Overview



In September 2019 a holding company reorganization was completed in which Famous
Dave's of America, Inc. ("FDA") became a wholly owned subsidiary of the new
parent holding company named BBQ Holdings, Inc. ("BBQ Holdings"). As used in
this Form 10-Q, "Company", "we" and "our" refer to BBQ Holdings and its wholly
owned subsidiaries. BBQ Holdings was incorporated on March 29, 2019 under the
laws of the State of Minnesota, while FDA was incorporated in Minnesota on March
14, 1994. The Company develops, owns and operates restaurants under the name
"Famous Dave's", "Village Inn", "Barrio Queen", "Granite City", Real Urban
Barbecue", "Clark Crew BBQ", "Tahoe Joe's Steakhouse", "Bakers Square", "Craft
Republic", and "Fox & Hound". Additionally, the Company franchises restaurants
under the name "Famous Dave's" and "Village Inn". As of April 3, 2022, there
were 144 Famous Dave's restaurants operating in three countries, including 40
Company-owned restaurants and 104 franchise-operated restaurants. This includes
the eight Famous Dave's ghost kitchens the Company operates out of its Granite
City restaurants. The first Clark Crew BBQ restaurant opened in December 2019 in
Oklahoma City, Oklahoma. BBQ Holdings has a 20% ownership in this venture. The
Company owns and operates 18 Granite City Food & Brewery restaurants located
throughout the Midwest and two Real Urban Barbecue restaurants located in
Illinois. On July 30, 2021, the Company completed the purchase of the Village
Inn family restaurant concept currently with 22 Company-owned restaurants and
103 franchised restaurants, and the Bakers Square pie and comfort food concept
currently with 14 Company-owned restaurants and four locations where Bakers
Square pies are licensed. On October 4, 2021, the Company opened its second Real
Urban Barbecue restaurant located in Oak Brook, Illinois and on October 8, 2021
the Company acquired the Tahoe Joe's Steakhouse brand. On March 11, 2022 the
Company acquired three bar-centric locations, collectively referred to as
"Famous Craft Concepts", and on April 25, 2022, the Company executed an Asset
Purchase Agreement for another bar-centric restaurant. On April 11, 2022, the
Company closed the purchase of Barrio Queen, a chain of seven authentic Mexican
fine dining restaurants in Phoenix, Arizona.

In March 2020, the World Health Organization declared the outbreak of a novel
coronavirus ("COVID-19") as a pandemic and the United States declared a National
Public Health Emergency. As a result, public health measures were taken to
minimize exposure to the virus. These measures, some of which are
government-mandated, have been implemented globally resulting in a dramatic
decrease in economic activity. During the first quarter of 2021, mandated
restrictions began to ease in a number of the markets in which the Company
operates. Although the Company has experienced some recovery from the initial
impact of COVID-19, the long-term impact of COVID-19 on the economy and on its
business remains uncertain, the duration and scope of which cannot currently be
predicted. As new variants of COVID-19 are being discovered and cases continue
to occur at material rates throughout the markets in which the Company does
business, the Company cannot predict the severity of another surge, what
additional restrictions may be enacted, to what extent it can maintain
off-premise sales volumes, whether it can maintain sufficient staffing levels,
or if individuals will be comfortable returning to its dining rooms during or
following social distancing protocols, and what long-lasting effects the
COVID-19 pandemic may have on the restaurants industry as a whole. The potential
impact of the COVID-19 pandemic on consumer spending behavior, which may be a
function of continued concerns over safety and/or depressed consumer sentiment
due to adverse economic conditions, including job losses, will determine the
significance of the impact to the Company's operating results and financial

position.

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                      BBQ HOLDINGS, INC. AND SUBSIDIARIES

The following table includes the number of Company-owned and franchise-operated restaurants as of the dates presented:



                                                            BBQ Holdings
                                              Three Months Ended    Three Months Ended
                                                April 3, 2022         April 4, 2021
Company-owned restaurants:
Famous Dave's                                                 40                    27
Granite City Food & Brewery                                   18                    18
Real Urban Barbecue                                            2                     1
Clark Crew BBQ                                                 1                     1
Village Inn                                                   22                     -
Bakers Square                                                 14                     -
Tahoe Joe's                                                    4                     -
Famous Craft Concepts                                          3                     -
End of period                                                104                    47
% of system                                                   33 %                  32 %
Franchise-operated and licensed restaurants:
Famous Dave's                                                104                   100
Village Inn                                                  103                     -
Bakers Square                                                  4                     -
End of period                                                211                   100
% of system                                                   67 %                  68 %
System end of period total                                   315                   147


Of the 104 franchise-operated restaurants, 19 are Famous Dave's ghost kitchens
operating out of the kitchen of another restaurant location or a shared kitchen
space. Additionally, eight of our Granite City locations are operating Famous
Dave's ghost kitchens under licensing agreements.

Fiscal Year



Our fiscal year ends on the Sunday closest to December 31st. Our fiscal year is
generally 52 weeks; however, it periodically consists of 53 weeks. Both
fiscal year 2022, ending January 1, 2023, and fiscal year 2021, ended January 2,
2022, consist of 52 weeks.

Revenue

Our revenue consists of restaurant sales, franchise-related revenue and
licensing, national advertising fund contributions and other revenue. Our
franchise-related revenue is comprised of three separate and distinct earnings
processes: area development fees, initial franchise fees, and continuing royalty
and national advertising fund payments. Currently, our domestic area development
fee consists of a one-time, non-refundable payment of approximately $15,000 per
restaurant in consideration for the services we perform in preparation of
executing each area development agreement. For our international area
development agreements, the one-time, non-refundable payment is negotiated on a
per development basis and is determined based on the costs incurred to arrange
for the sale of that development area. Currently, our initial, non-refundable,
franchise fee for domestic growth depends on the restaurant model and varies
from $15,000 to $45,000 per location. Finally, franchisees are also required to
pay us a monthly royalty equal to a percentage of their net sales. Licensing
revenue includes royalties from a retail line of business, including Famous
Dave's branded sauces, rubs, marinades and seasonings. Other revenue includes
the recognition of gift card breakage, opening assistance and training we
provide to our franchise partners, the sale of Real Urban Barbeque consumer
packaged goods, and the sale of raw brewing products produced at the Granite
City brewing facility.

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                      BBQ HOLDINGS, INC. AND SUBSIDIARIES

Costs and Expenses


Restaurant costs and expenses include food, beverage and merchandise costs;
labor and benefits costs; and operating expenses, which include occupancy costs,
repair and maintenance costs, supplies, advertising and promotion. Certain of
these costs and expenses are variable and will increase or decrease with sales
volume. The primary fixed costs are restaurant management, operations, and
catering support salaries, occupancy and insurance costs.

General and Administrative Expenses



General and administrative expenses include all corporate and administrative
functions to support future growth. Salaries and benefits, legal fees,
accounting fees, professional consulting fees, travel, rent and general
insurance are major items in this category. We also provide franchise services
for which the revenue is included in other revenue and the expenses are included
in general and administrative expenses.

Results of Operations - the three months ended April 3, 2022 compared to the three months ended April 4, 2021.

The following discussion and analysis of financial condition and results of operations should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and notes, and the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended January 2, 2022.

The table below presents items in our unaudited condensed consolidated statements of operations as a percentage of net restaurant sales or total revenue, as indicated, for the periods presented.



                                                Three Months Ended
                                          April 3, 2022    April 4, 2021
Food and beverage costs(1)                         31.3 %           29.9 %
Labor and benefits costs(1)                        33.0 %           30.5 %
Operating expenses(1)                              29.3 %           30.5 %

Restaurant-level operating margin(1)(2)             6.4 %            9.1 %
Depreciation and amortization expenses(3)           3.8 %            4.2 %
General and administrative expenses(3)              8.2 %           10.8 %
Income (loss) from operations(3)                    0.7 %            2.2 %

(1) As a percentage of restaurant sales, net

(2) Restaurant-level margins are equal to restaurant sales, net, less restaurant

level food and beverage costs, labor and benefit costs, and operating

expenses.

(3) As a percentage of total revenue

Total Revenue

Our components of and changes in revenue consisted of the following for the three months ended April 3, 2022 and April 4, 2021:



                                                           Three Months Ended
(dollars in thousands)               April 3, 2022      April 4, 2021      $ Change       % Change
Revenue:
Restaurant sales, net               $        58,731    $        33,603    $    25,128           74.8 %

Franchise royalty and fee revenue             3,607              2,374          1,233           51.9 %
Franchisee national advertising
fund contributions                              490                328            162           49.4 %
Licensing and other revenue                   1,356              1,014            342           33.7 %
Total revenue                       $        64,184    $        37,319    $    26,865           72.0 %


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                      BBQ HOLDINGS, INC. AND SUBSIDIARIES

Restaurant Sales, net



The increase in year-over-year net restaurant sales for the three months ended
April 3, 2022 was primarily due to the acquisition of 32 Village Inn and Bakers
Square restaurants in July 2021, the acquisiton of Tahoe Joe's in October 2021,
and the acquisition of 5 Famous Dave's franchise locations over the past 12
months. Additionally, dining restrictions related to the COVID-19 pandemic eased
throughout 2021, resulting in an increase in dine-in sales in the three months
ended April 3, 2022 compared to the three months ended April 4, 2021.

It is our policy to include in same store net sales base, restaurants that have
been open for 12 months under BBQ Holdings' ownership. In the first quarter of
2022, same store net sales for Company-owned restaurants increased 14.5%
compared to the first quarter of 2021, respectively.

Franchise-Related Revenue, including national advertising fund contributions



The increase in franchise royalty revenue and national advertising fund
contributions year over year was due primarily to the acquisition of the Village
Inn brand in July 2021 with over 100 franchise locations. Royalties and
advertising fund contributions are based on franchisee sales, so the easing of
the COVID-19 dining restrictions starting mid-2021 helped increase
franchise-related revenue.

Licensing and Other Revenue


For the three months ended April 3, 2022, licensing and other revenue grew 33.7%
compared to the three months ended April 4, 2021. This is due primarily to the
recognition of increased gift card breakage.

Average Weekly Net Sales

The following table shows Company-owned and franchise-operated average weekly same store sales for the periods presented:



                                                Three Months Ended
                                         April 3, 2022      April 4, 2021
Average Weekly Net Sales (AWS):
Franchise-Operated Famous Dave's(1)     $        49,585    $        45,640
Company-Owned Famous Dave's                      54,022             49,661
Company-Owned Granite City                       71,512             57,382
Company-Owned Clark Crew                        146,851            138,782
Company-Owned Real Urban BBQ                     44,086             39,459
Company-Owned Village Inn(2)                     32,791             27,347

Franchise-Operated Village Inn(1)(2)             33,519             27,940
Company-Owned Bakers Square(2)                   27,573             23,200
Company-Owned Tahoe Joe's(2)                     84,664             79,262

(1) AWS for franchise-operated restaurants are not our revenues and are not

included in our condensed consolidated financial statements. We believe that

disclosure of comparable restaurant net sales for franchise-operated

restaurants provides useful information to investors because historical

performance and trends of Famous Dave's and Village Inn franchisees relate

directly to trends in franchise royalty revenues that we receive from such

franchisees and have an impact on the perceived success and value of the

Famous Dave's and Village Inn brands. It also provides a comparison against

which management and investors can analyze the extent to which Company-owned

restaurants are realizing their revenue potential.

(2) Management notes that Village Inn, Bakers Square, and Tahoe Joe's were not


    owned by the Company in Q1 of 2021, and as such the respective amounts
    presented above are pro forma in nature.


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                      BBQ HOLDINGS, INC. AND SUBSIDIARIES

Food and Beverage Costs

Our food and beverage costs consisted of the following for the three months ended April 3, 2022, and April 4, 2021:



                                             Three Months Ended

(dollars in thousands) April 3, 2022 April 4, 2021 $ Change % Change Food and beverage costs $ 18,357 $ 10,057 $ 8,300

         82.5 %


Food and beverage costs for the three months ended April 3, 2022, and April 4,
2021, represented approximately 31.3% and 29.9% of net restaurant sales,
respectively. This year-over-year increase, as a percentage of net restaurant
sales, was a result of increases in commodity costs, which was partially offset
by a more favorable commodity mix due to 2021 acquisitions.

Labor and Benefits Costs

Our labor and benefits costs consisted of the following for the three months ended April 3, 2022, and April 4, 2021:



                                              Three Months Ended

(dollars in thousands) April 3, 2022 April 4, 2021 $ Change % Change Labor and benefits costs $ 19,386 $ 10,254 $ 9,132

         89.1 %


Labor and benefits costs for the three months ended April 3, 2022, and April 4,
2021, represented approximately 33.0% and 30.5% of net restaurant sales,
respectively. The year-over-year increase, as a percentage of net restaurant
sales, was driven in part by increased hourly and salary wage rates, as well as
an increase in dine-in sales requiring a higher level of staffing.

Operating Expenses

Our operating expenses consisted of the following for the three months ended April 3, 2022, and April 4, 2021:



                                            Three Months Ended

(dollars in thousands) April 3, 2022 April 4, 2021 $ Change % Change Operating expenses $ 17,239 $ 10,249 $ 6,990

         68.2 %


Operating expenses for the three months ended April 3, 2022, and April 4, 2021
represented approximately 29.3% and 30.5% of net restaurant sales, respectively.
This year-over-year decrease in expense as a percentage of net restaurant sales
was due primarily to leverage on our fixed operating costs.

Depreciation and Amortization



Depreciation and amortization expense for the three months ended April 3, 2022
was $2.4 million, compared to $1.6 million for the three months ended April 4,
2021. The increase in depreciation and amortization expense was due to the
acquisitions that occurred in the 12 months following the end of the first
quarter of 2021.

General and Administrative Expenses

Our general and administrative expenses consisted of the following for the three months ended April 3, 2022, and April 4, 2021:



                                                         Three Months Ended
(dollars in thousands)                April 3, 2022    April 4, 2021      $ Change     % Change
General and administrative expenses  $         5,291  $         4,038    $ 

  1,253         31.0 %


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                      BBQ HOLDINGS, INC. AND SUBSIDIARIES

General and administrative expenses for the three months ended April 3, 2022,
and April 4, 2021 represented approximately 8.2% and 10.8% of total revenues,
respectively. This year-over-year decrease in expense as a percentage of total
revenues was due primarily to leverage from the increased revenue resulting from
2021 acquisitions and an increase in dine-in sales.

Asset Impairment, Estimated Lease Termination and Other Closing Costs

The following is a summary of the asset impairment, estimated lease termination and other closings costs we incurred for the periods presented:



                                                                   Three Months Ended
(dollars in thousands)                                     April 3, 2022        April 4, 2021
Asset impairments, net                                    $           181      $             -

Lease termination and restaurant closure expenses                     228                   12
Asset impairment, estimated lease termination charges     $           409  

   $            12
and other closing costs


Income Tax (Expense) Benefit

Income tax benefit for the three months ended April 3, 2022 was approximately
$241,000, or 59.4% of our pretax income and the income tax expense for the three
months ended April 4, 2021 was $82,000, or 10.5% of our pretax income.

Financial Condition, Liquidity and Capital Resources



Our balance of unrestricted cash and cash equivalents was approximately $35.4
million and $40.3 million as of April 3, 2022, and January 2, 2022,
respectively. Our current ratio, which measures our immediate short-term
liquidity, was 1.1 as of April 3, 2022, and January 2, 2022, respectively. The
current ratio is computed by dividing total current assets by total current
liabilities.

Net cash provided by operating activities was approximately $1.4 million for the
first three months ended April 3, 2022, and was approximately $4.2 million for
the first three months ended April 4, 2021. The $2.8 million year-over-year
decrease in net cash provided by operating activities was driven by an
additional $1 million in gift card liability redemptions which corresponded with
higher gift card sales in the fourth quarter of 2021. Additionally, working
capital changes decreased cash flow from operations by approximately $2.1
million year-over-year.

Net cash used for investing activities was approximately $5.2 million for the
three months ended April 3, 2022 relating primarily to the purchase of the
Famous Craft Concepts restaurants, the acquisition of which we closed in March
2022.

Net cash used for investing activities was approximately $685,000 for the three
months ended April 4, 2021, relating to payments for the purchase of equipment
and leasehold improvements.

Net cash used for financing activities for the three months ended April 3, 2022, was approximately $585,000 which was primarily the result of payments of $562,000 on our long-term debt.

Net cash used for financing activities for the three months ended April 4, 2021, was approximately $519,000 which was for payments on our long-term debt.



We are subject to various financial and non-financial covenants on our long-term
debt, including a debt-service coverage ratio. As of April 3, 2022, we were in
compliance with all of our covenants.

Critical Accounting Policies



Our significant accounting policies are described in Note 1 - Nature of Business
and Significant Accounting Policies to the consolidated financial statements
included in our Annual Report on Form 10-K for the year ended January 2, 2022.
Except as disclosed in Note 1 "Basis of Presentation" to the accompanying notes
to the consolidated financial statements, there have been no updates to our
critical accounting policies.

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                      BBQ HOLDINGS, INC. AND SUBSIDIARIES

Forward-Looking Information

BBQ Holdings makes written and oral statements from time to time, including
statements contained in this Quarterly Report on Form 10-Q regarding its
business and prospects, such as projections of future performance, statements of
management's plans and objectives, forecasts of market trends and other matters
that are forward-looking statements within the meaning of Sections 27A of the
Securities Act of 1933 and Section 21E of the Securities Act of 1934. Statements
containing the words or phrases "will likely result", "anticipates", "are
expected to", "will continue", "is anticipated", "estimates", "projects",
"believes", "expects", "intends", "target", "goal", "plans", "objective",
"should" or similar expressions identify forward-looking statements which may
appear in documents, reports, filings with the SEC, news releases, written or
oral presentations made by our officers or other representatives to analysts,
shareholders, investors, news organizations, and others, and discussions with
our management and other Company representatives. For such statements, including
those contained in this report, we claim the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995.

Our future results, including results related to forward-looking statements,
involve a number of risks and uncertainties that are difficult to predict,
including but not limited to those identified herein under Part II, Item 1A.
"Risk Factors" and under Part I, Item 1A. "Risk Factors" of our Annual Report on
Form 10-K for the fiscal year ended January 2, 2022. No assurance can be given
that the results reflected in any forward-looking statements will be achieved.
Any forward-looking statements made by us or on our behalf speak only as of the
date on which such statement is made. Our forward-looking statements are based
upon assumptions that are sometimes based upon estimates, data, communications
and other information from suppliers, government agencies and other sources that
may be subject to revision. We do not undertake any obligation to update or keep
current either (i) any forward-looking statements to reflect events or
circumstances arising after the date of such statement, or (ii) the important
factors that could cause our future results to differ materially from historical
results or trends, results anticipated or planned by us, or which are reflected
from time to time in any forward-looking statement which may be made by us or on
our behalf.

Additional Information on BBQ Holdings



We are currently subject to the informational requirements of the Securities
Exchange Act of 1934, as amended. As a result, we are required to file periodic
reports and other information with the SEC, such as annual, quarterly, and
current reports, proxy and information statements. You are advised to read this
Quarterly Report on Form 10-Q in conjunction with the other reports, proxy
statements and other documents we file from time to time with the SEC. If you
would like more information regarding BBQ Holdings, our SEC filings are also
available to the public free of charge at the SEC's website. The address of this
website is http://www.sec.gov. Our most current SEC filings, such as our annual,
quarterly and current reports, proxy statements and press releases are available
to the public free of charge on our website.

The address of our website is http://www.bbq-holdings.com. Our website is not
intended to be, and is not, a part of this Quarterly Report on Form 10-Q. We
will provide electronic or paper copies of our SEC filings (excluding exhibits)
to any BBQ Holdings shareholder free of charge upon receipt of a written request
for any such filing. All requests for our SEC filings should be sent to the
attention of Investor Relations at BBQ Holdings, Inc., 12701 Whitewater Drive,
Suite 100, Minnetonka, MN 55343.

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