10-K: Ark Restaurants Reports Wider Loss Amid Lease Disputes

Ark Restaurants Corp. reported a significantly wider net loss for fiscal year 2025, driven by declining revenues, impairment charges, and ongoing legal battles over key New York City leases.

Summary

• Ark Restaurants Corp. reported a consolidated net loss of $9.163 million for the fiscal year ended September 27, 2025, compared to a net loss of $3.745 million in the prior year.
• Net loss attributable to Ark Restaurants Corp. common shareholders widened to $11.466 million ($3.18 per share) from $3.896 million ($1.08 per share) in the previous fiscal year.
• Total revenues decreased by 9.7% to $165.751 million in FY2025 from $183.545 million in FY2024.
• Company-wide same-store food and beverage sales decreased by 4.2% in FY2025.
• The company recognized $4.700 million in impairment losses on right-of-use and long-lived assets related to its Sequoia property in Washington, D.C., an 88% increase from $2.500 million in FY2024.
• A goodwill impairment charge of $3.440 million was recorded in FY2025, following a $4.000 million charge in FY2024, primarily due to a decline in stock price and uncertainty surrounding the Bryant Park leases.
• The leases for Bryant Park Grill & Caf and The Porch at Bryant Park expired on April 30, 2025, and March 31, 2025, respectively, and the company is engaged in a lawsuit to protect its rights after the landlord selected a new operator.
• The Bryant Park locations collectively accounted for $25.5 million (15.4% of total revenues) in FY2025, down from $31.1 million (17.4%) in FY2024.
• The company received a $5.5 million termination payment for the Tampa Food Court lease, resulting in a $5.235 million gain in FY2025.
• Three condominium units at Island Beach Resort were sold for $1.203 million net proceeds, yielding a $594,000 gain in FY2025.
• The company's investment in New Meadowlands Racetrack LLC (NMR) totals $5.256 million, with NMR actively pursuing a New Jersey casino license dependent on a November 2026 ballot referendum.
• Quarterly cash dividends of $0.1875 per share were paid in December 2023, March 2024, and June 2024, but no dividends have been declared since May 7, 2024.
• The credit agreement with Bank Hapoalim B.M. was amended, extending the maturity date to June 1, 2028, and reducing the maximum permitted obligations from $30 million to $20 million, while increasing the minimum tangible net worth covenant from $22 million to $28 million.

Sentiment

Score: 3

Explanation: The sentiment is negative due to a significantly wider net loss, declining revenues, negative same-store sales, substantial impairment charges, and ongoing material legal disputes over key revenue-generating leases. The suspension of dividends further reinforces a negative outlook, despite some positive gains from asset dispositions.

Positives

• The company recorded a $5.235 million gain from the termination of its Tampa Food Court lease in FY2025.
• Proceeds from the sale of three condominium units at Island Beach Resort generated $1.203 million in net proceeds and a $594,000 gain in FY2025.
• The working capital deficit improved to $5.377 million at September 27, 2025, from $10.659 million at September 28, 2024.
• The operating loss decreased by 5.4% to $4.064 million in FY2025 compared to $4.294 million in FY2024, although adjusted operating results show a decline.
• Leases for America and Village Eateries (including Broadway Burger Bar and Grill and Gonzalez y Gonzalez) at the New York-New York Hotel and Casino in Las Vegas were extended through December 2033 and December 2034, respectively.
• A new concept, Lucky Pig, was opened in the Village Eateries at a cost of approximately $850,000, as part of ongoing renovations.

Negatives

• Consolidated net loss widened significantly to $9.163 million in FY2025 from $3.745 million in FY2024.
• Net loss attributable to Ark Restaurants Corp. increased to $11.466 million ($3.18 per share) from $3.896 million ($1.08 per share).
• Total revenues decreased by 9.7% to $165.751 million in FY2025.
• Company-wide same-store food and beverage sales decreased by 4.2%, with notable declines in New York (-10.8%), Washington, D.C. (-14.9%), and Atlantic City, NJ (-10.2%).
• The Bryant Park Grill & Caf and The Porch at Bryant Park leases expired, and the company is in a legal dispute, with these locations' revenues declining from $31.1 million in FY2024 to $25.5 million in FY2025.
• Significant impairment losses on right-of-use and long-lived assets of $4.700 million were recognized for the Sequoia property in Washington, D.C., due to lower-than-expected operating results.
• A goodwill impairment charge of $3.440 million was recorded in FY2025, indicating a decline in the fair value of the company's equity.
• Food and beverage costs as a percentage of total revenues increased due to higher commodity prices and weaker event business.
• Payroll, occupancy, and other operating costs as a percentage of total revenues increased marginally due to rising minimum wages, base rents, insurance premiums, inflation, and legal fees related to the Bryant Park dispute.
• The Board has not declared any dividends since May 7, 2024, after previously paying quarterly cash dividends.
• The minimum tangible net worth covenant in the credit agreement was increased from $22 million to $28 million, and the maximum permitted obligations were reduced from $30 million to $20 million.

Risks

• The ongoing legal dispute and uncertainty surrounding the Bryant Park Grill & Caf and The Porch at Bryant Park leases could lead to the loss of these properties, which accounted for 15.4% of total revenues in FY2025, materially impacting business, financial condition, and results of operations.
• The company's $5.256 million investment in New Meadowlands Racetrack LLC (NMR) is subject to substantial impairment if the New Jersey casino referendum in November 2026 does not pass or if NMR fails to obtain a casino license.
• Interests in NMR may be diluted if the company does not contribute to NMR's substantial capital raise for a marketing campaign to support the casino referendum, or if NMR raises outside capital.
• Increases in food, beverage, and supply costs, especially for seafood, shellfish, chicken, and beef, could adversely affect profitability.
• Rising wages and benefit costs, including group medical insurance and minimum wage increases, could negatively impact labor costs.
• Vulnerability to changes in consumer preferences, economic conditions, adverse weather, and natural disasters, given the geographic concentration and real estate intensive nature of the business.
• Difficulty in extending existing leases on favorable terms or renewing expired leases, as seen with the Bryant Park properties.
• Negative publicity, whether valid or not, and the accelerated impact of social media could harm the company's reputation and business.
• Risks associated with food safety and quality, and food-borne illnesses.
• Reliance on the continued service of executive officers.
• Impact of security breaches of confidential customer information or failures of information technology systems.
• The company's ability to open new restaurants or expand existing ones to achieve significant revenue increases or replace lost revenue is not assured.
• The company has recorded a full valuation allowance against its deferred tax assets due to recent cumulative losses, indicating uncertainty about future taxable income.

Future Outlook

Management believes that existing cash balances, internal cash-generating capabilities, current banking facilities, and the ability to secure additional financing are sufficient to fund capital expenditures, debt maturities, and operating activities for at least the next 12 months and the foreseeable future. However, the company acknowledges that future cost increases may not be offset by higher menu prices, and macroeconomic conditions could limit pricing flexibility. The investment in New Meadowlands Racetrack LLC faces uncertainty regarding a casino license, which could lead to substantial impairment if a ballot referendum fails. The company intends to sell its remaining condominium units subject to market forces.

Management Comments

• Management, after consultation with legal counsel, is unable to predict the outcome of the Bryant Park lease dispute at this time.
• The uncertainty related to the Bryant Park dispute has had a material adverse impact on our business, financial condition, and results of operations and will continue to do so while the dispute is litigated and if we are unable to prevail in the above actions and/or are unable to extend or renew these leases on favorable terms, if at all.
• Our restaurants generally do not achieve substantial increases in revenue from year to year, which we consider to be typical of the restaurant industry.
• We believe that our existing cash balances, internal cash-generating capabilities, current banking facilities and ability to secure additional financing, if necessary, are sufficient to finance our capital expenditures, debt maturities and other operating activities for at least the next 12 months and the foreseeable future.

Industry Context

The restaurant industry is highly competitive and sensitive to changes in consumer tastes, economic conditions, and traffic patterns. The company operates in a seasonal business, with Florida locations partially offsetting the colder months in New York and Washington, D.C. The industry is currently experiencing commodity and wage inflation, which has impacted operating results. The company competes with many well-established national and local competitors, some with greater financial resources.

Comparison to Industry Standards

• The company's observation that its restaurants generally do not achieve substantial increases in revenue from year to year is considered typical of the broader restaurant industry.
• The hospitality industry is highly competitive, affected by changes in taste, economic conditions, and population/traffic patterns, aligning with general industry trends.
• The company competes with well-established national and locally owned competitors, some with substantially greater financial resources, which is a common characteristic of the fragmented restaurant market.

Corporate Governance

Legal Proceedings

• The company filed a complaint in New York State Supreme Court on March 28, 2025, alleging the Bryant Park landlord's bid process was defective, violated applicable law, and that a lease was awarded to a lower bidder, infringing on the company's right of first lease.
• Motions for preliminary injunctions to prevent eviction from Bryant Park Grill & Caf and The Porch at Bryant Park were denied by the New York State Supreme Court and Appellate Division.
• The company filed an amended complaint on June 16, 2025, adding a cause of action for age discrimination by the landlord.
• The landlord filed counterclaims on June 26, 2025, seeking to eject the company from the Bryant Park premises.
• The court ordered the company to make monthly use and occupancy payments for the Bryant Park properties during the pendency of the case, which the company has complied with.
• The company is a party to various lawsuits arising from accidents and workers' compensation claims, generally handled by insurance carriers, and employment discrimination litigation, none of which management believes will have a material adverse effect.

Related Party Transactions

• Payments totaling $57,000 were made to the mother of Samuel Weinstein, the Co-Chief Operating Officer, for design services during the year ended September 27, 2025.
• Employee receivables totaled approximately $136,000 at September 27, 2025, bearing interest at the minimum statutory rate (4.00%).

Stakeholder Impact

• Shareholders: Experienced a significantly wider net loss and suspension of dividends, indicating reduced returns and potential capital erosion. The ongoing legal disputes and investment uncertainties pose further risks to shareholder value.
• Employees: The company continues to face wage inflation and competition for talent, which could impact compensation packages and retention. Changes in restaurant-level procedures may affect daily operations.
• Customers: The legal dispute over Bryant Park leases and declining same-store sales in several regions suggest potential disruption or changes in service offerings at affected locations. Renovations in Las Vegas aim to enhance customer experience.
• Creditors: The credit agreement amendment extended maturity but increased the minimum tangible net worth covenant, indicating a need for stronger financial health to satisfy lenders.
• Suppliers: The company strives to obtain quality ingredients at competitive prices, but commodity price increases could impact supplier relationships or purchasing strategies.

Next Steps

• Continue to operate Bryant Park Grill & Caf and The Porch at Bryant Park until awarded lease extensions or ordered to vacate.
• Pursue all available legal options to protect the company's rights in the Bryant Park lease dispute, including the pending motion to dismiss counterclaims.
• Complete the $4.0 million refresh of the America restaurant at New York-New York Hotel and Casino by March 31, 2026.
• Complete the $3.5 million refresh of the Village Eateries, Broadway Burger Bar and Grill, and Gonzalez y Gonzalez at New York-New York Hotel and Casino by December 31, 2025.
• Monitor the New Jersey Senate Concurrent Resolution proposing a ballot referendum for casino authorization at Meadowlands Racetrack in November 2026.
• Evaluate the investment in NMR based on existing operations if the casino referendum fails, potentially leading to substantial impairment.
• Intend to sell the remaining 11 condominium units at Island Beach Resort, subject to market forces.
• The Board will continue to exercise discretion on future dividend payments based on operating performance and other factors.

Key Dates

Recommendation

The company reported a significantly wider net loss and a shift from adjusted operating income to a loss, indicating deteriorating financial performance. Key revenue-generating leases are under active legal dispute, posing a material risk to future operations and revenue. Substantial impairment charges on assets and goodwill reflect underlying business challenges and a decline in fair value. The suspension of dividends further signals financial strain. While some asset dispositions generated gains, these are overshadowed by the core operational and legal headwinds, making the stock a high-risk investment with a negative outlook.

Keywords

Restaurant Industry, SEC Filing, 10-K, Financial Performance, Lease Disputes, Restaurant Operations, Casino Gaming Investment, Impairment Charges, Revenue Decline, Same-Store Sales, Corporate Governance, ARKR