VARIABLE INTEREST ENTITIES	12 Months Ended
Dec. 29, 2019
Variable Interest Entities
Variable Interest Entities	(15) VARIABLE INTEREST ENTITIES A variable interest holder is considered to be the primary beneficiary of a variable interest entity (“VIE”) if it has the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and has the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE. Once an entity is determined to be a VIE, the primary beneficiary is required to consolidate the entity. We have an installment agreement with one of our franchisees as the result of refranchising our Lincoln, Nebraska restaurant. This franchisee is a VIE; however, the owners of the franchise operations are the primary beneficiaries of the entities; therefore, the franchise operations are not required to be consolidated in our consolidated financial statements. On November 1, 2017, we sold our Frederick, Maryland restaurant. Pursuant to the terms of the Frederick Agreement, we remained the primary obligor of the lease. As of December 29, 2019, the amount of future lease payments for which we would be liable in the event of a default was approximately $393,000. As the amount of such payments outweighed the amount of expected sublease income, in fiscal 2019, we recorded $200,000 as asset impairment related to ROU asset. Of such amount $159,000 approximates the present value of future minimum lease payments net of expected sublease receipts. On July 18, 2018, we and Clark Championship Products LLC (“Clark”), an entity owned by Travis Clark, became members of Mercury BBQ LLC (“Mercury”) for the purposes of building out and operating the inaugural Clark Crew BBQ restaurant in Oklahoma City, Oklahoma (the “Restaurant”). Clark will own 80% of the units outstanding of Mercury and we will own 20% of the units outstanding of Mercury. Mercury shall be governed by three managers, two of which will be appointed by us and one of which will be appointed by Clark. Also in July 2019, we entered into a secured promissory note with Mercury which we amended in October 2019. This promissory note as amended (the “Loan”) was in the amount of $3.9 million, the proceeds of which are required to be used for the build out of the Restaurant. The Loan bears interest at a rate of 8% per annum and requires payments of 100% of the excess monthly cash flows until the Loan and all interest accrued thereon is repaid. The Loan requires a balloon payment of unpaid principal and accrued interest on July 15, 2025 and may be prepaid at any time. Also on July 18, 2018, we and Clark entered into an intellectual property license agreement (the “License Agreement”) pursuant to which Clark granted to us an exclusive license to use and sublicense the patents, trademarks, trade names, service marks, logos and designs related to Clark Crew BBQ restaurants and products. The term of the License Agreement is indefinite and may only be terminated by mutual written consent, unless we breach the License Agreement. Because we have provided more than half of the subordinated financial support of Mercury and control Mercury via our representation on the board of managers, we have concluded that Mercury is a VIE, of which we are the primary beneficiary and must consolidate Mercury. Mercury generated a net loss of approximately $748,000, of which $598,000 was recorded as non-controlling interest on our consolidated financial statements. As of December 29, 2019, Mercury had assets of $5.8 million, which primarily consist of fixed assets. The liabilities recognized as a result of consolidating Mercury BBQ’s results of operations do not represent additional claims on the general assets of BBQ Holdings, Inc.; rather, they represent claims against the specific assets of the Mercury BBQ’s. Conversely, assets recognized as a result of consolidating the Mercury BBQ’s results of operations do not represent additional assets that could be used to satisfy claims against the general assets of BBQ Holdings.

VARIABLE INTEREST ENTITIES

12 Months Ended

Dec. 29, 2019

(15) VARIABLE INTEREST ENTITIES

A variable interest holder is considered to be the primary beneficiary of a variable interest entity (“VIE”) if it has the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and has the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE. Once an entity is determined to be a VIE, the primary beneficiary is required to consolidate the entity. We have an installment agreement with one of our franchisees as the result of refranchising our Lincoln, Nebraska restaurant. This franchisee is a VIE; however, the owners of the franchise operations are the primary beneficiaries of the entities; therefore, the franchise operations are not required to be consolidated in our consolidated financial statements.

On November 1, 2017, we sold our Frederick, Maryland restaurant. Pursuant to the terms of the Frederick Agreement, we remained the primary obligor of the lease. As of December 29, 2019, the amount of future lease payments for which we would be liable in the event of a default was approximately $393,000. As the amount of such payments outweighed the amount of expected sublease income, in fiscal 2019, we recorded $200,000 as asset impairment related to ROU asset. Of such amount $159,000 approximates the present value of future minimum lease payments net of expected sublease receipts.

On July 18, 2018, we and Clark Championship Products LLC (“Clark”), an entity owned by Travis Clark, became members of Mercury BBQ LLC (“Mercury”) for the purposes of building out and operating the inaugural Clark Crew

BBQ restaurant in Oklahoma City, Oklahoma (the “Restaurant”). Clark will own 80% of the units outstanding of Mercury and we will own 20% of the units outstanding of Mercury. Mercury shall be governed by three managers, two of which will be appointed by us and one of which will be appointed by Clark. Also in July 2019, we entered into a secured promissory note with Mercury which we amended in October 2019. This promissory note as amended (the “Loan”) was in the amount of $3.9 million, the proceeds of which are required to be used for the build out of the Restaurant. The Loan bears interest at a rate of 8% per annum and requires payments of 100% of the excess monthly cash flows until the Loan and all interest accrued thereon is repaid. The Loan requires a balloon payment of unpaid principal and accrued interest on July 15, 2025 and may be prepaid at any time. Also on July 18, 2018, we and Clark entered into an intellectual property license agreement (the “License Agreement”) pursuant to which Clark granted to us an exclusive license to use and sublicense the patents, trademarks, trade names, service marks, logos and designs related to Clark Crew BBQ restaurants and products. The term of the License Agreement is indefinite and may only be terminated by mutual written consent, unless we breach the License Agreement.

Because we have provided more than half of the subordinated financial support of Mercury and control Mercury via our representation on the board of managers, we have concluded that Mercury is a VIE, of which we are the primary beneficiary and must consolidate Mercury. Mercury generated a net loss of approximately $748,000, of which $598,000 was recorded as non-controlling interest on our consolidated financial statements. As of December 29, 2019, Mercury had assets of $5.8 million, which primarily consist of fixed assets. The liabilities recognized as a result of consolidating Mercury BBQ’s results of operations do not represent additional claims on the general assets of BBQ Holdings, Inc.; rather, they represent claims against the specific assets of the Mercury BBQ’s. Conversely, assets recognized as a result of consolidating the Mercury BBQ’s results of operations do not represent additional assets that could be used to satisfy claims against the general assets of BBQ Holdings.