10-K: Flanigan's Enterprises Reports Increased Revenue but Net Income Declines in Fiscal Year 2024

Flanigan's Enterprises saw a revenue increase in fiscal year 2024, driven by higher sales and menu price adjustments, but experienced a decrease in net income due to rising costs.

Summary

• Flanigan's Enterprises, Inc. reported a total revenue of $188.321 million for fiscal year 2024, an increase of 7.98% compared to $174.396 million in fiscal year 2023.
• Restaurant food sales reached $114.795 million, while restaurant bar sales totaled $30.010 million, and package store sales amounted to $40.497 million.
• The company's net income for fiscal year 2024 decreased by 2.14% to $5.3 million from $5.416 million in the previous year.
• Net income attributable to Flanigan's Enterprises Inc.'s stockholders was $3.356 million, a decrease of 16.08% from $3.999 million in fiscal year 2023.
• Comparable weekly restaurant food sales increased by 1.02%, while comparable weekly restaurant bar sales decreased by 2.41%.
• Same store package liquor sales increased by 6.81% compared to the previous year.
• The company opened a new restaurant in Hollywood, Florida (Store #19R) in March 2024, which contributed to the revenue increase.
• The company also operates a limited partnership owned restaurant in Miramar, Florida (Store #25) and package liquor stores in Miramar, Florida (Store #24) and Hollywood, Florida (Store #19P) for the entire fiscal year 2024, as opposed to a part of fiscal year 2023.
• The company increased menu prices for bar offerings by 5.63% in August 2024 and for food offerings by 2.06% and bar offerings by 5.65% in March 2023 to offset higher costs.
• The company's operating costs and expenses increased by 8.70% to $181.925 million, primarily due to increased payroll, consultant fees, and higher food costs.
• The company's gross profit margin for restaurant food and bar sales was 65.57% in fiscal year 2024, down from 66.61% in fiscal year 2023.
• The gross profit margin for package store sales was 25.60% in fiscal year 2024, down from 26.65% in fiscal year 2023.
• The company's cash and cash equivalents decreased by $4.13 million to $21.402 million as of September 28, 2024, primarily due to the completion of the construction of Store #19R.

Sentiment

Score: 5

Explanation: The document presents a mixed picture with revenue growth offset by declining profitability and rising costs. While there are positive aspects like increased sales and new store openings, the negative trends in net income and margins temper the overall sentiment. The company also faces several risks, including labor costs, competition, and potential liabilities.

Positives

• Total revenue increased by 7.98% year-over-year, indicating growth in the company's business.
• Restaurant food sales, restaurant bar sales, and package store sales all saw increases.
• The company successfully opened a new restaurant in Hollywood, Florida (Store #19R) in March 2024.
• The company implemented menu price increases to offset higher costs.
• Same store package liquor sales increased by 6.81%.

Negatives

• Net income decreased by 2.14% year-over-year, indicating a decline in profitability.
• Net income attributable to stockholders decreased by 16.08% year-over-year.
• Comparable weekly restaurant bar sales decreased by 2.41%.
• Operating costs and expenses increased by 8.70%, outpacing revenue growth.
• Gross profit margins for both restaurant food and bar sales and package store sales decreased.
• Cash and cash equivalents decreased by $4.13 million.

Risks

• The company faces risks related to staffing and retaining qualified personnel in a competitive labor market.
• The company is experiencing labor cost inflation, which could impact financial performance.
• Changes in consumer preferences and discretionary spending could adversely affect sales.
• Intense competition in the restaurant and package liquor store industry could prevent the company from increasing or sustaining revenues and profitability.
• Increases in food costs, raw materials, and other supplies due to inflation may have a material adverse impact on financial performance.
• The company may face liability under dram shop statutes.
• The company is exposed to risks related to cybersecurity.
• The company's business is subject to seasonal effects, with liquor purchases tending to increase during the holiday seasons.
• The company is subject to various federal, state, and local laws and regulations, including those related to alcoholic beverage control, labor, and health and safety.

Future Outlook

The company expects restaurant food and bar sales to increase in fiscal year 2025 due to increased traffic and the operation of the new Hollywood restaurant for the entire year. Package liquor store sales are also expected to increase due to increased traffic. The company anticipates that operating costs and expenses will continue to increase through fiscal year 2025. The company anticipates that the gross profit margin for package liquor store merchandise will decrease for fiscal year 2025 due to higher costs and a reduction in pricing of certain package store merchandise to be more competitive.

Management Comments

• Management anticipates that operating costs and expenses will continue to increase through fiscal year 2025.
• Management believes that current cash availability from cash on hand, positive cash flow from operations, and borrowed funds will be sufficient to fund operations and planned capital expenditures for at least the next twelve months.

Industry Context

The report highlights the competitive nature of the liquor and hospitality industries, which are often affected by changes in consumer tastes, economic conditions, and population patterns. The company competes with both national and local establishments, and its success depends on factors such as price, location, quality of facilities, and the type of food and beverages served. The company has had to adjust pricing to stay competitive, including meeting competitors' advertisements. The company believes it has a competitive position due to widespread consumer recognition of its brand names.

Comparison to Industry Standards

• The company's gross profit margin for restaurant food and bar sales was 65.57% in fiscal year 2024, which is within the typical range for casual dining restaurants, but slightly lower than the previous year.
• The company's gross profit margin for package store sales was 25.60% in fiscal year 2024, which is also within the typical range for liquor stores, but slightly lower than the previous year.
• The company's operating expenses increased by 8.70%, which is a significant increase and may be higher than some of its competitors.
• The company's net income decreased by 2.14%, which may be a concern compared to industry averages, especially given the revenue increase.
• The company's comparable weekly restaurant food sales increased by 1.02%, which is a modest increase and may be lower than some of its competitors.
• The company's same store package liquor sales increased by 6.81%, which is a positive sign and may be higher than some of its competitors.
• The company's reliance on limited partnerships for expansion is a unique approach compared to some of its competitors, which may have different capital structures and growth strategies.
• The company's use of a management agreement for The Whales Rib restaurant is also a unique approach compared to some of its competitors, which may have different management structures.

Legal Proceedings

• The company is subject to dram shop statutes due to its restaurant operations.
• The company is a party to various other claims, legal actions, and complaints arising in the ordinary course of business.

Related Party Transactions

• Four franchised stores are owned and operated by related parties, including members of the family of the Chairman of the Board, officers, and/or directors.
• The company has a mortgage payable to a related party, an entity the owners of which include persons who are either the company's officers, directors, or their family members.

Stakeholder Impact

• Shareholders may be concerned about the decrease in net income and profitability.
• Employees may be affected by the company's efforts to manage labor costs.
• Customers may be affected by menu price increases.
• Suppliers may be affected by the company's efforts to manage supply costs.
• Creditors may be affected by the company's debt levels and financial performance.

Next Steps

• The company will continue to monitor and manage its operating costs and expenses.
• The company will continue to evaluate the possibility of entering into arrangements to assist in managing risk and variability associated with the supply and demand of food products.
• The company will continue to invest in marketing and advertising strategies to attract customers and increase their connection with the brand.
• The company will continue to monitor and manage its interest rate risk on its debt instruments.
• The company will continue to evaluate the impact of new accounting guidance on its tax disclosures.

Key Dates

Keywords

restaurant, package liquor store, revenue, net income, sales, operating costs, gross profit, menu prices, labor costs, inflation, franchise, limited partnership, cybersecurity, risk factors