RESTAURANT ACQUISITIONS

12 Months Ended

Jan. 02, 2022

Restaurant Acquisitions

Restaurant Acquisitions

(2) RESTAURANT ACQUISITIONS

On July 12, 2021, the Company completed the acquisition of the assets and operations of four Famous Dave's restaurants in Kentucky and Tennessee from FFD Citadel LLC, FFD Hermitage LLC, FFD Cedar Bluff, and FFD Smyrna. The contract purchase price of the restaurants was approximately $1.1 million, exclusive of acquisition costs of approximately $52,000 which are reflected in general and administrative expenses. The assets acquired and liabilities assumed were recorded at estimated fair value based on information available. Pro forma results were deemed immaterial to the Company.

(in thousands)
Assets acquired:
Property, plant, equipment and leasehold improvements, net	$	641
Operating lease right-of-use assets		4,616
Total identifiable assets acquired		5,257
Liabilities assumed:
Gift card liability		(16)
Lease liability		(4,610)
Net assets acquired		631
Goodwill		469
Total consideration transferred	$	1,100

On June 24, 2021, the Company entered in to a Membership Interest Purchase Agreement (the “MIPA”) with VIBSQ Holdco, LLC, a Delaware limited liability company (the “Seller”) and Bakers Square Holdings, LLC, a Delaware limited liability company (“BSQ Holdings”), Village Inn Holdings, LLC, a Delaware limited liability company (“VI Holdings”), SVCC I, LLC, an Arizona limited liability company (“SVCC” and collectively with BSQ Holdings and VI Holdings, the “Target Companies”), and for certain limited purposes as described in the MIPA, RG Group Holdco, LLC, a Delaware limited liability company (the “Parent”), pursuant to which the Company agreed, subject to specified terms and conditions, to purchase from the Seller all of the issued and outstanding membership interests (the “Interests”) in each of the Target Companies (such purchase of Interests as contemplated by the MIPA, the “VIBS Transaction”). The VIBS Transaction closed on July 30, 2021. As a result of the VIBS Transaction, each of the Target Companies became a wholly-owned subsidiary of the Company, and each of the subsidiaries of the Target Companies, which subsidiaries own or franchise Village Inn Restaurants and Bakers Square Restaurants, became wholly-owned indirect subsidiaries of the Company. The purchase price of the VIBS Transaction was approximately $13.0 million and subject to certain purchase price adjustments and exclusive of acquisition costs of approximately $555,000 which are reflected in general and administrative expenses.

The VIBS Transaction was accounted for using the acquisition 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, July 30, 2021. Revenue and earnings of VIBS included in the consolidated statements of operations in the year ended January 2, 2022 totaled approximately $25.4 million and $2.9 million, respectively. The assets acquired and the liabilities assumed were recorded at estimated fair values based on information available as of the end of the fourth quarter of fiscal 2021.

The following table presents the allocation of assets acquired and liabilities assumed for the VIBS Transaction:

(in thousands)
Assets acquired:
Current assets	$	708
Property, plant, equipment and leasehold improvements, net		5,101
Owned properties		3,148
Franchise agreements		10,602
Identifiable intangible assets, net		2,645
Operating lease right-of-use assets		14,723
Total identifiable assets acquired		36,927
Liabilities assumed:
Deferred royalty revenue		(327)
Other current liabilities		(1,187)
Supply chain adjustment		(117)
Gift card and loyalty liability		(1,186)
Lease liabilities		(17,220)
Deferred tax liability		(904)
Net assets acquired		15,986
Gain on bargain purchase		2,995
Total consideration transferred	$	12,991

On October 8, 2021, the Company closed on the signed Asset Purchase Agreement with Fresh Acquisitions, LLC following the U.S. Bankruptcy Code Section 363 Auction where Tahoe Joe’s Steakhouse, LLC (wholly-owned subsidiary of BBQ Holdings, Inc.) was the successful bidder for the assets associated with the Tahoe Joe’s restaurant chain and the IP related to 4 buffet concepts. The Company purchased the Tahoe Joe’s restaurant chain as well as the buffet IP (the “Tahoe Joe’s Acquisition”). The purchase price was $4.2 million in cash plus additional cure costs, subject to normal closing adjustments.

The Tahoe Joe’s Acquisition was accounted for using the acquisition 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, October 8, 2021. Revenue and earnings of Tahoe Joe’s included in the consolidated statements of operations in the year ended January 2, 2022 totaled approximately $4.8 million and $200,000, respectively.

(in thousands)
Assets acquired:
Inventory		231
Property, plant, equipment and leasehold improvements, net		1,682
Lease right-of-use asset, net of unfavorable lease value		4,205
Identifiable intangible assets, net		1,200
Total identifiable assets acquired		7,318
Liabilities assumed:
Gift card liability		(160)
Lease liability		(4,355)
Deferred tax liability		(18)
Other current liabilities		(30)
Net assets acquired		2,755
Goodwill		1,962
Total consideration transferred	$	4,717

On March 16, 2020, the Company completed the acquisition of the assets and operations of a Real Urban Barbeque restaurant in Vernon Hills, Illinois from Real Urban Barbeque VH LLC. The contract purchase price of the restaurant was approximately $45,000, exclusive of closing costs plus the assumption of the lease, gift card and certain other liabilities. The assets acquired and the liabilities assumed were considered to be immaterial and were recorded at estimated fair values based on information available, including an ROU asset and offsetting liability of approximately $714,000.

On February 11, 2020, the Company entered into an Asset Purchase Agreement with Granite City Food & Brewery Ltd. (“Granite City”) to acquire certain assets associated with Granite City restaurants in connection with the Chapter 11 filing of Granite City (the “Granite City Acquisition”). The Granite City Acquisition was approved by the Bankruptcy Court at a hearing on February 21, 2020. The purchase price for the assets purchased was $3.7 million plus certain assumed liabilities including gift card liability and cure costs. On March 9, 2020, the Company closed the Granite City Acquisition with cash on hand and borrowing under its existing loan agreement with Choice Financial Group.

The Granite City Acquisition was accounted for using the acquisition 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 as of the end of fiscal year 2020.

The following table presents the allocation of assets acquired and liabilities assumed for the Granite City Acquisition:

(in thousands)
Assets acquired:
Cash and cash equivalents	$	128
Inventory		980
Property, plant, equipment and leasehold improvements, net		17,818
Lease right-of-use asset, net of unfavorable lease value		50,968
Identifiable intangible assets, net		8,329
Total identifiable assets acquired		78,223
Liabilities assumed:
Gift card liability		(3,923)
Lease liability		(50,968)
Deferred tax liability		(4,752)
Net assets acquired		18,580
Gain on bargain purchase		13,246
Total consideration transferred	$	5,334

Unaudited pro forma results of operations for the fiscal years ended January 2, 2022 and January 3, 2021 as if the Company had acquired the operations of the above referenced acquisitions at the beginning of each period presented is as follows. The pro forma results include estimates and assumptions which 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
	January 2, 2022		January 3, 2021
(in thousands)
Pro forma revenues	$	247,973	$	190,928
Pro forma net income attributable to shareholders	$	27,975	$	6,249
Basic pro forma net income per share attributable to shareholders	$	2.85	$	0.68
Diluted pro forma net income per share attributable to shareholders	$	2.82	$	0.68