Note 1 - Description of Business and Summary of Significant Accounting Policies.	12 Months Ended
Feb. 26, 2012
Organization, Consolidation, Basis of Presentation, Business Description and Accounting Policies [Text Block]	NOTE 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. Description of Business - Morgan's Foods, Inc. and its subsidiaries (the “Company") operate 57 KFC restaurants, five Taco Bell restaurants, nine KFC/Taco Bell “2n1” restaurants, three Taco Bell/Pizza Hut Express “2n1” restaurants, and one KFC/A&W “2n1”, in the states of Illinois, Missouri, Ohio, Pennsylvania, West Virginia and New York. The Company’s fiscal year is a 52-53 week year ending on the Sunday nearest the last day of February. The Company operates as one reporting business segment. Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions pending completion of related events. These estimates and assumptions include the recoverability of tangible and intangible asset values, projected compliance with financing agreements and the realizability of deferred tax assets. These estimates and assumptions affect the amounts reported at the date of the financial statements for assets, liabilities, revenues and expenses and the disclosure of contingencies. Actual results could differ from those estimates. Principles of Consolidation - The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions and balances have been eliminated. Liquidity - The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred losses in fiscal years 2012 and 2011 and has negative working capital and an accumulated deficit at February 26, 2012. The Company has managed its liquidity in 2012 through the refinancing of substantially all of its debt, the sale and leaseback of restaurant properties and entering into a Remodel Agreement with KFC (see notes 5 and 6). Should the Company have difficulty meeting its forecasts, this could have an adverse effect on its liquidity position. Management has taken actions to improve its cash flows, including closely monitoring its expenses and store closings for underperforming stores during fiscal 2011 and 2012 and expects to be able to achieve its forecast for the coming year. However, there can be no assurances that our cash flow will be sufficient to allow us to continue as a going concern if we are unable to meet our projections. Revenue Recognition - The Company recognizes revenue as customers pay for products at the time of sale. Taxes collected from customers and remitted to governmental agencies, such as sales taxes, are not included in revenue. Advertising Costs - The Company expenses advertising costs as incurred. Advertising expense was $4,817,000 and $5,493,000 for fiscal years 2012 and 2011, respectively. Cash and Cash Equivalents - The Company considers all highly liquid debt instruments purchased with an initial maturity of three months or less to be cash equivalents. The Company generally carries cash balances at financial institutions which are in excess of the FDIC insurance limits. Inventories - Inventories, principally food and beverages, are stated at the lower of aggregate cost (first-in, first-out basis) or market. Property and Equipment - Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets as follows: buildings and improvements - 3 to 20 years; equipment, furniture and fixtures - 3 to 10 years. Leasehold improvements are amortized over 3 to 15 years, which is the shorter of the life of the asset or the life of the lease. The asset values of the capitalized leases are amortized using the straight-line method over the lives of the respective leases which range from 7 to 20 years. Management assesses the carrying value of property and equipment whenever there is an indication of potential impairment, including quarterly assessments of any restaurant with negative cash flows. If the property and equipment of a restaurant on a held and used basis are not recoverable based upon forecasted, undiscounted cash flows, the assets are written down to their fair value. Management uses a valuation methodology to determine fair value, which is the sum of the restaurant's business value and real estate value. Business value is determined using a cash flow multiplier based upon market conditions and estimated cash flows of the restaurant. Real estate value is generally determined based upon the discounted market value of implied rent of the owned assets. Management believes the carrying value of property and equipment, after impairment write-downs, will be recovered from future cash flows. Assets held for sale are carried at estimated realizable value in a sale transaction. Deferred Financing Costs - Costs related to the acquisition of long-term debt are capitalized and expensed as interest over the term of the related debt. Amortization expense was $104,000 and $110,000 for fiscal years 2012 and 2011, respectively. The balance of deferred financing costs was $399,000 at February 26, 2012 and $303,000 at February 27, 2011 and is included in other assets in the consolidated balance sheets. In connection with its refinancing, the Company wrote off deferred financing costs of $216,000 related to the early extinguishment of debt and incurred $416,000 of deferred financing costs in connection with its new debt. Franchise Agreements - Franchise agreements are recorded at cost. Amortization is computed on the straight-line method over the term of the franchise agreement. The Company’s franchise agreements are predominantly 20 years in length. Goodwill - Goodwill represents the cost of acquisitions in excess of the fair value of identifiable assets acquired. Goodwill is not amortized, but is subject to assessment for impairment whenever there is an indication of impairment or at least annually as of fiscal year end by applying a fair value based test. Due to the significant amount of goodwill compared to the size of the Company’s balance sheet, goodwill is tested for impairment quarterly regardless of indications of impairment or lack thereof. Goodwill is disaggregated by market area, as defined by the various advertising co-operatives in which the Company participates, for application of the impairment tests. Also, when a property is sold, the proportion that the proceeds of the property bears to the total fair value of the market is removed from the goodwill balance of that market. Since the Company does not own a significant amount of real estate, the impact of real estate values on the fair value calculation is minimal. The calculation of fair value involves the application of valuation factors normally used in the market valuation of restaurants being purchased or sold to the trailing twelve month cash flow of each operating restaurant. In cases where the trailing cash flow is not indicative of the fair value of the restaurant, the present value of the projected ten year cash flow of the restaurant is used to calculate fair value. The discount rate used to present value the ten year cash flow is based on the valuation factor normally applied to trailing cash flow in the valuation of purchase and sale transactions. Advance on Supply Agreements - In conjunction with entering into contracts that require the Company to sell exclusively the specified beverage products for the term of the contract, the Company has received advances from the supplier. The Company amortizes advances on supply agreements as a reduction of food, paper and beverage cost of sales over the term of the related contract, using the straight-line method. These advances of $73,000 and $106,000 at February 26, 2012 and February 27, 2011, respectively, are included in other long-term liabilities in the consolidated balance sheets net of $126,000 and $236,000 included in accrued liabilities as of such dates. Lease Accounting - Operating lease expense is recognized on the straight-line basis over the term of the lease for those leases with fixed escalations. The difference between the scheduled amounts and the straight-line amounts is accrued. These accruals of $451,000 and $476,000 at February 26, 2012 and February 27, 2011, respectively, are included in other long-term liabilities in the consolidated balance sheets net of $46,000 and $60,000 included in accrued liabilities as of such dates. Gains realized in connection with sale/leaseback transactions are deferred and recognized against future rent expense for operating leases and future depreciation expense for assets under capitalized lease obligations. Included in “other long term liabilities” on the consolidated balance sheets for fiscal 2012 and 2011 is $11,171,000 and $3,850,000, respectively, of deferred gains on sale/leaseback transactions. Income Taxes - The provision for income taxes is based upon income or loss before tax for financial reporting purposes. Deferred tax assets or liabilities are recognized for the expected future tax consequences of temporary differences between the tax basis of assets and liabilities and their carrying values for financial reporting purposes. Deferred tax assets are also recorded for operating loss and tax credit carryforwards. A valuation allowance is recorded to reduce deferred tax assets to the amount more likely than not to be realized in the future, based on an evaluation of historical and projected profitability. The Company accounts for uncertain tax positions in accordance with the standards included in ASC Topic 740 “Income Taxes”. This accounting guidance requires that a position taken or expected to be taken in a tax return be recognized in the financial statements when it is more likely than not (i.e., a likelihood of more than fifty percent) that the position would be sustained upon examination by tax authorities. A recognized tax position is then measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. It is also required that changes in judgment that result in subsequent recognition, derecognition or change in a measurement of a tax position taken in a prior annual period (including any related interest and penalties) be recognized as a discrete item in the period in which the change occurs. It is the Company’s policy to include any penalties and interest related to income taxes in its income tax provision, however, the Company currently has no penalties or interest related to income taxes. In general, the earliest year that the Company is subject to examination of its Federal tax returns is the fiscal year ended March 1, 2009 and of its state and local tax returns is the fiscal year ended March 2, 2008. However, net operating loss carryforwards generated from 2002 through 2007 remain subject to adjustment by taxing authorities. Stock-Based Compensation - For the fiscal years ended February 26, 2012 and February 27, 2011 the Company reported no stock-based compensation expense. See Note 9 for further discussion. Reclassifications – Certain prior period items are reclassified to conform to the current period presentations.

Note 1 - Description of Business and Summary of Significant Accounting Policies.

12 Months Ended

Feb. 26, 2012

Organization, Consolidation, Basis of Presentation, Business Description and Accounting Policies [Text Block]

NOTE 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.

Description of Business - Morgan's Foods, Inc. and its subsidiaries (the “Company") operate 57 KFC restaurants, five Taco Bell restaurants, nine KFC/Taco Bell “2n1” restaurants, three Taco Bell/Pizza Hut Express “2n1” restaurants, and one KFC/A&W “2n1”, in the states of Illinois, Missouri, Ohio, Pennsylvania, West Virginia and New York. The Company’s fiscal year is a 52-53 week year ending on the Sunday nearest the last day of February. The Company operates as one reporting business segment.

Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions pending completion of related events. These estimates and assumptions include the recoverability of tangible and intangible asset values, projected compliance with financing agreements and the realizability of deferred tax assets. These estimates and assumptions affect the amounts reported at the date of the financial statements for assets, liabilities, revenues and expenses and the disclosure of contingencies. Actual results could differ from those estimates.

Principles of Consolidation - The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions and balances have been eliminated.

Liquidity - The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred losses in fiscal years 2012 and 2011 and has negative working capital and an accumulated deficit at February 26, 2012. The Company has managed its liquidity in 2012 through the refinancing of substantially all of its debt, the sale and leaseback of restaurant properties and entering into a Remodel Agreement with KFC (see notes 5 and 6). Should the Company have difficulty meeting its forecasts, this could have an adverse effect on its liquidity position. Management has taken actions to improve its cash flows, including closely monitoring its expenses and store closings for underperforming stores during fiscal 2011 and 2012 and expects to be able to achieve its forecast for the coming year. However, there can be no assurances that our cash flow will be sufficient to allow us to continue as a going concern if we are unable to meet our projections.

Revenue Recognition - The Company recognizes revenue as customers pay for products at the time of sale. Taxes collected from customers and remitted to governmental agencies, such as sales taxes, are not included in revenue.

Advertising Costs - The Company expenses advertising costs as incurred. Advertising expense was $4,817,000 and $5,493,000 for fiscal years 2012 and 2011, respectively.

Cash and Cash Equivalents - The Company considers all highly liquid debt instruments purchased with an initial maturity of three months or less to be cash equivalents. The Company generally carries cash balances at financial institutions which are in excess of the FDIC insurance limits.

Inventories - Inventories, principally food and beverages, are stated at the lower of aggregate cost (first-in, first-out basis) or market.

Property and Equipment - Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets as follows: buildings and improvements - 3 to 20 years; equipment, furniture and fixtures - 3 to 10 years. Leasehold improvements are amortized over 3 to 15 years, which is the shorter of the life of the asset or the life of the lease. The asset values of the capitalized leases are amortized using the straight-line method over the lives of the respective leases which range from 7 to 20 years.

Management assesses the carrying value of property and equipment whenever there is an indication of potential impairment, including quarterly assessments of any restaurant with negative cash flows. If the property and equipment of a restaurant on a held and used basis are not recoverable based upon forecasted, undiscounted cash flows, the assets are written down to their fair value. Management uses a valuation methodology to determine fair value, which is the sum of the restaurant's business value and real estate value. Business value is determined using a cash flow multiplier based upon market conditions and estimated cash flows of the restaurant. Real estate value is generally determined based upon the discounted market value of implied rent of the owned assets. Management believes the carrying value of property and equipment, after impairment write-downs, will be recovered from future cash flows. Assets held for sale are carried at estimated realizable value in a sale transaction.

Deferred Financing Costs - Costs related to the acquisition of long-term debt are capitalized and expensed as interest over the term of the related debt. Amortization expense was $104,000 and $110,000 for fiscal years 2012 and 2011, respectively. The balance of deferred financing costs was $399,000 at February 26, 2012 and $303,000 at February 27, 2011 and is included in other assets in the consolidated balance sheets. In connection with its refinancing, the Company wrote off deferred financing costs of $216,000 related to the early extinguishment of debt and incurred $416,000 of deferred financing costs in connection with its new debt.

Franchise Agreements - Franchise agreements are recorded at cost. Amortization is computed on the straight-line method over the term of the franchise agreement. The Company’s franchise agreements are predominantly 20 years in length.

Goodwill - Goodwill represents the cost of acquisitions in excess of the fair value of identifiable assets acquired. Goodwill is not amortized, but is subject to assessment for impairment whenever there is an indication of impairment or at least annually as of fiscal year end by applying a fair value based test. Due to the significant amount of goodwill compared to the size of the Company’s balance sheet, goodwill is tested for impairment quarterly regardless of indications of impairment or lack thereof. Goodwill is disaggregated by market area, as defined by the various advertising co-operatives in which the Company participates, for application of the impairment tests. Also, when a property is sold, the proportion that the proceeds of the property bears to the total fair value of the market is removed from the goodwill balance of that market. Since the Company does not own a significant amount of real estate, the impact of real estate values on the fair value calculation is minimal. The calculation of fair value involves the application of valuation factors normally used in the market valuation of restaurants being purchased or sold to the trailing twelve month cash flow of each operating restaurant. In cases where the trailing cash flow is not indicative of the fair value of the restaurant, the present value of the projected ten year cash flow of the restaurant is used to calculate fair value. The discount rate used to present value the ten year cash flow is based on the valuation factor normally applied to trailing cash flow in the valuation of purchase and sale transactions.

Advance on Supply Agreements - In conjunction with entering into contracts that require the Company to sell exclusively the specified beverage products for the term of the contract, the Company has received advances from the supplier. The Company amortizes advances on supply agreements as a reduction of food, paper and beverage cost of sales over the term of the related contract, using the straight-line method. These advances of $73,000 and $106,000 at February 26, 2012 and February 27, 2011, respectively, are included in other long-term liabilities in the consolidated balance sheets net of $126,000 and $236,000 included in accrued liabilities as of such dates.

Lease Accounting - Operating lease expense is recognized on the straight-line basis over the term of the lease for those leases with fixed escalations. The difference between the scheduled amounts and the straight-line amounts is accrued. These accruals of $451,000 and $476,000 at February 26, 2012 and February 27, 2011, respectively, are included in other long-term liabilities in the consolidated balance sheets net of $46,000 and $60,000 included in accrued liabilities as of such dates. Gains realized in connection with sale/leaseback transactions are deferred and recognized against future rent expense for operating leases and future depreciation expense for assets under capitalized lease obligations. Included in “other long term liabilities” on the consolidated balance sheets for fiscal 2012 and 2011 is $11,171,000 and $3,850,000, respectively, of deferred gains on sale/leaseback transactions.

Income Taxes - The provision for income taxes is based upon income or loss before tax for financial reporting purposes. Deferred tax assets or liabilities are recognized for the expected future tax consequences of temporary differences between the tax basis of assets and liabilities and their carrying values for financial reporting purposes. Deferred tax assets are also recorded for operating loss and tax credit carryforwards. A valuation allowance is recorded to reduce deferred tax assets to the amount more likely than not to be realized in the future, based on an evaluation of historical and projected profitability. The Company accounts for uncertain tax positions in accordance with the standards included in ASC Topic 740 “Income Taxes”. This accounting guidance requires that a position taken or expected to be taken in a tax return be recognized in the financial statements when it is more likely than not (i.e., a likelihood of more than fifty percent) that the position would be sustained upon examination by tax authorities. A recognized tax position is then measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. It is also required that changes in judgment that result in subsequent recognition, derecognition or change in a measurement of a tax position taken in a prior annual period (including any related interest and penalties) be recognized as a discrete item in the period in which the change occurs. It is the Company’s policy to include any penalties and interest related to income taxes in its income tax provision, however, the Company currently has no penalties or interest related to income taxes. In general, the earliest year that the Company is subject to examination of its Federal tax returns is the fiscal year ended March 1, 2009 and of its state and local tax returns is the fiscal year ended March 2, 2008. However, net operating loss carryforwards generated from 2002 through 2007 remain subject to adjustment by taxing authorities.

Stock-Based Compensation - For the fiscal years ended February 26, 2012 and February 27, 2011 the Company reported no stock-based compensation expense. See Note 9 for further discussion.

Reclassifications – Certain prior period items are reclassified to conform to the current period presentations.