COMMITMENTS AND CONTINGENCIES

6 Months Ended

Apr. 03, 2021

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

(8) COMMITMENTS AND CONTINGENCIES:

Construction Contracts

a. 2505 N. University Drive, Hollywood, Florida (Store #19)

During the third quarter of our fiscal year 2019, we entered into an agreement with a third party unaffiliated architect for design and development services totaling $77,000 for the re-build of our restaurant located at 2505 N. University Drive, Hollywood, Florida (Store #19) which has been closed since October 2018 due to damages caused by a fire, of which $62,000 has been paid. Additionally, during the third quarter of our fiscal year 2019, we entered into an agreement with a third party unaffiliated general contractor for site work at this location totaling $1,618,000, (i) to connect the real property where this restaurant operated (Store #19) to city sewer and (ii) to construct a new building on the adjacent parcel of real property for the operation of a package liquor store. During our fiscal year 2020 and the first and second quarters of our fiscal year 2021, we agreed to change orders to the agreement for additional construction services increasing the total contract price by $140,000 to $1,757,000, of which $133,000 of the total amount obligated has been paid through April 3, 2021. Subsequent to the end of the second quarter of our fiscal year 2021, we agreed to change orders to the agreement for additional construction services increasing the total contract price by $350,000 to $2,107,000, with an additional $117,000 paid subsequent to the end of the second quarter of our fiscal year 2021.

b. 14301 W. Sunrise Boulevard, Sunrise, Florida (Store #85)

During the third quarter of our fiscal year 2019, we also entered into an agreement with a third party unaffiliated design group for design and development services of our new location at 14301 W. Sunrise Boulevard, Sunrise, Florida 33323 (Store #85) for a total contract price of $122,000. During our fiscal year 2020, we agreed upon amendments to the $122,000 Contract for additional design and development services which had the effect of increasing the total contract price by $18,000 to $140,000, of which $115,000 has been paid through April 3, 2021, with an additional $16,000 paid subsequent to the end of the second quarter of our fiscal year 2021. Additionally, during the fourth quarter of our fiscal year 2020, we entered into an agreement with a third party unaffiliated general contractor for interior renovations at this location totaling $1,236,000, of which $111,000 has been paid through April 3, 2021 and an additional $156,000 has been paid subsequent to the end of the second quarter of our fiscal year 2021.

c. Miramar, Florida (“Flanigan’s Seafood Bar and Grill”)

During the fourth quarter of our fiscal year 2019, we entered into a Lease Agreement with a non-affiliated third party for the lease of a restaurant location in a shopping center at 11225 Miramar Parkway, #250, Miramar, Florida 33024 (Store #25). The shopping center is currently in the developmental stage and the Lease Agreement is still contingent upon our receipt of delivery of the leased premises by August 28, 2021. During the second quarter of our fiscal year 2021, we entered into an Architectural Professional Services Agreement with a third-party unaffiliated architect for design and development services for this new location (Store #25) for a total contract price of $73,850, of which $51,695 has been paid during the second quarter of our fiscal year 2021 and an additional $7,385 has been paid subsequent to the end of the second quarter of our fiscal year 2021.

d. Miramar, Florida (“Big Daddy’s Wine and Liquors”)

During the fourth quarter of our fiscal year 2019, we entered into a Lease Agreement with a non-affiliated third party for the lease of a retail package liquor store location in a shopping center at 11225 Miramar Parkway, #245, Miramar, Florida 33024 (Store #24). The shopping center is currently in the developmental stage and the Lease Agreement is still contingent upon our receipt of delivery of the leased premises by August 28, 2021. During the second quarter of our fiscal year 2021, we entered into an Architectural Professional Services Agreement with a third-party unaffiliated architect for design and development services for this new location (Store #24) for a total contract price of $18,650, of which $14,920 has been paid during the second quarter of our fiscal year 2021.

Leases

To conduct certain of our operations, we lease restaurant and package liquor store space in South Florida from unrelated third parties. Our leases have remaining lease terms of up to 10 years, some of which include options to renew and extend the lease terms for up to an additional 30 years. We presently intend to renew some of the extension options available to us and for purposes of computing the right-of-use assets and lease liabilities required by ASC 842, we have incorporated into all lease terms which may be extended, an additional term of the lesser of (i) the amount of years the lease may be extended; or (ii) 15 years.

Following adoption of ASC 842, common area maintenance and property taxes are not considered to be lease components.

The components of lease expense are as follows:

	13 Weeks		13 Weeks
	Ended April 3, 2021		Ended March 28, 2020
Finance Lease Amortization	$	79,000	$	—
Finance Lease Expense, which is included in interest expense		44,000		—
Operating Lease Expense, which is included in occupancy costs		808,000		1,131,000
	$	931,000	$	1,131,000

	26 Weeks		26 Weeks
	Ended April 3, 2021		Ended March 28, 2020
Finance Lease Amortization	$	198,000	$	—
Finance Lease Expense, which is included in interest expense		109,000		—
Operating Lease Expense, which is included in occupancy costs		1,867,000		2,261,000
	$	2,174,000	$	2,261,000

Supplemental balance sheet information related to leases as follows:

Classification on the Condensed Consolidated Balance Sheet	April 3, 2021		October 3, 2020
Assets
Finance lease assets	$	—	$	4,749,000
Operating lease assets		26,679,000		22,150,000
	$	26,679,000	$	26,899,000
Liabilities
Finance current liabilities	$	—	$	4,772,000
Operating current liabilities		1,825,000		3,116,000
Operating lease non-current liabilities	$	25,304,000	$	20,337,000
Weighted Average Remaining Lease Term:
Finance leases		—		0.42 Years
Operating leases		8.41 Years		7.71 Years
Weighted Average Discount:
Finance leases		—		5.5%
Operating leases		5.2%		5.5%

For fiscal year 2021	Operating			Finance
2021   (six (6) months)	$	1,584,000		$	—
2022		3,124,000			—
2023		3,201,000			—
2024		3,240,000			—
2025		3,227,000			—
Thereafter		21,089,000			—
Total lease payments
(Undiscounted cash flows)		35,465,000			—
Less imputed interest		(8,336,000	)		—
Total	$	27,129,000		$	—

Litigation

Our sale of alcoholic beverages subjects us to “dram shop” statutes, which allow an injured person to recover damages from an establishment that served alcoholic beverages to an intoxicated person. If we receive a judgment substantially in excess of our insurance coverage or if we fail to maintain our insurance coverage, our business, financial condition, operating results or cash flows could be materially and adversely affected. We currently have no “dram shop” claims.

We are a party to various other claims, legal actions and complaints arising in the ordinary course of our business. It is our opinion, after consulting with legal counsel, that all such matters are without merit or involve such amounts that an unfavorable disposition would not have a material adverse effect on our financial position or results of operations.