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LEASES | 12 Months Ended
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Dec. 29, 2024
LEASES |
LEASES | NOTE 4 – LEASES With Keegan’s acquisition, we entered into a lease for approximately 2,800 square feet of restaurant space. The 131-month Keegan’s lease provides for an initial rent of $5,000 per month with an annual escalation equal to the greater of 3% or the Consumer Price Index. Variable lease costs consist primarily of property taxes, insurance, certain utility expenses, and sales tax. The lease is being accounted for as an operating lease. At the inception of the lease, we recorded an operating lease obligation and a right-of-use asset of $624,000. The present value discounted at 3.75% of the remaining lease obligation of $505,626 at December 29, 2024 and $547,687 at the end of 2023 are reflected as liabilities in the accompanying financial statements. When we acquired the PIE assets, we entered into a lease for approximately 3,500 square feet of restaurant and bakery production space. Variable lease costs consist primarily of property taxes, insurance, certain utility expenses, and sales tax. The terms of the 60-month lease provide for an initial rent of $10,000 per month with an annual escalation of 3% after 24 months. The PIE lease includes three five-year renewal option periods at our option. The PIE lease is accounted for as an operating lease. At the inception of the lease, we concluded it was reasonably certain the initial five-year option would be exercised and recorded as an operating lease obligation and a right-of-use asset of approximately $1,055,000. The present value discounted at 4.5% of the remaining lease obligation of $847,949 on December 29, 2024, and $923,885 at the end of 2023 are reflected as liabilities in the accompanying financial statements. With the acquisition of VBG assets, we assumed a five-year lease from the seller for approximately 3,000 square feet of restaurant space and access to an additional 3,000 square feet of shared entertainment seating area. 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 VBG lease includes three five-year renewal periods at our option. Variable lease costs consist primarily of property taxes, insurance, certain utility expenses, and sales tax. The VBG lease is accounted for as an operating lease. At the inception of the lease, we recorded an operating lease obligation and a right-of-use asset of $470,000. The present value discounted at 4.5% of the remaining lease obligation of $256,462 as of December 29, 2024, and $352,100 at December 31, 2023 are reflected as liabilities in the accompanying consolidated financial statements. In May 2024, with the acquisition of Schnitzel Haus, we assumed the remaining 44 months on the restaurant’s lease obligation for approximately $5,400 per month for approximately 4,200 square feet. The Schnitzel Haus lease is accounted for as an operating lease. At its inception, we recorded an operating lease obligation and a right-of-use asset of $182,878. The present value, discounted at 6.5% of the remaining lease obligation of $161,774, is reflected as a liability in the accompanying consolidated balance sheet at December 29, 2024. The following is a schedule of the approximate minimum future lease payments on the operating leases as of December 29, 2024, including amounts assuming we exercise the option to extend leases where we believe that exercise of the option is likely.
|  | Total |
2025 |  | $ | 344,410 |
2026 |  |  | 368,288 |
2027 |  |  | 339,165 |
2028 |  |  | 225,193 |
2029 |  |  | 214,863 |
Thereafter |  |  | 582,279 |
Total future minimum lease payments |  |  | 2,074,198 |
Less - interest |  |  | (302,387 | )
Present value of lease obligations |  | $ | 1,771,811 |
The weighted average remaining lease term is approximately 6.6 years, and the weighted average discount rate is approximately 4.79%. We cannot determine the interest rate implicit in our leases. Therefore, the discount rate represents our estimated incremental interest rate to borrow an amount approximating the aggregate lease payments collateralized by the property over a similar term at the commencement of the lease. The total operating lease expense for 2024 and 2023 were $408,696 and $298,567, respectively. Cash paid for leases was approximately $330,000 in 2024 and $282,000 in 2023. Variable expenses for leased properties were $57,525 in 2024 and $16,500 in 2023. Through January 2025, we paid $550 per month under an annual rental agreement for corporate and administrative office spaces in West Fargo, North Dakota, which was terminated in January 2025, and we paid $1,350 per month in Minnetonka, Minnesota, for a combined monthly rent of approximately $1,900 in 2024.

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- Definition The entire disclosure for lessee entity's leasing arrangements including, but not limited to, all of the following: (a.) The basis on which contingent rental payments are determined, (b.) The existence and terms of renewal or purchase options and escalation clauses, (c.) Restrictions imposed by lease agreements, such as those concerning dividends, additional debt, and further leasing. + References Reference 1: http://fasb.org/us-gaap/role/ref/otherTransitionRef -Topic 840 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/840/tableOfContent + Details
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