RESTAURANT ACQUISITIONS

9 Months Ended

Oct. 03, 2021

(2) Restaurant Acquisitions

On June 24, 2021, the Company entered in to a Membership Interest Purchase Agreement (the “MIPA”) with VIBSQ Holdco, LLC, a Delaware limited liability company (the “Seller”) and Bakers Square Holdings, LLC, a Delaware limited liability company (“BSQ Holdings”), Village Inn Holdings, LLC, a Delaware limited liability company (“VI Holdings”), SVCC I, LLC, an Arizona limited liability company (“SVCC” and collectively with BSQ Holdings and VI Holdings, the “Target Companies”), and for certain limited purposes as described in the MIPA, RG Group Holdco, LLC, a Delaware limited liability company (the “Parent”), pursuant to which the Company agreed, subject to specified terms and conditions, to purchase from the Seller all of the issued and outstanding membership interests (the “Interests”) in each of the Target Companies (such purchase of Interests as contemplated by the MIPA, the “VIBS Transaction”). The VIBS Transaction closed on July 30, 2021. As a result of the VIBS Transaction, each of the Target Companies became a wholly-owned subsidiary of the Company, and each of the subsidiaries of the Target Companies, which subsidiaries own or franchise Village Inn Restaurants and Bakers Square Restaurants, became wholly-owned indirect subsidiaries of the Company. The purchase price of the VIBS Transaction was approximately $13.0 million and subject to certain purchase price adjustments and exclusive of acquisition costs of approximately $498,000 which are reflected in general and administrative expenses.

The VIBS Transaction was accounted for using the acquisition 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 of the third quarter of fiscal 2021.

The following table presents the allocation of assets acquired and liabilities assumed for the VIBS Transaction:


(in thousands)
Assets acquired:
Current assets	$	708
Property, plant, equipment and leasehold improvements, net		5,101
Owned properties		3,148
Franchise agreements		10,602
Identifiable intangible assets		2,645
Operating lease right-of-use assets		14,723
Total identifiable assets acquired		36,927
Liabilities assumed:
Deferred royalty revenue		(327)
Other current liabilities		(772)
Supply chain adjustment		(117)
Gift card and loyalty liability		(1,186)
Lease liabilities		(17,220)
Deferred tax liability		(1,111)
Net assets acquired		16,194
Gain on bargain purchase		(3,203)
Total consideration transferred	$	12,991

Unaudited pro forma results of operations for the three and nine months ended October 3, 2021 and September 27, 2020 as if the Company had acquired the operations of the VIBS Transaction 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.


	Three Months Ended				Nine Months Ended
	October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020
(in thousands)
Pro forma revenues	$	59,340	$	46,242	$	167,041	$	118,692
Pro forma net income attributable to shareholders	$	5,197	$	813	$	24,149	$	9,209
Basic pro forma net income per share attributable to shareholders	$	0.50	$	0.09	$	2.51	$	1.01
Diluted pro forma net income per share attributable to shareholders	$	0.50	$	0.09	$	2.48	$	1.01

On July 12, 2021, the Company completed the acquisition of the assets and operations of four Famous Dave's restaurants in Kentucky and Tennessee. The sellers of the Restaurants were FFD Citadel LLC, FFD Hermitage LLC, FFD Cedar Bluff, and FFD Smryna. The contract purchase price of the Restaurants was approximately $1.1 million, exclusive of acquisition costs of approximately $52,000 which are reflected in general and administrative expenses. The assets acquired and liabilities assumed were recorded at estimated fair value based on information available. Proforma results were deemed immaterial to the Company.


(in thousands)
Assets acquired:
Property, plant, equipment and leasehold improvements, net	$	641
Operating lease right-of-use assets		4,616
Total identifiable assets acquired		5,257
Liabilities assumed:
Gift card liability		(16)
Lease liabilities		(4,610)
Net assets acquired		631
Goodwill		469
Total consideration transferred	$	1,100