RESTAURANT ACQUISITIONS

12 Months Ended

Dec. 29, 2019

Restaurant Acquisitions

Restaurant Acquisitions

(11) RESTAURANT ACQUISITIONS

On August 6, 2018, we completed the acquisition of a Famous Dave's restaurant in Janesville, Wisconsin.  The seller of the restaurant was Team R N' B Wisconsin, LLC.  The contract purchase price of the restaurant was approximately $37,000, exclusive of closing costs plus the assumption of the gift card liability.

On October 8, 2018, we completed the acquisition of a Famous Dave's restaurant in Greenwood, Indiana.  The seller of the restaurant was Greenwood Ribs, LLC.  The contract purchase price of the restaurant was approximately $191,000, exclusive of closing costs plus the assumption of the gift card liability.

The acquisitions were accounted for using the purchase method of accounting in accordance with ASC 805 “Business Combinations” and, accordingly, the consolidated statements of operations include the results of these operations from the date of acquisition. The assets acquired and the liabilities assumed were recorded at estimated fair values based on information available.

(in thousands)
Assets acquired:
Cash and cash equivalents	$	4
Inventory		66
Property, plant, equipment and leasehold improvements, net		91
Goodwill		42
Reacquired franchise rights, net		25
Total assets acquired		228
Gift card liability assumed		(25)
Total purchase price	$	203

On March 4, 2019, we completed the acquisition of the assets and operations of four Famous Dave's restaurants in Colorado (the “Colorado Restaurants”). The sellers of the Colorado Restaurants were Legendary BBQ, Inc., Quebec Square BBQ, Inc., Cornerstar BBQ, Inc., Razorback BBQ, Inc., and Larkridge BBQ, Inc.  Pursuant to the same purchase agreement as the acquisition of the Colorado Restaurants, on June 3, 2019, we completed the acquisition of the assets and operations of one Famous Dave's restaurant in Grand Junction, Colorado (the “Grand Junction Restaurant”). The seller of the Grand Junction Restaurant was Mesa Mall BBQ, Inc. The contract purchase price of the Colorado Restaurants and the Grand Junction Restaurant was approximately $4.1 million, exclusive of acquisition costs of approximately $409,000, which are reflected in general and administrative expenses, plus the assumption of the gift card liability associated with the restaurants. Accounts receivable amounts owed to our company reduced the cash required to be paid for the purchase price.  We also purchased inventory on hand as of the acquisition dates. Effective as of the closing date of the acquisitions, the franchise agreements for the Colorado Restaurants and the Grand Junction Restaurant were terminated.

The acquisition was accounted for using the purchase method of accounting in accordance with ASC 805 “Business Combinations” and, accordingly, these consolidated statements of operations include the results of these operations from the date of acquisition.

(in thousands)
Assets acquired:
Cash and cash equivalents	$	13
Inventory		176
Property, plant, equipment and leasehold improvements, net		3,139
Lease right-of-use asset, net of unfavorable lease value		6,729
Identifiable intangible assets, net		1,368
Total identifiable assets acquired		11,425
Liabilities assumed:
Gift card liability		(182)
Lease liability		(7,116)
Net assets acquired		4,127
Goodwill		373
Total consideration transferred	$	4,500

On July 10, 2019, we completed the acquisition of the assets and operations of four Famous Dave's restaurants in Arizona (the “Arizona Restaurants”). The sellers of the Arizona Restaurants were Desert Ribs LLC, Famous Charlie LLC, Famous Freddie LLC, Famous Gracie LLC, and Famous George LLC, which were franchisees of the Company.  The

acquisition of the Arizona Restaurants was pursuant to the Purchase Agreement, as filed on June 26, 2019, resulting from a stalking horse bid in the sale process conducted under Sections 363 and 365 of Chapter 11 of the U.S. Bankruptcy Code.  The purchase price of the Arizona Restaurants was approximately $1.6 million in cash and approximately $1.4 million for the assumption of gift card and other liabilities as specified in the Purchase Agreement, settlement of outstanding franchise billings, and fees related to debtor-in-possession financing.  We incurred acquisition costs of approximately $166,000, which are reflected in general administrative expenses, associated with the purchase of the Arizona Restaurants. Effective as of the closing date of the acquisition, the franchise agreements for the Arizona Restaurants were terminated and outstanding receivables were considered additions to the purchase price.

The acquisition was accounted for using the purchase method of accounting in accordance with ASC 805 “Business Combinations” and, accordingly, these consolidated statements of operations include the results of these operations from the date of acquisition.

(in thousands)
Assets acquired:
Cash and cash equivalents	$	12
Inventory		103
Property, plant, equipment and leasehold improvements, net		5,177
Lease right-of-use asset, net of unfavorable lease value		731
Total identifiable assets acquired		6,023
Liabilities assumed:
Gift card liability		(428)
Lease liability		(2,992)
Net assets acquired		2,603
Goodwill		415
Total consideration transferred	$	3,018

The following table presents the allocation of assets acquired and liabilities assumed for individually immaterial acquisitions during the twelve months ended December 29, 2019:

(in thousands)
Assets acquired:
Cash and cash equivalents	$	15
Inventory		202
Property, plant, equipment and leasehold improvements, net		362
Lease right-of-use asset, net of unfavorable lease value		6,109
Identifiable intangible assets, net		728
Total identifiable assets acquired		7,416
Liabilities assumed:
Gift card liability		(71)
Lease liability		(6,715)
Net assets acquired		630
Gain on bargain purchase		(178)
Total consideration transferred	$	452

Unaudited pro forma results of operations for the fiscal years ended December 29, 2019 and December 30, 2018, as if we had acquired majority ownership of all operations on January 1, 2018 is as follows. The pro forma results include estimates and assumptions which our management believes are reasonable. However, pro forma results are not necessarily

indicative of the results that would have occurred if the business combination had been in effect on the dates indicated, or which may result in the future.

	Year Ended
	December 29, 2019		December 30, 2018
(in thousands)
Pro forma revenues	$	99,053	$	102,186
Pro forma net income	$	75	$	7,308
Basic pro forma net income per share attributable to shareholders	$	0.01	$	0.85
Diluted pro forma net income per share attributable to shareholders	$	0.01	$	0.85