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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Rave Restaurant Group Inc | NASDAQ:RAVE | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
-0.02 | -0.99% | 2.00 | 1.88 | 2.24 | 2.08 | 2.00 | 2.00 | 12,890 | 22:16:11 |
Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended
|
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
|
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
|
||
|
|
|
(Address of principal executive offices)
|
(Zip Code)
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
||
|
|
|
Large accelerated filer ☐
|
Accelerated filer ☐
|
|
Smaller reporting company
|
Emerging growth company
|
ITEM 1. |
BUSINESS.
|
ITEM 1A. |
RISK FACTORS.
|
ITEM 1B. |
UNRESOLVED STAFF COMMENTS.
|
ITEM 2. |
PROPERTIES.
|
ITEM 3. |
LEGAL PROCEEDINGS.
|
ITEM 4. |
MINE SAFETY DISCLOSURES.
|
ITEM 5. |
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
|
Period
|
Total Number
of Shares
Purchased
|
Average Price
Paid Per Share
|
Total Number of
Shares Purchased
as Part of Publicly
Announced Plan
|
Maximum Number
of Shares that May
Yet Be Purchased
Under the Plan
|
||||||||||||
June 27, 2022 - July 31, 2022
|
891,350
|
$
|
1.20
|
3,552,399
|
4,463,601
|
|||||||||||
August 1, 2022 - August 28, 2022
|
219,541
|
1.35
|
3,771,940
|
4,244,060
|
||||||||||||
August 29, 2022 - September 25, 2022
|
0
|
0
|
3,771,940
|
4,244,060
|
||||||||||||
September 26, 2022 - October 30, 2022
|
0
|
0
|
3,771,940
|
4,244,060
|
||||||||||||
October 31, 2022 - November 27, 2022
|
0
|
0
|
3,771,940
|
4,244,060
|
||||||||||||
November 28, 2022 - December 25, 2022
|
2,246,086
|
1.60
|
6,018,026
|
1,997,974
|
||||||||||||
December 26, 2022 - January 29, 2023
|
0
|
0
|
6,018,026
|
1,997,974
|
||||||||||||
January 30, 2023 - February 26, 2023
|
0
|
0
|
6,018,026
|
1,997,974
|
||||||||||||
February 27, 2023 - March 26, 2023
|
0
|
0
|
6,018,026
|
1,997,974
|
||||||||||||
March 27, 2023 - April 30, 2023
|
0
|
0
|
6,018,026
|
1,997,974
|
||||||||||||
May 1, 2023 - May 28, 2023
|
0
|
0
|
6,018,026
|
1,997,974
|
||||||||||||
May 29, 2023 - June 25, 2023
|
0
|
0
|
6,018,026
|
1,997,974
|
||||||||||||
Total
|
3,356,977
|
$
|
1.48
|
Plan Category
|
Number of securities to
be issued upon exercise
of outstanding options,
warrants, and rights
|
Weighted average
exercise price of
outstanding options,
warrants, and rights
|
Number of securities
remaining available for
future issuance under
equity compensation plans (1)
|
|||||||||
Stock option compensation plans approved by security holders
|
151,750
|
$
|
5.19
|
1,543,603
|
||||||||
Stock option compensation plans not approved by security holders
|
—
|
—
|
—
|
|||||||||
Total
|
151,750
|
$
|
5.19
|
1,543,603
|
(1) |
Securities remaining available for future issuance under the 2015 Long Term Incentive Program are net of a maximum of 1,328,531 shares of common stock issuable pursuant to outstanding restricted stock units, subject to applicable
vesting requirements and performance criteria. See Note I to the audited consolidated financial statements included in this report.
|
ITEM 6. |
Reserved
|
ITEM 7. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|
Pizza Inn
|
Pie Five
|
All Concepts
|
||||||||||||||||||||||
Ending
Units
|
Retail
Sales
|
Ending
Units
|
Retail
Sales
|
Ending
Units
|
Retail
Sales
|
|||||||||||||||||||
Domestic Franchised/Licensed
|
123
|
$
|
100,361
|
27
|
$
|
20,002
|
150
|
$
|
120,363
|
|||||||||||||||
Company-Owned
|
–
|
–
|
–
|
–
|
–
|
–
|
||||||||||||||||||
Total Domestic Units
|
123
|
$
|
100,361
|
27
|
$
|
20,002
|
150
|
$
|
120,363
|
|||||||||||||||
International Franchised
|
34
|
–
|
34
|
52 Weeks Ended
|
||||||||
June 25,
2023
|
June 26,
2022
|
|||||||
(in thousands)
|
||||||||
Pizza Inn Domestic Comparable Store Retail Sales
|
$
|
96,021
|
$
|
86,253
|
||||
Pie Five Domestic Comparable Store Retail Sales
|
19,173
|
18,184
|
||||||
Total Rave Comparable Store Retail Sales
|
$
|
115,194
|
$
|
104,437
|
Fiscal Year Ended
|
||||||||
June 25,
2023
|
June 26,
2022
|
|||||||
Net income
|
$
|
1,613
|
$
|
8,022
|
||||
Interest expense
|
1
|
61
|
||||||
Income taxes
|
537
|
(5,657
|
)
|
|||||
Depreciation and amortization
|
214
|
187
|
||||||
EBITDA
|
$
|
2,365
|
$
|
2,613
|
||||
Stock-based compensation expense
|
345
|
169
|
||||||
Severance
|
—
|
53
|
||||||
Impairment of long-lived assets and other lease charges
|
5
|
6
|
||||||
Franchisee default and closed store revenue
|
(13
|
)
|
(38
|
)
|
||||
Closed and non-operating store costs
|
—
|
3
|
||||||
Adjusted EBITDA
|
$
|
2,702
|
$
|
2,806
|
52 Weeks Ended
|
||||||||
June 25,
2023
|
June 26,
2022
|
|||||||
Pizza Inn Retail Sales - Total Domestic Units
|
(in thousands, except unit data)
|
|||||||
Domestic Units
|
||||||||
Buffet Units - Franchised
|
$
|
94,836
|
$
|
81,546
|
||||
Delco/Express Units - Franchised
|
5,335
|
6,198
|
||||||
PIE Units - Licensed
|
190
|
233
|
||||||
Total Domestic Retail Sales
|
$
|
100,361
|
$
|
87,977
|
||||
Pizza Inn Comparable Store Retail Sales - Total Domestic
|
$
|
96,021
|
$
|
86,253
|
||||
Pizza Inn Average Units Open in Period
|
||||||||
Domestic Units
|
||||||||
Buffet Units - Franchised
|
75
|
71
|
||||||
Delco/Express Units - Franchised
|
44
|
51
|
||||||
PIE Units - Licensed
|
7
|
10
|
||||||
Total Domestic Units
|
126
|
132
|
Fiscal Year Ended June 25, 2023
|
||||||||||||||||
Beginning
Units
|
Opened
|
Closed
|
Ending
Units
|
|||||||||||||
Domestic Units:
|
||||||||||||||||
Buffet Units - Franchised
|
72
|
5
|
—
|
77
|
||||||||||||
Delco/Express Units - Franchised
|
47
|
—
|
6
|
41
|
||||||||||||
PIE Units - Licensed
|
9
|
—
|
4
|
5
|
||||||||||||
Total Domestic Units
|
128
|
5
|
10
|
123
|
||||||||||||
International Units (all types)
|
31
|
3
|
—
|
34
|
||||||||||||
Total Units
|
159
|
8
|
10
|
157
|
52 Weeks Ended
|
||||||||
June 25,
2023
|
June 26,
2022
|
|||||||
(in thousands, except unit data)
|
||||||||
Pie Five Retail Sales - Total Units
|
||||||||
Domestic Units - Franchised
|
$
|
20,002
|
$
|
20,311
|
||||
Total Domestic Retail Sales
|
$
|
20,002
|
$
|
20,311
|
||||
Pie Five Comparable Store Retail Sales - Total
|
$
|
19,173
|
$
|
18,184
|
||||
Pie Five Average Units Open in Period
|
||||||||
Domestic Units - Franchised
|
29
|
32
|
||||||
Total Domestic Units
|
29
|
32
|
Fiscal Year Ended June 25, 2023
|
||||||||||||||||
Beginning
Units
|
Opened
|
Closed
|
Ending
Units
|
|||||||||||||
Domestic - Franchised
|
31
|
—
|
4
|
27
|
||||||||||||
Total Domestic Units
|
31
|
—
|
4
|
27
|
• |
“EBITDA” represents earnings before interest, taxes, depreciation and amortization.
|
• |
“Adjusted EBITDA” represents earnings before interest, taxes, depreciation and amortization, stock-based compensation expense, severance, gain/loss on sale of assets, costs related to impairment and other
lease charges, franchisee default and closed store revenue/expense, and closed and non-operating store costs.
|
• |
“Retail sales” represents the restaurant sales reported by our franchisees and Company-owned restaurants, which may be segmented by brand or domestic/international locations.
|
• |
“Comparable store retail sales” includes the retail sales for restaurants that have been open for at least 18 months as of the end of the reporting period. The sales results for a restaurant that was closed
temporarily for remodeling or relocation within the same trade area are included in the calculation only for the days that the restaurant was open in both periods being compared.
|
• |
“Store weeks” represent the total number of full weeks that specified restaurants were open during the period.
|
• |
“Average units open” reflects the number of restaurants open during a reporting period weighted by the percentage of the weeks in a reporting period that each restaurant was open.
|
• |
“Average weekly sales” for a specified period is calculated as total retail sales (excluding partial weeks) divided by store weeks in the period.
|
• |
“Restaurant operating cash flow” represents the pre-tax income earned by Company-owned restaurants before (1) allocated marketing and advertising expenses, (2) depreciation and amortization, (3) impairment
and other lease charges, and (4) non-operating store costs.
|
• |
“Non-operating store costs” represent gain or loss on asset disposal, store closure expenses, lease termination expenses and expenses related to abandoned store sites.
|
• |
“Franchisee default and closed store revenue/expense” represents the net of accelerated revenues and costs attributable to defaulted area development agreements and closed franchised stores.
|
Pizza Inn
Franchising
|
Pie Five
Franchising
|
Company-Owned
Stores
|
Corporate
|
Total
|
||||||||||||||||||||||||||||||||||||
Fiscal Year Ended
|
Fiscal Year Ended
|
Fiscal Year Ended
|
Fiscal Year Ended
|
Fiscal Year Ended
|
||||||||||||||||||||||||||||||||||||
June 25,
2023
|
June 26,
2022
|
June 25,
2023
|
June 26,
2022
|
June 25,
2023
|
June 26,
2022
|
June 25,
2023
|
June 26, 2022
|
June 25,
2023
|
June 26,
2022
|
|||||||||||||||||||||||||||||||
REVENUES:
|
||||||||||||||||||||||||||||||||||||||||
Franchise and license revenues
|
$
|
9,810
|
$
|
8,535
|
$
|
1,870
|
$
|
1,950
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
11,680
|
$
|
10,485
|
||||||||||||||||||||
Rental income
|
—
|
—
|
—
|
—
|
—
|
—
|
186
|
186
|
186
|
186
|
||||||||||||||||||||||||||||||
Interest income and other
|
—
|
—
|
23
|
17
|
—
|
—
|
—
|
4
|
23
|
21
|
||||||||||||||||||||||||||||||
Total revenues
|
9,810
|
8,535
|
1,893
|
1,967
|
—
|
—
|
186
|
190
|
11,889
|
10,692
|
||||||||||||||||||||||||||||||
COSTS AND EXPENSES:
|
||||||||||||||||||||||||||||||||||||||||
Cost of sales
|
—
|
—
|
—
|
—
|
—
|
1
|
—
|
—
|
—
|
1
|
||||||||||||||||||||||||||||||
General and administrative expenses
|
—
|
—
|
—
|
—
|
—
|
2
|
5,490
|
5,444
|
5,490
|
5,446
|
||||||||||||||||||||||||||||||
Franchise expenses
|
3,059
|
2,313
|
897
|
971
|
—
|
—
|
—
|
—
|
3,956
|
3,284
|
||||||||||||||||||||||||||||||
Impairment of long-lived assets
|
||||||||||||||||||||||||||||||||||||||||
and other lease charges
|
—
|
—
|
—
|
—
|
—
|
—
|
5
|
6
|
5
|
6
|
||||||||||||||||||||||||||||||
Bad debt expense
|
—
|
—
|
—
|
—
|
—
|
—
|
73
|
46
|
73
|
46
|
||||||||||||||||||||||||||||||
Interest expense
|
—
|
—
|
—
|
—
|
—
|
—
|
1
|
61
|
1
|
61
|
||||||||||||||||||||||||||||||
Depreciation and amortization expense
|
—
|
—
|
—
|
—
|
—
|
—
|
214
|
187
|
214
|
187
|
||||||||||||||||||||||||||||||
Total costs and expenses
|
3,059
|
2,313
|
897
|
971
|
—
|
3
|
5,783
|
5,744
|
9,739
|
9,031
|
||||||||||||||||||||||||||||||
OTHER INCOME:
|
||||||||||||||||||||||||||||||||||||||||
Employee retention credit
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
704
|
—
|
704
|
||||||||||||||||||||||||||||||
Total other income
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
704
|
—
|
704
|
||||||||||||||||||||||||||||||
INCOME/(LOSS) BEFORE TAXES
|
$
|
6,751
|
$
|
6,222
|
$
|
996
|
$
|
996
|
$
|
—
|
$
|
(3
|
)
|
$
|
(5,597
|
)
|
$
|
(4,850
|
)
|
$
|
2,150
|
$
|
2,365
|
ITEM 7A. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
|
ITEM 8. |
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
ITEM 9. |
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
|
ITEM 9A. |
CONTROLS AND PROCEDURES.
|
ITEM 10. |
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
|
ITEM 11. |
EXECUTIVE COMPENSATION.
|
ITEM 12. |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
|
ITEM 13. |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.
|
ITEM 14. |
PRINCIPAL ACCOUNTING FEES AND SERVICES.
|
ITEM 15. |
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
|
1. |
The financial statements filed as part of this report are listed in the Index to Consolidated Financial Statements and Supplementary Data appearing on page F-1 of this report on Form 10-K.
|
2. |
Any financial statement schedule filed as part of this report is listed in the Index to Consolidated Financial Statements and Supplementary Data appearing on page F-1 of this report on Form 10-K.
|
3. |
Exhibits:
|
Amended and Restated Articles of Incorporation of Rave Restaurant Group, Inc. (incorporated by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed January 8,
2015).
|
|
Amended and Restated Bylaws of Rave Restaurant Group, Inc. (incorporated by reference to Exhibit 3.2 to the registrant’s Current Report on Form 8-K filed January 8, 2015).
|
|
Description of Registrant’s Securities. (filed as Exhibit 4.4 to Form 10-K for the fiscal year ended June 27, 2021 and incorporated herein by reference).
|
|
2015 Long Term Incentive Plan of the Company (filed as Exhibit 10.1 to Form 8-K filed November 20, 2014 and incorporated herein by reference).*
|
|
Form of Stock Option Grant Agreement under the Company’s 2015 Long Term Incentive Plan (filed as Exhibit 10.2 to Form 8-K filed November 20, 2014 and incorporated herein by reference).*
|
|
Form of Restricted Stock Unit Award Agreement under the Company’s 2015 Long-Term Incentive Plan (filed as Exhibit 10.1 to Form 10-Q for the fiscal quarter ended December 27, 2015 and
incorporated herein by reference).*
|
|
Lease Agreement dated November 1, 2016, between A&H Properties Partnership and Rave Restaurant Group, Inc. (filed as Exhibit 10.4 to Form 10-K for the year ended June 30, 2019 and
incorporated herein by reference).*
|
|
First Amendment to Lease and Expansion dated July 1, 2017, between A&H Properties Partnership and Rave Restaurant Group, Inc. (filed as Exhibit 10.5 to Form 10-K for the year ended
June 30, 2019 and incorporated herein by reference).*
|
|
Second Amendment to Lease Agreement effective June 1, 2020, between A&H Properties Partnership and Rave Restaurant Group, Inc. (filed as Exhibit 10.6 to Form
10-K for the fiscal year ended June 27, 2021 and incorporated herein by reference).
|
|
Letter agreement dated October 18, 2019, between Rave Restaurant Group, Inc. and Brandon Solano (filed as Exhibit 10.1 to Form 8-K filed October 21, 2019 and incorporated herein by
reference).*
|
|
Letter agreement dated November 4, 2019, between Rave Restaurant Group, Inc. and Mike Burns (filed as Exhibit 10.1 to Form 8-K filed November 15, 2019 and incorporated herein by
reference).*
|
|
Letter agreement dated June 16, 2021, between Rave Restaurant Group, Inc. and Clinton Fendley (filed as Exhibit 10.1 to Form 8-K filed June 17, 2021 and incorporated herein by reference).*
|
|
List of Subsidiaries (filed as Exhibit 21.1 to Form 10-K filed September 30, 2019 and incorporated herin by reference).*
|
|
Consent of Independent Registered Public Accounting Firm.
|
|
Consent of Independent Registered Public Accounting Firm.
|
|
Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer.
|
|
Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer.
|
|
Section 1350 Certification of Principal Executive Officer.
|
|
Section 1350 Certification of Principal Financial Officer.
|
|
101
|
Interactive data files pursuant to Rule 405 of Regulation S-T.
|
ITEM 16. |
FORM 10-K SUMMARY.
|
Rave Restaurant Group, Inc.
|
|
Date: September 21, 2023
|
By: /s/ Brandon L. Solano
|
Brandon L. Solano
|
|
Chief Executive Officer
|
|
(principal executive officer) | |
By: /s/ Clinton D. Fendley | |
Clinton D. Fendley | |
Chief Financial Officer | |
(principal financial officer)
|
Name and Position
|
Date
|
||
/s/ Brandon L. Solano
|
|||
Brandon L. Solano
|
|||
Chief Executive Officer
|
|||
(principal executive officer)
|
September 21, 2023
|
||
/s/ Clinton D. Fendley
|
|||
Clinton D. Fendley
|
|||
Chief Financial Officer
|
|||
(principal financial officer)
|
September 21, 2023
|
||
|
|||
/s/ Mark E. Schwarz
|
|||
Mark E. Schwarz
|
|||
Director and Chairman of the Board
|
September 21, 2023
|
||
/s/ Robert B. Page
|
|||
Robert B. Page
|
|||
Director
|
September 21, 2023
|
||
/s/ William C. Hammett, Jr.
|
|||
William C. Hammett, Jr.
|
|||
Director
|
September 21, 2023
|
||
/s/ Clinton J. Coleman
|
|||
Clinton J. Coleman
|
|||
Director
|
September 21, 2023
|
Description
|
Page No.
|
Report of Independent Registered Public Accounting Firm (Whitley Penn LLP, PCAOB ID: )
|
F-2
|
Report of Independent Registered Public Accounting Firm (Armanino, LLP, PCAOB ID: ) |
F-3 |
F-4
|
|
F-5
|
|
F-6
|
|
F-7
|
|
F-7
|
|
F-8
|
•
|
We obtained the detail of all revenue transactions and performed the following procedures:
|
o
|
Identified the Company’s various revenue streams and any differences in the processes, methods, and policies applicable to each revenue
stream.
|
|
o
|
Reviewed the entity’s revenue recognition policies and evaluated whether following those policies comply with the requirements of ASC
606.
|
|
o
|
Obtained a listing of franchise revenue related contracts, agreements, and invoices during the year, sampled the detail, and tested
revenues by examining and documenting supporting contracts, invoices, and other documentation to determine whether revenue was recognized at the proper amount.
|
|
o
|
Performed various cutoff procedures to ensure revenue was recognized in the proper period.
|
Fiscal Year Ended
|
||||||||
June 25,
2023
|
June 26,
2022
|
|||||||
REVENUES
|
$
|
|
$
|
|
||||
COSTS AND EXPENSES:
|
||||||||
Cost of sales
|
|
|
||||||
General and administrative expenses
|
|
|
||||||
Franchise expenses
|
|
|
||||||
Impairment of long-lived assets and other lease charges
|
|
|
||||||
Bad debt expense
|
|
|
||||||
Interest expense
|
|
|
||||||
Depreciation and amortization expense
|
|
|
||||||
Total costs and expenses
|
|
|
||||||
OTHER INCOME:
|
||||||||
Employee retention credit
|
||||||||
Total other income
|
|
|
||||||
INCOME BEFORE TAXES
|
|
|
||||||
Income tax (expense) benefit
|
(
|
)
|
|
|||||
NET INCOME
|
$
|
|
$
|
|
||||
INCOME PER SHARE OF COMMON STOCK - BASIC:
|
$
|
|
$
|
|
||||
INCOME PER SHARE OF COMMON STOCK - DILUTED:
|
$
|
|
$
|
|
||||
Weighted average common shares outstanding - basic
|
|
|
||||||
Weighted average common and potential dilutive common shares outstanding
|
|
|
June 25,
2023
|
June 26,
2022
|
|||||||
ASSETS
|
||||||||
CURRENT ASSETS
|
||||||||
Cash and cash equivalents
|
$
|
|
$
|
|
||||
Accounts receivable, less allowance for bad debts of $
|
|
|
||||||
Notes receivable, current
|
|
|
||||||
Property held for sale
|
||||||||
Deferred contract charges, current
|
|
|
||||||
Prepaid expenses and other current assets
|
|
|
||||||
Total current assets
|
|
|
||||||
LONG-TERM ASSETS
|
||||||||
Property and equipment, net
|
|
|
||||||
Operating lease right of use asset, net
|
|
|
||||||
Intangible assets definite-lived, net
|
|
|
||||||
Notes receivable, net of current portion
|
|
|
||||||
Deferred tax asset, net
|
||||||||
Deferred contract charges, net of current portion
|
|
|
||||||
Total assets
|
$
|
|
$
|
|
||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
||||||||
CURRENT LIABILITIES
|
||||||||
Accounts payable - trade
|
$
|
|
$
|
|
||||
Accrued expenses
|
|
|
||||||
Other current liabilities
|
|
|
||||||
Operating lease liability, current
|
|
|
||||||
Short term loan
|
|
|
||||||
Deferred revenues, current
|
|
|
||||||
Total current liabilities
|
|
|
||||||
LONG-TERM LIABILITIES
|
||||||||
Operating lease liability, net of current portion
|
|
|
||||||
Deferred revenues, net of current portion
|
|
|
||||||
Total liabilities
|
|
|
||||||
COMMITMENTS AND CONTINGENCIES (SEE NOTE K)
|
||||||||
SHAREHOLDERS’ EQUITY
|
||||||||
Common stock, $
|
|
|
||||||
Additional paid-in capital
|
|
|
||||||
Retained earnings
|
|
|
||||||
Treasury stock at cost
|
||||||||
Shares in treasury:
|
(
|
)
|
(
|
)
|
||||
Total shareholders’ equity
|
|
|
||||||
Total liabilities and shareholders’ equity
|
$
|
|
$
|
|
Common Stock
|
Additional
Paid-in
|
Retained
Earnings/
|
Treasury Stock
|
|||||||||||||||||||||||||
Shares
|
Amount
|
Capital
|
(Accumulated
Deficit)
|
Shares
|
Amount
|
Total
|
||||||||||||||||||||||
Balance, June 27, 2021
|
|
$
|
|
$
|
|
$
|
(
|
)
|
(
|
)
|
$
|
(
|
)
|
$
|
|
|||||||||||||
Stock compensation expense
|
—
|
|
|
|
—
|
|
|
|||||||||||||||||||||
Purchase of treasury stock
|
|
|
|
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||||||||
Net income
|
—
|
|
|
|
—
|
|
|
|||||||||||||||||||||
Balance, June 26, 2022
|
|
$
|
|
$
|
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
Common Stock
|
Additional
Paid-in
|
Retained
Earnings
|
Treasury Stock
|
|||||||||||||||||||||||||
Shares
|
Amount
|
Capital
|
|
Shares
|
Amount
|
Total
|
||||||||||||||||||||||
Balance, June 26, 2022
|
|
$
|
|
$
|
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
||||||||||||||
Stock compensation expense
|
—
|
|
|
|
—
|
|
|
|||||||||||||||||||||
Purchase of treasury stock
|
|
|
|
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||||||||
Net income
|
—
|
|
|
|
—
|
|
|
|||||||||||||||||||||
Balance, June 25, 2023
|
|
$
|
|
$
|
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
Fiscal Year Ended
|
||||||||
June 25,
2023
|
June 26,
2022
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net income
|
$
|
|
$
|
|
||||
Adjustments to reconcile net income to cash provided by operating activities:
|
||||||||
Impairment of long-lived assets and other lease charges
|
|
|
||||||
Stock-based compensation expense
|
|
|
||||||
Depreciation and amortization
|
|
|
||||||
Amortization of operating right of use assets
|
|
|
||||||
Amortization of intangible assets definite-lived
|
|
|
||||||
Amortization of debt issue costs
|
|
|
||||||
Allowance for bad debts
|
|
|
||||||
Deferred income tax
|
|
(
|
)
|
|||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
|
(
|
)
|
|||||
Notes receivable
|
|
|
||||||
Deferred contract charges
|
|
(
|
)
|
|||||
Prepaid expenses and other
|
(
|
)
|
|
|||||
Accounts payable - trade
|
(
|
)
|
|
|||||
Accrued expenses
|
(
|
)
|
|
|||||
Other current liabilities
|
|
|
||||||
Operating lease liability
|
(
|
)
|
(
|
)
|
||||
Deferred revenues
|
(
|
)
|
(
|
)
|
||||
Cash provided by operating activities
|
$
|
|
$
|
|
||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Payments received on notes receivable
|
|
|
||||||
Proceeds from sale of assets
|
|
|
||||||
Purchase of intangible assets definite-lived
|
(
|
)
|
(
|
)
|
||||
Purchase of property and equipment
|
(
|
)
|
(
|
)
|
||||
Cash (used in)/provided by investing activities
|
(
|
)
|
|
|||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Purchase of treasury stock
|
( |
) | ( |
) | ||||
Payment of convertible notes
|
( |
) | ||||||
Payments on short term loan
|
(
|
)
|
(
|
)
|
||||
Cash used in financing activities
|
(
|
)
|
(
|
)
|
||||
Net decrease in cash and cash equivalents
|
(
|
)
|
(
|
)
|
||||
Cash and cash equivalents, beginning of period
|
|
|
||||||
Cash and cash equivalents, end of period
|
$
|
|
$
|
|
||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
|
||||||||
CASH PAID FOR:
|
||||||||
Interest
|
$
|
|
$
|
|
||||
Income taxes (net of refunds)
|
$
|
|
$
|
|
Notes Receivable
|
||||
2024
|
$ |
|
||
2025
|
|
|||
$
|
|
Fiscal Year Ended
|
||||||||
June 25,
2023
|
June 26,
2022
|
|||||||
Franchise royalties
|
$ |
|
$ |
|
||||
Supplier and distributor incentive revenues
|
|
|
||||||
Franchise license fees
|
|
|
||||||
Area development exclusivity fees and foreign master license fees
|
|
|
||||||
Advertising funds contributions
|
|
|
||||||
Supplier convention funds
|
|
|
||||||
Rental income
|
|
|
||||||
Other
|
|
|
||||||
$
|
|
$
|
|
Estimated
Useful Lives
|
June 25,
2023
|
June 26,
2022
|
|||||||
Equipment, furniture and fixtures
|
|
$
|
|
$
|
|
||||
Software
|
|
|
|
||||||
Leasehold improvements
|
|
|
|
||||||
|
|
||||||||
Less: accumulated depreciation/amortization
|
(
|
)
|
(
|
)
|
|||||
$
|
|
$
|
|
June 25,
2023
|
June 26,
2022
|
|||||||||||||||||||||||||
Estimated
Useful Lives
|
Acquisition
Cost
|
Accumulated
Amortization
|
Net
Value
|
Acquisition
Cost
|
Accumulated
Amortization
|
Net
Value
|
||||||||||||||||||||
Trademarks and tradenames
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||||
Name change
|
|
|
(
|
)
|
|
|
(
|
)
|
|
|||||||||||||||||
Prototypes
|
|
|
(
|
)
|
|
|
(
|
)
|
|
|||||||||||||||||
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
June 25,
2023
|
June 26,
2022
|
|||||||
Compensation
|
$
|
|
$
|
|
||||
Other
|
|
|
||||||
Professional fees
|
|
|
||||||
$
|
|
$
|
|
Fiscal Year Ended
|
||||||||
June 25,
2023
|
June 26,
2022
|
|||||||
Current - Federal
|
$
|
|
$
|
|
||||
Current - State
|
(
|
)
|
(
|
)
|
||||
Deferred - Federal
|
(
|
)
|
|
|||||
Deferred - State
|
(
|
)
|
|
|||||
Provision for income taxes
|
$
|
(
|
)
|
$
|
|
June 25,
2023
|
June 26,
2022
|
|||||||
Federal income taxes based on a statutory rate of
|
$
|
(
|
)
|
$
|
(
|
)
|
||
State income taxes (net of federal benefit)
|
(
|
)
|
|
|||||
Permanent adjustments
|
(
|
)
|
|
|||||
Return to provision | ||||||||
Change in valuation allowance
|
|
|
||||||
Other
|
( |
) |
(
|
)
|
||||
Provision for income taxes
|
$
|
(
|
)
|
$
|
|
June 25,
2023
|
June 26,
2022
|
|||||||
Allowance for bad debt
|
$
|
|
$
|
|
||||
Deferred fees
|
|
|
||||||
Other reserves and accruals
|
|
|
||||||
Operating lease liabilities
|
|
|
||||||
Credit carryforwards
|
|
|
||||||
Net operating loss carryforwards
|
|
|
||||||
Total gross deferred tax asset
|
|
|
||||||
Valuation allowance
|
|
|
||||||
Total deferred tax assets
|
$
|
|
$
|
|
Right-of-use asset
|
(
|
)
|
(
|
)
|
||||
Other deferred tax liabilities
|
(
|
)
|
(
|
)
|
||||
Total deferred tax liabilities
|
$
|
(
|
)
|
$
|
(
|
)
|
Net deferred tax asset
|
$
|
|
$
|
|
Guaranteed Leases
|
||||
2024
|
$
|
|
||
2025
|
|
|||
2026
|
|
|||
2027
|
|
|||
2028
|
|
|||
Thereafter
|
|
|||
$
|
|
Fiscal Year Ended
June 25, 2023
|
Fiscal Year Ended
June 26, 2022
|
|||||||
Operating lease cost
|
$
|
|
$ | |||||
Sublease income
|
(
|
)
|
( |
) | ||||
Total lease expense, net of sublease income
|
$
|
|
$ |
Fiscal Year Ended
June 25, 2023
|
Fiscal Year Ended
June 26, 2022
|
|||||||
Cash paid for amounts included in the measurement of lease liabilities
|
$
|
|
$ |
Fiscal Year Ended
June 25, 2023
|
Fiscal Year Ended
June 26, 2022
|
|||||||
Operating lease right of use asset, net
|
$
|
|
$ |
|||||
Operating lease liabilities, current
|
|
|||||||
Operating lease liabilities, net of current portion
|
|
Fiscal Year Ended
June 25, 2023
|
Fiscal Year Ended
June 26, 2022
|
|||||||
Weighted average remaining lease term
|
|
|||||||
Weighted average discount rate
|
|
%
|
% |
Operating Leases
|
||||
2024
|
$
|
|
||
2025
|
|
|||
2026
|
|
|||
2027
|
|
|||
2028 |
||||
Thereafter
|
|
|||
Total operating lease payments
|
$
|
|
||
Less: imputed interest
|
$
|
(
|
)
|
|
Total operating lease liability
|
$
|
|
Sublease Rental Income
|
||||
2024
|
$
|
|
||
2025
|
|
|||
$
|
|
Fiscal Year Ended
|
||||||||
June 25,
2023
|
June 26,
2022
|
|||||||
Minimum rentals
|
$
|
|
$
|
|
||||
Sublease rentals
|
(
|
)
|
(
|
)
|
||||
$
|
|
$
|
|
Fiscal Year Ended
|
Fiscal Year Ended | |||||||||||||||
June 25, 2023 | June 26, 2022 | June 25, 2023 | June 26, 2022 | |||||||||||||
Shares
|
Shares |
Weighted-
Average
Exercise Price
|
Weighted-
Average
Exercise Price
|
|||||||||||||
Outstanding at beginning of year
|
|
$
|
|
$
|
|
|||||||||||
Granted
|
|
|
|
|||||||||||||
Exercised
|
|
|
|
|||||||||||||
Forfeited/Canceled/Expired
|
|
( |
) |
|
|
|||||||||||
Outstanding at end of period
|
|
$
|
|
$
|
|
|||||||||||
Exercisable at end of period
|
|
$
|
|
$
|
|
Options Outstanding
|
Options Exercisable
|
|||||||||||||||||||||
Range of
Exercise Prices
|
Options
Outstanding
at June 25, 2023
|
Weighted-Average
Remaining
Contractual
Life (Years)
|
Weighted-
Average
Exercise Price
|
Shares
Exercisable
at June 25, 2023
|
Weighted-
Average
Exercise Price
|
|||||||||||||||||
$ |
$ |
$ |
||||||||||||||||||||
$
|
|
|
|
$
|
|
|
$
|
|
||||||||||||||
$
|
|
|
|
$
|
|
|
$
|
|
||||||||||||||
$
|
|
|
|
$
|
|
|
$
|
|
||||||||||||||
$
|
|
|
|
$
|
|
|
$
|
|
||||||||||||||
|
|
$
|
|
|
$
|
|
Fiscal Year Ended
|
June 25,
2023
|
|||
Expected life (in years)
|
|
|||
Expected volatility
|
|
|
||
Risk-free interest rate
|
|
|
||
Expected forfeiture rate
|
|
|
June 25,
2023
|
June 26,
2022
|
|||||||
Unvested at beginning of year
|
|
|
||||||
Granted during the year
|
|
|
||||||
Vested during the year
|
|
|
||||||
Forfeited during the year
|
|
(
|
)
|
|||||
Unvested at end of year
|
|
|
Fiscal Year Ended
|
||||||||
June 25,
2023
|
June 26,
2022
|
|||||||
Net income available to common shareholders
|
$
|
|
$
|
|
||||
Interest saved on convertible notes at
|
$
|
|
$
|
|
||||
Adjusted net income
|
$
|
|
$
|
|
||||
BASIC:
|
||||||||
Weighted average common shares
|
|
|
||||||
Net income per common share
|
$
|
|
$
|
|
||||
DILUTED:
|
||||||||
Weighted average common shares
|
|
|
||||||
Dilutive restricted stock units
|
|
|
||||||
Dilutive stock options |
||||||||
Weighted average common shares outstanding
|
|
|
||||||
Income from continuing operations per common share
|
$
|
|
$
|
|
Fiscal Year Ended
|
||||||||
June 25,
2023
|
June 26,
2022
|
|||||||
Net sales and operating revenues:
|
||||||||
Pizza Inn Franchising
|
$
|
|
$
|
|
||||
Pie Five Franchising
|
|
|
||||||
Company-Owned Restaurants |
||||||||
Corporate administration and other
|
|
|
||||||
Consolidated revenues
|
$
|
|
$
|
|
||||
Depreciation and amortization:
|
||||||||
Pizza Inn Franchising |
$ |
$ |
||||||
Pie Five Franchising |
||||||||
Company-Owned Restaurants |
||||||||
Combined
|
||||||||
Corporate administration and other
|
|
|
||||||
Depreciation and amortization
|
$
|
|
$
|
|
||||
Income before taxes:
|
||||||||
Pizza Inn Franchising
|
$
|
|
$
|
|
||||
Pie Five Franchising
|
|
|
||||||
Company-Owned Restaurants
|
|
(
|
)
|
|||||
Combined
|
|
|
||||||
Corporate administration and other
|
(
|
)
|
(
|
)
|
||||
Income before taxes
|
$
|
|
$
|
|
Geographic information (revenues):
|
||||||||
United States
|
$
|
|
$
|
|
||||
Foreign countries
|
|
|
||||||
Consolidated total
|
$
|
|
$
|
|
ArmaninoLLP
|
|
Dallas, Texas
|
|
September 21, 2023
|
1. |
I have reviewed this Annual Report on Form 10-K of Rave Restaurant Group, Inc. (“the Registrant”);
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
|
4. |
The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
|
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c. |
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d. |
Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter
(the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
|
5. |
The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
|
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
|
b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial
reporting.
|
Date: September 21, 2023
|
By:
|
/s/ Brandon L. Solano
|
Brandon L. Solano
|
||
Chief Executive Officer
|
||
(principal executive officer)
|
1. |
I have reviewed this Annual Report on Form 10-K of Rave Restaurant Group, Inc. (“the Registrant”);
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
|
4. |
The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
|
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c. |
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d. |
Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the
Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
|
5. |
The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s
auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
|
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect
the Registrant’s ability to record, process, summarize and report financial information; and
|
b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
|
Date: September 21, 2023
|
By:
|
/s/ Clinton D. Fendley
|
Clinton D. Fendley
|
||
Chief Financial Officer
|
||
(principal financial officer)
|
Date: September 21, 2023
|
By:
|
/s/ Brandon L. Solano
|
Brandon L. Solano
|
||
Chief Executive Officer
|
||
(principal executive officer)
|
Date: September 21, 2023
|
By:
|
/s/ Clinton D. Fendley
|
Clinton D. Fendley
|
||
Chief Financial Officer
|
||
(principal financial officer)
|
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands |
Jun. 25, 2023 |
Jun. 26, 2022 |
---|---|---|
CURRENT ASSETS | ||
Accounts receivable, allowance for bad debts | $ 58 | $ 27 |
SHAREHOLDERS' EQUITY | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 26,000,000 | 26,000,000 |
Common stock, shares issued (in shares) | 25,090,058 | 25,090,058 |
Common stock, shares outstanding (in shares) | 14,154,453 | 17,511,430 |
Treasury stock at cost (in shares) | 10,935,605 | 7,578,628 |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 25, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Description of Business:
Rave Restaurant Group, Inc., and its subsidiaries (collectively referred to as the
“Company”, or in the first person notations of “we”, “us” and “our”) franchise pizza buffet, delivery/carry-out and express restaurants domestically and internationally under the trademark “Pizza Inn” and franchise domestic fast casual restaurants
under the trademarks “Pie Five Pizza Company” or “Pie Five”. The Company also licenses pizza kiosks under the “Pizza Inn” trademark. We facilitate the procurement and distribution of food, equipment and supplies to our domestic and international
system of restaurants through agreements with third party distributors.
As of June 25, 2023, we had 152 franchised Pizza Inn restaurants, 27 franchised Pie Five
Units, and 5 licensed Pizza Inn Express, or PIE, kiosks (“PIE Units”). The 118 domestic franchised Pizza Inn restaurants were comprised of 77
pizza buffet restaurants (“Buffet Units”), 7 delivery/carry-out restaurants (“Delco Units”), and 34 express restaurants (“Express Units”). As of June 25, 2023, there were 34 international franchised Pizza Inn restaurants. Domestic Pizza Inn restaurants and kiosks were located predominantly in the southern half of the United States, with
Arkansas, Texas, North Carolina and Mississippi accounting for approximately 23%, 20%, 15% and 9%, respectively, of the total number of domestic units.
Principles of Consolidation:
The consolidated financial statements include the accounts of Rave Restaurant
Group, Inc. and its subsidiaries, all of which are wholly owned. All appropriate inter-company balances and transactions have been eliminated.
Cash and Cash Equivalents:
The Company considers all highly liquid investments purchased with an original maturity
of three months or less to be cash equivalents.
Concentration of Credit Risk:
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and
cash equivalents. Balances in accounts are insured up to Federal Deposit Insurance Corporation (“FDIC”) limits of $250 thousand per
institution. At June 25, 2023 and June 26, 2022, the Company had cash balances in excess of FDIC insurance coverage of approximately $5.1
million and $7.5 million, respectively. We do not believe we are exposed to any significant credit risk on cash and cash equivalents.
Notes receivable, which potentially subject the Company to concentrations of credit risk, consist primarily of promissory notes
from franchise agreements and structured Company-financed sales of assets. At June 25, 2023 and June 26, 2022, and at various times during the fiscal years then ended, the Company had concentrations of credit risk with three franchisees on notes receivables with both short and long term maturities. As of June 25, 2023, the Company had zero short term notes receivable and three
long term notes receivable with three franchisees. The financed asset sales were executed with a weighted average interest rate of 0.0%. Principal payments are due monthly and mature from September 1, 2024 to January 1, 2027.
Property
and Equipment:
Property and equipment are stated at cost
less accumulated depreciation and amortization. Repairs and maintenance are charged to operations as incurred while major renewals and betterments are capitalized. Upon the sale or disposition of any property or equipment, the asset and the
related accumulated depreciation or amortization are removed from the accounts and the gain or loss is included in operations. The Company capitalizes interest on borrowings during the active construction period of major capital projects.
Capitalized interest is added to the cost of the underlying asset and amortized over the estimated useful life of the asset.
Depreciation and amortization are computed on
the straight-line method over the estimated useful lives of the assets or, in the case of leasehold improvements, over the term of the lease including any reasonably assured renewal periods, if shorter. The useful lives of the assets range from
to ten years.Impairment of Long-Lived Asset and other Lease Charges:
The Company reviews long-lived assets for impairment when events or circumstances indicate that the carrying value of such
assets may not be fully recoverable. Impairment is evaluated based on the sum of undiscounted estimated future cash flows expected to result from use and eventual disposition of the assets compared to their carrying value. If impairment is
recognized, the carrying value of an impaired asset is reduced to its fair value, based on discounted estimated future cash flows. The Company recognized, pre-tax,
of $5 thousand and $6 thousand during fiscal 2023 and 2022, respectively. The Company had $0.2 million in sublease income during fiscal 2023 and 2022.Accounts Receivable:
Accounts receivable consist primarily of receivables generated from franchise royalties and supplier concessions. The Company
records an allowance for bad debts to allow for any amounts that may be unrecoverable based upon an analysis of the Company’s prior collection experience, customer creditworthiness and current economic trends. After all attempts to collect a
receivable have failed, the receivable is written off against the allowance. Finance charges may be accrued at a rate of 18% per year,
or up to the maximum amount allowed by law, on past due receivables. The interest income recorded from finance charges is immaterial.
Bad Debt Expense:
The Company monitors franchisee receivable balances and adjusts credit terms when necessary to minimize the Company’s exposure to
high risk accounts receivable. Bad debt expense increased by $27 thousand to $73 thousand in fiscal 2023 compared to $46 thousand in fiscal
2022 primarily related to collectability concerns on international accounts receivable.
Notes Receivable:
Notes receivable primarily consist of promissory notes arising from franchisee agreements and structured Company-financed sales
of assets. The majority of amounts and terms are evidenced by formal promissory notes and personal guarantees. All notes allow for early payment without penalty. Fixed principal payments are due monthly. Notes receivable mature at various dates
through 2025 and bore interest at a weighted average rate of 0.0% at June 25, 2023.
Management evaluates the creditworthiness of franchisees by considering credit history and sales to evaluate credit risk.
Management determines interest rates based on credit risk of the underlining franchisee. The Company monitors payment history to determine whether or not a loan should be placed on a nonaccrual status or impaired. The Company charges off notes
receivable based on an account-by-account analysis of the borrower’s current economic conditions, monthly payments history and historical loss experience. The allowance for doubtful notes receivable is netted within notes receivable.
The expected principal collections on notes receivable for the next two years are as follows as of June 25, 2023 (in
thousands):
Income Taxes:
Income taxes are accounted for using the asset and liability method pursuant to the authoritative guidance on Accounting for Income Taxes. Deferred taxes are recognized for the tax consequences of “temporary differences” by applying enacted statutory tax rates applicable to future years to differences between the
financial statement and carrying amounts and the tax bases of existing assets and liabilities. The effect on deferred taxes for a change in tax rates is recognized in income in the period that includes the enactment date. The Company recognizes
future tax benefits to the extent that realization of such benefits is more likely than not.
The Company continually reviews the realizability of its deferred tax assets, including an analysis of factors such as future
taxable income, reversal of existing taxable temporary differences, and tax planning strategies. In assessing the need for the valuation allowance, the Company considers both positive and negative evidence related to the likelihood of realization
of deferred tax assets. Future sources of taxable income are also considered in determining the amount of the recorded valuation allowance. Based on this analysis, the Company reversed the full amount of the established valuation allowance as of
June 26, 2022 (see Note F).
For the year ended June 25, 2023, the Company recorded an income tax expense of $0.5 million. The federal and state tax expense was $0.4 million
and $0.1 million, respectively. The Company utilized net operating losses to offset federal taxes. As of June 25, 2023, the Company had
federal net operating loss carryforwards totaling $21 million that are available to reduce future taxable income and will begin to expire
in
. Under the Tax Cuts and Jobs Act, approximately $1.4 million of the loss carryforwards are limited to 80% and do not expire. Tax years that remain
subject to examination by the IRS are the years ended June 28, through June 26, . Tax years that remain subject to examination by state authorities are the years ended June 30, through June 26, . There are no uncertain tax positions. Management’s position is that all relevant requirements are met and necessary returns have been filed, and
therefore the tax positions taken on the tax returns would be sustained upon examination.
Under ASC 740, we recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position
will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater
than 50% likelihood of being realized upon ultimate resolution. From time to time, the Company may be assessed interest and penalties by taxing authorities. In those cases, the charges are recorded as income tax expense, as incurred, in the
Consolidated Statements of Income.
Revenue Recognition:
Revenue is measured based on consideration specified in contracts with customers and excludes incentives and amounts collected
on behalf of third parties, primarily sales tax. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. Taxes assessed by a governmental authority that are both
imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue.
The following describes principal activities, separated by major product or service, from which the Company generates its
revenues:
Franchise Revenues
Franchise revenues consist of 1) franchise royalties, 2) supplier and distributor incentive revenues, 3) franchise license
fees, 4) area development exclusivity fees and foreign master license fees, 5) advertising funds, and 6) supplier convention funds.
Franchise royalties, which are based on a percentage of franchise restaurant sales, are recognized as sales occur.
Supplier and distributor incentive revenues are recognized when title to the underlying commodities transfer.
Franchise license fees are typically billed upon execution of the franchise agreement and amortized over the term of the
franchise agreement, which typically range from
to 20 years. Fees received for renewal periods are amortized over the life of the renewal period.Area development exclusivity fees and foreign master license fees are typically billed upon execution of the area development
and foreign master license agreements. Area development exclusivity fees are included in deferred revenue in the accompanying Consolidated Balance Sheets and allocated on a pro rata basis to all stores opened under that specific development
agreement as the stores are opened. Area development exclusivity fees that include rights to sub-franchise are amortized as revenue over the term of the contract.
Advertising fund contributions for Pizza Inn and Pie Five units represent contributions collected where we have control over
the activities of the fund. Contributions are based on a percentage of net retail sales. We have determined that we are the principal in these arrangements, and advertising fund contributions and expenditures are, therefore, reported on a gross
basis in the Consolidated Statements of Income. In general, we expect such advertising fund contributions and expenditures to be largely offsetting and, therefore, do not expect a significant impact on our reported income before income taxes. Our
obligation related to these funds is to develop and conduct advertising activities. Pizza Inn and Pie Five marketing fund contributions are billed and collected weekly or monthly.
Supplier convention funds are deferred until the obligations of the agreement are met and the event takes place.
Rental income is income from our subleasing of some of our restaurant space to third parties.
Total revenues consist of the following (in thousands):
The opening balance of accounts receivable on June 28, 2021 was $0.9 million. The opening balance of deferred revenues on June 28, 2021 was $1.8
million. Revenue recognized in fiscal 2023 that was in the deferred revenue balance at June 26, 2022 was $0.6 million.
Stock-Based Compensation:
The Company accounts for stock options using the fair value recognition provisions of the authoritative guidance on share-based
payments. The Company uses the Black-Scholes formula to estimate the value of stock-based compensation for options granted to employees and directors and expects to continue to use this acceptable option valuation model in the future. The
authoritative guidance also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow.
Restricted stock units (“RSUs”) represent the right to receive shares of common stock upon the satisfaction of vesting requirements,
performance criteria and other terms and conditions. Compensation cost for RSUs is measured as an amount equal to the fair value of the RSUs on the date of grant and is expensed over the vesting period if achievement of the performance criteria is
deemed probable, with the amount of the expense recognized based on the best estimate of the ultimate achievement level.
Fair Value of Financial Instruments:
The carrying amounts of accounts receivable and accounts payable approximate fair value because of the short maturity of these
instruments.
Contingencies:
Provisions for legal settlements are accrued when payment is considered probable and the amount of loss is reasonably estimable in
accordance with the authoritative guidance on Accounting for Contingencies. If the best estimate of cost can only be identified within a range and no specific amount within that range can be determined
more likely than any other amount within the range, and the loss is considered probable, the minimum of the range is accrued. Legal and related professional services costs to defend litigation are expensed as incurred.
Use of Management Estimates:
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of
America requires the Company’s management to make estimates and assumptions that affect its reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent liabilities. The Company bases its estimates on historical
experience and other various assumptions that it believes are reasonable under the circumstances. Estimates and assumptions are reviewed periodically. Actual results could differ materially from estimates.
Fiscal Year:
The Company’s fiscal year ends on the last Sunday in June. The fiscal years ended June 25, 2023 and June 26, 2022 each contained 52
weeks.
|
PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 25, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS |
NOTE B - PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS:
Property and equipment consist of the following (in thousands):
Depreciation and amortization expense for property and equipment was approximately $141 thousand and $140 thousand for the
fiscal years ended June 25, 2023 and June 26, 2022, respectively.
Intangible assets consist of the following (in thousands):
Amortization expense for intangible assets was approximately $73 thousand and $47 thousand for the
fiscal years ended June 25, 2023 and June 26, 2022, respectively.
|
ACCRUED EXPENSES |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 25, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
ACCRUED EXPENSES [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
ACCRUED EXPENSES |
NOTE C - ACCRUED EXPENSES:
Accrued expenses consist of the following (in thousands):
|
CONVERTIBLE NOTES |
12 Months Ended |
---|---|
Jun. 25, 2023 | |
CONVERTIBLE NOTES [Abstract] | |
CONVERTIBLE NOTES |
NOTE D - CONVERTIBLE NOTES:
On March 3, 2017, the Company completed a registered shareholder rights offering of its 4% Convertible Senior Notes Due 2022 (“Notes”). Shareholders exercised subscription rights to purchase all 30,000 of the Notes at the par value of $100 per Note, resulting
in gross offering proceeds to the Company of $3.0 million.
The Notes bore interest at the rate of 4% per annum on the principal or par value of $100 per note,
payable annually in arrears on February 15 of each year, commencing February 15, 2018. Interest was payable in cash or, at the Company’s discretion, in shares of Company common stock. The Notes were secured by a pledge of all outstanding equity
securities of our two primary direct operating subsidiaries. During the fiscal year ended June 26, 2022, no Notes were converted to common shares. The Notes matured on February 15, 2022, at which time all principal and unpaid interest was paid in cash. Therefore, as of June 25, 2023 and June 26, 2022, there were no Notes outstanding.
|
EMPLOYEE RETENTION CREDIT |
12 Months Ended |
---|---|
Jun. 25, 2023 | |
EMPLOYEE RETENTION CREDIT [Abstract] | |
EMPLOYEE RETENTION CREDIT |
NOTE E - EMPLOYEE RETENTION CREDIT:
On
December 27, 2020, the Consolidated Appropriations Act of 2021 (the “CAA”) was signed into law. The CAA expanded eligibility for an employee retention credit for companies impacted by the COVID-19 pandemic with fewer than five hundred employees
and at least a twenty percent decline in gross receipts compared to the same quarter in 2019, to encourage retention of employees. This payroll tax credit was a refundable tax credit against certain federal employment taxes. For the fiscal year
ended June 26, 2022, the Company recorded $0.7 million of other income for the employee retention credit. As of June 25, 2023, $0.6 million has been received and $0.1
million is still outstanding.
|
INCOME TAXES |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 25, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INCOME TAXES [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INCOME TAXES |
NOTE F - INCOME TAXES:
Provision for income taxes from continuing operations consists of the following (in
thousands):
The effective income tax rate varied from the statutory rate for the fiscal years ended June 25, 2023 and June 26, 2022 as
reflected below (in thousands):
The tax effects of temporary differences that give rise to the net deferred tax assets consisted of the
following (in thousands):
For the year ended June 25, 2023, the Company recorded an
income tax expense of $0.5 million. The federal and state tax expense was $0.4 million and $0.1 million, respectively. The Company utilized net
operating losses to offset federal taxes. As of June 25, 2023, the Company had federal net operating loss carryforwards totaling $21
million that are available to reduce future taxable income and will begin to expire in . For the year ended June 26, 2022, the Company recorded an income tax benefit of $5.7 million including federal deferred tax
benefit of $5.5 million and current/deferred state tax benefit of $0.2 million. As of June 26, 2022, the Company had net operating loss carryforwards totaling $23.1
million that are available to reduce future taxable income and will begin to expire in Tax years that remain subject to examination by the IRS are the years ended June 28, , of which $1.8 million are limited to 80% and do
not expire. Under the Tax Cuts and Jobs Act, approximately $1.4 million of the loss carryforwards are limited to 80% and do not expire. through June 26, . Tax years
that remain subject to examination by state authorities are the years ended June 30, through June 26, .
The Company continually reviews the realizability of its deferred tax assets, including
an analysis of factors such as future taxable income, reversal of existing taxable temporary differences, and tax planning strategies. In assessing the need for the valuation allowance, the Company considers both positive and negative evidence
related to the likelihood of realization of deferred tax assets. Future sources of taxable income are also considered in determining the amount of the recorded valuation allowance. Based on this analysis, the Company reversed the full amount of the
established valuation allowance as of June 26, 2022.
There are no uncertain tax positions. Management’s position is that all relevant
requirements are met and necessary returns have been filed, and therefore the tax positions taken on the tax returns would be sustained upon examination.
|
LEASES |
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LEASES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LEASES |
NOTE G - LEASES:
The Company leases its 19,576 square foot corporate office facility with average annual lease payments of approximately $18.00 per square foot. This lease began on January 2, 2017 and has a ten-year term. The Company
amended its lease agreement in June 2020 and has elected to defer
of the monthly base rent for the period from June 2020
through May 2021.The Company determines if an arrangement is a lease at inception of the arrangement. To the extent that it can
be determined that an arrangement represents a lease, it is classified as either an operating lease or a finance lease. The Company does not currently have any finance leases. The Company capitalizes operating leases on the Consolidated Balance
Sheets through a right of use asset and a corresponding lease liability. Right of use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments
arising from the lease. Short-term leases that have an initial term of one year or less are not capitalized. The Company does not presently have any short-term leases.
Operating lease right of use assets and liabilities are recognized at the commencement date of an arrangement
based on the present value of lease payments over the lease term. In addition to the present value of lease payments, the operating lease right of use asset also includes any lease payments made to the lessor prior to lease commencement less any
lease incentives and initial direct costs incurred. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term.
Nature of Leases
The Company leases certain office space, restaurant space, and information technology equipment under
non-cancelable leases to support its operations. A more detailed description of significant lease types is included below.
Office Agreements
The Company rents office space from third parties for its corporate location. Office agreements are typically
structured with non-cancelable terms of
to 10 years. The Company has concluded that its office agreements represent operating leases with a lease term that equals the primary non-cancelable contract term. Upon completion of the primary term, both parties
have substantive rights to terminate the lease. As a result, enforceable rights and obligations do not exist under the rental agreements subsequent to the primary term.
Restaurant Space Agreements
The Company rents restaurant space from third parties for its Company-owned restaurants. Restaurant space
agreements are typically structured with non-cancelable terms of
to 10 years. The Company has concluded that its restaurant agreements represent operating leases with a lease term that equals the primary non-cancelable contract term. Upon
completion of the primary term, both parties have substantive rights to terminate the lease. As a result, enforceable rights and obligations do not exist under the rental agreements subsequent to the primary term.The Company also subleases some of its restaurant space to third parties. The Company’s two subleases have terms that end in 2023 and 2025. The sublease agreements are noncancelable through the end of the term and both parties have
substantive rights to terminate the lease when the term is complete. Sublease agreements are not capitalized and are recorded as rental income in the period that rent is received.
As of June 25, 2023 and June 26, 2022, the Company had no Company-owned restaurants.
Information Technology Equipment
The Company rents information technology equipment, primarily printers and copiers, from a third party for its
corporate office location. Information technology equipment agreements are typically structured with non-cancelable terms of
to five years. The Company has concluded that its information technology equipment commitments are operating leases.Discount Rate
Leases typically do not provide an implicit interest rate. Accordingly, the Company is required to use its
incremental borrowing rate in determining the present value of lease payments based on the information available at the lease commencement date. The Company’s incremental borrowing rate reflects the estimated rate of interest that it would pay to
borrow on a collateralized basis over a similar term for an amount equal to the lease payments in a similar economic environment. The Company uses the implicit rate in the limited circumstances in which that rate is readily determinable.
Lease Guarantees
The Company has guaranteed the financial responsibilities of certain franchised store leases. These guaranteed
leases are not considered operating leases because the Company does not have the right to control the underlying asset. If the franchisee abandons the lease and fails to meet the lease’s financial obligations, the lessor may assign the lease to the
Company for the remainder of the term. If the Company does not expect to assign the abandoned lease to a new franchisee within 12 months, the lease will be considered an operating lease and a right-of-use asset and lease liability will be
recognized.
Future minimum rental
payments for guaranteed leases with initial or remaining terms of one year or more at June 25, 2023 were as follows (in thousands):
Practical Expedients and Accounting Policy Elections
Certain lease agreements include lease and non-lease components. For all existing asset classes with
multiple component types, the Company has utilized the practical expedient that exempts it from separating lease components from non-lease components. Accordingly, the Company accounts for the lease and non-lease components in an arrangement as a
single lease component.
In addition, for all existing asset classes, the Company has made an accounting policy election not to apply
the lease recognition requirements to short-term leases (that is, a lease that, at commencement, has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the Company is reasonably certain to
exercise). Accordingly, we recognize lease payments related to our short-term leases in our income statements on a straight-line basis over the lease term which has not changed from our prior recognition. To the extent that there are variable
lease payments, we recognize those payments in our income statements in the period in which the obligation for those payments is incurred.
The components of total lease expense for the fiscal years ended June 25, 2023 and June 26, 2022, the majority of which is included in general and
administrative expense in the accompanying Consolidated Statements of Income, are as follows (in thousands):
Supplemental cash flow information related to operating leases is included in the table below (in thousands):
Supplemental balance sheet information related to operating leases is included in the table below (in thousands):
Weighted average remaining lease term and weighted average discount rate for operating leases are as follows:
Operating lease liabilities with enforceable contract terms that are greater than one year mature as follows (in thousands):
Premises previously occupied by Company-owned restaurants were leased for initial terms
of
to ten years,
and each has multiple renewal terms. Certain lease agreements contain either a provision requiring additional rent if sales exceed specified amounts or an escalation clause based upon a predetermined multiple.Future minimum sublease rental income under active non-cancelable leases with initial or
remaining terms of one year or more at June 25, 2023 were as follows (in thousands):
Rental expense consisted of the following (in thousands):
|
EMPLOYEE BENEFITS |
12 Months Ended |
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Jun. 25, 2023 | |
EMPLOYEE BENEFITS [Abstract] | |
EMPLOYEE BENEFITS |
NOTE H - EMPLOYEE BENEFITS:
The Company has a tax advantaged savings plan that is designed to meet the requirements
of Section 401(k) of the Internal Revenue Code (the “Code”). Employees who have completed three months of service and are at least 21 years of age are eligible to participate in the plan. The plan provides that participating employees may elect to have between 1% and 15% of their compensation
deferred and contributed to the plan subject to certain IRS limitations. The Company has a discretionary matching contribution. Separate accounts are maintained with respect to contributions made on behalf of each participating employee. Employer
matching contributions and earnings thereon are invested in the same investments as each participant’s employee deferral. The plan is subject to the provisions of the Employee Retirement Income Security Act, as amended, and is a profit-sharing
plan as defined in Section 401(k) of the Code.
For the fiscal years ended June 25, 2023 and June 26, 2022, total matching contributions
to the tax advantaged savings plan by the Company on behalf of participating employees were approximately $24 thousand and $33 thousand, respectively.
|
STOCK BASED COMPENSATION PLANS |
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STOCK BASED COMPENSATION PLANS [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCK BASED COMPENSATION PLANS |
NOTE I - STOCK BASED COMPENSATION PLANS:
In June 2005, the 2005 Employee Incentive Stock Option Award Plan (the “2005 Employee
Plan”) was approved by the Company’s shareholders with a plan effective date of June 23, 2005. Under the 2005 Employee Plan, officers and employees of the Company were eligible to receive options to purchase shares of the Company’s common stock.
Options were granted at market value of the stock on the date of grant, were subject to various vesting and exercise periods as determined by the Compensation Committee of the board of directors and could be designated as non-qualified or incentive
stock options. A total of 1,000,000 shares of common stock were authorized for issuance under the 2005 Employee Plan. The 2005
Employee Plan expired by its terms on June 23, 2015.
The shareholders also approved the 2005 Non-Employee Directors Stock Award Plan (the
“2005 Directors Plan”) in June 2005, to be effective as of June 23, 2005. Directors not employed by the Company were eligible to receive stock options under the 2005 Directors Plan. Options for common stock equal to twice the number of shares of
common stock acquired during the previous fiscal year, up to 40,000 shares per year, were automatically granted to each non-employee
director on the first day of each fiscal year. Options were granted at market value of the stock on the first day of each fiscal year, with vesting periods beginning at a minimum of six months and with exercise periods up to ten years. A total of 650,000 shares of Company common stock were authorized for issuance pursuant to the 2005 Directors Plan. The 2005 Directors Plan expired by its terms
on June 23, 2015.
The 2015 Long Term Incentive Plan (the “2015 LTIP”) was approved by the Company’s
shareholders on November 18, 2014 and became effective June 1, 2015. Officers, employees and non-employee directors of the Company are eligible to receive awards under the 2015 LTIP. A total of 3,000,000 shares of common stock are authorized for issuance under the 2015 LTIP. Awards authorized under the 2015 LTIP include incentive stock options, non-qualified stock
options, restricted shares, restricted stock units and rights (either with or without accompanying options). The 2015 LTIP provides for options to be granted at market value of the stock on the date of grant and have exercise periods determined by
the Compensation Committee of the board of directors. The Compensation Committee may also determine the vesting periods, performance criteria and other terms and conditions of all awards under the 2015 LTIP. The Compensation Committee has adopted
resolutions under the 2015 LTIP automatically granting to each non-employee director on the first day of each fiscal year options to purchase twice the number of shares of common stock acquired during the previous fiscal year, up to a maximum of 40,000 shares. Such options are exercisable at the market value of the stock on the first day of the fiscal year, vest six months from the date of grant and expire 10 years
from the date of grant.
Stock based compensation expense is included in general and administrative expense in the
accompanying Consolidated Statements of Income.
Stock Options:
A summary of stock option transactions under all of the Company’s stock option plans and
information about fixed-price stock options is as follows:
The intrinsic value of options outstanding at June 25, 2023 was $33 thousand.
The following table provides information on options outstanding and options exercisable as of June 25, 2023:
We determine fair value following the authoritative guidance as follows:
Valuation and Amortization Method. We estimate the fair value of
share-based awards granted using the Black-Scholes option valuation model. We amortize the fair value of all awards on a straight-line basis over the requisite service periods, which are generally the vesting periods.
Expected Life. The expected life of awards granted represents the period of time that
they are expected to be outstanding. Unless a life is specifically stated, we determine the expected life using the “simplified method” in accordance with Staff Accounting Bulletin No. 110 since we do not have sufficient historical share
option exercise experience.
Expected Volatility. Using the Black-Scholes option valuation
model, we estimate the volatility of our common stock at the date of grant based on the historical volatility of our common stock.
Risk-Free Interest Rate. We base the risk-free interest rate used
in the Black-Scholes option valuation model on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award.
Expected Dividend Yield. We have not paid any cash dividends on our
common stock in the last ten years and we do not anticipate paying any cash dividends in the foreseeable future. Consequently, we use an expected dividend yield of zero in the Black-Scholes option valuation model.
Expected Forfeitures. We use historical data to estimate
pre-vesting option forfeitures. We record stock-based compensation only for those awards that are expected to vest.
The following weighted average assumptions were used for options granted during fiscal 2023:
At June 25, 2023, 111,750 of the stock options that the Company had granted were vested. $15
thousand stock compensation expense related to stock options was recognized in fiscal 2023. No stock compensation expense related to
stock options was recognized in fiscal 2022. There were 40,000 of the stock options that were unvested at June 25, 2023. 40,000 of the stock options vested on June 27, 2023 and, therefore, there was zero unamortized stock compensation expense at June 25, 2023.
Restricted Stock Units:
Restricted stock units awarded under the 2015 LTIP represent the right to receive shares
of common stock upon the satisfaction of vesting requirements, performance criteria and other terms and conditions. During fiscal 2023 and 2022, zero
and 362,500 performance-based restricted stock units, respectively, were granted to certain employees. For the years ended June 25, 2023
and June 26, 2022, the Company had stock compensation expense of $329 thousand and $169 thousand, respectively, related to RSUs. As of June 25, 2023, there was $212
thousand and $36 thousand unamortized stock compensation expense related to RSUs, which should be recognized during fiscal years 2024 and
2025, respectively.
The restricted stock units granted to each recipient are allocated among performance
criteria pertaining to various aspects of the Company’s business, as well as its overall operations, measured based on the second fiscal year following the date of grant. Achievement of the various performance criteria entitles the recipient to
receive shares of common stock in amounts ranging from 50% to 150% of the number of restricted stock units granted. Grantees of restricted stock units do not have any rights of a stockholder, and do not participate in any distributions on our common
stock, until the award fully vests upon satisfaction of the vesting schedule, performance criteria and other conditions set forth in their award agreement. Contingent unvested restricted stock units are considered participating securities under ASC
260, “Earnings Per Share,” and are included in the calculation of diluted earnings per share.
Compensation cost is measured as an amount equal to the fair value of the restricted
stock units on the date of grant and is expensed over the vesting period if achievement of the performance criteria is deemed probable, with the amount of the expense recognized based on the best estimate of the ultimate achievement level.
A summary of the status of restricted
stock units as of June 25, 2023 and June 26, 2022, and changes during the fiscal years then ended is presented below:
|
SHAREHOLDERS' EQUITY |
12 Months Ended |
---|---|
Jun. 25, 2023 | |
SHAREHOLDERS' EQUITY [Abstract] | |
SHAREHOLDERS' EQUITY |
NOTE J - SHAREHOLDERS’ EQUITY:
On April 22, 2009, the board of directors of the Company amended the stock repurchase
plan first authorized on May 23, 2007, and previously amended on June 2, 2008, by increasing the aggregate number of shares of common stock the Company may repurchase under the plan to a total of 3,016,000 shares.
On June 28, 2022, the Company’s board of directors again amended the stock repurchase plan to increase the number of shares of common stock
the Company may repurchase by 5,000,000 shares to a total of 8,016,000 shares. During fiscal 2023, 3,356,977 shares were repurchased and,
as of June 25, 2023, there were 1,997,974 shares available to be repurchased under the plan. Subsequent to fiscal 2023, the Company
has not repurchased any additional outstanding shares of
its common stock.
|
COMMITMENTS AND CONTINGENCIES |
12 Months Ended |
---|---|
Jun. 25, 2023 | |
COMMITMENTS AND CONTINGENCIES [Abstract] | |
COMMITMENTS AND CONTINGENCIES |
NOTE K - COMMITMENTS AND CONTINGENCIES:
On January 6,
2020, the Company’s former Chief Executive Officer, Scott Crane, filed suit in the U.S. District Court for the Eastern District of Texas alleging various claims in connection with the Company’s termination of his employment in July 2019. In
general, the suit asserted that the Company terminated Crane for the purpose of depriving him of certain equity compensation that otherwise would have been due to him on October 15, 2019. The Company asserted that Crane failed to meet the
contractual qualifications for the equity, as well as other defenses. The matter proceeded to trial which resulted in a verdict in favor of Crane, and the trial court entered judgment in Crane’s favor. The Company appealed the judgment to the
Fifth Circuit Court of Appeals, which on May 31, 2023 issued an opinion reversing the trial court and rendering judgment in favor of the Company on all claims brought by Crane, and returning the matter to the trial court for consideration of
costs and attorney fees to be awarded to the Company as the prevailing party in the litigation.
The Company is subject to other various claims and contingencies related to employment
agreements, franchise disputes, lawsuits, taxes, food product purchase contracts and other matters arising out of the normal course of business. Management believes that any such claims and actions currently pending are either covered by insurance
or would not have a material adverse effect on the Company’s annual results of operations or financial condition if decided in a manner that is unfavorable to the Company.
|
EARNINGS PER SHARE |
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EARNINGS PER SHARE [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EARNINGS PER SHARE |
NOTE L - EARNINGS PER SHARE:
The Company computes and presents earnings per share (“EPS”) in accordance with ASC 260 Earnings Per Share. Basic EPS excludes the effect of potentially dilutive securities while diluted EPS reflects the potential dilution that would occur if securities or other contracts to issue common stock
were exercised, converted or resulted in the issuance of common stock that then shared in the earnings of the Company.
The following table shows the reconciliation of the numerator and denominator of the
basic EPS calculation to the numerator and denominator of the diluted EPS calculation (in thousands, except per share amounts).
We had 151,750 and 111,750 shares of common stock potentially issuable upon exercise
of employee stock options for years ended June 25, 2023 and June 26, 2022, respectively, which were excluded from the weighted average number of shares outstanding on a diluted basis because they had an intrinsic value of zero. These options expire at varying times from fiscal 2024 through fiscal 2032. We had 271,825
and 859,501 restricted stock units for years ended June 25, 2023 and June 26, 2022, respectively, which were excluded from the
weighted average number of shares outstanding on a diluted basis because the performance criteria had not been met and vesting was not probable.
|
SEGMENT REPORTING |
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SEGMENT REPORTING [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENT REPORTING |
NOTE M - SEGMENT REPORTING:
The Company has three reportable operating segments as determined by management using the “management approach” as defined by ASC 280 Disclosures about
Segments of an Enterprise and Related Information: (1) Pizza Inn Franchising, (2) Pie Five Franchising and (3) Company-Owned Restaurants. These segments are a result of differences in the nature of the products and services sold.
Corporate administration costs, which include, but are not limited to, general accounting, human resources, legal and credit and collections, are partially allocated to the three operating segments. Other revenue consists of nonrecurring items.
The Pizza Inn and Pie Five Franchising segments establish franchisees, licensees and
territorial rights. Revenue for these segments are derived from franchise royalties, franchise fees, sale of area development and foreign master license rights and incentive payments from third party suppliers and distributors. Assets for these
segments include equipment, furniture and fixtures.
The Company-Owned Restaurants segment includes sales and operating results for all
Company-owned restaurants. Assets for this segment include equipment, furniture and fixtures for the Company-Owned restaurants. As of June 25, 2023 and June 26, 2022, the Company did not operate any Company-Owned restaurants.
Corporate administration and other assets primarily include cash and short-term
investments, as well as furniture and fixtures located at the corporate office and trademarks and other intangible assets. All assets are located within the United States.
Summarized in the following tables are net operating revenues, depreciation and
amortization expense, and income before taxes for the Company’s reportable segments as of and for the fiscal years ended June 25, 2023 and June 26, 2022 (in thousands):
The following table provides information on our foreign and domestic revenues:
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SUBSEQUENT EVENTS |
12 Months Ended |
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Jun. 25, 2023 | |
SUBSEQUENT EVENTS [Abstract] | |
SUBSEQUENT EVENTS |
NOTE N - SUBSEQUENT EVENTS:
In preparation of its financial statements, the Company considered subsequent events through September 21,
2023 which was the date the Company’s financial statements were available to be issued.
The Company terminated its master licensee of Pizza Inn in Saudi Arabia in September 2023. This termination resulted in the closure
of 12 international units. These locations represented approximately $0.1 million in revenue during fiscal 2023.
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ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 25, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Description of Business |
Description of Business:
Rave Restaurant Group, Inc., and its subsidiaries (collectively referred to as the
“Company”, or in the first person notations of “we”, “us” and “our”) franchise pizza buffet, delivery/carry-out and express restaurants domestically and internationally under the trademark “Pizza Inn” and franchise domestic fast casual restaurants
under the trademarks “Pie Five Pizza Company” or “Pie Five”. The Company also licenses pizza kiosks under the “Pizza Inn” trademark. We facilitate the procurement and distribution of food, equipment and supplies to our domestic and international
system of restaurants through agreements with third party distributors.
As of June 25, 2023, we had 152 franchised Pizza Inn restaurants, 27 franchised Pie Five
Units, and 5 licensed Pizza Inn Express, or PIE, kiosks (“PIE Units”). The 118 domestic franchised Pizza Inn restaurants were comprised of 77
pizza buffet restaurants (“Buffet Units”), 7 delivery/carry-out restaurants (“Delco Units”), and 34 express restaurants (“Express Units”). As of June 25, 2023, there were 34 international franchised Pizza Inn restaurants. Domestic Pizza Inn restaurants and kiosks were located predominantly in the southern half of the United States, with
Arkansas, Texas, North Carolina and Mississippi accounting for approximately 23%, 20%, 15% and 9%, respectively, of the total number of domestic units.
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Principles of Consolidation |
Principles of Consolidation:
The consolidated financial statements include the accounts of Rave Restaurant
Group, Inc. and its subsidiaries, all of which are wholly owned. All appropriate inter-company balances and transactions have been eliminated.
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Cash and Cash Equivalents |
Cash and Cash Equivalents:
The Company considers all highly liquid investments purchased with an original maturity
of three months or less to be cash equivalents.
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Concentration of Credit Risk |
Concentration of Credit Risk:
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and
cash equivalents. Balances in accounts are insured up to Federal Deposit Insurance Corporation (“FDIC”) limits of $250 thousand per
institution. At June 25, 2023 and June 26, 2022, the Company had cash balances in excess of FDIC insurance coverage of approximately $5.1
million and $7.5 million, respectively. We do not believe we are exposed to any significant credit risk on cash and cash equivalents.
Notes receivable, which potentially subject the Company to concentrations of credit risk, consist primarily of promissory notes
from franchise agreements and structured Company-financed sales of assets. At June 25, 2023 and June 26, 2022, and at various times during the fiscal years then ended, the Company had concentrations of credit risk with three franchisees on notes receivables with both short and long term maturities. As of June 25, 2023, the Company had zero short term notes receivable and three
long term notes receivable with three franchisees. The financed asset sales were executed with a weighted average interest rate of 0.0%. Principal payments are due monthly and mature from September 1, 2024 to January 1, 2027.
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Property and Equipment |
Property
and Equipment:
Property and equipment are stated at cost
less accumulated depreciation and amortization. Repairs and maintenance are charged to operations as incurred while major renewals and betterments are capitalized. Upon the sale or disposition of any property or equipment, the asset and the
related accumulated depreciation or amortization are removed from the accounts and the gain or loss is included in operations. The Company capitalizes interest on borrowings during the active construction period of major capital projects.
Capitalized interest is added to the cost of the underlying asset and amortized over the estimated useful life of the asset.
Depreciation and amortization are computed on
the straight-line method over the estimated useful lives of the assets or, in the case of leasehold improvements, over the term of the lease including any reasonably assured renewal periods, if shorter. The useful lives of the assets range from
to ten years. |
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Impairment of Long-Lived Asset and other Lease Charges |
Impairment of Long-Lived Asset and other Lease Charges:
The Company reviews long-lived assets for impairment when events or circumstances indicate that the carrying value of such
assets may not be fully recoverable. Impairment is evaluated based on the sum of undiscounted estimated future cash flows expected to result from use and eventual disposition of the assets compared to their carrying value. If impairment is
recognized, the carrying value of an impaired asset is reduced to its fair value, based on discounted estimated future cash flows. The Company recognized, pre-tax,
of $5 thousand and $6 thousand during fiscal 2023 and 2022, respectively. The Company had $0.2 million in sublease income during fiscal 2023 and 2022. |
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Accounts Receivable |
Accounts Receivable:
Accounts receivable consist primarily of receivables generated from franchise royalties and supplier concessions. The Company
records an allowance for bad debts to allow for any amounts that may be unrecoverable based upon an analysis of the Company’s prior collection experience, customer creditworthiness and current economic trends. After all attempts to collect a
receivable have failed, the receivable is written off against the allowance. Finance charges may be accrued at a rate of 18% per year,
or up to the maximum amount allowed by law, on past due receivables. The interest income recorded from finance charges is immaterial.
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Bad Debt Expense |
Bad Debt Expense:
The Company monitors franchisee receivable balances and adjusts credit terms when necessary to minimize the Company’s exposure to
high risk accounts receivable. Bad debt expense increased by $27 thousand to $73 thousand in fiscal 2023 compared to $46 thousand in fiscal
2022 primarily related to collectability concerns on international accounts receivable.
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Notes Receivable |
Notes Receivable:
Notes receivable primarily consist of promissory notes arising from franchisee agreements and structured Company-financed sales
of assets. The majority of amounts and terms are evidenced by formal promissory notes and personal guarantees. All notes allow for early payment without penalty. Fixed principal payments are due monthly. Notes receivable mature at various dates
through 2025 and bore interest at a weighted average rate of 0.0% at June 25, 2023.
Management evaluates the creditworthiness of franchisees by considering credit history and sales to evaluate credit risk.
Management determines interest rates based on credit risk of the underlining franchisee. The Company monitors payment history to determine whether or not a loan should be placed on a nonaccrual status or impaired. The Company charges off notes
receivable based on an account-by-account analysis of the borrower’s current economic conditions, monthly payments history and historical loss experience. The allowance for doubtful notes receivable is netted within notes receivable.
The expected principal collections on notes receivable for the next two years are as follows as of June 25, 2023 (in
thousands):
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Income Taxes |
Income Taxes:
Income taxes are accounted for using the asset and liability method pursuant to the authoritative guidance on Accounting for Income Taxes. Deferred taxes are recognized for the tax consequences of “temporary differences” by applying enacted statutory tax rates applicable to future years to differences between the
financial statement and carrying amounts and the tax bases of existing assets and liabilities. The effect on deferred taxes for a change in tax rates is recognized in income in the period that includes the enactment date. The Company recognizes
future tax benefits to the extent that realization of such benefits is more likely than not.
The Company continually reviews the realizability of its deferred tax assets, including an analysis of factors such as future
taxable income, reversal of existing taxable temporary differences, and tax planning strategies. In assessing the need for the valuation allowance, the Company considers both positive and negative evidence related to the likelihood of realization
of deferred tax assets. Future sources of taxable income are also considered in determining the amount of the recorded valuation allowance. Based on this analysis, the Company reversed the full amount of the established valuation allowance as of
June 26, 2022 (see Note F).
For the year ended June 25, 2023, the Company recorded an income tax expense of $0.5 million. The federal and state tax expense was $0.4 million
and $0.1 million, respectively. The Company utilized net operating losses to offset federal taxes. As of June 25, 2023, the Company had
federal net operating loss carryforwards totaling $21 million that are available to reduce future taxable income and will begin to expire
in
. Under the Tax Cuts and Jobs Act, approximately $1.4 million of the loss carryforwards are limited to 80% and do not expire. Tax years that remain
subject to examination by the IRS are the years ended June 28, through June 26, . Tax years that remain subject to examination by state authorities are the years ended June 30, through June 26, . There are no uncertain tax positions. Management’s position is that all relevant requirements are met and necessary returns have been filed, and
therefore the tax positions taken on the tax returns would be sustained upon examination.
Under ASC 740, we recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position
will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater
than 50% likelihood of being realized upon ultimate resolution. From time to time, the Company may be assessed interest and penalties by taxing authorities. In those cases, the charges are recorded as income tax expense, as incurred, in the
Consolidated Statements of Income.
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Revenue Recognition |
Revenue Recognition:
Revenue is measured based on consideration specified in contracts with customers and excludes incentives and amounts collected
on behalf of third parties, primarily sales tax. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. Taxes assessed by a governmental authority that are both
imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue.
The following describes principal activities, separated by major product or service, from which the Company generates its
revenues:
Franchise Revenues
Franchise revenues consist of 1) franchise royalties, 2) supplier and distributor incentive revenues, 3) franchise license
fees, 4) area development exclusivity fees and foreign master license fees, 5) advertising funds, and 6) supplier convention funds.
Franchise royalties, which are based on a percentage of franchise restaurant sales, are recognized as sales occur.
Supplier and distributor incentive revenues are recognized when title to the underlying commodities transfer.
Franchise license fees are typically billed upon execution of the franchise agreement and amortized over the term of the
franchise agreement, which typically range from
to 20 years. Fees received for renewal periods are amortized over the life of the renewal period.Area development exclusivity fees and foreign master license fees are typically billed upon execution of the area development
and foreign master license agreements. Area development exclusivity fees are included in deferred revenue in the accompanying Consolidated Balance Sheets and allocated on a pro rata basis to all stores opened under that specific development
agreement as the stores are opened. Area development exclusivity fees that include rights to sub-franchise are amortized as revenue over the term of the contract.
Advertising fund contributions for Pizza Inn and Pie Five units represent contributions collected where we have control over
the activities of the fund. Contributions are based on a percentage of net retail sales. We have determined that we are the principal in these arrangements, and advertising fund contributions and expenditures are, therefore, reported on a gross
basis in the Consolidated Statements of Income. In general, we expect such advertising fund contributions and expenditures to be largely offsetting and, therefore, do not expect a significant impact on our reported income before income taxes. Our
obligation related to these funds is to develop and conduct advertising activities. Pizza Inn and Pie Five marketing fund contributions are billed and collected weekly or monthly.
Supplier convention funds are deferred until the obligations of the agreement are met and the event takes place.
Rental income is income from our subleasing of some of our restaurant space to third parties.
Total revenues consist of the following (in thousands):
The opening balance of accounts receivable on June 28, 2021 was $0.9 million. The opening balance of deferred revenues on June 28, 2021 was $1.8
million. Revenue recognized in fiscal 2023 that was in the deferred revenue balance at June 26, 2022 was $0.6 million.
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Stock-Based Compensation |
Stock-Based Compensation:
The Company accounts for stock options using the fair value recognition provisions of the authoritative guidance on share-based
payments. The Company uses the Black-Scholes formula to estimate the value of stock-based compensation for options granted to employees and directors and expects to continue to use this acceptable option valuation model in the future. The
authoritative guidance also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow.
Restricted stock units (“RSUs”) represent the right to receive shares of common stock upon the satisfaction of vesting requirements,
performance criteria and other terms and conditions. Compensation cost for RSUs is measured as an amount equal to the fair value of the RSUs on the date of grant and is expensed over the vesting period if achievement of the performance criteria is
deemed probable, with the amount of the expense recognized based on the best estimate of the ultimate achievement level.
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Fair Value of Financial Instruments |
Fair Value of Financial Instruments:
The carrying amounts of accounts receivable and accounts payable approximate fair value because of the short maturity of these
instruments.
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Contingencies |
Contingencies:
Provisions for legal settlements are accrued when payment is considered probable and the amount of loss is reasonably estimable in
accordance with the authoritative guidance on Accounting for Contingencies. If the best estimate of cost can only be identified within a range and no specific amount within that range can be determined
more likely than any other amount within the range, and the loss is considered probable, the minimum of the range is accrued. Legal and related professional services costs to defend litigation are expensed as incurred.
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Use of Management Estimates |
Use of Management Estimates:
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of
America requires the Company’s management to make estimates and assumptions that affect its reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent liabilities. The Company bases its estimates on historical
experience and other various assumptions that it believes are reasonable under the circumstances. Estimates and assumptions are reviewed periodically. Actual results could differ materially from estimates.
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Fiscal Year |
Fiscal Year:
The Company’s fiscal year ends on the last Sunday in June. The fiscal years ended June 25, 2023 and June 26, 2022 each contained 52
weeks.
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ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) |
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Jun. 25, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes Receivable |
The expected principal collections on notes receivable for the next two years are as follows as of June 25, 2023 (in
thousands):
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Revenues |
Total revenues consist of the following (in thousands):
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PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS (Tables) |
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PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and Equipment |
Property and equipment consist of the following (in thousands):
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Intangible Assets |
Intangible assets consist of the following (in thousands):
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ACCRUED EXPENSES (Tables) |
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Jun. 25, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
ACCRUED EXPENSES [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Accrued Expenses |
Accrued expenses consist of the following (in thousands):
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INCOME TAXES (Tables) |
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INCOME TAXES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Provision for Income Taxes |
Provision for income taxes from continuing operations consists of the following (in
thousands):
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Effective Income Tax Rate Reconciliation |
The effective income tax rate varied from the statutory rate for the fiscal years ended June 25, 2023 and June 26, 2022 as
reflected below (in thousands):
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Deferred Tax Assets |
The tax effects of temporary differences that give rise to the net deferred tax assets consisted of the
following (in thousands):
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LEASES (Tables) |
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Jun. 25, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||
LEASES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||
Future Minimum Rental Payments for Guaranteed Leases |
Future minimum rental
payments for guaranteed leases with initial or remaining terms of one year or more at June 25, 2023 were as follows (in thousands):
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Components of Total Lease Expense |
The components of total lease expense for the fiscal years ended June 25, 2023 and June 26, 2022, the majority of which is included in general and
administrative expense in the accompanying Consolidated Statements of Income, are as follows (in thousands):
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Supplemental Cash Flow Information Related to Operating Leases |
Supplemental cash flow information related to operating leases is included in the table below (in thousands):
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Supplemental Balance Sheet Information Related to Operating Leases |
Supplemental balance sheet information related to operating leases is included in the table below (in thousands):
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Weighted Average Remaining Lease Term and Weighted Average Discount Rate |
Weighted average remaining lease term and weighted average discount rate for operating leases are as follows:
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Maturities of Operating Lease Liabilities |
Operating lease liabilities with enforceable contract terms that are greater than one year mature as follows (in thousands):
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Future Minimum Sublease Rental Income |
Future minimum sublease rental income under active non-cancelable leases with initial or
remaining terms of one year or more at June 25, 2023 were as follows (in thousands):
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Components of Rental Expense |
Rental expense consisted of the following (in thousands):
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STOCK BASED COMPENSATION PLANS (Tables) |
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Jun. 25, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCK BASED COMPENSATION PLANS [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Stock Options |
A summary of stock option transactions under all of the Company’s stock option plans and
information about fixed-price stock options is as follows:
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Information on Options Outstanding and Options Exercisable |
The following table provides information on options outstanding and options exercisable as of June 25, 2023:
|
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Weighted Average Assumptions |
The following weighted average assumptions were used for options granted during fiscal 2023:
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Summary of Restricted Stock Units |
A summary of the status of restricted
stock units as of June 25, 2023 and June 26, 2022, and changes during the fiscal years then ended is presented below:
|
EARNINGS PER SHARE (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 25, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EARNINGS PER SHARE [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per Share Basic and Diluted |
The following table shows the reconciliation of the numerator and denominator of the
basic EPS calculation to the numerator and denominator of the diluted EPS calculation (in thousands, except per share amounts).
|
SEGMENT REPORTING (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 25, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENT REPORTING [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting Information |
Summarized in the following tables are net operating revenues, depreciation and
amortization expense, and income before taxes for the Company’s reportable segments as of and for the fiscal years ended June 25, 2023 and June 26, 2022 (in thousands):
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Revenue by Geographic Areas |
The following table provides information on our foreign and domestic revenues:
|
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Concentration of Credit Risk (Details) - Concentration of Credit Risk [Member] $ in Thousands |
12 Months Ended | |
---|---|---|
Jun. 25, 2023
USD ($)
Note
Franchise
|
Jun. 26, 2022
USD ($)
Franchise
|
|
Concentration of Credit Risk [Abstract] | ||
Deposit insurance corporation (FDIC) limits | $ | $ 250 | |
Cash balances in excess of FDIC insurance coverage | $ | $ 5,100 | $ 7,500 |
Number of franchisees had credit risk on notes receivable | Franchise | 3 | 3 |
Number of short term notes receivables | Note | 0 | |
Number of long term notes receivable | Note | 3 | |
Number of franchisees in long term notes receivable | Franchise | 3 | |
Weighted average interest rate of financed assets sale | 0.00% |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Property and Equipment (Details) |
Jun. 25, 2023 |
---|---|
Minimum [Member] | |
Property and Equipment [Abstract] | |
Estimated useful lives of assets | 3 years |
Maximum [Member] | |
Property and Equipment [Abstract] | |
Estimated useful lives of assets | 10 years |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Impairment of Long-Lived Asset and other Lease Charges (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Jun. 25, 2023 |
Jun. 26, 2022 |
|
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | ||
Pre-tax, non-cash impairment charges on long lived assets | $ 5 | $ 6 |
Impairment, Long-Lived Asset, Held-for-Use, Statement of Income or Comprehensive Income [Extensible Enumeration] | Impairment of long-lived assets and other lease charges | |
Sublease income | $ 186 | $ 186 |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Accounts Receivable (Details) |
12 Months Ended |
---|---|
Jun. 25, 2023 | |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |
Finance charges rate | 18.00% |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Bad Debt Expense (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Jun. 25, 2023 |
Jun. 26, 2022 |
|
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | ||
Increase in bad debt expense | $ 27 | |
Bad debt expense | $ 73 | $ 46 |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Notes Receivable (Details) $ in Thousands |
Jun. 25, 2023
USD ($)
|
---|---|
Notes Receivable [Abstract] | |
Weighted average interest rate | 0.00% |
Maturities of Notes Receivable [Abstract] | |
2024 | $ 105 |
2025 | 28 |
Total | $ 133 |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Income Taxes (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Jun. 25, 2023 |
Jun. 26, 2022 |
|
Income Taxes [Abstract] | ||
Income tax expense | $ 537 | $ (5,657) |
Federal tax expense | 400 | |
State tax expense | 100 | |
Net operating loss carryforwards | $ 21,000 | $ 23,100 |
Operating loss carryforwards, expiry date | Dec. 31, 2035 | Dec. 31, 2032 |
Amount of operating loss carryforwards limited with no expiration | $ 1,400 | $ 1,800 |
Operating loss carryforward, percentage limitation on use | 80.00% | 80.00% |
IRS [Member] | Earliest Tax Year [Member] | ||
Income Tax Examination [Abstract] | ||
Open tax year | 2020 | |
IRS [Member] | Latest Tax Year [Member] | ||
Income Tax Examination [Abstract] | ||
Open tax year | 2022 | |
State [Member] | Earliest Tax Year [Member] | ||
Income Tax Examination [Abstract] | ||
Open tax year | 2019 | |
State [Member] | Latest Tax Year [Member] | ||
Income Tax Examination [Abstract] | ||
Open tax year | 2022 |
PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS, Intangible Assets (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Jun. 25, 2023 |
Jun. 26, 2022 |
|
Finite-Lived Intangible Assets, Net [Abstract] | ||
Acquisition cost | $ 687 | $ 519 |
Accumulated amortization | (359) | (287) |
Net value | 328 | 232 |
Amortization expense for intangible assets | $ 73 | 47 |
Trademarks and Trade Names [Member] | ||
Finite-Lived Intangible Assets, Net [Abstract] | ||
Estimated useful lives | 10 years | |
Acquisition cost | $ 278 | 279 |
Accumulated amortization | (248) | (233) |
Net value | $ 30 | 46 |
Name Change [Member] | ||
Finite-Lived Intangible Assets, Net [Abstract] | ||
Estimated useful lives | 15 years | |
Acquisition cost | $ 70 | 70 |
Accumulated amortization | (39) | (35) |
Net value | $ 31 | 35 |
Prototypes [Member] | ||
Finite-Lived Intangible Assets, Net [Abstract] | ||
Estimated useful lives | 5 years | |
Acquisition cost | $ 339 | 170 |
Accumulated amortization | (72) | (19) |
Net value | $ 267 | $ 151 |
ACCRUED EXPENSES (Details) - USD ($) $ in Thousands |
Jun. 25, 2023 |
Jun. 26, 2022 |
---|---|---|
ACCRUED EXPENSES [Abstract] | ||
Compensation | $ 776 | $ 875 |
Other | 21 | 118 |
Professional fees | 93 | 89 |
Accrued expenses | $ 890 | $ 1,082 |
CONVERTIBLE NOTES (Details) - 4% Convertible Senior Notes due 2022 [Member] |
12 Months Ended | ||
---|---|---|---|
Mar. 03, 2017
USD ($)
Note
|
Jun. 25, 2023
USD ($)
Subsidary
|
Jun. 26, 2022
USD ($)
|
|
Convertible Notes [Abstract] | |||
Interest on convertible notes | 4.00% | 4.00% | |
Shareholders exercised subscription rights | Note | 30,000 | ||
Par value of shares exercised per note | $ 100 | ||
Proceeds from issuance of convertible notes | $ 3,000,000 | ||
Number of direct operating subsidiaries | Subsidary | 2 | ||
Notes converted to common shares | $ 0 | ||
Maturity date of notes | Feb. 15, 2022 | ||
Notes outstanding | $ 0 | $ 0 |
EMPLOYEE RETENTION CREDIT (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Jun. 25, 2023 |
Jun. 26, 2022 |
|
Employee Retention Credit [Abstract] | ||
Other income for employee retention credit | $ 0 | $ 704 |
Amount received from employee retention credit | 600 | |
Employee retention credit receivable | $ 100 |
EMPLOYEE BENEFITS (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Jun. 25, 2023 |
Jun. 26, 2022 |
|
EMPLOYEE BENEFITS [Abstract] | ||
Service required for employees to be eligible to participate in employee benefits plan | 3 months | |
Defined contribution plan, minimum age limit for eligibility to participate in plan | 21 years | |
Total matching contributions | $ 24 | $ 33 |
Minimum [Member] | ||
EMPLOYEE BENEFITS [Abstract] | ||
Percentage of compensation deferred and contributed to employee benefits plan by employee | 1.00% | |
Maximum [Member] | ||
EMPLOYEE BENEFITS [Abstract] | ||
Percentage of compensation deferred and contributed to employee benefits plan by employee | 15.00% |
STOCK BASED COMPENSATION PLANS, Stock Option Award Plan (Details) - shares |
1 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2015 |
Jun. 25, 2023 |
Jun. 24, 2018 |
Jun. 02, 2015 |
|
2005 Employee Plan [Member] | ||||
Share-based Arrangements [Abstract] | ||||
Number of shares authorized (in shares) | 1,000,000 | |||
2005 Directors Plan [Member] | ||||
Share-based Arrangements [Abstract] | ||||
Number of shares authorized (in shares) | 650,000 | |||
Number of shares granted (in shares) | 40,000 | |||
2005 Directors Plan [Member] | Minimum [Member] | ||||
Share-based Arrangements [Abstract] | ||||
Vesting period | 6 months | |||
2005 Directors Plan [Member] | Maximum [Member] | ||||
Share-based Arrangements [Abstract] | ||||
Vesting period | 10 years | |||
2015 LTIP [Member] | ||||
Share-based Arrangements [Abstract] | ||||
Number of shares authorized (in shares) | 3,000,000 | |||
Number of shares granted (in shares) | 40,000 | |||
Vesting period | 6 months | |||
Expiration period | 10 years |
STOCK BASED COMPENSATION PLANS, Summary of Stock Options (Details) - Stock Options [Member] - USD ($) $ / shares in Units, $ in Thousands |
12 Months Ended | |
---|---|---|
Jun. 25, 2023 |
Jun. 26, 2022 |
|
Shares [Roll Forward] | ||
Outstanding at beginning of year (in shares) | 111,750 | 166,750 |
Granted (in shares) | 40,000 | 0 |
Exercised (in shares) | 0 | 0 |
Forfeited/Canceled/Expired (in shares) | 0 | (55,000) |
Outstanding at end of period (in shares) | 151,750 | 111,750 |
Exercisable at end of period (in shares) | 111,750 | 111,750 |
Weighted Average Exercise Price [Roll Forward] | ||
Outstanding at beginning of year (in dollars per share) | $ 6.67 | $ 5.49 |
Granted (in dollars per share) | 1.06 | 0 |
Exercised (in dollars per share) | 0 | 0 |
Forfeited/Canceled/Expired (in dollars per share) | 0 | 3.11 |
Outstanding at end of period (in dollars per share) | 5.19 | 6.67 |
Exercisable at end of year (in dollars per share) | $ 6.67 | $ 6.67 |
Intrinsic value of options outstanding | $ 33 |
STOCK BASED COMPENSATION PLANS, Weighted Average Assumptions (Details) - Stock Options [Member] - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Jun. 25, 2023 |
Jun. 26, 2022 |
Jun. 27, 2023 |
|
Share-Based Compensation Arrangement by Share-Based Payment Award, Fair Value Assumptions and Methodology [Abstract] | |||
Expected life (in years) | 5 years 6 months | ||
Expected volatility | 79.60% | ||
Risk-free interest rate | 2.90% | ||
Expected forfeiture rate | 48.80% | ||
Share-Based Payment Arrangement, Additional Disclosure [Abstract] | |||
Stock options vested (in shares) | 111,750 | ||
Stock compensation expense | $ 15 | $ 0 | |
Stock options unvested (in shares) | 40,000 | ||
Stock options vested or expected to vest (in shares) | 40,000 | ||
Unamortized stock-based compensation expense | $ 0 |
STOCK BASED COMPENSATION PLANS, Restricted Stock Units (Details) - Restricted Stock Units [Member] - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Jun. 25, 2023 |
Jun. 26, 2022 |
|
Share-based Arrangement [Abstract] | ||
Stock-based compensation expense recognized | $ 329 | $ 169 |
Unamortized stock-based compensation expense | $ 212 | $ 36 |
Summary of Restricted Stock Units [Roll forward] | ||
Unvested Beginning Balance (in shares) | 885,687 | 545,600 |
Granted (in shares) | 0 | 362,500 |
Vested (in shares) | 0 | 0 |
Forfeited (in shares) | 0 | (22,413) |
Unvested Ending Balance (in shares) | 885,687 | 885,687 |
Minimum [Member] | ||
Information of Restricted Stock Units Award [Abstract] | ||
Percentage of stock granted based on performance | 50.00% | |
Maximum [Member] | ||
Information of Restricted Stock Units Award [Abstract] | ||
Percentage of stock granted based on performance | 150.00% |
SHAREHOLDERS' EQUITY (Details) - shares |
12 Months Ended | ||
---|---|---|---|
Jun. 28, 2022 |
Jun. 25, 2023 |
Apr. 22, 2009 |
|
Treasury Stock, Shares [Abstract] | |||
Total number of shares purchased (in shares) | 3,356,977 | ||
Number of common stock shares available to be repurchased (in shares) | 1,997,974 | ||
Amended 2007 Stock Purchase Plan [Member] | |||
Treasury Stock, Shares [Abstract] | |||
Number of common stock shares authorized to purchase (in shares) | 8,016,000 | 3,016,000 | |
Increase in repurchase of authorized shares of common stock (in shares) | 5,000,000 |
SUBSEQUENT EVENTS (Details) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Sep. 21, 2023
USD ($)
Restaurant
|
Jun. 25, 2023
USD ($)
|
Jun. 26, 2022
USD ($)
|
|
Subsequent Event [Abstract] | |||
Revenues | $ 11,889 | $ 10,692 | |
Subsequent Event [Member] | Pizza Inn Franchising [Member] | |||
Subsequent Event [Abstract] | |||
Number of international units closure | Restaurant | 12 | ||
Revenues | $ 100 |
1 Year Rave Restaurant Chart |
1 Month Rave Restaurant Chart |
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