July 11, 2006
Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549
| RE: | Meritage Hospitality Group Inc. Form 10-K for Fiscal Year Ended November 27, 2005 Form 10-Q for Fiscal Quarter Ended February 26, 2006 Commission File No. 001-12319 |
Dear Ladies and Gentlemen:
We have reviewed the Staff’s comments of June 28, 2006 directed to Meritage Hospitality Group Inc. (the “Company”), and have the following responses:
| 1. | Wenotefromyourresponsetoourpriorcomment3thatundertheDirectorCompensationPlan,thefairmarketvalueoftheawardsiscomputedbyaveragingtheclosingpriceofthestockforthefivetradingdayspriortotheendofeachquarter.Pleaseexplaintous,withaviewtowardexpandeddisclosureinfuturefilings,whentheawardsaregrantedeachquarterandhowyouhavecompliedwithparagraph10ofAPB25inmeasuringthecompensationexpenseasoftheappropriatemeasurementdate.Includethenatureandtermsofthestockawardsinyourresponse. |
| Response: Under the Amended 1999 Directors’ Compensation Plan, common shares are issued as compensation for attendance at board and committee meetings, and are granted on the last day of the fiscal quarter. The number of common shares issued is determined by dividing the dollar amount of the compensation due by the average of the closing price per share for the five trading days prior to the end of each quarter. Common stock certificates are issued with a restrictive legend that prevents the recipient from disposing of such shares for six months from the date of issuance. |
| In the past, we used this average price in reporting the value of the stock compensation. Based on our review of APB 25, we determined that the calculation utilized is not appropriate (i.e., utilizing the average of the closing per share prices for the five trading days prior to the end of each quarter) for reporting the value of the compensation granted. Instead, we determined that we should utilize the closing per share price on the grant date (i.e., the last day of the fiscal quarter) for reporting the value of the compensation granted. |
| Using the grant date (i.e., the last day of the fiscal quarter) as the measurement date, we recalculated compensation expense under the Amended 1999 Directors’ Compensation Plan for fiscal years ended 2004 and 2005, and for the first two fiscal quarters of 2006, and determined that our cumulative expense was overstated for this period by $464. Because of the immaterial nature of this misstatement, we are not proposing any amendments to previously issued financial statements. |
| We appreciate this matter being brought to our attention, and going forward we will report the value of the compensation granted in the appropriate method described above. In addition, in future filings we will provide further clarity into when awards are granted and how we have complied with paragraph 10 of APB 25 in reporting the compensation expense as of the appropriate measurement date. |
Please feel free to contact our offices with any further questions or comments. Thank you.
Very truly yours,
/s/Gary A. Rose
Gary A. Rose
Vice President & Chief Financial Officer
GAR/bkf
| cc: | Gary P. Kreider, Esquire Kelly E. Springer, Plante & Moran Robert E. Schermer, Jr. James R. Saalfeld James P. Bishop |
Via Edgar Filing & Facsimile
