RESTAURANT ACQUISITIONS

12 Months Ended

Jan. 03, 2021

(2) RESTAURANT ACQUISITIONS

On March 4, 2019, the Company completed the acquisition of the assets and operations of four Famous Dave's restaurants in Colorado (the “Colorado Restaurants”). The sellers of the Colorado Restaurants were Legendary BBQ, Inc., Quebec Square BBQ, Inc., Cornerstar BBQ, Inc., Razorback BBQ, Inc., and Larkridge BBQ, Inc. Pursuant to the same purchase agreement as the acquisition of the Colorado Restaurants, on June 3, 2019, the Company completed the acquisition of the assets and operations of one Famous Dave's restaurant in Grand Junction, Colorado (the “Grand Junction Restaurant”). The seller of the Grand Junction Restaurant was Mesa Mall BBQ, Inc. The contract purchase price of the Colorado Restaurants and the Grand Junction Restaurant was approximately $4.1 million, exclusive of acquisition costs of approximately $409,000, which are reflected in general and administrative expenses, plus the assumption of the gift card liability associated with the restaurants. Accounts receivable amounts owed to the Company reduced the cash required to be paid for the purchase price. The Company also purchased inventory on hand as of the acquisition dates. Effective as of the closing date of the acquisitions, the franchise agreements for the Colorado Restaurants and the Grand Junction Restaurant were terminated.

The acquisition was accounted for using the purchase method of accounting in accordance with ASC 805 “Business Combinations” and, accordingly, these consolidated statements of operations include the results of these operations from the date of acquisition.


(in thousands)
Assets acquired:
Cash and cash equivalents	$	13
Inventory		176
Property, plant, equipment and leasehold improvements, net		3,139
Lease right-of-use asset, net of unfavorable lease value		6,729
Identifiable intangible assets, net		1,368
Total identifiable assets acquired		11,425
Liabilities assumed:
Gift card liability		(182)
Lease liability		(7,116)
Net assets acquired		4,127
Goodwill		373
Total consideration transferred	$	4,500

On July 10, 2019, the Company completed the acquisition of the assets and operations of four Famous Dave's restaurants in Arizona (the “Arizona Restaurants”). The sellers of the Arizona Restaurants were Desert Ribs LLC, Famous Charlie LLC, Famous Freddie LLC, Famous Gracie LLC, and Famous George LLC, which were franchisees of the Company. The acquisition of the Arizona Restaurants was pursuant to the Purchase Agreement, as filed on June 26, 2019, resulting from a stalking horse bid in the sale process conducted under Sections 363 and 365 of Chapter 11 of the U.S. Bankruptcy Code. The purchase price of the Arizona Restaurants was approximately $1.6 million in cash and approximately $1.4 million for the assumption of gift card and other liabilities as specified in the Purchase Agreement, settlement of outstanding franchise billings, and fees related to debtor-in-possession financing. The Company incurred acquisition costs of approximately $166,000, which are reflected in general administrative expenses, associated with the purchase of the Arizona Restaurants. Effective as of the closing date of the acquisition, the franchise agreements for the Arizona Restaurants were terminated and outstanding receivables were considered additions to the purchase price.


(in thousands)
Assets acquired:
Cash and cash equivalents	$	12
Inventory		103
Property, plant, equipment and leasehold improvements, net		5,177
Lease right-of-use asset, net of unfavorable lease value		731
Total identifiable assets acquired		6,023
Liabilities assumed:
Gift card liability		(428)
Lease liability		(2,992)
Net assets acquired		2,603
Goodwill		415
Total consideration transferred	$	3,018

The following table presents the allocation of assets acquired and liabilities assumed for individually immaterial acquisitions during the twelve months ended December 29, 2019:


(in thousands)
Assets acquired:
Cash and cash equivalents	$	15
Inventory		202
Property, plant, equipment and leasehold improvements, net		362
Lease right-of-use asset, net of unfavorable lease value		6,109
Identifiable intangible assets, net		728
Total identifiable assets acquired		7,416
Liabilities assumed:
Gift card liability		(71)
Lease liability		(6,715)
Net assets acquired		630
Gain on bargain purchase		(178)
Total consideration transferred	$	452

On March 16, 2020, the Company completed the acquisition of the assets and operations of a Real Urban Barbeque restaurant in Vernon Hills, Illinois from Real Urban Barbeque VH LLC. The contract purchase price of the restaurant was approximately $45,000, exclusive of closing costs plus the assumption of the lease, gift card and certain other liabilities. The assets acquired and the liabilities assumed were considered to be immaterial and were recorded at estimated fair values based on information available, including an ROU asset and offsetting liability of approximately $714,000.

On February 11, 2020, the Company entered into an Asset Purchase Agreement with Granite City Food & Brewery Ltd. (“Granite City”) to acquire certain assets associated with Granite City restaurants in connection with the Chapter 11 filing of Granite City. The Granite City Acquisition was approved by the Bankruptcy Court at a hearing on February 21, 2020. The purchase price for the assets purchased was $3,650,000 plus certain assumed liabilities

including gift card liability and cure costs. On March 9, 2020, the Company closed the Granite City Acquisition with cash on hand and borrowing under its existing loan agreement with Choice Bank.

The Granite City Acquisition was accounted for using the purchase method of accounting in accordance with ASC 805 “Business Combinations” and, accordingly, the consolidated statements of operations include the results of these operations from the date of acquisition. The assets acquired and the liabilities assumed were recorded at estimated fair values based on information available as of the end fiscal 2020.

The following table presents the allocation of assets acquired and liabilities assumed for the Granite City Acquisition:


(in thousands)
Assets acquired:
Cash and cash equivalents	$	128
Inventory		980
Property, plant, equipment and leasehold improvements, net		17,818
Lease right-of-use asset, net of unfavorable lease value		50,968
Identifiable intangible assets, net		8,329
Total identifiable assets acquired		78,223
Liabilities assumed:
Gift card liability		(3,923)
Lease liability		(50,968)
Deferred tax liability		(4,752)
Net assets acquired		18,580
Gain on bargain purchase		13,246
Total cash consideration	$	5,334

Unaudited pro forma results of operations for the fiscal years ended January 3, 2021 and December 29, 2019 as if the Company had acquired the operations of the above referenced acquisitions at the beginning of each period presented is as follows. The pro forma results include estimates and assumptions which management believes are reasonable. However, pro forma results are not necessarily indicative of the results that would have occurred if the business combination had been in effect on the dates indicated, or which may result in the future.


	Fiscal Years Ended
	January 3, 2021		December 29, 2019
(in thousands)
Pro forma revenues	$	133,841	$	170,384
Pro forma net income attributable to shareholders	$	3,929	$	2,312
Basic pro forma net income per share attributable to shareholders	$	0.43	$	0.25
Diluted pro forma net income per share attributable to shareholders	$	0.43	$	0.25