020) consisted of 53 weeks while the fiscal year ended December 29, 2019 (fiscal 2019) consisted of 52 weeks. Cash and cash equivalents Cash equivalents include all investments with original maturities of three months or less or which are readily convertible into known amounts of cash and are not legally restricted. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250,000 , while the remaining balances are uninsured. In May 2020, the Company invested $3.5 million in a certificate of deposit (CD) through Choice Bank. The interest rate on this CD is 3.0% with an annual percentage yield of 3.04 %. Interest is compounded every 30 days and the CD automatically renews monthly. This balance is included with cash and cash equivalents on the Company’s balance sheet. Restricted cash and marketing fund The Company has a Marketing Development Fund, to which most Company-owned Famous Dave’s restaurants, in addition to the majority of franchise-operated, contribute a percentage of net sales, for use in public relations and marketing development efforts. The funds held in this account are used in part to reimburse the Company for its marketing and digital services activities on behalf of the Famous Dave’s brand. The Company also receives funds from its suppliers to be used exclusively for point-of-sale equipment purchases for its own stores as well as its franchisees. As the assets held by these funds are considered to be restricted, the Company reflects the cash related to these funds within restricted cash and reflect the liability within accrued expenses on its consolidated balance sheets. The Company had approximately $1.5 million and $761,000 in these funds as of January 3, 2021 and December 29, 2019, respectively. Accounts receivable, net The Company provides an allowance for uncollectible accounts on accounts receivable based on historical losses and existing economic conditions, when relevant. The Company provides for a general bad debt reserve for franchise receivables due to increases in days sales outstanding and deterioration in general economic market conditions. This general reserve is based on the aging of receivables and is adjusted each quarter based on past due receivable balances. Additionally, the Company has periodically established a specific reserve on certain receivables as necessary. In assessing recoverability of these receivables, the Company makes judgments regarding the financial condition of the franchisees based primarily on past and current payment trends, as well as other variables, including annual financial information, which our franchisees are required to submit. Any changes to the reserve are recorded in general and administrative expenses. Accounts receivable are written off when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts. In fiscal 2020, the Company recorded approximately $403,000 in bad debt related to the discount it offered franchisees as a result of the pandemic on deferred payments remitted prior to June 30, 2020 as described above. Exclusive of that one-time adjustment, accounts receivable balances written off have not exceeded allowances provided and the Company believes all accounts receivable in excess of allowances provided are fully collectible. If accounts receivable in excess of provided allowances are determined uncollectible, they are charged to expense in the period that determination is made. The Company’s reserve for bad debt was $277,000 and $132,000 at January 3, 2021 and December 29, 2019, respectively. Inventories Inventories consist principally of small wares, food and beverages, and retail goods, and are recorded at the lower of cost (first-in, first-out) or net realizable value. Assets Held for Sale million. In September 2020, the Company sold the building and improvements at its Coon Rapids, Minnesota location, which had a carrying value of approximately $2.7 million, for a gross purchase price of $3.6 million. After standard closing costs, the Company recorded a gain of approximately $937,000 and used proceeds of approximately $3.5 million to pay down its loan with Choice Financial Group (Note 8 Long-term Debt Property, equipment and leasehold improvements, net Property, equipment and leasehold improvements are stated at cost, net of accumulated depreciation. The Company recognizes depreciation expense utilizing the straight-line method once an asset has been placed into service. The following table outlines the useful lives of the Copmpany’s major classes of property, equipment and leasehold improvements: Land N/A Buildings 30 years Leasehold improvements 0 - 30 years Furniture, fixtures, equipment and software (excluding restaurant signage) 3 - 7 years Restaurant signage 10 - 15 years Decor 7 years The Company capitalizes labor costs associated with the implementation of significant information technology infrastructure projects based on actual labor rates per person including benefits, for all time spent on the implementation of software and are depreciated over 5 years. The Company capitalizes construction overhead costs until the time a building is turned over to operations, which is approximately two weeks prior to opening and depreciate these items over the same useful life as leasehold improvements. Management reviews property and equipment, including leasehold improvements for impairment when events or circumstances indicate these assets might be impaired pursuant to the FASB accounting guidance on impairment or disposal of long-lived assets. The Company’s management considers such factors as the Company’s history of losses and the disruptions in the overall economy in preparing an analysis of its property, including leasehold improvements, to determine if events or circumstances have caused these assets to be impaired. Management bases this assessment upon the carrying value versus the fair market value of the asset and whether or not that difference is recoverable. Such assessment is performed on a restaurant-by-restaurant basis and includes other relevant facts and circumstances including the physical condition of the asset. If management determines the carrying value of the restaurant assets exceeds the projected future undiscounted cash flows, an impairment charge would be recorded to reduce the carrying value of the restaurant assets to their fair value. In fiscal 2020, the financial performance of the Company’s restaurants in Grand Junction, Colorado, Colorado Springs, Colorado, Madison, Wisconsin, Westbury, New York and Minneapolis, Minnesota including a history of negative cash flow as well as decreases in comparable restaurant sales, caused the Company to record impairment losses. The recorded impairment losses of the carrying value of each restaurant’s assets consisted of the following: Location FF&E ROU Asset Total (dollars in thousands) Westbury, NY $ 948 $ - $ 948 Colorado Springs, CO 462 97 559 Grand Junction, CO 1,032 1,187 2,219 Madison, WI 164 820 984 Minneapolis, MN 503 319 822 $ 3,109 $ 2,423 $ 5,532 Intangible Assets The Company has transferable liquor licenses in jurisdictions with a limited number of authorized liquor licenses. These licenses were capitalized as indefinite-lived intangible assets and are included in intangible assets, net in our consolidated balance sheets. The Company reviews annually the liquor licenses for impairment. The costs of obtaining non-transferable liquor licenses that are directly issued by local government agencies for nominal fees are expensed as incurred. Annual liquor license renewal fees are expensed over the renewal term. Goodwill represents the excess of cost over the fair value of identified net assets of businesses acquired. Goodwill is tested for impairment annually or on an interim basis if events or changes in circumstances between annual tests indicate a potential impairment. Factors considered include, but are not limited to historical financial performance, a significant decline in expected future cash flows, unanticipated competition, changes in management or key personnel, macroeconomic and industry conditions and the legal and regulatory environment. In fiscal year 2020, the Company adopted the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplified the accounting for goodwill impairment and reduced the cost and complexity of accounting for goodwill. ASU 2017-04 removes Step 2 of the goodwill impairment test, which required a hypothetical purchase price allocation. Instead, goodwill impairment will be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of the goodwill. The fair value assessment could change materially if different estimates and assumptions were used. No goodwill impairment charges were recognized during the years ended January 3, 2021 and December 29, 2019. In fiscal year 2020, the Company wrote off $39,000 of goodwill in conjunction with the closure of its Colorado Springs, CO location. Reacquired franchise rights are amortized over the life of the related franchise agreement. The Company evaluates reacquired franchise rights in conjunction with its impairment evaluation of long-lived assets. Advertising Advertising costs are charged to expense as incurred. Advertising costs were approximately $2.7 million and $2.8 million for the years ended January 3, 2021 and December 29, 2019, respectively, and are included in operating expenses for local store marketing and in national advertising fund expenses for national advertising in the consolidated statements of operations. Research and development costs Research and development costs represent all expenses incurred in relation to the creation of new menu and promotional offerings, recipe enhancements and documentation activities. Research and development costs were approximately $473,000 and $489,000 for the years ended January 3, 2021 and December 29, 2019, respectively, and are included in general and administrative expenses in the consolidated statements of operations. Pre-opening expenses All start-up and pre-opening costs are expensed as incurred. Pre-opening rent during the build-out period is included in pre-opening expense. We incurred approximately $10,000 and $460,000 of pre-opening expenses during the years ended January 3, 2021 and December 29, 2019. Leases The Company leases the property for its corporate headquarters, most of its Company-owned stores, and certain office and restaurant equipment. Beginning in fiscal 2019, the Company adopted ASU 2016-02 - Leases (Topic 842). Under this standard, the Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of use (“ROU”) assets, current portion of operating lease liabilities, and operating lease liabilities in its consolidated balance sheets. ROU assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term at the commencement date. Because most of the Company’s leases do not provide an implicit rate of return, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Operating lease ROU assets exclude lease incentives received. Lease terms for Company-owned stores generally range from 5 - 20 years with one or more five-year renewal options and generally require the Company to pay a proportionate share of real estate taxes, insurance, common area, and other operating costs in addition to a base or fixed rent. The Company elected the short term lease exemption for certain qualifying leases with lease terms of twelve months or less and, accordingly, did not record right-of-use assets and lease liabilities. These leases with initial terms of less than 12 months are recorded directly to occupancy expense on a straight-line basis over the term of the lease. Additionally, the Company decided to utilize the package of practical expedients and the practical expedient to not reassess certain land easements . The Company decided not to utilize the practical expedient to use hindsight. Certain of its leases also provide for variable lease payments in the form of percentage rent, in which additional rent is calculated as a percentage of sales in excess of a base amount, and not included in the calculation of the operating lease liability or ROU asset. The Company’s leases have remaining lease terms of one to 20 years . For purposes of calculating operating lease liabilities, lease terms may be deemed to include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Rent expense is recognized on a straight-line basis for operating leases over the entire lease term, including lease renewal options and build-out periods where the renewal is reasonably assured and the build-out period takes place prior to the restaurant opening or lease commencement date. Rent expense recorded during the build-out period is reported as pre-opening expense. Exit and disposal costs Exit or disposal activities, including restaurant closures, include the cost of disposing of the assets and other facility-related expenses from previously closed restaurants. These costs are generally expensed as incurred. Additionally, at the date the Company ceases using a property under an operating lease, it removes the remaining balance of the ROU asset. Any subsequent adjustments to the related liability as a result of lease termination are recorded in the period incurred. Upon disposal of the assets associated with a closed restaurant, any gain or loss and any costs incurred for restaurants that have been closed, after the date of their closure, are presented within the asset impairment, estimated lease termination and other closing costs line item of our consolidated statements of operations. Net income (loss) per common share Basic net income per common share (“EPS”) is computed by dividing net income by the weighted average number of common shares outstanding for the reporting period. Diluted EPS equals net income divided by the sum of the weighted average number of shares of common stock outstanding plus all additional common stock equivalents, such as stock options and restricted stock units, when dilutive. The following table is a reconciliation of basic and diluted net (loss) income per common share: Year Ended (in thousands, except per share data) January 3, 2021 December 29, 2019 Net income (loss) per share – basic: Net income (loss) attributable to shareholders $ 4,947 $ (649) Weighted average shares outstanding - basic 9,155 9,099 Basic net income (loss) per share attributable to shareholders $ 0.54 $ (0.07) Net income (loss) per share – diluted: Net income (loss) attributable to shareholders $ 4,947 $ (649) Weighted average shares outstanding - diluted 9,168 9,099 Diluted net income (loss) per share attributable to shareholders $ 0.54 $ (0.07) There were approximately 271,176 and 191,000 stock options as of January 3, 2021 and December 29, 2019, respectively that were not included in the computation of diluted EPS because they were anti-dilutive. Stock-based compensation The Company recognizes compensation cost for share-based awards granted to team members and board members based on their fair values at the time of grant over the requisite service period. Stock options granted to non-employees are marked to market as they vest. Bonus compensation issued in the form of unrestricted, freely tradable shares of the Company’s common stock and is expensed in full when earned. Compensation cost for stock options and other incentive awards is included in general and administrative expenses in the Company’s consolidated statements of operations (see Note 10 Stock-based Compensation) Beginning in fiscal 2019, the Company adopted ASU 2018-07 – Stock Compensation , which simplifies the accounting related to nonemployee share-based payments. The update brings the accounting for nonemployees in line with that of awards granted to employees. The standard allows for measurement at the grant date for equity awards as opposed to the earlier of the performance commitment date or the date performance is complete. The new standard allows an entity to use the expected term or the contractual term. Income Taxes The Company provides for income taxes based on its estimate of federal and state income tax liabilities. These estimates include, among other items, effective rates for state and local income taxes, allowable tax credits for items such as taxes paid on reported tip income, estimates related to depreciation and amortization expense allowable for tax purposes, and the tax deductibility of certain other items. The Company’s estimates are based on the information available to it at the time that it prepare the income tax provision. The Company generally files its annual income tax returns several months after its fiscal year-end. Income tax returns are subject to audit by federal, state, and local governments, generally years after the tax returns are filed. These returns could be subject to material adjustments or differing interpretations of the tax laws. Revenue recognition The Company recognizes revenue at the point in time when food and services are provided to a restaurant guest or other customer. Revenues from restaurant operations are presented net of discounts, coupons, employee meals and complimentary meals and recognized when food, beverage and retail products are sold. Sales tax collected from customers is excluded from sales and the obligation is included in sales tax payable until the taxes are remitted to the appropriate taxing authorities. Revenue from catered events are recognized in income upon satisfaction of the performance obligation (the date the event is held). All customer payments, including nonrefundable upfront deposits, are deferred as a liability until such time. The Company recognizes franchise fee revenue on a straight-line basis over the life of the related franchise agreements and any exercised renewal periods. Cash payments are due upon the opening of a new restaurant or upon the execution of a renewal of the related franchise agreement. The Company’s performance obligation with respect to franchise fee revenues consists of a license to utilize our company’s brand for a specified period of time, which is satisfied equally over the life of each franchise agreement. Area development fees are deferred until a new restaurant is opened pursuant to the area development agreement, at which time revenue is recognized on a straight-line basis over the life of the franchise agreement. Cash payments for area development agreements are typically due when an area development agreement has been executed. Gift card breakage revenue is recognized proportionately as gift cards are redeemed utilizing an estimated breakage rate based on our company’s historical experience. Gift card breakage revenue is reported within the licensing and other revenue line item of the consolidated statements of operations. The Company defers revenue associated with the estimated selling price of reward points earned pursuant to its loyalty program and establishes a corresponding liability. This deferral is based on the estimated value of the product for which the reward is expected to be redeemed, net of estimated unredeemed points. When a guest redeems an earned reward, the Company recognizes revenue for the redeemed product and reduces the deferred revenue. Deferred revenue associated with our loyalty program was Contract liabilities consist of deferred revenue resulting from franchise fees paid by franchisees. The Company classifies these liabilities within other current liabilities and other liabilities within the consolidated balance sheets based on the expected timing of revenue recognition associated with these liabilities. (in thousands) January 3, 2021 December 29, 2019 Beginning Balance $ 1,318 $ 1,998 Revenue recognized (417) (680) Ending Balance $ 901 $ 1,318 The following table illustrates estimated revenues expected to be recognized in the future related to unsatisfied performance obligations as of January 3, 2021: (in thousands) Fiscal Year 2021 $ 95 2022 95 2023 95 2024 91 2025 84 Thereafter 441 Total $ 901 Revision of prior financial statements In fiscal 2020, the Company determined that it would be more accurate to have fees charged to the Company by the various delivery service providers (“DPS”) reflected in costs of operations rather than discounts to revenue. These fees charged to the Company do not reduce the amount of revenue but rather are additional costs incurred by the Company to allow its customers to enjoy its menu items outside of its restaurants’ dining rooms. As a result, the fiscal year 2019 accounting for the DSP fees as of December 29, 2019 has been adjusted to reflect an increase of $1.3 million in both revenue and cost of operations. As a result, the loss from operations as a percentage of revenue for fiscal year 2019 changed from as reported currently. The fiscal year 2019 adjustment had no effect on loss from operations, net loss, cash flow or financial position Recent Accounting Guidance Recently adopted accounting guidance In August 2018, the the Financial Accounting Standards Board ("FASB") issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which changes disclosure requirements for fair value measurements. The objective of the new guidance is to provide additional information about assets and liabilities measured at fair value in the statement of financial position or disclosed in the notes to financial statements. New incremental disclosure requirements include the amount of fair value hierarchy level 3 changes in unrealized gains and losses and the range and weighted average used to develop significant unobservable inputs for level 3 fair value measurements. The Company adopted this guidance during the first quarter of 2020. The adoption of this guidance did not have a material impact on its co |
