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What changed in BT Brands, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of BT Brands, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+364 added−228 removedSource: 10-K (2023-04-18) vs 10-K (2022-03-17)

Top changes in BT Brands, Inc.'s 2023 10-K

364 paragraphs added · 228 removed · 78 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeOther key elements of our growth strategy encompass increasing same-store sales and introducing a campaign to boost brand awareness. 8 Table of Contents As we develop and extend our business into new food concepts and geographic areas, we expect to pursue strategies that will leverage our multiple brands, capacity, and reach, which may include: · introducing dual concept locations that allow for two or more of our brands to operate in a single space and share a single kitchen and staff, to enhance our return on investment; · advancing aggressive third-party national branded and local delivery services; · entering into local and regional product licensing agreements that allow for the sale in third-party retail establishments of popular products that we offer at our restaurants; and · employing extensive use of direct database marketing, including social media, to drive business to all concepts under our control.
Biggest changeAs we develop and extend our business into new food concepts and geographic areas, we expect to pursue strategies that will leverage our multiple brands, capacity, and reach, which may include: · creating dual concept locations allowing for two or more of our brands to operate in a single space with a shared kitchen; · offering third-party (e.g., Uber Eats) and local delivery services; · entering into licensing agreements allowing the third-party sale of our products; and · employing direct database marketing, including social media, to drive business.
Our operating principles for Burger Time include: (i) offering a “Bigger Burger” to deliver our customers “more good food for your money”; (ii) offering a limited menu to permit attention to quality and speed of preparation; (iii) providing fast service by way of single and double drive-thru designs and a point-of-sale system at our restaurants that expedites the ordering and preparation process; and (iv) great tasting quality food made fresh to order at a fair price.
Our operating principles for Burger Time include: (i) offering a “Bigger Burger” to deliver our customers “more good food for your money”; (ii) offering a limited menu to permit attention to quality and speed of preparation; (iii) providing fast service by way of single and double drive-thru designs and a point-of-sale system that expedites the ordering and preparation process; and (iv) great tasting quality food made fresh to order at a fair price.
Successful execution of our acquisition strategy will allow us to diversify our operations both into other dining concepts and geographic locations.
Successful execution of our strategy will allow us to diversify our operations both into other dining concepts and geographic locations.
On November 12, 2021, we completed a public offering of 2,400,000 units of our securities at a public offering price of $5.00 per unit, each unit comprising one share of common stock and one warrant to purchase one share of common stock at an initial exercise price of $5.50 per share.
On November 12, 2021, we completed an initial public offering of 2,400,000 units of our securities at a public offering price of $5.00 per unit, each unit comprising one share of common stock and one warrant to purchase one share of common stock at an initial exercise price of $5.50 per share (the “IPO”).
We may acquire operating assets where a franchise program is the focus of the acquired foodservice business. We intend to follow a disciplined strategy of evaluating acquisition opportunities to ensure and enable the accretive and efficient acquisition and integration of additional restaurant concepts.
In addition, we may acquire operating assets where a franchise program is the focus of the acquired food service business. We intend to follow a disciplined strategy of evaluating acquisition opportunities to ensure the accretive and efficient integration of additional restaurant concepts.
As a public company, we may be presented with and would evaluate any opportunities to become a reverse merger candidate in the restaurant industry, whereby a significantly larger private restaurant chain seeks to avail itself of our public company status by merging with our business.
As a public company, we may be presented with and would evaluate any other opportunities that may become available, including, for example, a reverse merger candidate in the restaurant industry, whereby a significantly larger private restaurant chain seeking to avail itself of our public company status by merging with our business.
Expansion Through Acquisitions We intend to make strategic and opportunistic acquisitions that provide an entrance into targeted restaurant segments and geographic areas. Restaurant businesses become available for acquisition frequently. We believe that we may purchase either individual restaurant properties or multi-unit businesses at prices that provide an attractive return on our investment.
Growth Through Acquisitions We intend to continue to make acquisitions that provide an entrance into targeted restaurant segments and geographic areas. Restaurant businesses frequently become available for acquisition. We may purchase either individual restaurant properties or multi-unit businesses at prices projected to provide attractive returns on our investment.
The general manager of each restaurant reports directly to a Director of Operations, who reports to our Chief Operating Officer, who oversees all aspects of restaurant operations, including kitchen operations, restaurant facility management, new restaurant openings, and the roll-out of key operational initiatives.
These systems allow managers to monitor sales, labor, customer counts and other pertinent information. The general manager of each restaurant reports directly to a Director of Operations, who in turn reports to our Chief Operating Officer, who oversees all aspects of restaurant operations, including kitchen operations, restaurant facility management, new restaurant openings and the roll-out of key operational initiatives.
Over the next five years, several additional Burger Time restaurants were opened in Minnesota, North Dakota, and South Dakota.
Additional Burger Time restaurants opened in Minnesota, North Dakota, and South Dakota in the following years.
We will develop and implement forward-looking branding strategies for our Burger Time concept and any acquired businesses. We will seek to leverage social media and employ targeted digital advertising to expand the reach of our brands and drive traffic to our stores.
Increase Brand Awareness Increasing brand awareness is essential to the growth of our Company. We intend to develop and implement forward-looking branding strategies for our businesses. We will seek to leverage social media and employ targeted digital advertising to expand the reach of our brands and drive traffic to our stores.
Trademarks and Service Marks We have registered “It’s Burger Time” and “Hot ‘n Now” with the United States Patent and Trademark Office. Our trademarks and service marks are valuable to us and essential to our marketing efforts. We may develop additional trademarks in the future.
We have registered “It’s Burger Time” with the United States Patent and Trademark Office. Our trademarks and service marks, whether or not formally registered, are valuable to us and important to our marketing efforts. We may develop additional marks in the future. Our policy is to pursue registration of our marks when appropriate and to vigorously oppose infringement .
We also focus on food safety and sanitation, employment laws and regulations, and systems to control food and labor costs. All managers and assistant managers are required to obtain food safety (HACCP) training and obtain the Certification applicable to their location. Our managers and assistant managers are full-time employees.
We also focus on food safety and sanitation, employment laws and regulations, and systems to control food and labor costs. All managers and assistant managers must obtain the required food safety (HACCP) certification applicable to their location. Each restaurant has a point-of-sale system monitored by the management of the restaurant.
In addition, we have employed product discount coupons, live remote broadcasts, customer contests, and direct mailings. We also utilize marketing incentives from our suppliers whenever possible. We recently introduced an online ordering capability and curbside delivery program through our website. We expect to emphasize direct database marketing supplemented by social media tools to promote our brand and local stores.
In addition, we have employed product discount coupons, live remote broadcasts, customer contests, and direct mailings. We also utilize marketing incentives from our suppliers whenever possible. Our Burger Time restaurants offer an online ordering capability and curbside delivery program through the BTND website, and we expect to implement online ordering at all of our businesses.
The net proceeds to the Company from the offering, including the exercise of the underwriter’s option to purchase additional warrants, were approximately $10.7 million, excluding any proceeds from the exercise of warrants, after deducting underwriting discounts and commissions and payment of estimated offering expenses of approximately $1.3 million. 4 Table of Contents The Burger Time brand originated in August 1987 with its first restaurant in Fargo, North Dakota.
The net proceeds from the IPO, including the exercise of the underwriters’ option to purchase additional warrants, were approximately $10.7 million, excluding any proceeds from the exercise of warrants and after deducting underwriting discounts and commissions and payment of estimated offering expenses of approximately $1.3 million.
None of our employees are unionized or covered by collective bargaining agreements, and we consider our current employee relations to be good. Marketable Securities We have, from time to time, purchased publicly-traded marketable securities. Historically, these securities consisted of investments in exchange-listed common stocks with published prices per share readily available.
None of our employees are unionized or covered by collective bargaining agreements, and we consider our current employee relations to be good. Marketable Securities From time to time, we purchase publicly traded marketable securities.
In addition, we will investigate using public relations and experiential marketing to engage customers. We expect our strategies to increase same-store sales will evolve as we acquire new restaurant concepts in new markets. Increase Brand Awareness Increasing brand awareness is important to the growth of our Company.
We expect to utilize customer feedback and analyze sales data to introduce, test, and hone existing and new menu items. In addition, we will investigate using public relations and experiential marketing to engage customers. Our strategies to increase same-store sales will evolve as we acquire new restaurant concepts in new markets.
In evaluating potential acquisitions, we may consider the following characteristics, among others that management considers relevant to each opportunity: · the value proposition offered by acquisition targets when comparing the purchase price to the potential return on our investment; · established, recognized brands within their geographic footprint; · steady cash flow; · track records of long-term operating performance; · sustainable operating results; · geographic diversification; and · growth potential.
In evaluating potential acquisitions, we may consider the following characteristics, among others relevant to each opportunity: · the value proposition when comparing the purchase price to the potential return on our investment; · established, recognized brands within a geographic footprint; · a historical record of consistent and growing cash flow; · record of operating performance; · sustainable operating results; · geographic diversification; and · growth potential. 4 Table of Contents When we acquire new businesses, we will operate the business or businesses with a shared central management organization.
Collectively, however, our marketing-related expenditures have historically comprised less than 1% of our net revenues. We believe our restaurant sales have traditionally, and generally, been derived from drive-by traffic and dedicated return visits from loyal customers. However, we recognize that as we expand our restaurant base, our marketing and advertising expenditures may need to increase.
We emphasize direct database marketing supplemented by social media tools to promote our brand and local stores. Collectively, however, our marketing-related expenditures have historically comprised less than 1% of our net revenues. Generally, restaurant sales are derived from drive-by traffic and dedicated return visits from loyal customers.
Assuming we successfully acquire new businesses, we will operate the business or businesses with a shared central management organization. Following the acquisition, we expect to pursue a growth plan to expand the number of locations and increase comparable store sales and profits, as described below.
Following the acquisition, we expect to pursue a growth plan to expand the number of locations and increase comparable store sales and profits, as described below. By leveraging our management services platform, we will achieve post-acquisition cost benefits by reducing the corporate overhead of the acquired business.
We will seek to establish similar relationships with the managers who join us in the future. Our experienced managers train new assistant managers in all facets of a restaurant’s operations. Other personnel are trained in a matter of days. Our manager training stresses food quality, fast, friendly customer service; restaurant cleanliness; and proper quick-service restaurant management operations.
We support our managers by offering competitive wages, including incentive bonuses for performance. Our experienced managers train new assistant managers in all facets of a restaurant’s operations. Our manager training stresses food quality; fast, friendly customer service; restaurant cleanliness; and proper management operations of a quick service restaurant.
Purchasing and Distribution We purchase most of our food, paper, packaging, and related supplies from Sysco Corporation, the nation’s largest distributor of food products. Sysco distributes these supplies to our restaurants on a frequent and routine basis. Typically, our inventory of food and supplies usually does not exceed $10,000 at any individual restaurant.
All our restaurants prepare detailed monthly operating budgets and compare their actual results to their budgets. We purchase a majority of our food, paper, packaging and related supplies for our Burger Time restaurants from Sysco Corporation, the nation’s largest distributor of food products. Sysco distributes these supplies to our restaurants on a frequent and routine basis.
We will apply techniques proven in the restaurant industry to increase same-store sales at our Burger Time restaurants and our acquired properties and develop new approaches that reflect our corporate character and restaurant composition. We expect to utilize customer feedback and analyze sales data to introduce, test, and hone existing and new menu items.
We intend to deploy a multi-faceted sales growth strategy to optimize restaurant performance. We will apply techniques proven in the restaurant industry to increase same-store sales at all our restaurants. We also may develop new approaches that reflect our corporate character and restaurant composition.
We believe that our restaurants appeal to a broad spectrum of consumers., We cater to consumers who appreciate the size and variety of our burgers, the value for the money proposition offered by our bigger burgers, and the speed and efficiency offered by our single and double drive-thru windows. 5 Table of Contents Locations The table below provides basic information about each of our restaurants.
We cater to consumers who appreciate the size and variety of our burgers and the value of our Bigger Burger, combined with the speed and efficiency provided by our single and double drive-thru windows.
Expressly, we are prohibited from selling any non-Dairy Queen-approved items at this franchise location, and we may not market this restaurant as a part of Burger Time.
We are prohibited from selling non-DQ-approved items at this franchise location and may not market this restaurant as a part of Burger Time. We have no plans to enter into additional franchise agreements with DQ or any other national chain of restaurants. However, we will consider franchise opportunities if we become aware of an attractive opportunity.
Each of the Burger Time restaurants and the Dairy Queen franchise has a manager, a full-time, salaried employee, an assistant manager or supervisor, and a varying number of restaurant staff, all of whom are hourly employees. As of January 2, 2022, we had approximately 107 employees, of which 17 were full-time, and 90 were part-time.
In addition, each of our restaurants has a General Manager, an assistant manager or supervisor, and a varying number of restaurant staff, all hourly employees. Including wholly owned subsidiaries of the Company, as of April 15, 2023, we had approximately 220 employees, including 51 full-time and 168 part-time employees.
If we acquire one or more restaurant chains or individual units near each other, we believe the concentration of operations will provide economic synergies with respect to management functions, marketing, and advertising, supply chain assistance, staff training, and operational oversight. 9 Table of Contents Future Development of Additional Burger Time Restaurants We may, in certain circumstances, consider developing an additional Burger Time location.
If we acquire restaurant chains or individual units close to each other, concentration could provide economic synergies with respect to management functions, marketing, advertising, supply chain assistance, staff training, and operational oversight. Increase Sales Same-store sales growth reflects the change in year-over-year sales for the comparable store base.
Seasonality Seasonal factors and the timing of holidays cause our revenue to fluctuate from quarter to quarter. Our revenue per Burger Time is typically slightly lower in the first and fourth quarters due to the impact of cold weather at our upper Midwest locations.
Seasonality Seasonal factors and the timing of holidays cause our revenue to fluctuate from quarter to quarter. Our BTND revenue is typically lower in the first and fourth quarters because of winter weather. PIE is highly seasonal, with a significant portion of its business occurring during summer. Our Florida locations achieve peak revenue during the winter travel season.
Due to rounding, figures in tables may not sum exactly. Overview of Our Company We own and operate fast-food restaurants in the north-central United States and are seeking to expand into other regions and other foodservice businesses.
Due to rounding, figures in tables may not sum exactly. Overview of Our Company BT Brands owns and operates various restaurants in the eastern two-thirds of the United States.
In addition, we intend to develop mobile applications that will allow consumers to find restaurants, order online and receive special offers. We will deploy cross-over ads with radio and social media interacting with each other. We expect our branding initiatives to evolve as we consummate acquisitions of restaurant concepts that appeal to distinct consumer markets in differing geographic areas.
In addition, we intend to develop mobile applications that will allow consumers to find restaurants, order online and receive special offers. We expect our branding initiatives to evolve as we complete acquisitions. Trademarks and Service Marks We operate under several tradenames and have acquired a variety of trade and service marks.
Because we are a franchisee, we are party to a franchise agreement with Dairy Queen that, among other things, restricts our menu offerings at this location to the established Dairy Queen menu and limits our flexibility in the operating model we may employ at this location.
The franchise’s remaining 1% ownership interest is owned by the General Manager, with specific DQ qualifications and whose ownership is required under the operating agreement with the franchisor. We are party to a franchise agreement with DQ that, among other things, restricts our menu offerings to the established DQ menu and limits our flexibility.
Burger Time Restaurants Menu At our Burger Time restaurants, we seek to give our customers more good food for their money and deliver it “hot ‘n fresh.” Our Burger Time restaurants feature a wide variety of juicy, flame-broiled burgers that we refer to as “Bigger Burgers” because they are made with approximately 25% more meat and are larger in diameter than the typical quarter-pound burger offerings served by our competitors.
Our juicy, flame-broiled burgers, called “Bigger Burgers,” are made with approximately 25% more meat and are larger in diameter than our competitors' typical quarter-pound burger offerings. Our burger patties are made to our specifications by our supplier. We prepare each burger to a customer’s order and serve it hot and fresh.
Our restaurants do not provide an interior dining area but offer parking and a patio for outdoor eating. 6 Table of Contents Staffing Each restaurant employs eight to sixteen employees, including a manager and an assistant manager. Work shifts are staggered and vary in time to ensure superior customer service during our busiest times.
Each restaurant typically employs eight to sixteen employees, including a manager and an assistant manager. Work shifts are staggered to ensure superior customer service during our busiest times. We focus on customer service and seek to staff our stores with friendly, customer-focused personnel. Our managers and assistant managers are full-time employees.
We also offer soft drinks and other reasonably priced food and beverage items. In addition, we offer specialty sandwiches and wraps at similar price points from time to time. Our limited menu is designed to deliver quality across all products, a high taste profile, and speedy delivery.
Our limited menu is designed to deliver quality across all products, a high taste profile, and speedy delivery. Our Burger Time brand appeals to a broad spectrum of consumers.
The menu, store layout, and equipment are designed to work together to offer exceptional food with rapid service times. This integrated design seeks to maximize food output with minimal labor. Burger Time stores have a visible, distinctive look intended to appeal to customers of all ages. Historically, Burger Time stores have ranged from 600 to 1000 sq. ft.
Our Burger Time units are free-standing facilities with single or double “drive-thru’ s” and walk-up service windows. The menu, store layout and equipment are designed to work together to offer exceptional food with fast service times. This integrated design allows for maximum food output with minimal labor.
(3) Restaurant operations are 99% owned by BTND, LLC, and 1% owned by the current restaurant manager. (4) Restaurant operations closed in December 2018. (5) Property for sale. We own the real estate on which all but one of our ten operating restaurants are situated.
Our eight Burger Time restaurants are in Minnesota, North Dakota and South Dakota. We own the real estate on which all but one of our Burger Time restaurants are situated. In addition, we lease the property for one of our Sioux Falls, South Dakota locations.
Other entrees include chicken sandwiches, pulled pork sandwiches, and chicken chunks. Our burgers and sandwiches are served on fresh buns and are topped generously with top-tier condiments. We offer an array of traditional and signature sides, many of which have evolved into regional favorites, such as large cut battered onion rings, cheese curds, fried pickle spears, and chicken fries.
Other entrees include chicken sandwiches, pulled pork sandwiches, and chicken chunks. We offer an array of traditional and signature sides, many of which have evolved into regional favorites. We also offer other reasonably priced food and beverage items. From time to time, we offer specialty sandwiches and wraps at competitive prices.
We further expect that as we open new restaurants in existing geographic areas, we will be able to take advantage of operating and marketing efficiencies resulting from the “clustering” of our restaurants. We expect to develop and deploy a more sophisticated marketing campaign, including an expanded social media presence, to build consumer brand awareness of our restaurants.
However, as we expand our restaurant base, our marketing and advertising expenditures may need to increase. We expect to develop more sophisticated marketing programs, including an expanded social media presence, to build consumer brand awareness of our restaurants. Growth Strategy We are seeking to increase value for our shareholders in the food service industry.
Our objective is to increase value for our shareholders in the foodservice industry. Our principal strategy is to acquire multi-unit restaurant concepts and individual restaurant properties at attractive earnings multiples. Though we do not currently plan to do so, we may develop additional Burger Time locations under certain circumstances.
Our objective is to build value for our shareholders in the food service industry. Our principal strategy is to acquire multi-unit restaurant concepts and individual restaurant properties at attractive earnings multiples. During fiscal 2022, we deployed a portion of our November 2021 public offering acquiring three operating restaurant properties. We operate the acquired businesses with a shared central management organization.
Dairy Queen Franchise In October 2015, we acquired a 99% ownership interest in a Dairy Queen franchise in Ham Lake, Minnesota. The franchise’s remaining 1% ownership interest is held by the General Manager of the location, who possesses specific Dairy Queen qualifications and whose ownership is required under the operating agreement with the franchisor.
Our full-time employees are salaried managers and assistant managers; the remaining restaurant staff are hourly employees. 2 Table of Contents Dairy Queen Franchise In October 2015, we acquired a 99% ownership interest in a Dairy Queen (“DQ”) franchise in Ham Lake, Minnesota.
In 2005, the restaurant assets were sold to STEN Corporation, a public company of which Kenneth Brimmer, our Chief Operating Officer, Chairman and member of the board of directors, and Gary Copperud, our Chief Executive Officer and a member of our board of directors, were officers and directors. In May 2007, BTND purchased the Burger Time assets from STEN Corporation.
Our CEO, Gary Copperud, is Chairman of the board of directors of NGI. Our Chief Operating Officer, Kenneth Brimmer, is also a member of the board of directors of NGI and serves as its Chief Financial Officer.
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We currently own and operate nine Burger Time restaurants in Minnesota, North Dakota, and South Dakota and a Dairy Queen franchise in Ham Lake, Minnesota. Our plan is to purchase one or more existing restaurant businesses.
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As of April 1, 2023, including our 41.2% owned Bagger Dave’s business, we operated nineteen restaurants comprising the following: · Eight Burger Time fast-food restaurants and one Dairy Queen franchise located in the North Central region of the United States, collectively (“BTND”); · Bagger Dave’s Burger Tavern, Inc, a 41.2% owned affiliate, operates six Bagger Dave’s restaurants in Michigan, Ohio, and Indiana (“Bagger Dave’s”); · Keegan’s Seafood Grille in Indian Rocks Beach, Florida (“Keegan’s”); · Pie In The Sky Coffee and Bakery in Woods Hole, Massachusetts (“PIE”). · Village Bier Garten is a German-themed restaurant, bar, and entertainment venue in Cocoa, Florida (“VBG”).
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We currently serve the drive-thru and take-out segment of the restaurant industry. We operate in the fast-food hamburger category of the quick service restaurant, or QSR, a restaurant industry segment. Fast-food restaurants are characterized by limited menus, limited or no table service, and fast service.
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Additional elements of our growth strategy encompass increasing sales and efforts to boost brand awareness. Our Corporate History The Company was incorporated in Delaware as Hartmax of NY, Inc. in January 2016. In 2020, we changed our corporate domicile from Delaware to Wyoming. The Burger Time brand originated in August 1987 with the first restaurant in Fargo, North Dakota.
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According to IBISWorld, there are nearly 200,000 fast-food restaurants in the United States, and fast food generated an estimated $278.6 billion in revenue in 2021, with an estimated $126.9 billion, or approximately 45% of the U.S. fast-food market, deriving from the hamburger segment. Therefore, the hamburger segment is the largest segment of the U.S. QSR market.
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Following our IPO, we have pursued the acquisition of restaurant properties in diverse locations across the United States.
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Once acquired, we will operate the acquired business(es) with a shared central management organization.
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Our recent acquisitions have allowed us to diversify our operations into new restaurant segments and new geographic regions, reducing our dependency on the financial performance of our Burger Time restaurants. 1 Table of Contents Our Restaurants Burger Time Burger Time restaurants feature a variety of burgers and other quick-serve foods.
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Assuming we are successful in acquiring an operating business, following the acquisition, we may pursue expansion in the number of locations and will implement programs to increase comparable-store sales and profits and to boost brand awareness Our Corporate History The Company was incorporated in Delaware as Hartmax of NY, Inc. in January 2016.
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Subject to seasonal and local conditions, our restaurants are generally open seven days a week from 10 a.m. until 9 or 10 p.m., depending on the time of year. We offer online ordering through our website with curbside delivery. Burger Time serves the drive-thru and take-out segment of the restaurant industry.
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Prior to the Share Exchange, the Company was majority-owned by affiliates of the placement agent in the 2018 Private Placement described below.
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As of April 1, 2023, our Burger Time restaurants employed 81 individuals, including 20 full-time and 61 part-time employees.
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Upon the closing of the 2018 Private Placement, the Company, and BTND, LLC, “BTND,” entered into a Share Exchange Agreement whereby the membership interests in BTND were exchanged for shares of our common stock comprising 85.9% of the outstanding shares of our Company, without giving effect to the sale of any securities sold in the 2018 Private Placement (the “Share Exchange”).
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Keegan’s Seafood Grille On March 2, 2022, we acquired substantially all the assets of Keegan’s Seafood Grille, Inc., an operating restaurant located in Indian Rocks Beach, Florida, for $1,150,000. Keegan’s Seafood Grille has operated in the same location for over 35 years, serving the Clearwater, Florida market.
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Following the Share Exchange, the Company became the sole member of BTND and changed its name to BT Brands, Inc.
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We acquired the “Keegan’s Seafood Grille” tradename and website and plan to continue to operate as Keegan’s Seafood Grille. Keegan’s is a family-friendly casual restaurant located directly across the street from the beach. The establishment’s award-winning dishes are made in-house using the freshest local ingredients.
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Concurrent with the Share Exchange, Maxim Group, LLC acted as the placement agent for 205,002 shares of our common stock at $3.00 per share and warrants to purchase up to 102,503 shares of our common stock with an initial exercise price of $4.00 per share, for which Maxim Group, LLC acted as the placement agent (the “2018 Private Placement”).
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Keegan’s motto is “Eat Fresh and Eat Wild.” Keegan’s is well known for daily fish specials, innovative seafood dishes, an extensive kids’ menu, and excellent service. Keegan’s offers a selection of beer and wine. The restaurant features indoor and outdoor dining options, is open daily for lunch and dinner, and offers take-out and curbside pickup options.
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We received approximately $615,000 in gross proceeds and $492,266 in net proceeds from the 2018 Private Placement. On June 13, 2019, the Company amended and restated its certificate of incorporation to change its corporate name to “BT Brands, Inc.” to better reflect its growth plans and adopt specific provisions in line with its status as a public company.
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As of April 15, 2023, Keegan’s employed 41 persons, including 21 full-time and 20 part-time employees. Our employees include a full-time, salaried manager and a salaried kitchen manager; the remaining restaurant staff are hourly employees.
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On June 12, 2020, the holders of 100% of our outstanding shares of common stock adopted resolutions approving the change of corporate domicile from Delaware to Wyoming. As of December 18, 2020, the Company became domiciled in Wyoming.
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Pie In The Sky Coffee and Bakery On May 11, 2022, we acquired the assets of Pie In The Sky Coffee and Bakery (“PIE”), a coffee restaurant and bakery near the Steamship Authority ferry terminal in Woods Hole, Massachusetts. We acquired the assets for an aggregate purchase price of $1,150,000.
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On November 12, 2021, the underwriters of the offering exercised their option to purchase 360,000 Warrants for $3,600 under the over-allotment option, and on November 16, 2021, the public offering closed.
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We acquired the “Pie In The Sky” tradename and the piecoffee.com web address as part of the purchase. PIE has served the local community and ferry travelers to Martha’s Vineyard for nearly forty years. PIE serves a variety of breakfast and lunch sandwiches, all prepared on store-baked bread; handmade pastries, soups and salads are all freshly made.
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Gary Copperud was the managing member of BTND from the acquisition in 2007 until the closing of the Share Exchange and 2018 Private Placement.
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In addition, we offer patrons freshly roasted coffee beverages, smoothies, and brand merchandise. The store is open seven days a week, year-round, except Christmas. As of April 15, 2023, PIE employed 47 persons, including three full-time and 44 part-time employees.
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Our burgers are custom made to our specifications by our supplier, with no fillers, only beef and salt. Each burger is prepared to a customer’s order and is served hot and fresh. Burger favorites include a mushroom Swiss burger, a jalapeno burger, and a full-pound burger to satisfy the heartiest appetite.
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Our full-time employees include three full-time, salaried managers and assistant managers and a varying number of staff, all of whom are hourly employees. Village Bier Garten On August 4, 2022, we acquired substantially all of the assets, including tradenames and social media accounts of Von Stephan Village Bier Garten.
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Our objective is to serve customers within 60 seconds of their arrival during the peak day parts of lunch and dinner and within 3 minutes at other times. We can achieve this based on our single and double drive-thru format and our integrated restaurant design and equipment layout to deliver exceptional food with fast service times.
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We have rebranded the business Village ( “VBG”), a German-themed, family-friendly casual restaurant and bar concept in Cocoa, Florida. VBG features authentic German food and imported German beers combined with regular entertainment, creating an entertaining atmosphere and delivering a memorable guest experience.
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Our restaurants have a computerized point-of-sale system which displays each item ordered on a monitor viewed by food and drink preparers. This enables the preparers to begin filling an order before the order is completed and totaled, thereby increasing the speed of service to the customer and the number of sales per hour.
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The restaurant offers indoor seating and access to an outdoor shared seating area where patrons eat and enjoy live entertainment most evenings. As of April 1, 2023, Village Bier Garten employed 31 persons, including six full-time and 25 part-time employees. Our employees include two salaried managers, two hourly assistant managers, and hourly restaurant staff.
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One of our key operating strategies is to manage inventory and storage requirements with frequent deliveries, ensuring that our food is always fresh. Subject to seasonal and local conditions, our restaurants are generally open seven days a week from 10 am to 10 pm for lunch, dinner, and late-night snacks and meals.
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Bagger Dave’s Burger Tavern In June 2022, we acquired capital stock representing 41.2% ownership of Bagger Dave’s Burger Tavern, Inc., a publicly-traded company that owns and operates six Bagger Dave’s restaurants, a casual restaurant and bar concept. Bagger Dave’s provides an inviting, entertaining atmosphere specializing in burgers, tavern-style pizzas, hand-cut fries, local craft beers, milkshakes, salads and other items.
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We also have recently introduced online ordering through our website with curbside delivery.
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Bagger Dave’s opened its first restaurant in Berkley, Michigan, in January 2008 and operates four restaurants in Michigan, one restaurant in Ft.
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Location Open Since Building (Approx. Sq. Ft.) Land (Sq.
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Wayne, Indiana, and one location in Centerville, Ohio, with 165 full-time employees, including a total of 22 salaried managers and assistants. 3 Table of Contents Marketing and Advertising Our marketing and advertising expenditures have been principally allocated to social media, with limited advertisements in newspapers and radio.
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Ft.) Real Estate Owner Restaurant Business Owner Fargo, North Dakota 1987 600 35,000 BTND, LLC BTND, LLC Moorhead, Minnesota 1988 600 22,680 BTND, LLC BTND, LLC Grand Forks, North Dakota 1989 650 29,580 BTND, LLC BTND, LLC Waite Park, Minnesota 1989 700 17,575 BTND, LLC BTND, LLC Bismarck, North Dakota 1989 600 30,750 BTND, LLC BTND, LLC Sioux Falls, South Dakota 1991 650 17,688 BTND, LLC BTND, LLC Sioux Falls, South Dakota (1) 1991 650 15,000 Leased BTND, LLC Minot, North Dakota 1992 800 33,600 BTND, LLC BTND, LLC Ham Lake, Minnesota (2) 2015 1,664 31,723 BTND DQ, LLC BTND DQ, LLC (3) West St.
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Our strategy is acquiring restaurant concepts and individual properties at attractive earnings multiples. Other key elements of our growth strategy encompass increasing same-store sales and introducing a campaign to boost brand awareness.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Item 1A. Risk Factors. As a smaller reporting company, as defined by Rule 12b-2 of the Securities Act of 1934, as amended, (the “Exchange Act”) and Item 10(f)(1) of Regulation S-K, the Company has elected to comply with certain scaled disclosure reporting obligations and is not required to provide the information required by this item.
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Item 1A. Risk Factors. Risks Related to a Health Emergency COVID-19 disrupted the economy and future health emergencies may adversely impact our business. The COVID-19 pandemic and government responses significantly impacted the economy.
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Although our business did not experience significant negative effects from the initial spread of COVID, its variants or another virus could negatively affect our business in the future.
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Possible outcomes include declines in customer traffic at our restaurants, our inability to fully staff our restaurants and, in more severe cases, may cause a temporary closure, our inability to obtain supplies, and increased commodity costs, possibly for prolonged periods of time. While most of our restaurants have remained operational, some locations were temporarily closed.
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More recently, we have had to modify some store hours in response to recent labor availability issues. We expect to continue to experience isolated labor shortages and supply chain issues due to disruptions to the economy.
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The extent to which health emergencies may impact our business, markets, supply chain, customers and the workforce will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of a health emergency and the actions to contain it or to otherwise limit its impact, a rapidly spreading virus could contribute to the perceived health risk and may affect our business.
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If any or all of the foregoing events were to occur, our business, liquidity, financial condition and results of operations could be materially adversely impacted. Risks Related to our Growth Strategy Finding a suitable acquisition target may be challenging. Our growth plans include continuing to acquire restaurants and developing new brands.
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Although we believe that acquisition opportunities will be available, competition for acquisition candidates will likely exist and intensify, and fewer opportunities may be available to us at increased prices. There can be no assurance that we can identify, acquire, manage, or successfully integrate the restaurants we acquire without substantial costs, delays, or operational or financial problems.
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Acquiring or opening new restaurants is subject to risks and challenges.
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We will face challenges as we acquire or open new restaurants; many of these challenges pose risks that are potentially beyond our control, including, but not limited to, our ability to acquire locations at a favorable cost, the expense and other factors involved in remodeling or updating locations, hiring managerial personnel and our lack of familiarity with local regulations.
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Any one of these challenges, as well as others we may not have identified, could result in significant unanticipated costs being incurred by us. If we are unable to open new restaurants, or if restaurant openings are significantly delayed or costlier, our revenue growth and earnings could be adversely impacted, and our business negatively affected.
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As discussed throughout this Annual Report, difficulties of integration include coordinating and consolidating geographically separated systems and facilities, integrating the management and personnel of the acquired brands, maintaining employee morale and retaining key employees, implementing our management information systems and financial accounting and reporting systems, establishing and maintaining effective internal control over financial reporting, and implementing operational procedures and disciplines to control costs and increase profitability.
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In addition, we must have the liquidity to financially nurture our acquisitions after the consummation of transactions. 7 Table of Contents If we acquire additional restaurant businesses, the integration and operation of acquisitions may place significant demands on our management, which could adversely affect our ability to manage our existing restaurants.
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In addition, we may be required to obtain additional financing to fund future acquisitions, and there can be no assurance that we can obtain additional financing on acceptable terms or at all. Our expansion into new markets will subject us to risks. We are now operating restaurants in markets where we have no operating experience.
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New markets we enter may have competitive conditions, consumer tastes and discretionary spending patterns that are difficult to anticipate. We may need to invest more than we originally planned in advertising and promotional activity in new markets. In addition, we may find it more difficult to hire, motivate and keep qualified employees.
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As a result, these new restaurants may be less successful than projected. Our inability to fully implement or failure to successfully execute our plans could have a material adverse effect on our business, financial condition and results of operations. Our business could suffer if we fail to effectively acquire new or existing restaurants.
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As we grow our business, one of our biggest challenges is identifying and securing suitable acquisition opportunities. Competition for acquisition opportunities such as those we seek is intense. Competitors may have significantly greater financial resources than we do, allowing them to bid more aggressively for those opportunities.
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These include other restaurant businesses seeking to grow through acquisitions and venture capital firms and leveraged buyout firms that specialize in restaurant industry transactions. We cannot be assured that new opportunities will be available in desirable areas or on terms that are acceptable to us in order to grow our business.
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If we are unable to acquire new restaurants, or if the acquisitions are significantly delayed, our revenue growth and earnings could be adversely impacted.
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There are numerous factors involved in identifying, evaluating, and securing restaurant acquisition, including: · evaluating traffic patterns and infrastructure that will drive high levels of customer traffic and sales; · competition in new markets, including competition for restaurant sites; · obtaining licenses or permits for development projects on a timely basis; · the proximity of potential restaurant sites to existing restaurants; · anticipated infrastructure development near the potential restaurant site; and · availability of acceptable acquisition or lease terms and arrangements.
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Given the numerous factors involved, we may not be able to successfully identify and secure attractive restaurant acquisitions and following an acquisition we may not be able to successfully operate the acquired business, which could have a material adverse effect on our business, financial condition and results of operations.
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Acquisition of existing restaurants is subject to risks that could negatively impact our operations and financial condition. We expect to continue expanding our business through the acquisition of existing restaurant businesses. Any such business may be in geographic regions in which we have not operated and may offer food concepts significantly different from our existing business.
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Our strategy to pursue expansion through the acquisition of existing restaurant businesses is subject to risks and uncertainties, including all the risks of our current operations as outlined in this Annual Report and other factors, including: · the investigation of the business of the target business and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require substantial management time and attention and substantial costs, and if we decide not to or cannot complete a specific acquisition, the costs incurred likely would not be recoverable; · a target business may be a privately held company with very information available; · the business that we acquire may be financially unstable; · we may not be able to retain the management or other key personnel of the business that we acquire; · our corporate culture could differ from the corporate culture of the business that we acquire, making the integration of the acquired target business difficult; · our ability to assess the management of a target business may be limited; · we may experience impairment of acquired tangible and intangible assets and goodwill; · the target business may have unknown liabilities; · we may incur debt to complete an acquisition, and debt could have a variety of negative effects, including: o foreclosure on our assets if our operating revenues are insufficient to repay our debt obligations; o immediate payment of all principal and accrued interest if the debt security is payable on demand; o such debt may include covenants that prohibit us from paying dividends on our common stock; o using a substantial portion of our cash flow to pay principal and interest on our debt, reducing funds available for dividends on our common stock, our ability to pay expenses, make capital expenditures and acquisitions, and fund other general corporate purposes; o limitations on our flexibility in planning for changes in our business and in the industry; o increased vulnerability to adverse changes in general economic and competitive conditions and adverse changes in government regulation; o such debt may include covenants that limit our ability to borrow additional amounts: o other disadvantages compared to competitors with lower leverage. 8 Table of Contents These factors, among the many other risks and uncertainties that typically are associated with acquisitions of existing businesses, could negatively impact our Company, which would have a material adverse effect on our business, financial condition and results of operations.
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Acquisitions may have unanticipated consequences that could harm our business and our financial condition.
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Any acquisition that we pursue, whether completed or not, involves risks, including: · material adverse effects on our operating results, particularly in the fiscal quarters immediately following the acquisition as the acquired restaurants are integrated into our operations; · problems retaining key personnel; · potential impairment of tangible and intangible assets and goodwill acquired in the acquisition; · potential unknown liabilities; · difficulties of integration and failure to realize anticipated synergies; and · disruption of our ongoing business, including the diversion of management’s attention.
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Future acquisitions may be through a cash purchase transaction, the issuance of our equity securities or a combination of both which could result in potentially dilutive issuances of our equity securities, or we may incur debt and assume contingent liabilities which could harm our business and financial condition.
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Failure to manage new restaurants properly could negatively impact our operations and deplete our capital resources. Though we expect to retain key personnel of any existing restaurant group to assist with managing the restaurants, we may not be able to retain such personnel for any meaningful period.
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Moreover, even if we retain management from the acquired business, our executive officers may not manage the new restaurants profitably for numerous reasons, including our inability to predict the consumer preferences and trends that drive the success of these types of restaurants.
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Any failure to effectively manage the restaurants comprising an acquired restaurant group could, among other negative effects, adversely impact our operations and deplete our capital resources, affecting our financial condition and the market price for our common stock. Our growth strategy requires substantial additional capital to execute which may not be available.
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Our growth depends principally on acquiring new restaurants and operating those restaurants on a profitable basis. The cost of acquiring a business will be based on a number of factors, including the number of restaurants comprising the group and their profitability.
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If we require additional capital to continue our growth plans, we may seek to raise capital by way of equity or debt financing.
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If we raise additional funds through issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock.
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Any debt financing secured by us in the future could involve restrictive covenants relating to our capital-raising activities and other financial and operational matters, which might make it more difficult for us to obtain additional capital and pursue business opportunities, including making further attractive acquisitions or opening new restaurants.
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Moreover, if we issue debt securities, the debt holders would have rights senior to common stockholders to make claims on our assets. In addition, we might not be able to obtain additional financing on terms favorable to us, if at all.
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If we are unable to obtain adequate financing on satisfactory terms our ability to support our business growth and to respond to business challenges could be significantly limited. 9 Table of Contents Rising interest rates could negatively impact our performance and acquisition plans.
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Rising interest rates could significantly increase our borrowing costs or make it difficult or impossible for us to obtain financing in the future. An increased cost of borrowing would make it more expensive for us to borrow funds to acquire new businesses, which may negatively impact our performance.
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If we cannot obtain financing in the future, our growth could be affected, negatively impacting our operating results. Our growth strategy may divert management’s attention from operating our existing restaurants.
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As we execute our growth strategy, management will be focused on the numerous complex and time-consuming activities required to acquire or open new restaurants, and to integrate and operate an existing restaurant group. These activities may divert management’s attention from our existing restaurants, and our existing restaurants may suffer.
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If the time management allocates to implementing our growth strategies interferes with its ability to manage our existing restaurants and our revenues decline at existing restaurants, our business, financial condition and results of operations will be adversely affected. We may enter into additional long-term non-cancelable leases.
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In connection with restaurants that we acquired over the last year, we have entered into long-term non-cancelable leases for the space in which such restaurants operate. Further, future acquisitions may be subject to long-term non-cancelable leases.
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Under non-cancelable leases, we may be required to pay all or a portion of the real estate taxes, insurance, common area maintenance charges and other operating costs associated with the property. In addition, some non-cancelable leases may provide for contingent rental payments based on sales thresholds.
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If acquired restaurants are subject to long-term non-cancelable leases or we enter into such leases when we acquire a restaurant and such restaurants are not profitable, and we decide to close one or more of them, we may nonetheless be committed to perform our obligations under the applicable leases including, among other things, paying the base rent and other expenses that we agreed to pay for the balance of the lease term.
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In addition, as leases for our restaurants expire, we may need to negotiate renewals which could cause us to pay increased occupancy costs or to close restaurants in desirable locations. These payments and costs, as well as the failure to negotiate new leases for restaurants, could have a material adverse effect on our business, financial condition and results of operations.
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Difficulties managing our growth could adversely affect our results of operations. If we experience rapid and substantial growth, it will strain our administrative infrastructure and our managerial and financial resources.
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To manage the significant growth of our operations, we will be required to: · improve existing, and implement new, operational, financial and management controls, reporting systems and procedures; · install enhanced management information systems; and · hire, train, motivate, manage and retain our employees.
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We may not be able to install adequate management information and control systems in an efficient and timely manner, and our current or planned personnel, systems, procedures and controls may not be adequate to support our future operations. Our business could be seriously harmed if we cannot manage growth effectively.
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Our inability to sufficiently raise menu prices could result in a decline in profitability. We increase menu price increases to help offset costs, including the increased cost for commodities, minimum wages, employee benefits, insurance arrangements, construction, utilities and other key operating costs resulting from general inflation in the economy.
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If our selection and amount of menu price increases are not accepted by consumers and reduce guest traffic, or are insufficient to counter increased costs, our financial results could be negatively affected. 10 Table of Contents Risks Related to the Nature of Our Business and Operating in the Restaurant Industry Our inability to compete effectively may affect sales and restaurant-level profit margins, adversely affecting our business.
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The restaurant industry is intensely competitive, with many well-established companies competing directly and indirectly with us. We compete in the restaurant industry with national, regional, locally owned, quick-service, casual, and full-service restaurants. Many of our competitors have significantly greater financial, marketing, personnel and other resources than we do.
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Many of our competitors are well-established in markets where we have existing restaurants or may acquire new ones. In addition, many of our competitors have greater name recognition nationally. Failure to successfully compete with the restaurants in our markets will place downward pressure on our customer traffic and may prevent us from increasing or sustaining our revenues and profitability.
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Consumer tastes, nutritional and dietary trends, traffic patterns and the type, number and location of competing restaurants often affect the restaurant. Our competitors may react more efficiently and effectively to those conditions. Further, we face growing competition from the supermarket industry, with improvements in meal preparation and delivery alternatives.
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Additionally, there is increased competition from limited-service and fast-casual restaurants that are aggressively pursuing delivery and “to-go” programs. Meal kit delivery companies and other eat-at-home options also compete with traditional restaurants. In addition, our competitors in the past have offered and promoted price discounts on specific menu offerings, and they may continue to do so in the future.
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If we cannot continue to compete effectively, our traffic, sales and restaurant-level profit margins could decline, and our business, financial condition and results of operations would be adversely affected. Our Dairy Queen franchise business must comply with the Dairy Queen franchise agreement. We own a Dairy Queen (“DQ”) franchise in Ham Lake, Minnesota.
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We are contractually bound to abide by the franchise agreement with DQ, including certain financial obligations, monthly royalty payments, and marketing fees comprising a significant percentage of our DQ gross sales. Failure to abide by the terms of the franchise agreement or take actions prohibited by the franchise agreements could result in termination of the franchise agreement by the franchisor.
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If this franchise were terminated, our operating results would be adversely affected. Public attitudes regarding diet and health could result in new regulations influencing consumers.
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Changes in attitudes regarding diet and health or new information regarding the adverse health effects of consuming certain foods could result in changes in government regulation and shifts in consumer eating habits that may impact our business, financial condition or results of operations.
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These changes have resulted in and may continue to result in, laws and regulations requiring us to disclose the nutritional content of our food offerings. We may not be able to effectively respond to changes in consumer health perceptions or successfully implement the nutrient content disclosure requirements and adapt our menu offerings to trends in eating habits.
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The imposition of menu labeling laws and an inability to keep up with consumer eating habits could materially adversely affect our business, financial condition or results of operations, as well as our position within the restaurant industry in general. Negative publicity could reduce sales at our restaurants.
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We may face negative publicity, including comments on social media, relating to aspects of our business, including, among others, food quality, public health concerns, restaurant facilities, customer complaints or litigation alleging illness or injury, health inspection scores, the integrity of our suppliers’ food processing and other policies, practices and procedures, employee relationships or other matters at one or more of our restaurants.
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Negative publicity generated against our restaurants may adversely affect us, regardless of whether the allegations are valid or whether we are held to be responsible. In addition, the negative impact of adverse publicity relating to one restaurant may extend beyond the restaurant involved to affect our other restaurants.
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A similar risk exists concerning food service businesses unrelated to us if customers mistakenly associate such unrelated businesses with our operations.
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Employee claims against us based on, among other things, wage and hour violations, discrimination, harassment, or wrongful termination may also create not only legal and financial liability but negative publicity that could adversely affect us and divert our financial and management resources that would otherwise be exerted in favor of our operations.
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These risks are amplified because of the prevalence of social media. Adverse social media comments and negative publicity could materially adversely affect our business, financial condition, results of operations and cash flows. Food safety concerns could have an adverse effect on our business by reducing demand and increasing costs.
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The occurrence or reports of food-borne illnesses and food safety issues have occurred in the food industry in the past and could occur in the future. Any report or publicity linking us to food-borne illness or other food safety issues, including food tampering or contamination, could adversely affect our brand, reputation, revenues, and profits.
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In addition, instances of food-borne illness, food tampering or food contamination occurring at restaurants of our competitors could result in negative publicity about the food service industry generally and adversely impact our sales.
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Furthermore, our reliance on external food suppliers and distributors increases the risk that food-borne illness incidents could be caused by factors outside our control and that multiple locations would be affected rather than a single restaurant.
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We cannot assure that all food items are properly maintained during transport throughout the supply chain and that our employees will identify all products that may be spoiled or contaminated and should not be used in our restaurants. If our customers become ill from food-borne illnesses, we could temporarily close some restaurants.
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Furthermore, any instances of food contamination, whether or not at our restaurants, could subject our suppliers or us to a food advisory, recall or withdrawal under the Food Safety Modernization Act. 11 Table of Contents Risks Related to Labor and Supply Chain Increased commodity, energy and other costs could decrease our restaurant-level profit margins.
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Our profitability depends in part on our ability to anticipate and react to changes in the price and availability of food commodities, including, among other things, beef, poultry, grains, dairy and produce.
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Prices may be affected due to market changes, increased competition, public health issues, the general risk of inflation, shortages or interruptions in supply due to weather, disease or other conditions beyond our control, or other reasons.
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Other events could increase commodity prices or cause shortages that could affect the cost and quality of the items we buy or require us to raise prices or limit our menu options. These events, combined with other more general economic and demographic conditions, could impact our pricing and negatively affect our sales and restaurant-level profit margins.
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We do not enter into forward pricing arrangements with our suppliers, making us more susceptible to changes in commodity prices. Our profitability is also adversely affected by increases in the price of utilities, such as natural gas, whether due to inflation, shortages or interruptions in supply, or otherwise.
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Our profitability is also affected by the costs of insurance, labor, marketing, taxes and real estate, all of which could increase due to inflation, changes in laws, competition or other events beyond our control.
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Our ability to respond by raising menu prices depends on our ability to anticipate and react to such increases and other more general economic and demographic conditions, as well as the responses of our competitors and customers. All these things may be difficult to predict and beyond our control. In this manner, increased costs could adversely affect our performance.
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Shortages or interruptions in the supply or delivery of fresh food products could adversely affect our operating results. We are dependent on frequent deliveries of fresh food products that meet our specifications.
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Shortages or interruptions in the supply of fresh food products caused by problems in production or distribution, inclement weather, unanticipated demand, or other conditions could adversely affect the availability, quality and cost of ingredients, adversely affecting our operating results. We rely on certain vendors, suppliers and distributors for all our supplies.
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We purchase substantial food, paper, packaging and related supplies from Sysco Corporation, the nation’s largest distributor of food products. In fiscal 2022, approximately 60% of our cost of goods sold, food and paper, for all locations was purchases were from Sysco. In addition, for Burger Time, we purchase our beverages, other than coffee, tea or milk, from affiliates of PepsiCo.
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These entities also are responsible for delivering these products to us. Our reliance on these vendors exclusively to provide us with our entire inventory at reasonable prices presents certain risks. We do not control the businesses of our vendors, and our efforts to specify and monitor the standards under which they perform may not be successful.
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If our current vendors are unable to support our expansion into new markets, or if we are unable to find vendors to meet our supply specifications or service needs as we expand, we could likewise encounter supply shortages and incur higher costs to secure adequate supplies, which would have a material adverse effect on our business, financial condition and results of operations.
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We rely on the services of our Chief Executive Officer and Chief Operating Officer to operate our business. We rely on Gary Copperud, our Chief Executive Officer, and Kenneth Brimmer, our Chief Operating Officer, to make all key decisions relating to our operations and finances. The unexpected loss of the services of Messrs.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeUnder the terms of the refinanced mortgage debt, we lowered the nominal interest cost from 4.75% to 3.45% fixed for the next ten years. Rental Properties We currently lease the land for one of our Sioux Falls, South Dakota locations on a month-to-month basis, and the monthly rent is $1,600.
Biggest changeWe currently lease the land for one of our Sioux Falls, South Dakota, Burger Time locations on a month-to-month basis, and the monthly rent is $1,600. Keegan’s Restaurant Concurrent with our acquisition of Keegan’s assets in March 2022, we entered into a 132-month triple-net lease for the property occupied by Keegan’s with an unrelated landlord.
Item 2. Properties. A description of our restaurant properties appears above under the heading “BUSINESS—Locations.” We lease our executive offices, consisting of approximately 1,000 square feet located at 405 West Main Street, West Fargo, North Dakota, on a month-to-month basis at the cost of $500 per month.
A description of our restaurant properties appears above under the heading “BUSINESS—Locations.” We lease our executive offices, consisting of approximately 1,000 square feet, located at 405 West Main Street, West Fargo, North Dakota, on a month-to-month basis at the cost of $500 per month.
In addition, effective January 2, 2022, we have agreed to reimburse Brimmer Company, LLC for the monthly rent of approximately $1,300 on approximately 1100 square feet in Minnetonka, Minnesota, where certain administrative activities are performed. We believe our current office space is suitable and adequate for its intended purposes and our near-term expansion plans.
In addition, effective January 2, 2022, we have agreed to reimburse Brimmer Company, LLC, an affiliate of the Company, for the monthly rent of $1,250 on 1100 square feet in Minnetonka, Minnesota, at 10501 Wayzata Blvd Ave S, Suite 102 where administrative activities are performed. Our office space is adequate for its intended purposes and our near-term expansion plans.
Mortgages On June 28, 2021, we refinanced most of our existing mortgage debt, which bore interest at 4.75%. As of January 2, 2022, we had $3,049,971 in contractual obligations principally for amounts due under mortgages on the real property on which our stores are situated. Our monthly required payment is approximately $22,700.
On June 28, 2021, we refinanced our BTND mortgage debt, bearing interest at 4.75%. As of January 1, 2023, we had $2,826,093 in contractual obligations relating principally to amounts due under mortgages on the real property on which our Burger Time restaurants are situated. Our monthly required payment is approximately $22,700.
We also pay a combined total of approximately $1,800 for office space in West Fargo, North Dakota and Minnetonka, Minnesota. Both corporate locations are paid for and utilized on a month-to-month basis.
Item 2. Properties. Corporate Offices Our principal offices are in leased office space in West Fargo, North Dakota with additional leased space in Minnetonka, Minnesota. Both locations are leased on a month-to-month basis for a total of $1,800 per month. 19 Table of Contents Burger Time Properties The table below provides basic information about each of our Burger Time restaurants.
Removed
Regulation and Compliance Our operations are subject to a wide range of federal, state, and local government regulations, including those relating to, among others, public health and safety, zoning and fire codes, labor, and franchising. Our failure to obtain or retain food or other licenses and registrations or exemptions could adversely affect the operations of our restaurants.
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Location Open Since Building (Approx. Sq. Ft.) Land (Sq.
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We operate each of our restaurants in accordance with standards and procedures designed to comply with applicable laws, codes, and regulations.
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Ft.) Real Estate Owner Restaurant Business Owner Fargo, North Dakota 1987 600 35,000 BTND, LLC BTND, LLC Moorhead, Minnesota 1988 600 22,680 BTND, LLC BTND, LLC Grand Forks, North Dakota 1989 650 29,580 BTND, LLC BTND, LLC Waite Park, Minnesota 1989 700 17,575 BTND, LLC BTND, LLC Bismarck, North Dakota 1989 600 30,750 BTND, LLC BTND, LLC Sioux Falls, South Dakota 1991 650 17,688 BTND, LLC BTND, LLC Sioux Falls, South Dakota (1) 1991 650 15,000 Leased BTND, LLC Minot, North Dakota 1992 800 33,600 BTND, LLC BTND, LLC Ham Lake, Minnesota (2) 2015 1,664 31,723 BTND DQ, LLC BTND DQ, LLC (3) West St.
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To date, we have not experienced and do not anticipate any significant problems in obtaining required licenses, permits, or approvals; however, any difficulties, delays, or failures in obtaining such licenses, permits, registrations, exemptions, or approvals in the future could delay or prevent the opening of, or adversely impact the viability of, a restaurant.
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Paul, Minnesota (6) Sold 2023 1,020 18.280 SOLD SOLD Richmond, Indiana (4)(5) held for sale 1,062 23,086 BTND IN, LLC (4) (5) BTND, LLC Hazelwood, Missouri (5) (7) held for sale 1,566 51,386 BTND MO, LLC (5) BTND MO, LLC (5) ___________ (1) The land is leased from a third party. (2) Dairy Queen franchise.
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The development and construction of additional restaurants will be subject to compliance with applicable zoning, land use, and environmental regulations.
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(3) Restaurant operations are 99% owned by BTND, LLC, and 1% owned by the current restaurant manager. (4) Restaurant operations closed in December 2018. At Property for sale. (6) The West St. Paul property was sold for $496,000, and the sale closed in the first quarter of 2023 with a gain on sale of approximately $313,000.
Removed
We believe federal and state environmental regulations have not had a material effect on operations, but more stringent and varied requirements of local government bodies with respect to zoning, land use, and environmental factors could delay construction and increase development costs for new restaurants. 12 Table of Contents We are also subject to the Fair Labor Standards Act, the Immigration Reform and Control Act of 1986, and various federal and state laws governing such matters as minimum wages, overtime, unemployment tax rates, workers’ compensation rates, citizenship requirements, and other working conditions.
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(7) The Company is in the process of abandoning the Hazelwood, Missouri, property in lieu of paying property taxes. This abandonment is expected to be completed in the second quarter of 2023 at which time the Company will recognize a gain of approximately $180,000 upon the final disposition of the property.
Removed
A significant portion of the hourly staff is paid at rates consistent with the applicable federal or state minimum wage. Accordingly, increases in the minimum wage will increase labor costs. We are also subject to various laws and regulations relating to any future franchise operations.
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Terms of the lease provide for an initial rent of $5,000 per month, increasing annually at the greater of 3% or the increase in the Consumer Price Index over that period. The location comprises approximately 2,900 square feet of dining, kitchen, and storage space and includes typical features for a full-service restaurant.
Removed
We are also subject to the Americans with Disabilities Act, which prohibits discrimination based on disability in public accommodations and employment, which may require us to design or modify our restaurants to make reasonable accommodations for disabled persons.
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Pie In The Sky Restaurant Concurrent with our purchase of PIE assets in May 2022, we entered into a five-year triple-net lease for the property occupied by PIE with the seller of the assets that provides us with three five-year extensions at our option.
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Many states, counties, and cities have enacted menu labeling laws requiring multi-unit restaurant operators to disclose to consumers certain nutritional information or have enacted legislation restricting the use of certain types of ingredients in restaurants. Many of these requirements are inconsistent or interpreted differently from one jurisdiction to another.
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Terms of the lease provide for an initial rent of $10,000 per month, increasing annually to approximately $11,000 per month during the first five-year term.
Removed
These requirements may be different or inconsistent with requirements that we are subject to under the ACA, which establishes a uniform, federal requirement for certain restaurants to post nutritional information on their menus.
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The location comprises approximately 3,500 square feet of dining, kitchen and storage space on two levels, with a production kitchen and storage and office space on the lower level; there is also approximately 1,500 square feet of outdoor dining, which is serviced by an outdoor service bar.
Removed
Specifically, the ACA requires chain restaurants with 20 or more locations in the United States operating under the same name and offering substantially the same menus to publish the total number of calories of standard menu items on menus and menu boards, along with a statement that puts this calorie information in the context of a total daily calorie intake.
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The landlord granted us a right of first refusal to purchase the property on terms it receives from a third party during the entire term and any lease extension.
Removed
The ACA also requires covered restaurants to provide to consumers, upon request, a written summary of detailed nutritional information for each standard menu item and to provide a statement on menus and menu boards about the availability of this information upon request.
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Village Bier Garten Restaurant Concurrent with our acquisition of the Village Bier Garten assets, we entered a five-year lease with the seller for approximately 3,000 square feet of restaurant space and access to an additional 3,000 square feet of shared entertainment and seating area and includes all of the features typical for a full-service restaurant.
Removed
While our ability to adapt to consumer preferences is a strength of our concepts, the effect of such labeling requirements on consumer choices, if any, is unclear at this time. Currently, the Company is not engaged in the business as a “franchisor” and operates a Dairy Queen unit as a “franchisee” of Dairy Queen.
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The terms of the triple-net 60-month lease provide for an initial rent of $8,200 per month with an annual escalation of 3%. The lease includes three five-year renewal option periods. Item 3. Legal Proceedings.
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Franchise operations will be governed by state laws that regulate the offer and sale of franchises and the franchisor-franchisee relationship.
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We are not presently a party to any material litigation, nor, to the knowledge of management, is any litigation threatened against us that may materially affect us. Item 4. Mine Safety Disclosures. Not applicable. 20 Table of Contents PART II
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Such laws generally require registration of the franchise offering with state authorities and regulate the franchise relationship by, for example, requiring the franchisor to deal with its franchisees in good faith, prohibiting interference with the right of free association among franchisees, limiting the imposition of standards of performance on a franchisee and regulating discrimination against franchisees in charges, royalties or fees.
Removed
In addition, such laws may restrict a franchisor in the termination of a franchise agreement by, for example, requiring “good cause” to exist as a basis for the termination, advance notice to the franchisee of the termination, an opportunity to cure a default and a repurchase of inventory or other compensation.
Removed
Environmental Matters Our operations are subject to extensive federal, state, and local laws and regulations relating to environmental protection, including regulation of discharges into the air and water, storage and disposal of waste, and clean-up of contaminated soil and groundwater.
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Under various federal, state, and local laws, an owner or operator of real estate may be liable for the costs of removal or remediation of hazardous or toxic substances on, in, or emanating from such property.
Removed
Such liability may be imposed without regard to whether the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. We have not conducted a comprehensive environmental review of our properties or operations.
Removed
No assurance can be given that we have identified potential environmental liabilities at our properties or that such costs would not have a material adverse effect on our financial condition if assessed.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePlan Category Number of securities to be issued upon exercise of outstanding options and restricted stock units Weighted-average exercise price of outstanding options Number of securities remaining available for future issuance under equity compensation plans Equity compensation plans approved by security holders 15,000 $ 5.00 230,500 Equity compensation plans not approved by security holders
Biggest changePlan Category Number of securities to be issued upon exercise of outstanding options Weighted-average exercise price of outstanding options Number of securities remaining available for future issuance under equity compensation plans Equity compensation plans approved by security holders 220,250 $ 2.74 779,750 Equity compensation plans not approved by security holders - - - 21 Table of Contents Purchases of Equity Securities by the Issuer and Affiliated Purchasers.
Dividends We have never declared or paid cash dividends on our capital stock. We do not anticipate paying cash dividends on our common stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to support our operations and finance the growth and development of our business.
Dividends We have never declared or paid cash dividends on our capital stock. We do not anticipate paying cash dividends on our common stock in the foreseeable future. We intend to retain all available funds and any future earnings to support our operations and finance the growth and development of our business.
Item 5. Market for Registrant’s Common Equity Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock began trading on Nasdaq under the symbol “BTBD” on November 12, 2021. Our warrants issued as part of the units we sold in the initial public offering began trading on Nasdaq under the symbol “BTBDW” on November 12, 2021.
Item 5. Market for Registrant’s Common Equity Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock began trading on Nasdaq under the symbol “BTBD” on November 12, 2021. Our warrants issued as part of the units we sold in the IPO commenced trading on Nasdaq under the symbol “BTBDW” on November 12, 2021.
Holders As of March 15, 2022, there were approximately 54 stockholders of record of 6,461,118 shares of common stock issued and outstanding and one holder of record of 2,746,388 warrants issued and outstanding. A significant number of beneficial owners of our common stock and listed warrants hold their securities in street name.
Stockholders As of April 9, 2023, there were approximately 41 stockholders of record of 6,396,118 shares of common stock issued and outstanding and one holder of record of 2,746,838 warrants issued and outstanding. A significant number of beneficial owners of our common stock and listed warrants hold their shares in street names.
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Recent Sales of Unregistered Securities During the year ended January 2, 2022, we issued options to purchase 15,000 shares of common stock under the 2019 BT Brands, Inc. Incentive Plan (the “2019 Incentive Plan”) as stock awards to three directors of the Company in connection with their joining the board of directors.
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Recent Sales of Unregistered Securities During the year that ended January 1, 2023, we did not sell any equity securities. Securities Authorized for Issuance under Equity Compensation Plans In October 2019, our board of directors and stockholders adopted the 2019 Incentive Stock Plan (the “Plan”).
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The options are exercisable at $5 per share at any time through 2031.
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At the Annual Stockholders Meeting held in December 2022, the stockholders authorized the increase of shares available for grant under the Plan from 250,000 shares to 1,000,000 shares.
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The issuances of the securities under the 2019 Incentive Plan were exempt from registration under the Securities Act under Rule 701 promulgated under Section 3(b) of the Securities Act of 1933, as amended (the “Securities Act”) in that the transactions were under a compensatory benefit plan as provided under Rule 701.
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The Plan is a comprehensive incentive compensation plan under which we can grant equity-based and other incentive awards to officers, employees and directors of, and consultants and advisers to, BT Brands and its subsidiaries. The plan aims to help attract, motivate and retain qualified personnel and enhance stockholder value. Awards that lapse or are forfeited become available again for grant.
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Securities Authorized for Issuance under Equity Compensation Plans The following information is as of January 2, 2022.
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As of January 1, 2023, the Company has granted outstanding options to purchase 220,250 shares, including 213,700 common stock purchase options to employees, 10,000 to a consultant, and 15,000 to non-employee directors. Non-employee director options were immediately vested and grants to employees were subject to a four-year vesting requirement, with one-fourth of the options vesting each year.
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Effective February 27, 2023, our board of directors approved a total grant of 250,000 shares of its common stock to two officers (the “Grant Shares”). The Grant Shares vest if our common stock trades at a price of $8.50 per share for 20 consecutive trading days.
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This requirement triggers the Company’s right to redeem the common stock warrant issued in our November 2021 IPO.
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During the quarter ended January 1, 2023, the Company purchased less than 0.1 million shares of our common stock in open market purchases, as disclosed in the table below.
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Period Total number of shares purchased Average price paid per share (1) Total number of shares purchased as part of publicly announced plans or programs Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs December 1 – December 31, 2022 65,000 $ 1.646 NONE NA (1) Calculated inclusive of commissions.
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Report of Offering of Securities and Use of Proceeds Therefrom.
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On November 12, 2021, we completed our IPO of 2,400,000 units with a public offering price of $5.00 per unit, each containing one share of common stock and one warrant to purchase one share of Common Stock at an exercise price of $5.50 per share pursuant to our Registration Statement on Form S-1 (as amended) (File No. 333-250957).
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Maxim Group LLC and Joseph Gunnar & Co., LLC served as the representatives of several underwriters in the underwritten public offering. The net proceeds from the offering were approximately $10.68 million after deducting underwriting discounts, commissions, and offering expenses.
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There has been no material change in the planned use of proceeds from our IPO as described in our final prospectus, dated November 16, 2021, which was filed with the SEC on November 16, 2021, pursuant to Rule 424(b) under the Securities Act.
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No payments were made by us to directors, officers or persons owning ten percent or more of our common stock or to their associates or our affiliates other than payments in the ordinary course of business to officers for salaries.
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Including our three restaurant business acquisitions and our purchase of 41.2% of Bagger Dave’s for $1,260,000, we have invested the net proceeds in money market funds and equity securities including the purchase of 1,098,690 shares of Noble Roman’s Inc. for an aggregate cost of $231,115 at January 1, 2023.
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Noble Roman’s, Inc., is a public company, based in Indianapolis, Indiana operating pizza-focused food services including nine full-service locations. Item 6. Reserved

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeFISCAL YEAR 2021 2020 52 WEEKS 53 WEEKS SALES 100.0 % 100.0 % COSTS AND EXPENSES Restaurant operating expenses Food and paper costs 38.9 % 37.9 % Labor costs 28.2 % 28.6 % Occupancy costs 8.1 % 8.7 % Other operating expenses 5.6 % 5.2 % Depreciation and amortization 2.8 % 2.3 % Impairment of assets held for sale 0.0 % 2.3 % General and administrative 4.9 % 8.4 % Total costs and expenses 88.4 % 93.5 % Income from operations 11.6 % 6.5 % INTEREST INCOME 0.0 % 1.3 % OTHER INCOME 0.0 % 5.7 % INTEREST EXPENSE -2.0 % -2.2 % INCOME BEFORE TAXES 9.6 % 11.3 % INCOME TAX PROVISION -2.4 % -1.6 % NET INCOME 7.2 % 9.7 % 52 Week Period Ended January 2, 2022 (Fiscal 2021) compared to the 53 weeks Ended January 3, 2021 (Fiscal 2020) Net Revenues: Net sales for 2021 increased $292,074 or 3.5% to $8,451,870 from $8,159,796 in 2020.
Biggest changeThe percentages below may not reconcile because of rounding. 52 weeks ended, January 1, 2023 52 weeks ended, January 2, 2022 Amount % Amount % SALES $ 12,601,169 100.0 % $ 8,451,870 100.0 % COSTS AND EXPENSES Restaurant operating expenses Food and paper costs 4,854,321 38.5 3,285,752 38.9 Labor costs 4,126,837 32.7 2,383,206 28.2 Occupancy costs 1,147,744 9.1 681,560 8.1 Other operating expenses 780,564 6.2 469,822 5.6 Depreciation and amortization 449,038 3.6 234,027 2.8 General and administrative 1,633,829 13.0 416,791 4.9 Total costs and expenses 12,992,333 103.1 7,471,158 88.4 Income (loss) from operations (391,164 ) (3.1 ) 980,712 11.6 UNREALIZED LOSS ON MARKETABLE SECURITIES (86,422 ) (.7 ) INTEREST EXPENSE (114,766 ) (.9 ) (172,861 ) (2.0 ) INTEREST AND DIVIDEND INCOME 125,529 1.0 - - OTHER EXPENSE (80,649 ) (.6 ) EQUITY IN AFFILIATE LOSS (194,813 ) (1.6 ) - - INCOME TAX (EXPENSE) BENEFIT 180,000 1.4 (200,000 ) (2.4 ) NET INCOME (LOSS) $ (562,285 ) (4.5 )% $ 607,851 7.2 % Net Revenues: Net sales for 2022 increased $4,149,299 or 49.1% to $12,601,169 from $8,451,870 in 2021.
Restaurant-level EBITDA should not be considered a substitute for or superior to operating income, which is calculated in accordance with GAAP, and the reconciliations to operating income set forth below should be carefully evaluated. We define restaurant-level EBITDA as operating income before pre-opening costs, if any, general and administrative costs, depreciation and amortization, and impairment charges.
Restaurant-level EBITDA should not be considered a substitute for or superior to operating income, which is calculated in accordance with GAAP, and the reconciliations to operating income set forth below should be carefully evaluated. We define restaurant-level EBITDA as operating income before pre-opening costs if any, general and administrative costs, depreciation and amortization.
Cash Flows from Financing Activities On November 12, 2021, the Company completed a public offering of Units consisting of one share of common stock and one five-year stock purchase warrant to purchase one common share at $5.50. The Company has the right to redeem the warrants under certain conditions.
Cash Flows from Financing Activities On November 12, 2021, the Company completed a public offering of Units, each consisting of one share of common stock and one five-year stock purchase warrant to purchase one common share at $5.50. We have the right to redeem the warrants under certain conditions.
Our Burger Time operating principles include: (i) offering a “Bigger Burger” to deliver our customers “more good food for your money”; (ii) offering a limited menu to permit attention to quality and speed of preparation; (iii) providing fast service by way of single and double drive-thru designs and a point-of-sale system that expedites the ordering and preparation process; and (iv) great tasting quality food made fresh to order at a fair price.
Burger Time’s operating principles include (i) offering bigger burgers and more value for the money; (ii) offering a limited menu to permit attention to quality and speed of preparation; (iii) providing fast service by way of single and double drive-thru designs and a point-of-sale system that expedites the ordering and preparation process, and (iv) great tasting and quality food made fresh to order at a fair price.
Our primary requirements for liquidity are to fund our working capital needs, capital expenditures, and general corporate needs, as well as to invest in or acquire businesses that are synergistic with our business. Our operations do not require significant working capital, and, like many restaurant companies, we may operate with negative working capital.
Our primary requirements for liquidity are to fund our working capital needs, capital expenditures, and general corporate needs, as well as to invest in or acquire businesses that are synergistic with our business. Our operations do not require significant working capital as generally restaurants operate with negative working capital. Working capital deficits may be incurred in the future.
General and administrative expenses are excluded as they are generally not specific to restaurant-specific costs. Depreciation and amortization, and impairment charges are excluded because they are not ongoing controllable cash expenses and are not related to the health of ongoing operations.
General and administrative expenses are excluded as they are generally unrelated to restaurant-specific costs. Depreciation and amortization are excluded because they are not ongoing controllable cash expenses and are unrelated to ongoing operations' health.
Restaurant-level EBITDA : To supplement the consolidated financial statements, which are prepared and presented in accordance with GAAP, the Company uses restaurant-level EBITDA, which is not a measure defined by GAAP.
Restaurant-level EBITDA : To supplement the consolidated financial statements, which are prepared and presented in accordance with GAAP, we use restaurant-level EBITDA (earnings before interest, taxes, depreciation and amortization), which is not a measure defined by GAAP.
Our working capital position benefits from the fact that we collect cash from sales from our customers at the point of sale or within a few days from our credit card processor, and in general, payments to our vendors are not due for thirty days.
Our working capital position benefits from the fact that we collect cash from sales from our customers at the point of sale or within a few days from our credit card processor, and in general, payments to our vendors are not due for thirty days. 27 Table of Contents Summary of Cash Flows Cash Flows Provided by Operating Activities Operating cash flow in 2022 was $211,798, a decline in cash flow from operations from $813,955 in 2021.
This non-GAAP operating measure is useful to both management and, we believe, investors because it represents one means of gauging the overall profitability of our recurring and controllable core restaurant operations. However, this measure is not indicative of our overall results, nor does restaurant-level profit accrue directly to the benefit of stockholders, primarily due to the exclusion of corporate-level expenses.
This non-GAAP operating measure is useful to both management and, we believe, to investors because it represents one means of gauging the overall profitability of our recurring and controllable core restaurant operations.
These trends principally relate to the rapidly changing technology and food delivery area. The major companies in the restaurant industry have rapidly adopted and developed applications for smartphone and mobile delivery, have aggressively expanded drive-through, take-home and delivery operations, and have developed loyalty programs and database marketing supported by a robust technology platform.
The major companies in the restaurant industry have rapidly adopted and developed smartphone and mobile delivery applications, have aggressively expanded drive-through operations, and developed loyalty programs and database marketing supported by a robust technology platform. We expect these trends to continue as restaurants aggressively compete for customers. Competitors will continue to discount prices through aggressive promotions.
Fiscal Year The Company’s fiscal year is a 52/53-week year, ending on the Sunday closest to December 31. The 52-week fiscal 2021 ended on January 2, 2022, and the 53-week fiscal 2020 year ended on January 3, 2021.
Fiscal Year Our fiscal year is a 52/53-week year, ending on the Sunday closest to December 31.
Our monthly required payment is approximately $22,700. On June 28, 2021, the Company refinanced most of its outstanding mortgage debt with a new lender lowering its nominal interest cost from 4.75% to 3.45% fixed for the next ten years.
On June 28, 2021, we refinanced most of our outstanding mortgage debt with a new lender lowering its nominal interest cost from 4.75% to 3.45% fixed for the next ten years. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Item 8. Financial Statements and Supplementary Data.
These capital additions offset the decrease resulting in a significant amount of the company’s equipment reaching a fully depreciated status. General and Administrative Costs General and administrative costs in 2021 decreased 39.4%, or $270,733, to $416,791 (4.9% of sales) from $687,254 (8.4% of sales) in 2020.
These capital additions offset the decrease in depreciation and amortization resulting from a significant amount of our equipment reaching a fully depreciated status. General and Administrative Costs General and administrative costs in 2022 increased 292.0%, or $1,217,038, to $1,633,829 (13.0% of sales) from $416,791 (4.9% of sales) in 2021.
Our primary sources of liquidity and cash flows are operating cash flows and cash on hand. We use this to service debt, maintain our stores to operate efficiently and increase our working capital.
Our liquidity and cash flows sources are operating cash flows and cash on hand. We have used available cash to make acquisitions, service debt, and to maintain our stores.
The change in 2021 from 2020 was primarily attributable to the matters discussed in the “Net Revenues,” “Restaurant Operating Costs,” “General and Administrative Costs,” and “Other Income” sections and the impact of the PPP grant income included in other income and partially offset by impairment charges in 2020.
Louis property. Net Income (loss): The net loss was $562,285 in 2022, compared to an income of $607,851 in 2021. The change in 2022 from 2021 was primarily attributable to the matters discussed in the “Net Revenues,” “Restaurant Operating Costs,” “General and Administrative Costs,” and “Other Income” sections.
The Company issued 2,400,000 common shares in the offering and 2,760,000 common stock purchase warrants. After deducting all fees and expenses, net proceeds from the offering were $10,696,575. Contractual Obligations As of January 2, 2022, we had $3,49,9711 in contractual obligations relating to amounts due under mortgages on the real properties on which are stores are situated.
The Company issued 2,400,000 common shares in the offering and 2,760,000 stock purchase warrants. After deducting all fees and expenses, net proceeds from the offering were $10,696,575.
This increase resulted from an inflationary price environment that included increases in beef and paper costs, two of our principal cost items. 18 Table of Contents Restaurant Operating Costs: During 2021, restaurant operating costs (which refer to all the costs associated with the operation of our restaurants but do not include general and administrative expenses, depreciation and amortization, and impairment charges) as a percent of restaurant sales increased slightly to 80.8% in 2021 from 80.4% in 2020.
Restaurant Operating Costs: During 2022, restaurant operating costs (which refer to all the costs associated with operating our restaurants but do not include general and administrative expenses and depreciation and amortization) increased to 86.6% in restaurant sales in 2022 from 80.8% in 2021.
We expect our branding initiatives to evolve as we consummate acquisitions of restaurant concepts that appeal to distinct consumer markets in differing geographic areas. 17 Table of Contents Results of Operations. The following table sets forth, for the years indicated, our Consolidated Statements of Operations expressed as a percentage of total revenues.
The following table sets forth, for the years indicated, our Consolidated Statements of Operations expressed as a percentage of total revenues.
Restaurant sales for 2021 ranged from a low of $518,000 to a high of $1,124,000, and average sales for each Burger Time unit during the period was approximately $858,700 in 2021, an increase of approximately 2.3% from $839,000 in 2020.
Same store sales at BTND for stores open at year-end decreased by approximately 11.2%. For BTND locations open at year-end, 2022 restaurant sales ranged from a low of $458,000 to a high of $1,012,000. The average sales for each Burger Time unit open at year-end were approximately $809,000 in 2022, a decline of approximately 6.1% from $858,700 in 2021.
Beef costs increased slightly in 2021, following stable prices in 2020. In 2021 beef price increased by approximately 4% per pound. Given the competitive nature of the fast-food burger restaurant industry, it may be challenging to raise menu prices to cover future cost increases fully.
Food costs have increased over the last two years, and we expect to see continued inflationary pressure during 2023. Beef and egg costs continued to increase in 2022. Given the competitive nature of the restaurant industry, it may be challenging to raise menu prices to fully cover cost increases. Future margin improvements may be difficult to achieve.
Depreciation and Amortization Costs: For 2021, depreciation and amortization costs increased 23.6% or $44,638 to $234,027 (2.8% of sales) from $189,389 (2.3 % of sales) in 2020. Depreciation costs increased due to capital additions in the last two years, including four stores having replaced point of sale equipment and significant replacement of HVAC equipment at several locations.
Depreciation and amortization costs increased principally due to the purchase of three restaurants during 2022 for approximately $2.4 million and capital additions in the last two years, including major parking lot repairs and significant replacement of HVAC equipment at several locations.
The changes in restaurant-level costs from 2020 to 2021 were also impacted by a significant increase in restaurant sales volume in 2020 continuing into early 2021 combined with a 2021 menu price increase and may be detailed as follows: Restaurant operating costs for the period ended January 3, 2021 $ 6,563,022 Increase in food and paper costs 194,936 Increase in labor costs 47,257 Increase in occupancy and operating cost 15,125 Restaurant operating costs for the period ended January 2, 2022 $ 6,820,340 Labor Costs: In 2021, labor and benefits cost decreased to 28.2% of restaurant sales from 28.6% in 2020.
A decline in BTND restaurant sales also impacted the changes in restaurant-level costs from 2021 to 2022. 25 Table of Contents The impact of cost increases and the addition of three non-BTND restaurants during the year and may be detailed as follows: Restaurant operating costs for the period ended January 2, 2022 $ 6,820,340 Increase in food and paper costs 1,568,569 Increase in labor costs 1,743,631 Increase in occupancy and operating cost 776,928 Restaurant operating costs for the periods ended January 1, 2023 $ 10,909,466 Costs of Sales - food and paper: Cost of sales - food and paper - for 2022 decreased to 38.5% of restaurant sales from 38.9% of restaurant sales in 2021.
Fiscal Year 2021 2020 Revenues $ 8,451,870 $ 8,159,796 Reconciliation: Income from operations 980,711 529,368 Depreciation and amortization 234,027 189,389 Impairment charges - 190,493 General and administrative, corporate-level expenses 416,792 687,524 Restaurant-level EBITDA $ 1,631,530 $ 1,596,774 Restaurant-level EBITDA margin 19.3 % 19.6 % Liquidity and Capital Resources For the 52 weeks ended January 2, 2022, the Company earned an after-tax profit of $607,851, and principally as a result of the Company’s public offering of common stock and warrants in November 2021, on January 2, 2022, the Company had $12,385,632 in cash and working capital of $11,639,269.
Fiscal Year 2022 2021 Revenues $ 12,601,169 $ 8,451,870 Reconciliation: Income (loss) from operations (391,164 ) 980,712 Depreciation and amortization 449,038 234,027 General and administrative, corporate-level expenses 1,633,829 416,791 Restaurant-level EBITDA $ 1,691,703 $ 1,631,530 Restaurant-level EBITDA margin 13.4 % 19.3 % Liquidity and Capital Resources For the 52 weeks that ended January 1, 2023, we recorded an after-tax loss of $562,285.
Occupancy and Other Operating Costs: For 2021, occupancy and other costs declined as a percentage of sales to 13.7% or $1,151,382 compared to 13.9% of restaurant sales of $1,136,257 in 2020, a significant portion of these costs are fixed in nature and decline as a percentage as revenues increase.
Occupancy and Other Operating Costs: For 2022, occupancy and other costs increased to 15.3% of sales or $1,928,308 compared to $1,151,382 or 13.7% of restaurant sales in 2021, principally because of the impact on these costs of three leased restaurant locations added in 2022.
Our average customer transaction increased by approximately 7% in 2021 compared to 2020 and currently is approximately $12.30. This recent increase is principally because of a menu price increase implemented in the middle of 2020. Many factors influence our sales trends, and the environment remains challenging for smaller restaurant chains as competition from the major fast-food hamburger-focused business is intense.
A 2022 price increase of approximately 10% on our popular “Deal of the Day” significantly increased our check average. We implemented an additional menu price increase in September 2022 and regularly monitor market prices to remain competitive. Many factors influence our sales trends. Our business environment is challenging as competition is intense.
The decrease resulted from a decline in executive compensation, including bonus compensation and the temporary reduction of one corporate position. Income from Operations: The income from operations was $980,712 in 2021 compared to an operating income of $529,368 in 2020.
Income (loss) from Operations: The loss from operations was $391,164 in 2022 compared to operating income of $980,712 in 2021.
Additional margin improvements may have to be made through operational enhancements, equipment advances, and increased volumes to help offset any food cost increases due to the competitive state of the restaurant industry. 15 Table of Contents Labor is a critical factor in operating our stores.
Margin improvement will be achieved through operational enhancements, equipment advances, and increased volumes offsetting food cost increases. Labor is a critical factor in operating our stores. Securing staff to run our locations at full capacity has become more challenging in most areas where we operate our restaurants.
Introduction We own and operate ten fast-food restaurants, including nine Burger Time restaurants and one Dairy Queen restaurant, all of which are in the North Central region of the United States. Our Burger Time restaurants feature a wide variety of burgers and other affordable foods such as chicken sandwiches, pulled pork sandwiches, sides, and soft drinks.
Burger Time restaurants feature a traditional grilled hamburger and other affordable foods such as chicken sandwiches, pulled pork sandwiches, sides, and soft drinks.
Costs of Sales - food and paper: Cost of sales - food and paper for 2021 increased to 38.9% of restaurant sales from 37.9% of restaurant sales in 2020.
PIE, because of its coffee-focused menu, has significantly lower food and paper costs than BTND and Keegan’s. Labor Costs: In 2022, labor and benefits cost increased to 32.7% of restaurant sales from 28.2% in 2021.
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Our Dairy Queen restaurant offers the established Dairy Queen menu consisting of burgers, chicken, sides, ice cream, other desserts, and a wide array of beverages. Our revenues are derived from the sale of food and beverages at our restaurants.
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The 52-week fiscal 2022 ended on January 1, 2023, and the 52-week fiscal 2021 year ended on January 2, 2022. 22 Table of Contents Introduction As of January 1, 2023, including our partially owned Bagger Dave’s business, we owned and operated eighteen restaurants comprising the following: · Eight Burger Time fast-food restaurants and one Dairy Queen franchise (“BTND”); · Village Bier Garten a German-themed restaurant, bar, and entertainment venue in Cocoa, Florida.
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Our primary strategy is to serve the drive-thru and take-out segment of the quick-service restaurant industry. Operationally, we take several steps to maintain efficiency, including maintaining inventory of approximately $10,000 per store at any given time (which also has the advantage of allowing for frequent deliveries of fresh food).
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(“VBG”): · Keegan’s Seafood Grille in Indian Rocks Beach, Florida (“Keegan’s”); · Pie In The Sky Coffee and Bakery in Woods Hole, Massachusetts (“PIE”). · Unconsolidated affiliate, Bagger Dave’s Burger Tavern, Inc, 41.2% owned operates six Bagger Dave’s restaurants in Michigan, Ohio, and Indiana (“BD”). Burger Time opened its first restaurant in Fargo, North Dakota, in 1987.
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Historically, our Burger Time investment model targeted an average total cash investment of between $325,000 and $535,000. Real estate and finance costs vary materially by location but, assuming the average investment figure applies, the amount allocated to purchasing real estate would be approximately $225,000.
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Our primary strategy is to serve the drive-thru and take-out segment of the quick-service restaurant industry. The average customer transaction at our Burger Time restaurants increased by approximately 30% in fiscal 2022 compared to 2021 and currently is about $16.90. This recent increase is principally because of the menu price increases implemented in 2021 and 2022.
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In the fourth quarter of 2021, we completed an initial public offering of units of our securities at a public offering price of $5.00 per unit, each unit comprising one share of common stock and one warrant to purchase one share of common stock at an exercise price of $5.50 per share.
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We operate through a central management organization that provides continuity across our restaurant base by utilizing the efficiencies of a central management team. Notable 2022 Events Our recent acquisitions have allowed us to diversify our operations into new restaurant segments and new geographic regions, reducing our dependency on the financial performance of our Burger Time restaurants.
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The net proceeds to the Company from the offering, including the exercise of the underwriter’s option to purchase additional warrants, were approximately $10.7 million, after deducting underwriting discounts and commissions and payment of estimated offering expenses totaling approximately $1.3 million. Material Trends and Uncertainties There are industry trends that may have an impact on our business.
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During the 2022 fiscal year, we acquired three operating restaurants and a 41.2% ownership interest in BD, an operator of six casual restaurants. We expect to consider acquisition opportunities in the future. Keegan’s Seafood Grille, acquired in March 2022, has served customers in the Indian Rocks Beach and Clearwater, Florida markets for over 35 years.
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We expect these trends to continue as restaurants aggressively compete for customers. Further, the major industry participants have continued to discount prices through promotions strategically. We expect these significant trends will continue. The cost of food has increased over the last two years, and we expect to see continued inflationary pressure continue and perhaps accelerate in 2022.
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Keegan’s is primarily a dine-in restaurant offering a variety of traditional fresh seafood items for lunch and dinner and a selection of beer and wine. In May 2022, we acquired the assets and business operations of the iconic Pie In The Sky Coffee Restaurant and Bakery. PIE is adjacent to the ferry terminal in Woods Hole, Massachusetts.
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During 2020 and continuing in 2021, a significant increase in business volume contributed to improved profit margins.
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PIE has operated in the same location for over thirty years, offering a range of breakfast and lunch options, freshly roasted coffee, and branded merchandise serving locals and tourists. In August 2022, we purchased the assets of Van Stephan Village Bier Garten, a full-service bar and restaurant in Cocoa, Florida. We have rebranded the restaurant Village Bier Garten.
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In most areas where we operate our restaurants, there historically has been a shortage of suitable labor. Recently restaurant staffing has become more challenging, occasionally resulting in short hours and store closures. As a result of these challenges, we face higher wages as the competition for employees intensifies in the restaurant industry and all retail and service industries.
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The restaurant features a German-themed menu, specialty imported European beers, and regular entertainment. In June 2022, we acquired shares of stock representing 41.2% ownership of publicly held Dave’s Burger Tavern, Inc., the owner and operator of six Bagger Dave’s restaurants, a casual restaurant and bar concept.
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The Company consistently develops and maintains programs to attract and retain quality employees. Increases in the federally and state-mandated minimum wage may also impact our operations. A variety of proposals have been made to increase the federal minimum wage to $15 per hour, and state and local governments have, in some cases, implemented minimum wage rates.
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Bagger Dave’s provides an inviting, entertaining atmosphere specializing in burgers, hand-cut fries, craft beer, milkshakes, salads, pizza, and other items. Bagger Dave’s opened its first restaurant in Berkley, Michigan, in January 2008 and operates four restaurants in Michigan, one restaurant in Ft.
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In North Dakota, the minimum wage is set at the federally mandated minimum wage of $7.25 per hour. The rates are annually adjusted to reflect any increase in the cost of living. South Dakota has established a minimum wage of $9.10 per hour, which is annually adjusted to increase with the cost of living.
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Wayne, Indiana, and one location in Centerville, Ohio. 23 Table of Contents Material Trends and Uncertainties Industry trends have a direct impact on our business. Current trends include difficulties attracting food service workers and rapid inflation in the cost of input items. Recent trends also include the rapidly changing area of technology and food delivery.
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Minnesota’s minimum-wage rate for small employers, such as us, is $8.04 per hour. On average, our hourly employees earn approximately $12 to $15 per hour. An increase in the minimum wage to $15 per hour would adversely impact our profit margins.
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The current labor market has resulted in higher wages as the competition for employees intensifies, not only in the restaurant industry but in practically all retail and service industries. We must develop and retain quality employees.
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Since March 2020, we have faced the effects of COVID-19 and its more recent variants as a global pandemic that has been both unpredictable and persistent. The COVID-19 pandemic has adversely affected workforces, customers, economies, and financial markets globally and has disrupted the normal flow of the U.S. economy.
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Although moderating over the last twelve months, since March 2020, COVID-19 and its variants have adversely affected workforces, customers, economies, and financial markets globally and disrupted the US economy’s normal flow. Our stores have, with some exceptions, generally remained open for drive-through business. However, many businesses have experienced a disruption of operations.
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For the most part, our stores have remained open for drive-through business during the last year; however; many businesses experienced a disruption of normal operations. More recently, food service businesses, including ours, have faced challenges attracting and hiring workers. The labor shortages may become more acute in the busier summer months.
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More recently, food service businesses, including ours, have faced challenges in attracting and hiring workers. Labor shortages have resulted in some store curtailment of operating hours which may become more acute as market participants compete to attract employees. We cannot determine the future effects of any public health matters on our operations and financial results.
Removed
In 2020 extending into 2021, many states and local jurisdictions, including Minnesota, mandated limited public gatherings and the wearing of masks to halt or delay the spread of disease. Under these emergency orders, certain essential services remained open, including, but not limited to gas stations, pharmacies, grocery stores, food banks, convenience stores, take-out and delivery restaurants, banks, hospitals, and laundromats.
Added
We have and could continue to experience the impact of recent events including but not limited to commodity inflation, disruption in our supply chain, and labor availability challenges at certain shops. We have increased and plan to continue increasing prices to offset additional costs due to a higher inflationary economic environment in the U.S.
Removed
Under the directions limiting public gatherings, regulators generally allowed drive-through restaurant services to remain open. To date, our restaurants have remained open, although we have curtailed hours at some stores and have experienced temporary restaurant closures while locations have been cleaned and employees tested.
Added
These price increases may not be sufficient to mitigate higher costs, and further increases may negatively impact consumer behavior. 24 Table of Contents Result of operations for the 52 weeks ending January 1, 2023, compared to the 52 weeks ending January 2, 2022.
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Thus far, we have been able to reopen after two or three days after such temporary closing. Local, regional, or national governments may, at any time, implement directives that limit or order our business to close or take other measures intended to mitigate the spread of disease.
Added
The sales increase resulted from the acquisition of three restaurants during the year contributing $5,595,003 in revenue. The BTND business experienced a sales decline of $1,041,000 as the business continued a trend toward a return to pandemic pre-lockdown sales levels. Sales results also reflect the closing of the West St Paul Burger Time location in the fourth quarter of 2022.
Removed
Further, some customers may choose to remain in self-imposed isolation and avoid public gathering places. While a program to vaccinate a majority of Americans is currently in progress, we can’t predict the duration or magnitude of the effects of the outbreak and its impact on our business or the results of operations at this time.
Added
The decrease results from the inclusion of PIE which operates at a lower food cost than BTND. The decrease also reflects the net result of price increases during the year offset by an inflationary cost environment, including increases in beef, paper and egg costs.
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The conditions may influence restaurant customer traffic and our ability to adequately staff our restaurants, receive deliveries on a timely basis or perform functions at the corporate level. Further, such conditions could impact the availability of the menu items we offer and the ability of suppliers to deliver such products.
Added
The increase is the net result of lower BTND activity in 2022, and higher wages because of labor shortages in some of our markets, contributing to an unfavorable utilization of the fixed portion of labor costs. PIE and Keegan’s businesses run at higher labor costs than BTND. We benefit from minimal turnover in unit restaurant management.
Removed
We also may be adversely affected if jurisdictions in which we have restaurants impose mandatory closures, seek voluntary closures, or impose restrictions on operations. Even if such measures are not implemented, the perceived risk of infection or significant health risk may adversely affect our business. We expect to continue to navigate an unprecedented time for our company and industry.
Added
All of which operate at a higher occupancy cost than our BTND locations where we own the majority of the real estate. Depreciation and Amortization Costs: For 2022, depreciation and amortization costs increased 91.9% or $215,011 to $449,038 (3.6% of sales) from $234,027 (2.8% of sales) in 2021.
Removed
As the restrictions on behavior eased with approved vaccines being distributed and administered, all the states in which we operate have lifted mandatory mask mandates, and we expect that, in most respects, restaurant industry operations will return to pre-pandemic norms.
Added
The increase was principally the result of our transition to a public company and including higher officer salaries and bonus payments related to new senior management employment agreements, listing fees, increased quarterly review expenses, $118,700 of non-cash stock-based compensation for stock option expenses and costs associated with acquiring, transitioning to new ownership, and administering the three geographically dispersed businesses acquired during the year.
Removed
As a result, our restaurants may revert to more typical pre-pandemic operations and revenues, resulting in a decline in sales from recent levels. We may be subject to additional competition, as many restaurants initiated take-home and delivery services during the pandemic.
Added
The change in income from operations in 2022 compared to 2021 was primarily due to the matters discussed in the “Net Revenues,” “General and Administrative Costs” and “Restaurant Operating Costs,” sections above. 26 Table of Contents Interest expense: In 2022, our interest expense decreased $58,095 to $114,766 (.9% of restaurant sales) from $172,861 (2.0% of restaurant sales) in 2021 as a result of schedule amortization reducing the loan balance and a full year of the refinanced lower interest rate which reduced the interest rate to 3.45% in 2021.
Removed
Customers may have grown accustomed to a broader range of take-out foods beyond quick-service restaurant (QSR) options, which may negatively impact our revenue. We continue to monitor the course of the pandemic and its impact on our customer base and the country.
Added
Prior to the June 2021 refinancing the interest rate was 4.75%. Interest and Dividends and Other Income: Interest and Dividend income was $125,529 in 2022 resulting from interest and other investment income from the investment of the proceeds from the November 2021 IPO. Other expense of $80,649 in 2022 includes $100,000 accrual for property taxes on the Company’s St.
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We can’t predict the future course of the pandemic in light of a multitude of factors, including the spread of new variants of the original coronavirus disease among the U.S. population and the efficacy of existing treatments and vaccines. Growth Strategy and Outlook We are seeking to increase value for our shareholders in the foodservice industry.
Added
However, this measure is not indicative of our overall results, nor does restaurant-level profit accrue directly to the benefit of stockholders, primarily due to the exclusion of corporate-level expenses.
Removed
Our principal strategy is to acquire multi-unit restaurant concepts and individual restaurant properties at attractive earnings multiples. Though we do not have plans to do so, we may, under certain circumstances, develop additional Burger Time locations.
Added
At January 1, 2023, we had $8,144,872 in cash and marketable securities and net working capital of $6,730,552. The aftermath of the pandemic restrictions continues to have a significant impact on the U.S. economy, and it is difficult to predict the near-term variations in the economy in general and specifically the impact on our businesses, operating results and financial condition.
Removed
Other key elements of our growth strategy encompass increasing same-store sales and introducing a campaign to boost brand awareness. 16 Table of Contents Expansion Through Acquisitions: We intend to make strategic and opportunistic acquisitions that provide an entrance into targeted restaurant segments and geographic areas. Restaurant businesses become available for acquisition frequently.
Added
Cash Flows Used in Investing Activities In 2022, we invested approximately $5.7 million in marketable securities, including $4.9 million in short-term U.S. Treasury Bills and approximately $3 million in acquiring the operating assets of three existing restaurants and $1.26 million in acquiring our 41.2% ownership of Bagger Dave’s.
Removed
We believe that we may purchase either individual restaurant properties or multi-unit businesses at prices that provide an attractive return on our investment. We may acquire operating assets where a franchise program is the focus of the acquired foodservice business.

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