10-Q: BT Brands Reports Q3 2026 Results: Sales Decline, Net Loss

BT Brands, Inc. reported a net loss of $145,397 for the third quarter of 2026, with sales decreasing to $3.8 million, impacted by rising operating costs and an unrealized loss on marketable securities.

Summary

• BT Brands, Inc. reported a net loss of $145,397 for the thirteen weeks ended September 27, 2026, a significant decrease from a net income of $914,975 in the prior year period.
• Sales for the third quarter decreased by approximately $79,000 to $3.8 million from $3.9 million in the prior year, primarily due to a decline in Burger Time sales.
• Restaurant operating costs as a percentage of sales increased to 81.4% from 78.7% in the prior year, driven by higher food and paper costs, labor, and occupancy expenses.
• General and administrative expenses significantly increased to $418,422 from $178,389, largely due to a reserve placed on advances to Bagger Daves Burger Tavern, Inc. (BDVB).
• For the 39 weeks ended September 27, 2026, the company reported a net loss of $319,975, compared to a net income of $640,157 in the same period last year.
• Sales for the 39-week period decreased by approximately $696,000 to $10.2 million from $10.9 million in the prior year, attributed to Burger Time sales decline and the closure of a Minot location.
• Restaurant-level EBITDA for the 39-week period was $1,573,625, a decrease from $1,738,104 in the prior year, with a margin of 15.5% compared to 16.0%.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing as negative due to declining sales, increased operating costs as a percentage of sales, and a net loss for the period, despite some positive adjustments in cost of sales.

Positives

• Cost of sales - food and paper decreased as a percentage of restaurant sales to 32.1% from 33.4% in the comparable 2025 period for the 39-week period, due to menu changes and moderate inflationary pressures.
• General and administrative expenses decreased by approximately $41,000 for the 39-week period compared to the prior year, due to cost-cutting initiatives.
• The company has $4.6 million in cash and marketable securities and $4.4 million in net working capital as of September 27, 2026.
• The company's publicly traded warrants (BTBDW) are set to expire on November 16, 2026, which will remove a potential overhang.

Negatives

• Net loss of $145,397 for the thirteen weeks ended September 27, 2026, compared to a net income of $914,975 in the prior year period.
• Sales for the thirteen weeks ended September 27, 2026, decreased to $3.8 million from $3.9 million in the prior year.
• Restaurant operating costs as a percentage of sales increased to 81.4% in Q3 2026 from 78.7% in Q3 2025.
• Labor costs increased as a percentage of restaurant sales to 34.7% in Q3 2026 from 33.5% in Q3 2025.
• General and administrative expenses increased significantly to $418,422 in Q3 2026 from $178,389 in Q3 2025, primarily due to a reserve on advances to BDVB.
• Net loss of $319,975 for the 39 weeks ended September 27, 2026, compared to a net income of $640,157 in the prior year period.
• Sales for the 39-week period decreased to $10.2 million from $10.9 million in the prior year.
• Restaurant-level EBITDA margin decreased to 15.5% for the 39-week period from 16.0% in the prior year.

Risks

• Risks associated with operating in a business outside the restaurant industry.
• Ability to execute growth strategy, including identifying and integrating acquisitions.
• Labor shortages, wage inflation, and ability to attract and retain employees.
• Increases in food, commodity, and energy costs and supply chain disruptions.
• Changes in consumer preferences and discretionary spending.
• Competition in the restaurant industry and broader economic conditions.
• Cybersecurity risks and potential disruptions to information systems.
• The dispute with Aero Velocity regarding the termination of the merger agreement.

Future Outlook

The company faces ongoing uncertainty from public health matters, inflationary pressures, supply chain disruptions, and labor availability. Menu price increases may not fully offset higher costs and could impact consumer demand. The termination of the Aero Velocity merger introduces transaction-related uncertainties and potential costs.

Management Comments

• "We continually evaluate menu pricing to manage gross margins amid fluctuating input costs."
• "Our operating environment remains highly competitive, and numerous factors, including consumer demand, pricing sensitivity, competition, and broader economic conditions, influence sales trends."
• "While restaurants remain our primary operating focus, we believe that certain non-restaurant businesses with strong fundamentals and scalable operating models may complement our existing structure."
• "The Company maintains a portfolio of marketable securities, the value of which is subject to market volatility."
• "It is difficult to predict the United States economy in general, the impact on the quick service drive-through segment of the food service industry, and our operating results and financial condition."

Industry Context

StockSavvy.ai notes that BT Brands is operating in a challenging restaurant industry environment characterized by labor shortages, wage inflation, and fluctuating food costs. The company's strategy to diversify beyond restaurants, while exploratory, reflects a broader trend of seeking stability and growth in less volatile sectors.

Comparison to Industry Standards

• The company's restaurant-level EBITDA margin of 15.5% for the 39-week period is below the 16.0% achieved in the prior year, indicating pressure on core restaurant profitability.
• Labor costs as a percentage of sales increased to 36.2% for the 39-week period, which is a common challenge across the restaurant industry due to wage inflation and staffing difficulties.
• Food and paper costs as a percentage of sales decreased to 32.1% for the 39-week period, which is a positive trend that may not be universally achieved by all competitors given ongoing commodity price volatility.

Legal Proceedings

• Village Bier Garten lease litigation: The landlord is seeking recovery of unpaid rent and other amounts. The company disputes the claims and believes the landlord's actions may reduce any amounts ultimately recoverable. The company also has a claim against the assignee.
• Aero Velocity merger termination dispute: Aero Velocity asserts the termination was invalid and seeks damages. The company disputes these assertions and believes no termination fee is owed. No formal legal proceedings have been initiated.

Related Party Transactions

• The company advanced funds to Bagger Daves Burger Tavern, Inc. (BDVB), an unconsolidated affiliate where the CEO also serves as president and director. A reserve was placed on these advances.
• The company previously held an equity investment in NGI Corporation, which was fully impaired in fiscal 2025. Transactions with NGI are considered related party transactions as a former CFO was also an NGI officer.

Stakeholder Impact

• Shareholders: The net loss and declining sales may negatively impact shareholder value. The expiration of warrants could remove a potential overhang.
• Creditors: The company's liquidity and profitability pressures could impact its ability to service debt.
• Suppliers: Increased food and paper costs could impact margins, potentially leading to renegotiated terms or price adjustments.
• Employees: Labor cost increases and potential staffing challenges could affect employee compensation and retention strategies.

Next Steps

• The company will continue to evaluate menu pricing to manage gross margins.
• The company will continue to assess the need for a valuation allowance for deferred tax assets.
• The company will continue to monitor the Village Bier Garten lease litigation and the Aero Velocity dispute.
• Publicly traded warrants are set to expire on November 16, 2026.

Key Dates

Recommendation

The company is experiencing declining sales and profitability, with a net loss in the current reporting period. While there are some positive cost management efforts and a strong cash position, the persistent operational challenges, legal disputes, and lack of clear growth catalysts suggest a cautious approach. The upcoming warrant expiration is a neutral event. Therefore, a 'hold' recommendation is appropriate pending signs of operational turnaround or strategic clarity.

Keywords

Restaurant Operations, Financial Performance, Sales Trends, Cost Management, Stock-Based Compensation, Marketable Securities, Related Party Transactions, Lease Obligations