FLANIGANS ENTERPRISES INC (Form: 10-K, Received: 12/28/2012 16:50:24)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K


ý		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 29, 2012

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File Number 1-6836

FLANIGAN'S ENTERPRISES, INC.

(Exact name of registrant as specified in its charter)

Florida	59-0877638
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)

5059 N.E. 18th Avenue, Fort Lauderdale, Florida	33334
(Address of principal executive offices)	Zip Code

(954) 377-1961

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, $.10 Par Value	NYSE AMEX
Title of each class	Name of each exchange
	on which registered

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ý

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company ý

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No ý

The aggregate market value of the voting stock held by non-affiliates of the registrant was $6,005,000 as of March 31, 2012, the last business day of the registrant’s most recently completed second fiscal quarter, based on the closing price of the common stock as reported on the NYSE AMEX of $7.47.

There were 1,860,247 shares of the Registrant's Common Stock, $0.10 par value, outstanding as of December 28, 2012.

DOCUMENTS INCORPORATED BY REFERENCE

Information required by Part III (Items 10, 11, 12, 13 and 14) is incorporated by reference to portions of the Registrant’s Proxy Statement for the 2013 Annual Meeting of Shareholders which will be filed with the Securities and Exchange Commission by January 24, 2013.

FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

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PART I .

Item 1	Business	5

Item 1A	Risk Factors	18

Item 1B	Unresolved Staff Comments	25

Item 2	Properties	25

Item 3	Legal Proceedings	32

PART II

Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.	32

Item 6	Selected Financial Data.	34

Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operation.	34

Item 7A	Quantitative and Qualitative Disclosures About Market Risk.	45

Item 8	Financial Statements and Supplementary Data.	46

Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.	46

Item 9A	Controls and Procedures.	46

Item 9B.	Other Information	47

PART III.

Item 10	Directors, Executive Officers and Corporate Governance	47

Item 11	Executive Compensation	48

Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters	48

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Item 13	Certain Relationships and Related Transactions, and Director Independence.	48

Item 14	Principal Accounting Fees and Services	48

PART IV

Item 15	Exhibits and Financial Statement Schedules.	48

SIGNATURES
CERTIFICATIONS

As used in this Annual Report on Form 10-K, the terms “we,” “us,” “our,” the “Company” and “Flanigan’s” mean Flanigan's Enterprises, Inc. and its subsidiaries (unless the context indicates a different meaning).

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PART I

Item 1. Business

When used in this report, the words "anticipate", "believe", "estimate", “will”, “intend” and “expect” and similar expressions identify forward-looking statements. Forward-looking statements in this report include, but are not limited to, those relating to the general expansion of our business. Although we believe that our plans, intentions and expectations reflected in these forward-looking statements are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved. We undertake no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this annual report on Form 10-K.

General

At September 29, 2012, we (i) operated 24 units, (excluding the adult entertainment club referenced in (ii) below), consisting of restaurants, package liquor stores and combination restaurants/package liquor stores that we either own or have operational control over and partial ownership in; (ii) own but do not operate one adult entertainment club; and (iii) franchise an additional five units, consisting of two restaurants (one of which we operate) and three combination restaurants/package liquor stores. The table below provides information concerning the type (i.e. restaurant, package liquor store or combination restaurant/package liquor store) and ownership of the units (i.e. whether (i) we own 100% of the unit; (ii) the unit is owned by a limited partnership of which we are the sole general partner and/or have invested in; or (iii) the unit is franchised by us), as of September 29, 2012 and as compared to October 1, 2011. With the exception of “The Whale’s Rib”, a restaurant we operate but do not own, all of the restaurants operate under our service mark “Flanigan’s Seafood Bar and Grill” and all of the package liquor stores operate under our service mark “Big Daddy’s Liquors”.

	FISCAL	FISCAL
	YEAR	YEAR	NOTE
	2012	2011	NUMBER
TYPES OF UNITS
Company Owned:
Combination package liquor
store and restaurant	4	4
Restaurant only	5	5
Package liquor store only	5	5

Company Managed
Restaurants Only:
Limited partnerships	8	8
Franchise	1	1
Unrelated Third Party	1	1

Company Owned Club:	1	1
TOTAL - Company
Owned/Operated Units:	25	25

FRANCHISED - units	5	5	(1)(2)

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Notes:

(1) We operate a restaurant for one (1) franchisee. This unit is included in the table both as a franchised restaurant, as well as a restaurant operated by us.

(2) During the fourth quarter of our fiscal year ended September 29, 2012, with our consent, a franchised package store ceased operations in order to accommodate expanded restaurant operations at the location.

History and Development of Our Business

We were incorporated in Florida in 1959 and commenced operating as a chain of small cocktail lounges and package liquor stores throughout South Florida. By 1970, we had established a chain of "Big Daddy's" lounges and package liquor stores between Vero Beach and Homestead, Florida. From 1970 to 1979, we expanded our package liquor store and lounge operations throughout Florida and opened clubs in five other "Sun Belt" states. In 1975, we discontinued most of our package store operations in Florida except in the South Florida areas of Miami-Dade, Broward, Palm Beach and Monroe Counties. In 1982 we expanded our club operations into the Philadelphia, Pennsylvania area as general partner of several limited partnerships we organized. In March 1985 we began franchising package liquor stores and lounges in the South Florida area. See Note 8 to the consolidated financial statements and the discussion of franchised units on page 8.

During our fiscal year 1987, we began renovating our lounges to provide full restaurant food service, and subsequently renovated and added food service to most of our lounges. Food sales currently represent approximately 78.8% and bar sales approximately 21.2% of our total restaurant sales.

Our package liquor stores emphasize high volume business by providing customers with a wide variety of brand name and private label merchandise at discount prices. Our restaurants offer alcoholic beverages and full food service with abundant portions and reasonable prices, served in a relaxed, friendly and casual atmosphere.

We conduct our operations directly and through a number of limited partnerships and wholly owned subsidiaries, all of which are listed below. Our subsidiaries and the limited partnerships, (except for the limited partnership, where we are not the general partner, which owns and operates our franchised restaurant in Fort Lauderdale, Florida) are reported on a consolidated basis.

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	STATE OF	PERCENTAGE
ENTITY	ORGANIZATION	OWNED

Flanigan’s Management Services, Inc.	Florida	100
Flanigan’s Enterprises, Inc. of Georgia	Georgia	100
Flanigan’s Enterprises, Inc. of Pa.	Pennsylvania	100
Flanigan’s Enterprises of N. Miami, Inc.	Florida	100
CIC Investors #13, Limited Partnership	Florida	40
CIC Investors #50, Limited Partnership	Florida	18
CIC Investors #55, Limited Partnership	Florida	48
CIC Investors #60, Limited Partnership	Florida	45
CIC Investors #65, Limited Partnership	Florida	28
CIC Investors #70, Limited Partnership	Florida	41
CIC Investors #75, Limited Partnership	Florida	13
CIC Investors #80, Limited Partnership	Florida	27
CIC Investors #90, Limited Partnership	Florida	5
CIC Investors #95, Limited Partnership	Florida	30
Josar Investments, LLC	Florida	100
Flanigan’s Calusa Center, LLC	Florida	100

Package Liquor Store Operations

Our package liquor stores emphasize high volume business by providing customers with a wide selection of brand name and private label liquors, beer and wines while offering competitive pricing by meeting the published sales prices of our competitors. We provide sales training to our package liquor store personnel. The stores are open for business six or seven days a week from 9:00-10:00 a.m. to 9:00-10:00 p.m., depending upon demand and local law. Approximately half of our units have "night windows" with extended evening hours.

Company Owned Package Liquor Stores . We own and operate nine package liquor stores in the South Florida area under the name “Big Daddy’s Liquors”, four of which are jointly operated with restaurants we own.

Franchised Package Liquor Stores . We currently franchise three package liquor stores, all in the South Florida area, all of which are operated under the name “Big Daddy’s Liquors” and are jointly operated with our franchisee’s restaurant operations. During the fourth quarter of our fiscal year ended 2012, a franchised package liquor store located in Deerfield Beach, Florida, franchised to members of the family of our Chairman of the Board, officers and/or directors, with our consent, ceased operations in order to permit expanded operations of the jointly operated restaurant at the location. Two of the three remaining franchised package liquor stores are franchised to members of the family of our Chairman of the Board, officers and/or directors. We have not entered into a franchise arrangement for either a package liquor store, restaurant or combination package liquor store/restaurant since 1986 and do not anticipate that we will do so in the foreseeable future.

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Generally, a franchise agreement with our franchisees for the operation of a package liquor store runs for the balance of the term of the franchisee’s lease for the business premises, extended by the franchisee’s continued occupancy of the business premises thereafter, whether by lease or ownership. In exchange for our providing management and related services to the franchisee and our granting the right to the franchisee to use our service mark, “Big Daddy’s Liquors”, franchisees of package liquor stores pay us weekly in arrears, (i) a royalty equal to approximately 1% of gross sales; plus (ii) an amount for advertising equal to between 1-1/2% to 3% of gross sales generated at the stores depending upon our actual advertising costs.

Restaurant Operations.

Our restaurants provide a neighborhood casual, standardized dining experience, typical of casual restaurant chains. The interior decor of the restaurants is nautical with numerous fishing and boating pictures and decorations. The restaurants are designed to permit minor modifications without significant capital expenditures. However, from time to time we are required to redesign and refurbish the restaurants at significant cost. Drink prices may vary between locations to meet local conditions. Food prices are substantially standardized for all restaurants. The restaurants' hours of operation are from 11:00 a.m. to 1:00-5:00 a.m. depending upon demand and local law.

Company Owned Restaurants . We own and operate nine restaurants all under our service mark “Flanigan’s Seafood Bar and Grill” four of which are jointly operated with package liquor stores we own.

Franchised Restaurants . We franchise five restaurants, all of which operate under our service mark “Flanigan’s Seafood Bar and Grill”, two of which operate as a restaurant only and three of which operate jointly with a franchisee operated “Big Daddy’s Liquors” package liquor store.

Generally, a franchise agreement with our franchisees for the operation of a restaurant runs for the balance of the term of the franchisee’s lease for the business premises, extended by the franchisee’s continued occupancy of the business premises thereafter, whether by lease or ownership. In exchange for our providing management and related services to the franchisee and our granting the right to the franchisee to use our service mark, “Flanigan’s Seafood Bar and Grill”, our franchisees pay us weekly in arrears, (i) a royalty equal to approximately 3% of gross sales; plus (ii) an amount for advertising equal to between 1-1/2% to 3% of gross sales from the restaurants.

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For accounting purposes, we do not consolidate the revenue and expenses of our franchisees’ operations with our revenue and expenses. Franchise royalties we receive are “earned” when sales are made by franchisees.

Restaurants Owned by Affiliated Limited Partnerships

We have invested with others, (some of whom are or are affiliated with our officers and directors), in eight limited partnerships which currently own and operate eight South Florida based restaurants under our service mark “Flanigan’s Seafood Bar and Grill”. We have also invested with others, (some of whom are or are affiliated with our officers and directors), in one limited partnership which currently owns and is renovating a location in Miami, Florida to operate a new restaurant under our service mark “Flanigan’s Seafood Bar and Grill”. In addition to being a limited partner in these limited partnerships, we are the sole general partner of all of these limited partnerships and manage and control the operations of the restaurants, except for the restaurant located in Fort Lauderdale, Florida where we only hold a limited partnership interest.

Generally, the terms of the limited partnership agreements provide that until the investors’ cash investment in a limited partnership (including any cash invested by us) is returned in full, the limited partnership distributes to the investors annually out of available cash from the operation of the restaurant, as a return of capital, up to 25% of the cash invested in the limited partnership, with no management fee paid to us. Any available cash in excess of the 25% of the cash invested in the limited partnership distributed to the investors annually, is paid one-half (½) to us as a management fee and one-half (1/2) to the investors, (including us), pro-rata based on the investors’ investment, as a return of capital. Once all of the investors, (including us), have received, in full, amounts equal to their cash invested, an annual management fee becomes payable to us equal to one-half (½) of cash available to be distributed, with the other one half (½) of available cash distributed to the investors (including us), as a profit distribution, pro-rata based on the investors’ investment. As of September 29, 2012, limited partnerships owning three (3) restaurants, (Surfside, Florida, Kendall, Florida and West Miami, Florida locations), have returned all cash invested and we receive an annual management fee equal to one-half (½) of the cash available for distribution by the limited partnership. In addition to our receipt of distributable amounts from the limited partnerships, we receive a fee equal to 3% of gross sales for use of our “Flanigan’s Seafood Bar and Grill” service mark, which use is authorized while we act as general partner only. This 3% fee is “earned” when sales are made by the limited partnerships and is paid weekly, in arrears. The restaurant under development in Miami, Florida uses the same financial arrangement. Whether we will have any additional restaurants under development in the future will be dependent, among other things, on market conditions and our ability to raise capital. We anticipate that we will continue to form limited partnerships to raise funds to own and operate restaurants under our service mark “Flanigan’s Seafood Bar and Grill” using the same or substantially similar financial arrangements.

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Below is information on the nine limited partnerships which own and operate “Flanigan’s Seafood Bar and Grill” restaurants:

Surfside, Florida

We are the sole general partner and a 45% limited partner in this limited partnership which has owned and operated a restaurant in Surfside, Florida under our “Flanigan’s Seafood Bar and Grill” service mark since March 6, 1998. 34.9% of the remaining limited partnership interest is owned by persons who are either our officers, directors or their family members. This limited partnership has returned to its investors all of their initial cash invested and we receive an annual management fee equal to one-half (½) of the cash available for distribution by this limited partnership.

Kendall, Florida

We are the sole general partner and a 41% limited partner in this limited partnership which has owned and operated a restaurant in Kendall, Florida under our “Flanigan’s Seafood Bar and Grill” service mark since April 4, 2000. 29.7% of the remaining limited partnership interest is owned by persons who are either our officers, directors or their family members. This limited partnership has returned to its investors all of their initial cash invested and we receive an annual management fee equal to one-half (½) of the cash available for distribution by this limited partnership.

West Miami, Florida

We are the sole general partner and a 27% limited partner in this limited partnership which has owned and operated a restaurant in West Miami, Florida under our “Flanigan’s Seafood Bar and Grill” service mark since October 11, 2001. 34.1% of the remaining limited partnership interest is owned by persons who are either our officers, directors or their family members. This limited partnership has returned to its investors all of their initial cash invested and we receive an annual management fee equal to one-half (½) of the cash available for distribution by this limited partnership.

Weston, Florida

We are the sole general partner and a 30% limited partner in this limited partnership which has owned and operated a restaurant in Weston, Florida under our “Flanigan’s Seafood Bar and Grill” service mark since January 20, 2003. 35.1% of the remaining limited partnership interest is owned by persons who are either our officers, directors or their family members. As of the end of our fiscal year 2012, this limited partnership has returned to its investors approximately 81.25% of their initial cash invested. During our fiscal year 2012, no distributions were made to limited partners as this limited partnership had limited positive cash flow generated by this restaurant. The limited cash flow was primarily attributable to increased competition, which we expect to continue into our fiscal year 2013.

Wellington, Florida

We are the sole general partner and a 28% limited partner in this limited partnership which has owned and operated a restaurant in Wellington, Florida under our “Flanigan’s Seafood Bar and Grill” service mark since May 27, 2005. 25.7% of the remaining limited partnership interest is owned by persons who are either our officers, directors or their family members. As of the end of our fiscal year 2012, this limited partnership has returned to its investors approximately 56% of their initial cash invested, increased from approximately 52% as of the end of our fiscal year 2011.

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Pinecrest, Florida

We are the sole general partner and 40% limited partner in this limited partnership which has owned and operated a restaurant in Pinecrest, Florida under our “Flanigan’s Seafood Bar and Grill” service mark since August 14, 2006. 15.0% of the remaining limited partnership interest is owned by persons who are either our officers, directors or their family members. As of the end of our fiscal year 2012, this limited partnership has returned to its investors approximately 80% of their initial cash invested, increased from approximately 65% as of our fiscal year ended 2011.

Pembroke Pines, Florida

We are the sole general partner and an 18% limited partner in this limited partnership which has owned and operated a restaurant in Pembroke Pines, Florida under our “Flanigan’s Seafood Bar and Grill” service mark since October 29, 2007. 17.9% of the remaining limited partnership interest is owned by persons who are either our officers, directors or their family members. As of the end of our fiscal year 2012, this limited partnership has returned to its investors approximately 41.0% of their initial cash invested, increased from approximately 32.0% as of the end of our fiscal year 2011.

Davie, Florida

We are the sole general partner and a 48% limited partner in this limited partnership which has owned and operated a restaurant in Davie, Florida under our “Flanigan’s Seafood Bar and Grill” service mark since July 28, 2008. 9.7% of the remaining limited partnership interest is owned by persons who are either our officers, directors or their family members. As of the end of our fiscal year 2012, this limited partnership has returned to its investors approximately 27.5% of their initial cash invested, increased from approximately 19.5% as of the end of our fiscal year 2011.

Fort Lauderdale, Florida

A corporation, owned by one of our board members, acts as sole general partner of a limited partnership which has owned and operated a restaurant in Fort Lauderdale, Florida under our “Flanigan’s Seafood Bar and Grill” service mark since April 1, 1997. We have a 25% limited partnership interest in this limited partnership. 60.1% of the remaining limited partnership interest is owned by persons who are either our officers, directors or their family members. This limited partnership has returned to its investors all cash invested, but since we are not the general partner of this limited partnership, we do not receive an annual management fee. We have a franchise arrangement with this limited partnership and for accounting purposes, we do not consolidate the operations of this limited partnership into our operations.

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Investment in Limited Partnership

During the second quarter of our fiscal year 2012, a limited partnership in which (i) we are the sole general partner; and (ii) we and a wholly owned subsidiary were the sole limited partners, acquired personal property assets and a leasehold interest of a non-affiliated restaurant operation located in Miami, Florida for $155,000 for the purpose of establishing a new restaurant. During the third quarter of our fiscal year 2012, the limited partnership completed its private offering of limited partnership interests, raising funds to renovate this new restaurant location using our limited partnership model. We advanced the purchase price to the limited partnership and through the closing of the private offering advanced an additional $196,000 for expenses of the limited partnership. $105,000 of the amounts advanced by us to the limited partnership were allocated to pay for our equity interest in the limited partnership, (which equity interests were purchased at the same price and upon the same terms as other equity investors), and the excess amounts advanced by us, ($246,000), were reimbursed by the limited partnership without interest from the proceeds of the limited partnership’s private offering. 24.3% of the remaining limited partnership interest is owned by persons who are either our officers, directors or their family members. The limited partnership owned restaurant in Miami, Florida opened for business as a "Flanigan's Seafood Bar and Grill" restaurant on December 27, 2012.

Management Agreement for “The Whale’s Rib” Restaurant

Since January, 2006, we have managed “The Whale’s Rib”, a casual dining restaurant located in Deerfield Beach, Florida, pursuant to a management agreement. We paid $500,000 in exchange for our rights to manage this restaurant. The restaurant is owned by a third party unaffiliated with us. In exchange for providing management, bookkeeping and related services, we receive one-half (½) of the net profit, if any, from the operation of the restaurant. For our fiscal years ended September 29, 2012 and October 1, 2011, we generated $320,000 and $250,000 of revenue, respectively, from providing these management services. As of September 29, 2012, we have generated revenue in excess of the purchase price of the management agreement.

Adult Entertainment Club

We own, but do not operate, an adult entertainment nightclub located in Atlanta, Georgia which operates under the name “Mardi Gras”. We have a management agreement with an unaffiliated third party to manage the club. Under our management agreement, the unaffiliated third party management firm is obligated to pay us an annual amount, paid monthly, equal to the greater of $150,000 or ten (10%) percent of gross sales from the club, offset by one-half (1/2) of any rental increases, provided our fees will never be less than $150,000 per year. For our fiscal years ended September 29, 2012 and October 1, 2011, we generated $157,000 and $161,000 of revenue, respectively, from the operation of the club.

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Operations and Management

We emphasize systematic operations and control of all package liquor stores and restaurants regardless of whether we own, franchise or manage the unit. Each unit has its own manager who is responsible for monitoring inventory levels, supervising sales personnel, food preparation and service in restaurants and generally assuring that the unit is managed in accordance with our guidelines and procedures. We have in effect an incentive cash bonus program for our managers and salespersons based upon various performance criteria. Our operations are supervised by area supervisors. Each area supervisor supervises the operations of the units within his or her territory and visits those units to provide on-site management and support. There are five area supervisors responsible for package liquor store, restaurant and club operations in specific geographic districts.

All of our managers and salespersons receive extensive training in sales techniques. We arrange for independent third parties, or "shoppers", to inspect each unit in order to evaluate the unit's operations, including the handling of cash transactions.

Purchasing and Inventory

The package liquor business requires a constant substantial capital investment in inventory in the units. Our inventory consists primarily of liquor and wine products and as such, does not become excessive or obsolete that would require identifying and recording of the same. Liquor inventory purchased can normally be returned only if defective or broken.

All of our purchases of liquor inventory are made through our purchasing department from our corporate headquarters. The major portion of inventory is purchased under individual purchase orders with licensed wholesalers and distributors who deliver the merchandise within one or two days of the placing of an order. Frequently there is only one wholesaler in the immediate marketing area with an exclusive distributorship of certain liquor product lines. Substantially all of our liquor inventory is shipped by the wholesalers or distributors directly to our stores. We significantly increase our inventory prior to Christmas, New Year's Eve and other holidays. Under Florida law, we are required to pay for our liquor purchases within ten days of delivery.

Negotiations with food suppliers are conducted by our purchasing department at our corporate headquarters. We believe this ensures that the best quality and prices will be available to each restaurant. Orders for food products are prepared by each restaurant's kitchen manager and reviewed by the restaurant's general manager before orders are placed. Food is delivered by the supplier directly to each restaurant. Orders are placed several times a week to ensure product freshness. Food inventory is primarily paid for monthly.

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Government Regulation

Our operations are subject to various federal, state and local laws affecting our business. In particular, our operations are subject to regulation by federal agencies and to licensing and regulation by state and local health, sanitation, alcoholic beverage control, safety and fire department agencies in the state or municipality where our units are located.

Alcoholic beverage control regulations require each of our restaurants and package liquor stores to obtain a license to sell alcoholic beverages from a state authority and in certain locations, county and municipal authorities.

In Florida, where all of our restaurants and package liquor stores are located, most of our liquor licenses are issued on a "quota license" basis. Quota licenses are issued on the basis of a population count established from time to time under the latest applicable census. Because the total number of liquor licenses available under a quota license system is limited and restrictions are placed upon their transfer, the licenses have purchase and resale value based upon supply and demand in the particular areas in which they are issued. The quota licenses held by us allow the sale of liquor for on and off premises consumption. In Florida, the other liquor licenses held by us or limited partnerships of which we are the general partner are restaurant liquor licenses, which do not have quota restrictions and no purchase or resale value. A restaurant liquor license is issued to every applicant who meets all of the state and local licensing requirements, including, but not limited to zoning and minimum restaurant size, seating and menu. The restaurant liquor licenses held by us allow the sale of liquor for on premises consumption only.

In the State of Georgia, where our adult entertainment club is located, licensed establishments also do not have quota restrictions for on-premises consumption and such licenses are issued to any applicant who meets all of the state and local licensing requirements based upon extensive license application filings and investigations of the applicant.

All licenses must be renewed annually and may be revoked or suspended for cause at any time. Suspension or revocation may result from violation by the licensee or its employees of any federal, state or local law regulation pertaining to alcoholic beverage control. Alcoholic beverage control regulations relate to numerous aspects of the daily operations of our units, including, minimum age of patrons and employees, hours of operations, advertising, wholesale purchasing, inventory control, handling, storage and dispensing of alcoholic beverages, internal control and accounting and collection of state alcoholic beverage taxes.

As the sale of alcoholic beverages constitutes a large share of our revenue, the failure to receive or retain, or a delay in obtaining a liquor license in a particular location could adversely affect our operations in that location and could impair our ability to obtain licenses elsewhere.

During our fiscal years 2012 and 2011, no significant pending matters have been initiated concerning any of our licenses which might be expected to result in a revocation of a liquor license or other significant actions against us.

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We are subject to “dram-shop” statutes due to our restaurant operations and club ownership. These statutes generally provide a person injured by an intoxicated person the right to recover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated individual. We carry liquor liability coverage as part of our existing comprehensive general liability insurance, which we believe is consistent with coverage carried by other entities in the restaurant industry. Although we are covered by insurance, a judgment against us under a dram-shop statute in excess of our liability coverage could have a material adverse effect on us.

Our operations are also subject to federal and state laws governing such matters as wages, working conditions, citizenship requirements and overtime. Significant numbers of hourly personnel at our restaurants are paid at rates related to the federal or Florida minimum wage, whichever is higher, and accordingly, increases in the minimum wage will increase labor costs. We are also subject to the Americans With Disability Act of 1990 (ADA), which, among other things, may require certain renovations to our restaurants to meet federally mandated requirements. The cost of any such renovations is not expected to materially affect us.

We are not aware of any statute, ordinance, rule or regulation under present consideration which would significantly limit or restrict our business as now conducted. However, in view of the number of jurisdictions in which we conduct business, and the highly regulated nature of the liquor business, there can be no assurance that additional limitations may not be imposed in the future, even though none are presently anticipated.

General Liability Insurance

We have general liability insurance which incorporates a semi-self-insured plan under which we assume the full risk of the first $50,000 of exposure per occurrence, while the limited partnerships assume the full risk of the first $10,000 of exposure per occurrence. Our insurance carrier is responsible for $1,000,000 coverage per occurrence above our self-insured deductible, up to a maximum aggregate of $2,000,000 per year. During our fiscal year 2012 and again in fiscal year 2013 we were able to purchase excess liability insurance at a reasonable premium, whereby our excess insurance carrier is responsible for $6,000,000 coverage above our primary general liability insurance coverage. With the exception of one (1) limited partnership which has higher general liability insurance coverage to comply with the terms of its lease for the business premises, we are un-insured against liability claims in excess of $7,000,000 per occurrence and in the aggregate.

Our general policy is to settle only those legitimate and reasonable claims asserted and to aggressively defend and go to trial, if necessary, on frivolous and unreasonable claims. We have established a group of defense attorneys which we use in conjunction with this program. Under our current liability insurance policy, any expense incurred by us in defending a claim, including adjusters and attorney's fees, are a part of our $50,000 or $10,000, as applicable, self-insured retentions.

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In accordance with accounting guidance, we accrue for any self-insured liability by recognizing costs when it is probable that a covered liability has been incurred and the cost can be reasonably estimated. Accordingly, our annual self-insurance costs may be subject to adjustment from previous estimates as facts and circumstances change. Our self-insured accruals are included in the accompanying consolidated balance sheets in the caption "Accounts payable and accrued expenses". A significant unfavorable judgment or settlement against us in excess of our liability insurance coverage could have a materially adverse effect on the Company.

Property Insurance; Windstorm Insurance; Deductibles

For the policy year commencing December 30, 2012, our property insurance will be the third year of our three (3) year property insurance policy with our insurance carrier, including coverage for properties leased by us and our consolidated limited partnerships, and will provide for full insurance coverage for property losses, including those caused by windstorm, such as a hurricane. For property losses caused by windstorm, the property insurance will have fixed deductibles per location, per occurrence. For all other property losses, the property insurance will have deductibles of $10,000 per location, per occurrence. Our insurance expense for the policy year commencing December 30, 2012, including insurance coverage for our consolidated limited partnerships, will be approximately equal to our insurance expense for the policy year which commenced December 30, 2011, ($294,000), as our three (3) year property insurance policy does not provide for premium rate increases during the term.

Competition and the Company's Market

The liquor and hospitality industries are highly competitive and are often affected by changes in taste and entertainment trends among the public, by local, national and economic conditions affecting spending habits, and by population and traffic patterns. We believe that the principal means of competition among package liquor stores is price and that, in general, the principal means of competition among restaurants include the location, type and quality of facilities and the type, quality and price of beverage and food served.

Our package liquor stores compete directly or indirectly with local retailers and discount "superstores". Due to the competitive nature of the liquor industry in South Florida, we have had to adjust our pricing to stay competitive, including meeting all competitors’ advertisements. Such practices will continue in the package liquor business. We believe that we have a competitive position in our market because of widespread consumer recognition of the "Big Daddy's Liquors" name.

Our restaurants compete directly or indirectly with many well-established competitors, both nationally and locally owned. Due to the competitive nature of the hospitality industry, we have limited our menu price increases, but during the fourth quarter of our fiscal year 2011 and the third quarter of our fiscal year 2012, higher food costs and higher overall expenses left us with no alternative but to raise our menu prices. During the second quarter of our fiscal year 2012, we also raised our restaurant bar prices. We continue to offer our customers our customary quality and quantity of beverage and food served, all at a reasonable price. We believe that we have a competitive position in our market because of widespread consumer recognition of the "Flanigan’s Seafood Bar and Grill" name.

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We have many well-established competitors, both nationally and locally owned, with substantially greater financial resources and a longer history of operations than we do. Their resources and market presence may provide advantages in marketing, purchasing and negotiating leases. We compete with other restaurant and retail establishments for sites and finding management personnel.

Our business is subject to seasonal effects, including that liquor purchases tend to increase during the holiday seasons.

Trade Names

We operate our package liquor stores and restaurants under two service marks; "Big Daddy's Liquors" and "Flanigan's Seafood Bar and Grill", both of which are federally registered trademarks owned by us. Our right to the use of the "Big Daddy's" service mark is set forth under a consent decree of a Federal Court entered into by us in settlement of federal trademark litigation. The consent decree and the settlement agreement allow us to continue to use and to expand our use of the "Big Daddy's” service mark in connection with our package liquor sales in Florida, while restricting future liquor sales in Florida under the "Big Daddy's" name by the other party who has a federally registered service mark for "Big Daddy's" use in the restaurant business. The Federal Court retained jurisdiction to enforce the consent decree. We have acquired registered Federal trademarks on the principal register for our "Flanigan's" and “Flanigan’s Seafood Bar and Grill” service marks.

The standard symbolic trademark associated with our facilities and operations is the bearded face and head of "Big Daddy" which is predominantly displayed at all "Flanigan's" facilities and all "Big Daddy's" facilities throughout the country. The face comprising this trademark is that of the Company’s founder, Joseph "Big Daddy" Flanigan, and is a federally registered trademark owned by us.

Employees

As of our fiscal year end 2012, we employed 1,109 persons, of which 893 were full-time and 216 were part-time. Of these, 35 were employed at our corporate offices in administrative capacities and 8 were employed in maintenance. Of the remaining employees, 35 were employed in package liquor stores and 1,031 in restaurants.

None of our employees are represented by collective bargaining organizations. We consider our labor relations to be favorable.

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EXECUTIVE OFFICERS

	Positions and Offices		Office or Position
Name	Currently Held	Age	Held Since

James G. Flanigan	Chairman of the Board of Directors, Chief Executive Officer and President	48	(1)

August Bucci	Chief Operating Officer and Executive Vice President	68	2002

Jeffrey D. Kastner	Chief Financial Officer, General Counsel and Secretary	59	(2)

Jean Picard	Vice President of Package Liquor Store Operations	74	2002

(1)

Chairman of the Board of Directors, Chief Executive Officer since 2005; President since 2002.

(2)

Chief Financial Officer since 2004; Secretary since 1995; and General Counsel since 1982.

Mike Roberts, a member of our Board of Directors since 2001, died on December 26, 2012. Mike Roberts served on our Audit Committee, Independence Committee and Corporate Governance and Nominating Committee.

Flanigan’s 401(k) Plan

Effective July 1, 2004, we began sponsoring a 401(k) retirement plan covering substantially all employees who meet certain eligibility requirements. Employees may contribute elective deferrals to the plan up to amounts allowed under the Internal Revenue Code. We are not required to contribute to the plan but may make discretionary profit sharing and/or matching contributions. During our fiscal years ended September 29, 2012 and October 1, 2011, the Board of Directors approved discretionary matching contributions totaling $23,000 and $24,000, respectively.

Environmental Matters

We are not aware of any federal, state or local environmental laws or regulations that will materially affect our earnings or competitive position or result in material capital expenditures. However, we cannot predict the effect of possible future environmental legislation or regulations on our operations.

Item 1A Risk Factors

An investment in our common stock involves a high degree of risk. These risks should be considered carefully with the uncertainties described below, and all other information included in this Annual Report on Form 10-K, before deciding whether to purchase our common stock. Additional risks and uncertainties not currently known to management or that management currently deems immaterial may also become important factors that may harm our business, financial condition or results of operations. The occurrence of any of the following risks could harm our business, financial condition and results of operations. The trading price of our common stock could decline due to any of these risks and uncertainties and you may lose part or all of your investment.

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Certain statements in this report contain forward-looking information. In general, forward-looking statements include estimates of future revenues, cash flow, capital expenditures, or other financial items and assumptions underlying any of the foregoing. Forward-looking statements reflect management’s current expectations regarding future events and use words such as “anticipate”, “believe”, “expect”, “may”, “will” and other similar terminology. These statements speak only as of the date they were made and involve a number of risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Several factors, many beyond our control, could cause actual results to differ materially from management’s expectations.

Continued High Unemployment, Instability in the Housing Market, High Energy and Food Costs and General Economic Uncertainty could result in a Decline in Consumer Discretionary Spending that would Materially Affect our Financial Performance.

Dining out is a discretionary expense. Factors that affect consumer behavior and spending for restaurant dining, such as changes in general economic conditions (including national, regional and local economic conditions), discretionary spending patterns, employment levels, instability in the housing market, and high energy and food costs may have a material adverse effect on us. Leading economic indicators, such as unemployment and consumer confidence, remain volatile and may not show meaningful improvement in our fiscal year 2013. If economic conditions worsen, our financial performance could be adversely affected.

Intense Competition In The Restaurant And Package Liquor Store Industry Could Prevent Us From Increasing Or Sustaining Our Revenues And Profitability.

The restaurant and package liquor store industry is intensely competitive with respect to food quality, price-value relationships, ambiance, service and location and many restaurants and package liquor stores compete with us at each of our locations. There are a number of well-established competitors with substantially greater financial, marketing, personnel and other resources than ours, and many of our competitors are well established in the markets where we have restaurants and/or stores where we intend to locate restaurants. Additionally, other companies may develop restaurants and/or stores that operate with similar concepts.

Any inability to successfully compete with the other restaurants and/or stores in our markets will prevent us from increasing or sustaining our revenues and profitability and will result in a material adverse effect on our business, financial condition, results of operations or cash flows. We may also need to modify or refine elements of our business to evolve our concepts in order to compete with popular new restaurant formats or store concepts that may develop in the future. There can be no assurance that we will be successful in implementing these modifications or that these modifications will not reduce our profitability.

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New Information Or Attitudes Regarding Diet And Health Could Result In Changes In Regulations And Consumer Eating Habits That Could Adversely Affect Our Revenues.

Regulations and consumer eating habits may change as a result of new information or attitudes regarding diet and health. These changes may include regulations that impact the ingredients and nutritional content of our menu items at our restaurants. For example, a number of states, counties and cities are enacting menu labeling laws requiring multi-unit restaurant operators to make certain nutritional information available to guests or restrict the sales of certain types of ingredients in restaurants. The success of our restaurant operations is dependent, in part, upon our ability to effectively respond to changes in consumer health and disclosure regulations and to adapt our menu offerings to trends in eating habits. If consumer health regulations or consumer eating habits change significantly, we may be required to modify or delete certain menu items. To the extent we are unable to respond with appropriate changes to our menu offerings, it could materially affect customer demand and have an adverse impact on our revenues.

Adverse Public Or Medical Opinions About Health Effects Of Consuming Our Products As Well As Negative Publicity About Us, Our Restaurants And/Or Package Liquor Stores And About Others Across The Food And Liquor Industry Supply Chain, Whether Or Not Accurate, Could Negatively Affect Us.

Restaurant operators have received more scrutiny from regulators and health organizations in recent years relating to the health effects of consuming certain products. An unfavorable report on the products we use in our menu, the size of our portions or the consumption of those items could influence the demand for our offerings. In addition, adverse publicity or news reports, whether or not accurate, of food quality issues, illness, injury, health concerns, or operating issues stemming from a single restaurant, a limited number of restaurants, restaurants operated by others or generally in the food supply chain could be damaging to the restaurant industry overall and specifically harm our reputation. A decrease in guest traffic as a result of these types of health concerns or negative publicity could materially harm our results of operations.

Our Inability To Successfully And Sufficiently Raise Menu Prices Could Result In A Decline In Profitability.

We utilize menu price increases to help offset cost increases, including increased cost for commodities, minimum wages, employee benefits, insurance arrangements, construction, utilities and other key operating costs. If our selection and amount of menu price increases are not accepted by consumers and reduce guest traffic, or are insufficient to counter increased costs, our financial results could be negatively affected. However, we have not experienced any adverse affects from our recent menu price increases.

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Increases in food costs, raw materials and other supplies and services may have a material adverse impact on our financial performance.

Our operating margins depend on, among other things, our ability to anticipate and react to changes in the costs of key operating resources, including food and beverage costs, utilities and other supplies and services. We attempt to negotiate short-term and long-term agreements for our principal commodity, supply and equipment requirements, depending on market conditions and expected demand. However, we are currently unable to contract for extended periods of time for certain of our commodities. Consequently, these commodities can be subject to unforeseen supply and cost fluctuations due to factors such as changes in demand patterns, increases in the cost of key inputs, fuel costs, weather and other market conditions outside of our control. Dairy costs can also fluctuate due to government regulation. Our suppliers also may be affected by higher costs to produce and transport commodities used in our restaurants, higher minimum wage and benefit costs, and other expenses that they pass through to their customers, which could result in higher costs for goods and services supplied to us.

Our Business Could Be Materially Adversely Affected If We Are Unable To Expand In A Timely And Profitable Manner

To grow successfully, we must open new restaurants on a timely and profitable basis. We have experienced delays in restaurant openings from time to time and may experience delays in the future. During our fiscal year 2012 we have one new restaurant under development which opened for business on December 27, 2012. During our fiscal year 2011, we did not open any new restaurants, nor did we have any new restaurants under development.

Our ability to open and profitably operate restaurants and/or package liquor stores is subject to various risks such as identification and availability of suitable and economically viable locations, the negotiation of acceptable leases or the purchase terms of existing locations, the availability of limited partner investors or other means to raise capital, the need to obtain all required governmental permits (including zoning approvals) on a timely basis, the need to comply with other regulatory requirements, the availability of necessary contractors and subcontractors, the availability of construction materials and labor, the ability to meet construction schedules and budgets, variations in labor and building material costs, changes in weather or other acts of God that could result in construction delays and adversely affect the results of one or more restaurants and/or package liquor stores for an indeterminate amount of time. If we are unable to successfully manage these risks, we will face increased costs and lower than anticipated revenues which will materially adversely affect our business, financial condition, operating results and cash flow.

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Changes In Customer Preferences For Casual Dining Styles Could Adversely Affect Financial Performance

Changing customer preferences, tastes and dietary habits can adversely impact our business and financial performance. We offer a large variety of entrees, side dishes and desserts and our continued success depends, in part, on the popularity of our cuisine and casual style of dining. A change from this dining style may have an adverse effect on our business.

Our Success Depends Substantially on the Value of our Brands and our Reputation for Offering Guests a Satisfactory Experience.

We believe we have built a reasonably strong reputation for the predictability of our menu items, as part of the experience that guests enjoy in our restaurants. We believe we must protect and grow the value of our brands to continue to be successful in the future. Any incident that erodes consumer trust in or affinity for our brands could be harmful to us. If consumers perceive or experience a reduction in food quality, service or ambiance, or in any way believe we failed to deliver a consistently positive experience, our brand value could suffer.

Labor Shortages, An Increase In Labor Costs, Or Inability To Attract Employees Could Harm Our Business

Our employees are essential to our operations and our ability to deliver an enjoyable dining experience to our customers. If we are unable to attract and retain enough qualified restaurant and/or package liquor store personnel at a reasonable cost, and if they do not deliver an enjoyable dining experience, our results may be negatively affected. Additionally, competition for qualified employees could require us to pay higher wages, which could result in higher labor costs.

Increases In Employee Minimum Wages By The Federal Or State Government Could Adversely Affect Business

Certain of our Company employees are paid wages that relate to federal and state minimum wage rates. Increases in the minimum wage rates, such as annual cost of living increases in the State of Florida minimum wage, may significantly increase our labor costs. In addition, since our business is labor-intensive, shortages in the labor pool or other inflationary pressure could increase labor costs, which could harm our financial performance.

Due To Our Geographic Locations, Restaurants Are Subject To Climate Conditions That Could Affect Operations

All but one (1) of our restaurants and package liquor stores are located in South Florida, with the remaining restaurant located in Central Florida. During hurricane season, (June 1 ^st through November 30 ^th each year), our restaurants and/or package liquor stores may face harsh weather associated with hurricanes and tropical storms. These harsh weather conditions may make it more difficult for customers to visit our restaurants and package liquor stores, or may necessitate the closure of the stores and restaurants for a period of time. If customers are unable to visit our restaurants and/or package liquor stores, our sales and operating results may be negatively affected.

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Due To Our Geographic Locations, We May Not Be Able To Acquire Windstorm Insurance Coverage Or Adequate Windstorm Insurance Coverage At A Reasonable Rate

Due to the anticipated active hurricane seasons in South Florida in the future, we may not be able to acquire windstorm insurance coverage for our restaurant and package liquor store locations on a year-to-year basis or may not be able to get adequate windstorm insurance coverage at reasonable rates. If we are unable to obtain windstorm insurance coverage or adequate windstorm insurance coverage at reasonable rates, then we will be self-insured for all or a part of the exposure for damages caused by a hurricane impacting South Florida, which may have a material adverse effect upon our financial condition and/or results of operations.

Inability To Attract And Retain Customers Could Affect Results Of Operations

We take pride in our ability to attract and retain customers, however, if we do not deliver an enjoyable dining experience for our customers, they may not return and results may be negatively affected.

Failure To Comply With Governmental Regulations Could Harm Our Business And Our Reputation.

We are subject to regulation by federal agencies and regulation by state and local health, sanitation, building, zoning, safety, fire and other departments relating to the development and operation of restaurants. These regulations include matters relating to:


	●	the environment;
	●	building construction;
	●	zoning requirements;
	●	the preparation and sale of food and alcoholic beverages; and
	●	employment.

Our facilities are licensed and subject to regulation under state and local fire, health and safety codes. The construction and remodeling of restaurants will be subject to compliance with applicable zoning, land use and environmental regulations. We may not be able to obtain necessary licenses or other approvals on a cost-effective and timely basis in order to construct and develop restaurants in the future.

Various federal and state labor laws govern our operations and our relationship with our employees, minimum wage, overtime, working conditions, fringe benefit and work authorization requirements. In particular, we are subject to federal immigration regulations. Given the location of many of our restaurants, even if we operate those restaurants in strict compliance with federal immigration requirements, our employees may not all meet federal work authorization or residency requirements, which could lead to disruptions in our work force.

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Our business can be adversely affected by negative publicity resulting from, among other things, complaints or litigation alleging poor food quality, food-borne illness or other health concerns or operating issues stemming from one or a limited number of restaurants. Unfavorable publicity could negatively impact public perception of our brands.

We are required to comply with the alcohol licensing requirements of the federal government, states and municipalities where our restaurants are located. Alcoholic beverage control regulations require applications to state authorities and, in certain locations, county and municipal authorities for a license and permit to sell alcoholic beverages. Typically, licenses must be renewed annually and may be revoked or suspended for cause at any time. Alcoholic beverage control regulations relate to numerous aspects of the daily operations of the restaurants, including minimum age of guests and employees, hours of operation, advertising, wholesale purchasing, inventory control and handling and storage and dispensing of alcoholic beverages. If we fail to comply with federal, state or local regulations, our licenses may be revoked and we may be forced to terminate the sale of alcoholic beverages at one or more of our restaurants.

The Federal Americans with Disabilities Act (the “ADA”) prohibits discrimination on the basis of disability in public accommodations and employment. We are required to comply with the ADA and regulations relating to accommodating the needs of disabled persons in connection with the construction of new facilities and with significant renovations of existing facilities.

Failure to comply with these and other regulations could negatively impact our reputation and could have an adverse effect on our business, financial condition, results of operations or cash flows.

We May Face Liability Under Dram Shop Statutes

Our sale of alcoholic beverages subjects us to “dram shop” statutes. These statutes allow an injured person to recover damages from an establishment that served alcoholic beverages to an intoxicated person. If we receive a judgment substantially in excess of our insurance coverage, or if we fail to maintain our insurance coverage, our business, financial condition, operating results or cash flows could be materially and adversely affected. We currently have two “dram shop” claims, which we are defending vigorously. See “Item 1. Business—Government Regulation” for a discussion of the regulations with which we must comply.

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We May Face Instances Of Food Borne Illness

In years past, several nationally known restaurants experienced outbreaks of food poisoning believed to be caused by E.coli contained in fresh spinach, which is not included in any of the items on our menu, Asian and European countries experienced outbreaks of avian flu and incidents of “mad cow” disease have occurred in Canadian and U.S. cattle herds. These problems, other food-borne illnesses (such as, hepatitis A, trichinosis or salmonella) and injuries caused by food tampering have in the past, and could in the future, adversely affect the price and availability of affected ingredients and cause changes in consumer preference. As a result, our sales could decline.

Instances of food-borne illnesses, real or perceived, whether at our restaurants or those of our competitors, could also result in negative publicity about us or the restaurant industry, which could adversely affect sales. If we react to negative publicity by changing our menu or other key aspects of the dining experience we offer, we may lose customers who do not accept those changes, and may not be able to attract enough new customers to produce the revenue needed to make our restaurants profitable. If our guests become ill from food-borne illnesses, we could be forced to temporarily close some restaurants. A decrease in guest traffic as a result of health concerns or negative publicity, or as a result of a change in our menu or dining experience or a temporary closure of any of our restaurants, could materially harm our business.

If We Are Unable To Protect Our Customers’ Credit Card Data, We Could Be Exposed To Data Loss, Litigation, And Liability, And Our Reputation Could Be Significantly Harmed.

In connection with credit card sales, we transmit confidential credit card information by way of secure private retail networks. Although we use private networks, third parties may have the technology or know-how to breach the security of the customer information transmitted in connection with credit card sales, and our security measures and those of our technology vendors may not effectively prohibit others from obtaining improper access to this information. If a person is able to circumvent these security measures, he or she could destroy or steal valuable information or disrupt our operations. Any security breach could expose us to risks of data loss, litigation, and liability, and could seriously disrupt our operations and any resulting negative publicity could significantly harm our reputation.

Item 1B. Unresolved Staff Comments

As a Smaller Reporting Company as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item 1B.

Item 2. Properties

Our operations are conducted primarily on leased property with the exception of (i) a 10,000 square foot stand-alone building located in Fort Lauderdale, Florida that we purchased in December, 1999, which since April, 2001 has housed our corporate headquarters; (ii) a 4,600 square foot stand-alone building located in Hallandale, Florida that we purchased in July, 2006 and which since September, 1968 has housed our Hallandale, Florida Company-owned combination restaurant and package liquor store (Store #31); (iii) a 4,120 square foot stand-alone building in Hollywood, Florida we constructed in November, 2003, upon real property we acquired in September, 2001 pursuant to a 25 year ground lease interest, (a portion of this building is leased to an unaffiliated third party), and which since November, 2003 has housed our Hollywood, Florida Company-owned package liquor store (Store #4); (iv) a 4,500 square foot stand-alone building located in Hollywood, Florida that we purchased in October, 2009 and which since March, 1972 has housed our Hollywood, Florida Company-owned combination restaurant and package liquor store (Store #19); (v) a 4,600 square foot stand-alone building located in Fort Lauderdale, Florida that we purchased in August, 2010 and which since December, 1968 has housed our Fort Lauderdale, Florida Company-owned restaurant (Store #22); (vi) a 5,100 square foot stand-alone building in North Miami, Florida that we purchased in November, 2010 and which since July, 1968 has housed our North Miami, Florida Company-owned combination restaurant and package store (Store #20); and (vii) a 23,678 square foot two building shopping center in Miami, Florida that we purchased in November, 2011, one building, approximately 18,828 square feet, is leased to twelve unaffiliated third parties and a second stand-alone building, approximately 4,850 square feet, which since April, 2000 has housed our Kendall, Florida based restaurant, which is owned by our affiliated limited partnership (Store #70).

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All of our units require periodic refurbishing in order to remain competitive. We have budgeted $850,000 for our refurbishing program for fiscal year 2013. See Item 7, "Liquidity and Capital Resources" for discussion of the amounts spent in fiscal year 2012.

The following table summarizes information related to the properties upon which our operations are conducted:

	Square		Franchised/
Name and Location	Footage	Seats	Owned by	Lease Terms

Big Daddy's Liquors #4	1,978	N/A	Company	3/1/02 to 2/28/27
Flanigan's Enterprises				and Options to
Inc. (6)				2/28/47
7003 Taft Street
Hollywood, FL

Big Daddy's Liquors #7	1,450	N/A	Company	11/1/00 to 10/31/13
Flanigan's Enterprises,				and Annual Options
Inc.				to 10/31/15
1550 W. 84th Street
Hialeah, FL

Big Daddy's Liquors #8	1,942	N/A	Company	5/1/99 to 4/30/14
Flanigan's Enterprises, Inc
959 State Road 84
Fort Lauderdale, FL

Flanigan’s Seafood	4,300	130	Company	1/1/10 to 12/31/14
Bar and Grill #9				Options to 12/31/24
Flanigan’s Enterprises,
Inc.
1550 W. 84 ^th Street
Hialeah, FL

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	Square		Franchised/
Name and Location	Footage	Seats	Owned by	Lease Terms

Flanigan's Legends	5,000	150	Franchise	1/4/00 to 1/3/20
Seafood Bar and Grill #11				Option to 1/3/25
11 Corporation (1)
330 Southern Blvd.
W. Palm Beach, FL

Flanigan's Seafood	5,000	180	Company	11/15/92 to
Bar and Grill #12				11/15/13
Flanigan’s Enterprises, Inc.				Option to 11/15/16
2405 Tenth Ave. North
Lake Worth, FL

Flanigan's Seafood	3,320	90	Franchise	6/1/79 to 6/1/14
Bar and Grill #14				Option to 6/1/19
Big Daddy's #14, Inc. (1)(2)(5)
2041 NE Second St.
Deerfield Beach, FL

Flanigan’s Seafood	4,000	90	Franchise/	1/1/09 to 8/31/16
Bar and Grill #15			Limited	Options to 12/31/24
CIC Investors #15 Ltd.(1)			Partnership
1479 E. Commercial Blvd.
Ft. Lauderdale, FL

Flanigan's Seafood	4,300	100	Franchise	2/15/72 to 12/31/15
Bar and Grill #18				Option to 12/31/20
Twenty Seven Birds
Corp. (1)(2)
2721 Bird Avenue
Miami, FL

Flanigan’s Seafood	4,500	160	Company	Company-Owned
Bar and Grill #19
Flanigan’s Enterprises,
Inc.
2505 N. University Dr.
Hollywood, FL

Flanigan's Seafood	5,100	140	Company	Company-Owned
Bar and Grill #20				Parking Lease
Flanigan's Enterprises				5/1/69 to 12/31/12
Inc. (8)				Annual options
13205 Biscayne Blvd.				until the Company
North Miami, FL				fails to exercise

Flanigan's Seafood	4,100	200	Company	Company-Owned
Bar and Grill #22
Flanigan's Enterprises,
Inc.
2600 W. Davie Blvd.

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	Square		Franchised/
Name and Location	Footage	Seats	Owned by	Lease Terms

Ft. Lauderdale, FL

Flanigan's Seafood	4,600	150	Company	Company Owned
Bar and Grill #31
Flanigan's Enterprises, Inc.
4 N. Federal Highway
Hallandale, FL

Flanigan's Seafood Bar	4,620	130	Company	10/1/10 to 5/31/20
and Grill #33
Flanigan’s Enterprises, Inc.
45 S. Federal Highway
Boca Raton, FL

Big Daddy's Liquors #34	3,000	N/A	Company	5/29/97 to 5/28/17
Flanigan's Enterprises, Inc.				Options to 5/28/27
9494 Harding Ave.
Surfside, FL

Flanigan's Seafood	4,600	140	Company	4/1/71 to 12/31/15
Bar and Grill #40,
Flanigan's Enterprises, Inc.
5450 N. State Road 7
N. Lauderdale, FL

Piranha Pat's #43	4,500	90	Franchise	12/1/72 to 11/30/17
BD 43 Corporation (1)(2)				Option to 11/30/22
2500 E. Atlantic Blvd.
Pompano Beach, FL

Big Daddy's Liquors #47	6,000	N/A	Company	12/21/68 to 1/1/20
Flanigan's Enterprises,				Options to 1/1/50
Inc. (3)
8600 Biscayne Blvd.
Miami, FL

Flanigan’s Seafood	8,000	200	Limited	06/01/11 to 5/31/16
Bar and Grill #13,			Partnership	Option to 5/31/21
CIC Investors #13, Ltd.
11415 S. Dixie Highway
Pinecrest, FL

Flanigan’s Seafood	4,000	200	Limited	10/24/06 to 10/23/16
Bar and Grill #50,			Partnership	Options to 10/23/26
CIC investors #50, Ltd.
17185 Pines Boulevard
Pembroke Pines, FL

Flanigan’s Seafood	5,900	200	Limited	1/5/07 to 12/31/21
Bar and Grill #55			Partnership	Options to 12/31/31

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	Square		Franchised/
Name and Location	Footage	Seats	Owned by	Lease Terms

CIC Investors #55, Ltd.
2190 S. University Drive
Davie, Florida

Flanigan's Seafood	6,800	200	Limited	8/1/97 to 12/31/21
Bar and Grill #60			Partnership
CIC Investors #60 Ltd.
9516 Harding Avenue
Surfside, FL

Flanigan’s Seafood	6,128	200	Limited	5/01/05 to 6/30/15
Bar and Grill #65			Partnership	Options to 3/31/25
CIC Investors #65, Ltd.
2335 State Road 7, Suite 100
Wellington, FL

Flanigan's Seafood	4,850	161	Limited	4/1/00 to 3/31/15
Bar and Grill #70			Partnership	Options to 3/31/30
CIC Investors #70 Ltd.
12790 SW 88 St
Miami, FL

Flanigan’s Seafood	7,000	200	Company	5/1/10 to 4/30/13
Bar and Grill #75 (9)				Option to 4/30/16
Flanigan’s Enterprises, Inc.
950 S. Federal Highway
Stuart, FL

Flanigan's Seafood	5,000	165	Limited	6/15/01 to 12/14/19
Bar and Grill #80			Partnership	Options to 12/14/39
CIC Investors #80 Ltd.
8695 N.W. 12th St
Miami, FL

Flanigan's Seafood	4,300	200	Limited	4/1/11 to 3/31/26
Bar and Grill #90 (11)			Partnership	Option to 3/31/31
CIC Investors #90 Ltd.
9857 S.W. 40 ^th Street
Miami, FL

Flanigan's Seafood	5,700	235	Limited	7/29/01 to 7/28/17
Bar and Grill #95			Partnership	Options to 7/28/32
CIC Investors #95 Ltd.
2460 Weston Road
Weston, FL

Mardi Gras	10,000	400	Company	4/30/06 to 4/30/16
Flanigan’s Enterprises,				Option to 4/30/26
Inc., #600 (4)(7)
Powers Ferry Landing

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	Square		Franchised/
Name and Location	Footage	Seats	Owned by	Lease Terms

Atlanta, GA

Flanigan’s Calusa	28,000 sq. ft.	shopping center		Company owned
Center, LLC (10)
12750 – 12790 S.W. 88 ^th Street
Miami, Florida

(1)

Franchised by Company.

(2)

Lease assigned to franchisee.

(3)

In 1974, we sold and assigned the underlying ground lease to unaffiliated third parties and simultaneously subleased it back. As of September 29, 2012, we have purchased from the unaffiliated third parties and own 52% of the underlying ground lease and our sublease agreement. As a result, we pay all rent due under the ground lease, but only 48% of the rent due under the sublease agreement.

(4)

Location managed by an unaffiliated third party.

(5)

Effective December 1, 1998, we purchased the Management Agreement to operate the franchised restaurant for the franchisee.

(6)

Ground lease executed by us on September 25, 2001. We constructed a 4,120 square foot building, of which 1,978 square feet is used by us for the operation of a package liquor store and the other 2,142 square feet is subleased to an unaffiliated third party as retail space. The package liquor store opened for business on November 17, 2003.

(7)

During the third quarter of our fiscal year 2006, our lease for this location expired. The unaffiliated third party entered into a new lease for the business premises effective May 1, 2006 and as of that date, we no longer have responsibility to pay any amounts under the lease.

(8)

During the first quarter of our fiscal year 2011, we closed on the purchase of the real property and building at this location.

(9)

During the fourth quarter of our fiscal year 2011, we purchased the operating assets of this restaurant from our limited partnership.

(10)

During the first quarter of our fiscal year 2012, our wholly owned subsidiary, Flanigan’s Calusa Center, LLC, closed on the purchase of the two building shopping center in Miami, Florida, which consists of one building which is leased to twelve unaffiliated third parties and a second stand-alone building where our limited partnership owned restaurant located at 12790 SW 88 ^th Street, Miami, Florida, (Store #70), operates.

(11)

Restaurant opened for business on December 27, 2012.

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Recent Purchase of Real Property

Miami, Florida

During the first quarter of our fiscal year 2012, we, through a new wholly owned subsidiary, (Flanigan’s Calusa Center, LLC, a Florida limited liability company), closed on the purchase of a two building shopping center in Miami, Florida, which consists of one building which is leased to twelve unaffiliated third parties and a second stand-alone building where our limited partnership owned restaurant located at 12790 SW 88 ^th Street, Miami, Florida,(Store #70), operates. We paid $6,140,000 for this property, $4,500,000 of which we borrowed from a non-affiliated third party lender, pursuant to a first mortgage, (the “$4.5M Mortgage Loan”), which we guaranteed. The $4.5M Mortgage Loan is in the original principal amount of $4,500,000 and bears interest at a variable rate. We entered into an interest rate swap agreement to hedge the interest rate risk as to $3,750,000 of the principal amount, (the “$3.75M Hedged Amount”), which fixed the interest rate as to that portion of the principal amount of the $4.5M Mortgage Loan at 4.51% per annum throughout the term of the loan. The $4.5M Mortgage Loan is amortized over twenty (20) years, with our current monthly payment of principal and interest as to the $3.75M Hedged Amount, each in the amount of $23,700 and with our current monthly payment of principal and interest as to that portion of the principal amount not fixed by the interest rate swap agreement, ($750,000), payable at a variable interest rate of LIBOR - 1 Month plus 2.25%, (2.46% as of November 30, 2012). The entire principal balance and all accrued but unpaid interest is due on December 1, 2019.

Recent Extension of Existing Lease for Existing Location

Surfside, Florida

During the first quarter of our fiscal year 2012, we exercised the final five (5) year renewal option for the package liquor store which we own located at 9494 Harding Avenue, Surfside, Florida, (Store #34), and simultaneously received two additional five year renewal options for us to further extend the term of the lease. The renewal terms under the options to renew, if we exercise the same, are the same as the existing lease, including that the annual rent will be subject to a fixed increase at the start of each renewal option exercised.

Subsequent Events

Purchase of Real Property, (N. Miami, FL.):

Subsequent to the end of our fiscal year 2012, we closed on the purchase of the two parcels of property adjacent to the Company owned property where our combination package liquor store and restaurant located at 13205 Biscayne Boulevard, North Miami, Florida, (Store #20) operates. We lease the first parcel of property for non-exclusive parking. Each parcel of property includes a building of approximately 2,600 square feet, but the building on the property directly adjacent to our property will be demolished for the construction of a parking lot. We will offer the second building for lease. We paid $2,900,000 for this property, $1,950,000 of which is financed by the seller. The mortgage bears interest at the rate of 7.5% annually and is amortized over twenty (20) years, with our monthly payment of principal and interest totaling $15,700. The entire principal balance and all accrued but unpaid interest is due on December 31, 2022.

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Line of Credit

Subsequent to the end of our fiscal year 2012, we were in the process of finalizing a $500,000 line of credit from a non affiliated third party lender, (the “Line of Credit”), to insure that we have adequate working capital and cash reserves after the purchase of the two parcels of property adjacent to the Company owned property where our combination package liquor store and restaurant located at 13205 Biscayne Boulevard, North Miami, Florida, (Store #20) operates. The Line of Credit bears interest at the floating rate of prime plus 1%. The entire principal balance and all accrued but unpaid interest is due in four months. We granted our lender a security interest in substantially all of our assets as collateral to secure our repayment obligations under our Line of Credit.

Item 3. Legal Proceedings.

From time to time, we are a defendant in litigation arising in the ordinary course of our business, including claims resulting from “slip and fall” accidents, claims under federal and state laws governing access to public accommodations, employment-related claims and claims from guests alleging illness, injury or other food quality, health or operational concerns. To date, none of this litigation, some of which is covered by insurance, has had a material effect on us.

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our common stock is traded on the NYSE/AMEX under the symbol “BDL”. The following table sets forth the high and low sales prices of a share of our common stock for the periods specified as reported by the NYSE/AMEX:

Fiscal Year 2011	High		Low
First Quarter (October 3, 2010 - January 1, 2011)	$	8.92	$	6.59
Second Quarter (January 2, 2011 – April 2, 2011)	$	9.02	$	7.56
Third Quarter (April 3, 2011 – July 2, 2011)	$	9.46	$	7.27
Fourth Quarter (July 3, 2011 – October 1, 2011)	$	7.90	$	6.48

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Fiscal Year 2012
First Quarter (October 2, 2011 - December 31, 2011)	$	8.25	$	6.74
Second Quarter (January 1, 2012 – March 31, 2012)	$	8.91	$	6.42
Third Quarter (April 1, 2012 – June 30, 2012)	$	8.25	$	7.15
Fourth Quarter (July 1, 2012 – September 29, 2012)	$	8.25	$	7.25

Holders

As of the close of business on December 28, 2012, there were approximately 309 holders of record of our common stock.

Dividend Policy

We did not declare or pay any cash dividends on our capital stock in our fiscal year 2012. During our fiscal year 2011, our Board declared a cash dividend of 10 cents per share which was paid on January 18, 2011 to shareholders of record on January 7, 2011. Any future determination to pay cash dividends will be at our Board’s discretion and will depend upon our financial condition, operating results, capital requirements and such other factors as our Board deems relevant.

Equity Compensation Plan Information

The following table sets forth information at September 29, 2012 regarding compensation plans under which our equity securities are authorized for issuance:

Number of securities to be issued upon

Weighted-average

Number of securities

exercise of

exercise price of

remaining available for

outstanding options,

future issuance under

warrants, restricted

equity compensation

Plan category

stock and rights

Plans

Equity compensation plans approved by security holders

—

40,000

Equity compensation plans not approved by security holders

—

Total

—

40,000

Issuer Repurchases of Equity Securities

Pursuant to a discretionary plan approved by the Board of Directors at its meeting on May 17, 2007, the Board of Directors authorized management to purchase up to 100,000 shares of our common stock. Since the Board’s 2007 authorization, we have purchased an aggregate of 32,986 shares, of which 800 shares were purchased by us in fiscal year 2012. As of September 29, 2012, we still have authority to purchase 67,014 shares of our common stock under the discretionary plan approved by the Board of Directors.

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Item 6. Selected Financial Data

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Except for the historical information contained herein, the following discussion contains forward-looking statements that are subject to known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from those expressed or implied by such forward-looking statements. We discuss such risks, uncertainties and other factors throughout this report and specifically under the captions “Risk Factors”. In addition, the following discussion and analysis should be read in conjunction with the 2012 Consolidated Financial Statements and the related Notes to Consolidated Financial Statements included elsewhere in this report.

Overview

Financial Information Concerning Industry Segments

Our business is conducted principally in two segments: the restaurant segment and the package liquor store segment. Financial information broken into these two principal industry segments for the two fiscal years ended September 29, 2012 and October 1, 2011 is set forth in the consolidated financial statements which are attached hereto.

General

Franchised Units . In exchange for our providing management and related services to our franchisees and granting them the right to use our service marks "Flanigan's Seafood Bar and Grill" and "Big Daddy's Liquors", our franchisees (four of which are franchised to members of the family of our Chairman of the Board, officers and/or directors), are required to (i) pay to us a royalty equal to 1% of gross package liquor sales and 3% of gross restaurant sales; and (ii) make advertising expenditures equal to between 1.5% to 3% of all gross sales based upon our actual advertising costs allocated between stores, pro-rata, based upon gross sales.

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Affiliated Limited Partnership Owned Units . We manage and control the operations of the eight restaurants owned by limited partnerships, except the Fort Lauderdale, Florida restaurant which is managed and controlled by a related franchisee. We currently have one restaurant under development in Miami, Florida which will result in us operating the restaurant as general partner. This new restaurant opened for business on December 27, 2012. Accordingly, the results of operations of all limited partnership owned restaurants, except the Fort Lauderdale, Florida restaurant are consolidated with our results of operations for accounting purposes. The results of operations of the Fort Lauderdale, Florida restaurant are accounted for by us utilizing the equity method.

Results of Operations

REVENUES (in thousands):
	Fifty Two			Fifty Two
	Weeks Ended			Weeks Ended
	Sept. 29, 2012			Oct. 1, 2011
Sales

Restaurant, food	$	48,943	64.9%	$	45,951	64.8%
Restaurant, bar		13,255	17.6%		11,814	16.7%
Package goods		13,214	17.5%		13,141	18.5%
Total		75,412	100.0%		70,906	100.0%

Franchise related revenues		1,133			1,023
Owner’s fee		157			161
Other operating income		158			219
Rental income		475			—
Total Revenues	$	77,335		$	72,309

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Comparison of Fiscal Years Ended September 29, 2012 and October 1, 2011

Revenues. Total revenue for our fiscal year 2012 increased $5,026,000 or 6 .95 % to $77,335,000 from $72,309,000 for our fiscal year 2011. The increase in total revenue during our fiscal year 2012 was primarily due to revenue generated from the sale of food at our restaurants caused by our increasing our menu prices during the fourth quarter of our fiscal year 2011 and the third quarter of our fiscal year 2012 and revenue generated from the sale of alcoholic beverages at restaurants caused by our increasing our bar liquor prices during the third quarter of our fiscal year 2012.

Restaurant Food Sales . Restaurant revenue generated from the sale of food, including non-alcoholic beverages, at restaurants totaled $48,943,000 for our fiscal year 2012 as compared to $45,951,000 for our fiscal year 2011. Comparable weekly restaurant food sales (for restaurants open for all of our fiscal years 2012 and 2011, which consists of eight restaurants owned by us and eight restaurants owned by affiliated limited partnerships) was $911,000 and $853,000 for our fiscal years 2012 and 2011, respectively, an increase of 6.80%. Comparable weekly restaurant food sales for Company owned restaurants only was $405,000 and $370,000 for our fiscal years 2012 and 2011, respectively, an increase of 9.46%. Comparable weekly restaurant food sales for affiliated limited partnership owned restaurants only was $506,000 and $483,000 for our fiscal years 2012 and 2011, respectively, an increase of 4.76%. The increase in restaurant revenue generated from the sale of food at restaurants was primarily caused by our increasing menu prices during the fourth quarter of our fiscal year 2011 and the third quarter of our fiscal year 2012.

Restaurant Bar Sales . Restaurant revenue generated from the sale of alcoholic beverages at restaurants totaled $13,255,000 for our fiscal year 2012 as compared to $11,814,000 for our fiscal year 2011. Comparable weekly restaurant bar sales (for restaurants open for all of our fiscal years 2012 and 2011, which consists of eight restaurants owned by us and eight restaurants owned by affiliated limited partnerships) was $247,000 and $220,000 for our fiscal years 2012 and 2011, respectively, an increase of 12.27%. Comparable weekly restaurant bar sales for Company owned restaurants only was $105,000 and $94,000 for our fiscal years 2012 and 2011, respectively, an increase of 11.70%. Comparable weekly restaurant bar sales for affiliated limited partnership owned restaurants only was $142,000 and $126,000 for our fiscal years 2012 and 2011, respectively, an increase of 12.70%. The increase in restaurant revenue generated from the sale of alcoholic beverages at restaurants was primarily caused by our increasing our bar liquor prices during the third quarter of our fiscal year 2012.

Package Liquor Store Sales . Revenue generated from sales of liquor and related items at package liquor stores totaled $13,214,000 for our fiscal year 2012 as compared to $13,141,000 for our fiscal year 2011, an increase of $73,000 or 0.56%. The weekly average of same store package liquor store sales, which includes all nine (9) Company owned package liquor stores, was $254,000 for our fiscal year 2012 as compared to $253,000 for our fiscal year 2011.

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Operating Costs and Expenses . Operating costs and expenses, (consisting of cost of merchandise sold, payroll and related costs, occupancy costs and selling, general and administrative expenses), for our fiscal year 2012 increased $4,582,000 or 6.62% to $73,764,000 from $69,182,000 for our fiscal year 2011. The increase was primarily due to the costs related to our new restaurant location in Miami, Florida acquired by a limited partnership during the second quarter of our fiscal year 2012 and opened for business on December 27, 2012, the shopping center in Miami, Florida acquired during the first quarter of our fiscal year 2012 and to an expected general increase in food costs, including an increase in the cost of poultry , offset by a decrease in repairs and maintenance to our units and actions taken by management to reduce and/or control costs and expenses. We anticipate that our operating costs and expenses will continue to increase through our fiscal year 2013 for the same reasons. Operating costs and expenses decreased as a percentage of total sales to approximately 95.38% in our fiscal year 2012 from 95.68% in our fiscal year 2011.

Gross Profit . Gross profit is calculated by subtracting the cost of merchandise sold from sales.

Restaurant Food and Bar Sales . Gross profit for food and bar sales for our fiscal year 2012 increased to $40,059,000 from $37,857,000 for our fiscal year 2011. Our gross profit margin for restaurant food and bar sales (calculated as gross profit reflected as a percentage of restaurant food and bar sales), was 64.41% for our fiscal year 2012 and 65.54% for our fiscal year 2011. We anticipate that our gross profit for restaurant food and bar sales will decrease during our fiscal year 2013 due to higher food costs, including our cost of poultry, offset by a decrease in our cost of ribs during calendar year 2013.

Package Liquor Store Sales . Gross profit for package liquor store sales for our fiscal year 2012 decreased to $4,102,000 from $4,381,000 for our fiscal year 2011. Our gross profit margin (calculated as gross profit reflected as a percentage of package liquor store sales) for package liquor store sales was 31.04% for our fiscal year 2012 and 33.34% for our fiscal year 2011. The decrease in our gross profit margin for package liquor store sales during our fiscal year 2012 (-2.30%) was due to our inability to purchase “close out” and inventory reduction merchandise from wholesalers which we were able to obtain during the first and second quarters of our fiscal year 2011. We anticipate that our gross profit margin for package liquor store sales will stabilize during our fiscal year 2013.

Payroll and Related Costs . Payroll and related costs for our fiscal year 2012 increased $1,642,000 or 7.56% to $23,354,000 from $21,712,000 for our fiscal year 2011 due primarily to an increase in the Florida minimum wage (4.92%), which was effective January 1, 2012, and to increases in payroll taxes, including unemployment taxes. We anticipate that our payroll and related costs will increase throughout our fiscal year 2013 due primarily to payroll associated with the new restaurant location in Miami, Florida acquired by a limited partnership during the second quarter of our fiscal year 2012 and opened for business on December 27, 2012. Payroll and related costs as a percentage of total sales was 30.20% in our fiscal year 2012 and 30.03% of total sales in our fiscal year 2011.

Occupancy Costs . Occupancy costs (consisting of rent, common area maintenance, repairs, real property taxes and amortization of leasehold interests) for our fiscal year 2012 increased $64,000 or 1.48% to $4,328,000 from $4,264,000 for our fiscal year 2011. Our occupancy costs increased primarily due to increasing percentage rents at various locations and due to rental payments for the new restaurant location in Miami, Florida acquired by a limited partnership, which commenced January 27, 2012, partially offset by the elimination of rent from a limited partnership owned restaurant located in the shopping center in Miami, Florida which we purchased during the first quarter of our fiscal year 2012 and the elimination of rent paid for our combination restaurant and package liquor store located at 13205 Biscayne Boulevard, North Miami, Florida, the real property and building of which we purchased during the first quarter of our fiscal year 2011. We anticipate that our occupancy costs will remain stable throughout our fiscal year 2013 as rental payments for the new restaurant location in Miami, Florida, will be offset by the reduction in rental payments as a result of our purchase of the building on November 30, 2011 where Store #70 is located.

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Selling, General and Administrative Expenses . Selling, general and administrative expenses (consisting of general corporate expenses, including but not limited to advertising, insurance, professional costs, clerical and administrative overhead) for our fiscal year 2012 increased $293,000 or 2.02% to $14,831,000 from $14,538,000 for our fiscal year 2011. Selling, general and administrative expenses decreased as a percentage of total sales in our fiscal year 2012 to 19.18% as compared to 20.11% in our fiscal year 2011. We anticipate that our selling, general and administrative expenses will increase throughout our fiscal year 2013 due primarily to the new restaurant location in Miami, Florida acquired by a limited partnership during the second quarter of our fiscal year 2012 and opened for business on December 27, 2012, the shopping center acquired during the first quarter of our fiscal year 2012 and increases across all categories.

Depreciation and Amortization. Depreciation and amortization for our fiscal year 2012 decreased $42,000 or 1.63% to $2,528,000 from $2,570,000 for our fiscal year 2011. As a percentage of revenue, depreciation and amortization expense was 3.27% of revenue for our fiscal year 2012 and 3.55% of revenue for our fiscal year 2011.

Interest Expense, Net . Interest expense for our fiscal year 2012 increased $191,000 to $806,000 from $615,000 for our fiscal year 2011. I nterest expense increased during our fiscal year 2012 primarily due to the interest paid on the $4.5 million mortgage loan, the proceeds of which we used to purchase a shopping center in Miami, Florida and a $1.6 million term loan the proceeds of which were also ultimately used to purchase the shopping center, while permitting us to retain our working capital and cash reserves.

Net Income Attributable to Stockholders . Net income attributable to stockholders for our fiscal year 2012 decreased $36,000 or 2.48% to $1,413,000 from $1,449,000 for our fiscal year 2011. As a percentage of sales, net income for our fiscal year 2012 is 1.83%, as compared to 2.00% in our fiscal year 2011. During our fiscal year 2011, we recognized income of $231,000, offset by income tax of $67,000, from the sale of our interest, as guarantor, of a nine (9) year leasehold interest. Without giving effect to the above non-recurring item, our net income attributable to stockholders for our fiscal year 2012 would have increased $128,000 or 9.96% to $1,285,000 for our fiscal year 2011.

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New Limited Partnership Restaurants

As new restaurants open, our income from operations will be adversely affected due to our obligation to fund pre-opening costs, including but not limited to pre-opening rent for the new locations. During our fiscal year 2012, we recognized pre-opening rent expense in the approximate amount of $83,000 for the Miami, Florida restaurant which opened for business on December 27, 2012. During our fiscal year 2011, we did not have a new restaurant location in the development stage and did not recognize any pre-opening rent. We are recognizing rent expense on a straight line basis over the term of the lease.

During our fiscal year 2012, the limited partnership restaurant in Miami, Florida which opened for business on December 27, 2012, reported losses of $107,000 primarily due to pre-opening costs, thus contributing to a reduction in the operating income for our fiscal year 2012. During our fiscal year 2011, we did not have a new restaurant location in the development stage and did not recognize any pre-opening costs.

We believe that our current cash on hand, together with our expected cash generated from operations will be sufficient to fund our operations and capital expenditures for at least the next twelve months.

Trends

During the next twelve months, we expect that our restaurant food and bar sales will increase , but gross profit for restaurant food and bar sales will decrease due to higher food costs, including our cost of poultry, offset by a decrease in our cost of ribs during calendar year 2013. We anticipate that our package liquor store sales and gross profit margin for package liquor store sales will stabilize during our fiscal year 2013. We expect higher food costs and higher overall expenses to adversely affect our net income. W e also plan to continue our increased advertising to attract and retain our customers against increased competition. With our recent menu price increases, we plan to limit further menu price increases as long as possible, but continue to face increased competition and expect higher food costs and higher overall expenses, which will adversely affect our net income. We may be required to raise menu prices wherever competitively possible.

We currently have a new restaurant in the development stage, which opened for business on December 27, 2012 using our limited partnership ownership model. We continue to search for new locations to open restaurants and thereby expand our business. Any new locations will likely be opened using our limited partnership ownership model.

We are not actively searching for locations for the operation of new package liquor stores, but if an appropriate location for a package liquor store becomes available, we will consider it.

Liquidity and Capital Resources

We fund our operations through our cash on hand and positive cash flow from operations. As of September 29, 2012, we had cash of approximately $7,221,000, an increase of $2,957,000 from our cash balance of $4,264,000 as of October 1, 2011. The increase in cash as of September 29, 2012 was primarily due to a balance of $1,306,000 of net proceeds from the private sale of limited partnership interests by the affiliated limited partnership which owns the new Miami, Florida restaurant and opened for business on December 27, 2012. Management believes that the Company’s current cash availability from its cash on hand and the expected cash from operations will be sufficient to fund operations and capital expenditures for at least the next twelve months.

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Cash Flows

	Fiscal Years
	2012			2011
	(in thousands)
Net cash and cash equivalents
provided by operating activities	$	6,212		$	4,352
Net cash and cash equivalents
used in investing activities		(2,030	)		(4,172	)
Net cash and cash equivalents
used in financing activities		(1,225	)		(2,363	)
Net increase (decrease)
in cash and equivalents		2,957			(2,183	)
Cash and equivalents,
beginning of year		4,264			6,447
Cash and equivalents,
end of year	$	7,221		$	4,264

Capital Expenditures

In addition to using cash for our operating expenses, we use cash to fund the development and construction of new restaurants and to fund capitalized property improvements for our existing restaurants. We acquired property and equipment of $7,800,000, (including $6,100,000 of which was financed and $30,000 of deposits recorded in other assets as of October 1, 2011), during our fiscal year 2012, including $507,000 for renovations to one (1) existing Company owned restaurant and three (3) existing limited partnership owned restaurants. During our fiscal year 2011, we acquired property and equipment of $4,586,000, (including $122,000 of which was financed and $28,000 of deposits recorded in other assets as of October 1, 2010), during our fiscal year 2011, including $1,261,000 for renovations to one (1) existing Company owned restaurant. All of our owned units require periodic refurbishing in order to remain competitive. The cost of this refurbishment in our fiscal year 2012 was $507,000 for renovations to one (1) existing Company owned restaurant and for renovations to three (3) limited partnership owned restaurants. We anticipate the cost of this refurbishment in our fiscal year 2013 will be approximately $850,000, which funds will be provided from operations.

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Debt

As of the end of our fiscal year 2012, we had debt of $13,418,000, as compared to $8,757,000 as of the end of our fiscal year 2011. As of September 29, 2012, we are in compliance with the covenants of all loans with our lender.

We repaid long term debt, including auto loans, financed insurance premiums and mortgages in the amount of $1,859,000 and $1,350,000 in our fiscal years 2012 and 2011, respectively.

Financed Insurance Premiums

(i) For the policy year beginning December 30, 2010, our property insurance is a three (3) year policy with our insurance carrier. The three (3) year property insurance premium is in the amount of $894,000, of which $727,000 is financed through an unaffiliated third party lender. The finance agreement provides that we are obligated to repay the amounts financed, together with interest at the rate of 4.89% per annum, over 30 months, with monthly payments of principal and interest, each in the amount of approximately $25,000. The finance agreement is secured by a security interest in all insurance policies, all unearned premium, return premium, dividend payments and loss payments thereof.

(ii) For the policy year beginning December 30, 2011, our general liability insurance, excluding limited partnerships, is a one (1) year policy with our insurance carriers, including automobile and excess liability coverage. The one (1) year general liability insurance premiums, including automobile and excess liability coverage, total, in the aggregate $286,000, of which $250,000 was financed through the same unaffiliated third party lender. The finance agreement obligated us to repay the amounts financed together with interest at the rate of 3.19% per annum, over 10 months, with monthly payments of principal and interest, each in the amount of $25,000. The finance agreement was secured by a security interest in all insurance policies, all unearned premium, return premium, dividend payments and loss payments thereof.

(iii) For the policy year beginning December 30, 2011, our general liability insurance for our limited partnerships is a one (1) year policy with our insurance carriers, including excess liability coverage. The one (1) year general liability insurance premiums, including excess liability coverage, total, in the aggregate $356,000, of which $297,000 was financed through the same unaffiliated third party lender. The finance agreement obligated us to repay the amounts financed, together with interest at the rate of 3.19% per annum, over 9 months, with monthly payments of principal and interest, each in the amount of $30,000 and was paid in full during the fourth quarter of our fiscal year 2012. The finance agreement was secured by a security agreement in all insurance policies, all unearned premium, return premium, dividend payments and loss payments thereof.

(iv) For the policy year beginning December 30, 2012, our general liability insurance, excluding limited partnerships, is a one (1) year policy with our insurance carriers, including automobile and excess liability coverage. The one (1) year general liability insurance premiums, including automobile and excess liability coverage, total, in the aggregate $309,000, of which $282,000 is financed through the same unaffiliated third party lender. The finance agreement obligates us to repay the amounts financed together with interest at the rate of 3.29% per annum, over 10 months, with monthly payments of principal and interest, each in the amount of $29,000. The finance agreement is secured by a security interest in all insurance policies, all unearned premium, return premium, dividend payments and loss payments thereof.

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(v) For the policy year beginning December 30, 2012, our general liability insurance for our limited partnerships is a one (1) year policy with our insurance carriers, including excess liability coverage. The one (1) year general liability insurance premiums, including excess liability coverage, total, in the aggregate $390,000, of which $356,000 is financed through the same unaffiliated third party lender. The finance agreement obligates us to repay the amounts financed, together with interest at the rate of 3.29% per annum, over 10 months, with monthly payments of principal and interest, each in the amount of $36,000. The finance agreement is secured by a security agreement in all insurance policies, all unearned premium, return premium, dividend payments and loss payments thereof.

As of September 29, 2012, the aggregate principal balance owed from the financing of our property and general liability insurance policies is $333,000.

Purchase Commitments

In order to fix the cost and ensure adequate supply of baby back ribs for our restaurants, on September 19, 2012, we entered into a purchase agreement with a new rib supplier, whereby we agreed to purchase approximately $3,800,000 of baby back ribs during calendar year 2013 from this vendor at a fixed cost. While we anticipate purchasing all of our rib supply from this vendor, we believe there are several other alternative vendors available, if needed.

Purchase of Limited Partnership Interests

During our fiscal year 2012, we purchased from one limited partner (who is not an officer, director or family member of officers or directors) a limited partnership interest of 0.18% in one (1) limited partnership which owns a restaurant for an aggregate purchase price of $3,000. During our fiscal year 2011, we purchased from one limited partner (who is not an officer, director or family member of officers or directors) a limited partnership interest of 1.06% in one (1) limited partnership which owns a restaurant for an aggregate purchase price of $17,000.

Working capital

The table below summarizes our current assets, current liabilities and working capital for our fiscal years 2012 and 2011:

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	Sept. 29		Oct. 1
(in thousands)	2012		2011

Current assets	$	11,433	$	8,293

Current liabilities		8,283		6,473

Working capital		3,150		1,820

Our working capital as of September 29, 2012 increased by 73.13% from working capital as of October 1, 2011. Our working capital increased during our fiscal year 2012 from our working capital for our fiscal year ended October 1, 2011 primarily due to the net funds ($1,306,000) remaining from the private sale of limited partnership interests by the affiliated limited partnership which owns the new Miami, Florida restaurant.

While there can be no assurance due to, among other things, unanticipated expenses or unanticipated decline in revenues, or both, we believe that our cash on hand and positive cash flow from operations will adequately fund operations, debt reductions and planned capital expenditures throughout our fiscal year 2013, including payment for a new point of sale system for our restaurants ($415,000).

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements as of the end of our fiscal year 2012 or our fiscal year 2011.

Critical Accounting Policies

Our significant accounting policies are more fully described in Note 1 to our consolidated financial statements located in Item 8 of this Annual Report on Form 10-K. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, and the related disclosures of contingent assets and liabilities. Actual results could differ from those estimates under different assumptions or conditions. We believe that the following critical accounting policies are subject to estimates and judgments used in the preparation of our consolidated financial statements:

Estimated Useful Lives of Property and Equipment

The estimates of useful lives for property and equipment are significant estimates. Expenditures for the leasehold improvements and equipment when a restaurant is first constructed are material. In addition, periodic refurbishing takes place and those expenditures can be material. We estimate the useful life of those assets by considering, among other things, expected use, life of the lease on the building, and warranty period, if applicable. The assets are then depreciated using a straight line method over those estimated lives. These estimated lives are reviewed periodically and adjusted if necessary. Any necessary adjustment to depreciation expense is made in the income statement of the period in which the adjustment is determined to be necessary.

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Consolidation of Limited Partnerships

As of September 29, 2012, we operate eight (8) restaurants as general partner of the limited partnerships that own the operations of these restaurants. We currently have one restaurant under development in Miami, Florida which will result in us operating the restaurant as general partner. This new restaurant opened for business on December 27, 2012. Additionally, we expect that any expansion which takes place in opening additional new restaurants will also result in us operating the restaurants as general partner. In addition to the general partnership interest we also purchase limited partnership units ranging from 5% to 48% of the total units outstanding. As a result of these controlling interests, we consolidate the operations of these limited partnerships with ours despite the fact that we do not own in excess of 50% of the equity interests. All intercompany transactions are eliminated in consolidation. The noncontrolling interests in the earnings of these limited partnerships are removed from net income and are not included in the calculation of earnings per share.

Income Taxes

FASB ASC Topic 740 – Income Taxes , requires, among other things, recognition of future tax benefits measured at enacted rates attributable to deductible temporary differences between financial statement and income tax bases of assets and liabilities and to tax net operating loss and tip credit carryforwards to the extent that realization of said benefits is more likely than not. For discussion regarding our carryforwards refer to Note 6 to the consolidated financial statements for our fiscal year 2012.

Other Matters

Impact of Inflation

The primary inflationary factors affecting our operations are food, beverage and labor costs. A large number of restaurant personnel are paid at rates based upon applicable minimum wage and increases in minimum wage directly affect labor costs. To date, inflation has not had a material impact on our operating results, but this circumstance may change in the future if food and fuel costs continue to rise.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

As part of our ongoing operations, we are exposed to interest rate fluctuations on our borrowings. As more fully described in Note 9 “Fair Value Measurements of Financial Instruments” to the Consolidated Financial Statements included in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K, we use interest rate swap agreements to manage these risks. These instruments are not used for speculative purposes but are used to modify variable rate obligations into fixed rate obligations.

At September 29, 2012, we had four variable rate debt instruments outstanding that are impacted by changes in interest rates. In July, 2010, we converted the amount outstanding on our line of credit ($1,586,000) to a term loan (the “Term Loan”) and we also re-financed the mortgage loan encumbering our corporate offices (the “Refinanced Mortgage Loan”). In November, 2011, we financed our purchase of the real property and two building shopping center in Miami, Florida, with a $4,500,000 mortgage loan (the “$4.5M Mortgage Loan”), and received a $1,600,000 term loan (the “$1.6M Term Loan”) the proceeds of which were ultimately used to purchase the shopping center, while permitting us to retain our working capital and cash reserves. As a means of managing our interest rate risk on these debt instruments, we entered into interest rate swap agreements with our unrelated third party lender to convert these variable rate debt obligations to fixed rates. We are currently party to the following four (4) interest rate swap agreements:

(i) One (1) interest rate swap agreement entered into in July, 2010 relates to the Term Loan, (the “Term Loan Swap”), which converts the LIBOR based variable rate interest to a fixed rate. The Term Loan Swap requires us to pay interest for a three (3) year period at a fixed rate of 4.55% on an initial amortizing notional principal amount of $1,586,000, while receiving interest for the same period at the British Bankers Association LIBOR (“LIBOR”), Daily Floating Rate, plus 3.25%, on the same amortizing notional principal amount. Under this method of accounting, at September 29, 2012, we determined that based upon unadjusted quoted prices in active markets for similar assets or liabilities provided by our unrelated third party lender, t he fair value of the Term Loan Swap was not significant; and

(ii) The second interest rate swap agreement entered into July, 2010 relates to the Refinanced Mortgage Loan (the “Mortgage Loan Swap”). The Mortgage Loan Swap requires us to pay interest for a seven (7) year period at a fixed rate of 5.11% on an initial amortizing notional principal amount of $935,000, while receiving interest for the same period at LIBOR, Daily Floating Rate, plus 2.25%, on the same amortizing notional principal amount. Under this method of accounting, at September 29, 2012, we determined that based upon unadjusted quoted prices in active markets for similar assets or liabilities provided by our unrelated third party lender, t he fair value of the Mortgage Loan Swap was not significant; and

(iii) The third interest rate swap agreement entered into in November, 2011 by our wholly owned subsidiary, Flanigan’s Calusa Center, LLC, relates to the $4.5 Mortgage Loan (the “$4.5M Mortgage Loan Swap”). The $4.5M Mortgage Loan Swap requires us to pay interest for an eight (8) year period at a fixed rate of 4.51% on an initial amortizing notional principal amount of $3,750,000, while receiving interest for the same period at LIBOR – 1 Month, plus 2.25%, on the same amortizing notional principal amount. We determined that at September 29, 2012, the interest rate swap agreement is an effective hedging agreement and the fair value was not material; and

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(iv) The fourth interest rate swap agreement entered into in November, 2011 relates to the $1.6M Term Loan (the “$1.6M Term Loan Swap”). The $1.6M Term Loan Swap requires us to pay interest for a four (4) year period at a fixed rate of 3.43% on an initial amortizing notional principal amount of $1,600,000, while receiving interest for the same period at LIBOR – 1 Month, plus 2.25%, on the same amortizing notional principal amount. We determined that at September 29, 2012, the interest rate swap agreement is an effective hedging agreement and the fair value was not material.

At September 29, 2012, our cash resources earn interest at variable rates. Accordingly, our return on these funds is affected by fluctuations in interest rates.

There is no assurance that interest rates will increase or decrease over our next fiscal year or that an increase will not have a material adverse effect on our operations.

Item 8. Financial Statements and Supplementary Data.

Our Financial Statements and supplementary data are on pages F-1 through F-6.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures.

None

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Based on evaluations as of the end of the period covered by this report, our Chief Executive Officer and Chief Financial Officer, with the participation of our management team, have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) to the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) were effective.

Management’s Assessment on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Management, including our Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of the Company's internal control over financial reporting. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of September 29, 2012, our internal control over financial reporting was effective.

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Limitations on the Effectiveness of Controls and Permitted Omission from Management’s Assessment

Our internal control over financial reporting is designed 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. All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal controls can only provide reasonable assurance with respect to financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to rules of the SEC that permit us to provide only management’s report in this Annual Report on Form 10-K.

Changes in Internal Control Over Financial Reporting

During the period covered by this report, we have not made any change to our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information.

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The information required by Item 10 is incorporated by reference to our Proxy Statement for our 2013 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission by January 24, 2013.

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Item 11. Executive Compensation.

The information required by Item 11 is incorporated by reference to our Proxy Statement for our 2013 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission by January 24, 2013.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by Item 12 is incorporated by reference to our Proxy Statement for our 2013 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission by January 24, 2013.

Item 13. Certain Relationships and Related Transactions and Director Independence.

The information required by Item 13 is incorporated by reference to our Proxy Statement for our 2013 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission by January 24, 2013.

Item 14. Principal Accountant Fees and Services.

The information required by Item 14 is incorporated by reference to our Proxy Statement for our 2013 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission by January 24, 2013.

PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a)(1)

Financial Statements

See Item 8, “Financial Statements and Supplementary Data” for Financial Statements included with this Annual Report on Form 10-K.

(a)(2)

Financial Statement Schedules

All other schedules have been omitted because the required information is not applicable or the information is included in the consolidated financial statements or the Notes thereto.

(a)(3)

Exhibits

The exhibits listed on the accompanying Index to Exhibits are filed as part of this Annual Report.

		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	Date	Number	Filed Herewith
2	Plan of Reorganization, Amended Disclosure Statement, Amended Plan of Reorganization, Modification of Amended Plan of Reorganization, Second Modification of Amended Plan of Reorganization, Order Confirming Plan of Reorganization	SB-2	5/5/87	2

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3	Restated Articles of Incorporation, adopted January 9, 1984	10-K	12/29/02	3

10(a)(1)	Employment Agreement with Joseph G. Flanigan*	DEF14A	1/27/1988	10(a)(1)

10(a)(2)	Form of Employment Agreement between Joseph G. Flanigan and the Company (as ratified and amended by the stockholders at the 1988 annual meeting is incorporated herein by reference).*	10-K		10(a)(1)

10(c)	Consent Agreement regarding the Company's Trademark Litigation	8-K	4/10/1985	10( c)

10(d)	King of Prussia(#850)Partnership Agreement*	8-K	4/10/1985	10(d)

10(o)	Management Agreement for Atlanta, Georgia, (#600)*	10-K	10/3/1992	10(o)

10(p)	Settlement Agreement with Former Vice Chairman of the Board of Directors (re #5)	10-K	10/3/1992	10(p)

10(q)	Hardware Purchase Agreement and Software License Agreement for restaurant point of sale system.	10-KSB	10/2/1993	10(q)

10(a)(3)	Key Employee Incentive Stock Option Plan	DEF14A	1/26/1994	10(a)(3)

10( r)	Limited Partnership Agreement of CIC Investors #13, Ltd,. between Flanigan's Enterprises, Inc., as General Partner and fifty percent owner of the limited partnership, and Hotel Properties, LTD. *	10-KSB	9/30/1995	10(r)

10(s)	Form of Franchise Agreement between Flanigan's Enterprises, Inc. and Franchisees.*	10-KSB	9/30/1995	10(s)

10(t)	Licensing Agreement between Flanigan's Enterprises, Inc. and James B. Flanigan, dated November 4, 1996, for non-exclusive use of the servicemark "Flanigan's" in the Commonwealth of Pennsylvania. *	10-KSB	9/28/1996	10(t)

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10(u)	Limited Partnership Agreement of CIC Investors #15 Ltd., dated March 28, 1997, between B.D. 15 Corp. as General Partner and numerous limited partners, including Flanigan's Enterprises, Inc. as a limited partner owning twenty five percent of the limited partnership. *	10-KSB	9/27/1997	10(u)

10(v)	Limited Partnership Agreement of CIC Investors #60 Ltd., dated July 8, 1997, between Flanigan's Enterprises, Inc., as General Partner and numerous limited partners, including Flanigan's Enterprises, Inc. as limited partner owning forty percent of the limited partnership. *	10-KSB	9/27/1997	10(v)

10(w)	Stipulated Agreed Order of Dismissal upon Mediation with former franchisee.	10-KSB	9/27/1997	10(w)

10(x)	Limited Partnership Agreement of CIC Investors #70, Ltd. dated February 1999 between Flanigan's Enterprises, Inc. as General Partner and numerous limited partners, including Flanigan's Enterprises, Inc. as limited partner owning forty percent of the limited partnership. *	10-KSB	10/02/1999	10(x)

10(y)	Limited Partnership Agreement of CIC Investors #80, Ltd., dated May 2001, between Flanigan's Enterprises, Inc. as General Partner and numerous limited partners, including Flanigan's Enterprises, Inc., as limited partner owning twenty five percent of the limited partnership. *	10-KSB	9/29/2001	10(y)

10(z)	Limited Partnership Agreement of CIC Investors #95, Ltd., dated July 2001, between Flanigan's Enterprises, Inc., as General Partner and numerous limited partners, including Flanigan's Enterprises, Inc. as limited partner owning twenty eight percent of the limited partnership. *	10-KSB	9/29/2001	10(z)

10(aa)	Limited Partnership Agreement of CIC Investors #75, Ltd., dated June 17, 2003, between Flanigan’s Enterprises, Inc., as General Partner, and numerous limited partners, including Flanigan’s Enterprises, Inc. as limited partner owning twelve percent of the limited partnership. *	10-K	9/27/03	10(aa)
10(bb)	Limited Partnership Agreement of CIC Investors #65, Ltd., dated June 24, 2004, between Flanigan’s Enterprises, Inc., as General Partner, and numerous limited partners, including Flanigan’s Enterprises, Inc. as limited partner owning twenty six percent of the limited partnership. *	10-K	10/2/2004	10(bb)

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10(cc)	Amended and Restated Limited Partnership Certificate and Agreement of CIC Investors #13, Ltd., dated March 1, 2006, between Flanigan’s Enterprises, Inc., as General Partner, Flanigan’s Management Services, Inc. and numerous limited partners, including Flanigan’s Enterprises, Inc. as limited partner owning thirty nine percent of the limited partnership. *	10-K	9/30/2006	10(cc)

10(dd)	Limited Partnership Agreement of CIC Investors #50, Ltd., dated October 17, 2006, between Flanigan’s Enterprises, Inc., as General Partner, Flanigan’s Management Services, Inc. and numerous limited partners, including Flanigan’s Enterprises, Inc. as limited partner owning sixteen percent of the limited partnership. *	10-K	9/29/2007	10(dd)

10(ee)	Limited Partnership Agreement of CIC Investors #55, Ltd., dated December 12, 2006, between Flanigan’s Enterprises, Inc., as General Partner, Flanigan’s Management Services, Inc. and numerous limited partners, including Flanigan’s Enterprises, Inc. as limited partner owning forty eight percent of the limited partnership. *	10-K	9/29/2007	10(ee)

10(ff)	Limited Partnership Agreement of CIC Investors #90, Ltd., dated January 18, 2012, between Flanigan’s Enterprises, Inc., as General Partner, Flanigan’s Management Services, Inc. and numerous limited partners, including Flanigan’s Enterprises, Inc. as limited partner owning five percent of the limited partnership. *	10-K	9/29/2012	10(ff)	X

13	Registrant's Form 10-K constitutes the Annual Report to Shareholders for the fiscal year ended September 29, 2012.				X

21(a)	Company's subsidiaries are set forth in this Annual Report on Form 10-K.				X

31.1	Certification Pursuant to Section 302 of Sarbanes-Oxley Act of 2002 of Chief Executive Officer.				X

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31.2		Certification Pursuant to Section 302 of Sarbanes-Oxley Act of 2002 of Chief Financial Officer.	X

32.1		Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Chief Executive Officer.	X

32.2		Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Chief Financial Officer.	X

*	Compensatory plan or arrangement.

List of XBRL documents as exhibits 101

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed

on its behalf by the undersigned thereunto duly authorized.

	Flanigan's Enterprises, Inc.
	Registrant

	By:	/s/ JAMES G. FLANIGAN II
		JAMES G. FLANIGAN II
		Chief Executive Officer
		Date: 12/28/2012

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in their capacities and on the dates indicated.

/s/ JAMES G. FLANIGAN II	Chairman of the Board,	Date: 12/28/2012
James G. Flanigan II	Chief Executive Officer,
	and Director


/s/ JEFFREY D. KASTNER	Chief Financial Officer	Date: 12/28/2012
Jeffrey D. Kastner	Secretary and Director

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/s/ GERMAINE M. BELL	Director	Date: 12/28/2012
Germaine M. Bell


/s/ BARBARA J. KRONK	Director	Date: 12/28/2012
Barbara J. Kronk


/s/ AUGIE BUCCI	Chief Operating Officer	Date: 12/28/2012
Augie Bucci	and Director


/s/ MICHAEL B. FLANIGAN	Director	Date: 12/28/2012
Michael B. Flanigan


/s/ PATRICK J. FLANIGAN	Director	Date: 12/28/2012
Patrick J. Flanigan


/s/ CHRISTOPHER O’NEIL	Director	Date: 12/28/2012
Christopher O’Neil

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F LANIGAN’S E NTERPRISES, I NC. AND S UBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 29, 2012 AND OCTOBER 1, 2011

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F LANIGAN’S E NTERPRISES, I NC. AND S UBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	PAGE



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	F-1


CONSOLIDATED FINANCIAL STATEMENTS

Balance Sheets	F-2

Statements of Income	F-3

Statements of Stockholders’ Equity	F-4

Statements of Cash Flows	F-5 – F-6

Notes to Financial Statements	F-7 - F-29

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Flanigan’s Enterprises, Inc.

Fort Lauderdale, Florida

We have audited the accompanying consolidated balance sheets of Flanigan’s Enterprises, Inc. and Subsidiaries as of September 29, 2012 and October 1, 2011 and the related consolidated statements of income, stockholders’ equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Flanigan’s Enterprises, Inc. and Subsidiaries as of September 29, 2012 and October 1, 2011, and the consolidated results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Marcum LLP

Fort Lauderdale, FL

December 28, 2012

F- 1

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F LANIGAN’S E NTERPRISES, I NC. AND S UBSIDIARIES

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 29, 2012 AND OCTOBER 1, 2011

(rounded to the nearest thousandth, except share amounts)

ASSETS	2012			2011
Current Assets:
Cash and cash equivalents	$	7,221,000		$	4,264,000
Prepaid income taxes		—			219,000
Other receivables		207,000			152,000
Inventories		2,516,000			2,185,000
Prepaid expenses		1,118,000			1,119,000
Deferred tax assets		371,000			354,000
Total current assets		11,433,000			8,293,000

Property and Equipment, Net		31,595,000			26,182,000

Investment in Limited Partnership		171,000			140,000

Other Assets:
Liquor licenses		470,000			470,000
Deferred tax assets		961,000			908,000
Leasehold interests, net		1,177,000			1,233,000
Other		937,000			940,000
Total other assets		3,545,000			3,551,000
Total assets	$	46,744,000		$	38,166,000

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses	$	5,265,000		$	4,673,000
Income taxes payable		39,000			—
Due to franchisees		1,231,000			632,000
Current portion of long-term debt		1,732,000			1,151,000
Deferred rent		16,000			17,000
Total current liabilities		8,283,000			6,473,000

Long-Term Debt, Net of Current Portion		11,686,000			7,606,000

Deferred Rent, Net of Current Portion		147,000			163,000

Commitments and Contingencies

Equity:
Flanigan's Enterprises, Inc. stockholders' equity
Common stock, $.10 par value; 5,000,000 shares authorized; 4,197,642 shares
issued; 1,860,247 and 1,861,047 outstanding for years ended 2012 and 2011		420,000			420,000
Capital in excess of par value		6,240,000			6,240,000
Retained earnings		18,130,000			16,717,000
Treasury stock, at cost, 2,337,395 and 2,336,595 shares for the years
ended 2012 and 2011, respectively		(6,061,000	)		(6,055,000	)
Total Flanigan's Enterprises, Inc. stockholders' equity		18,729,000			17,322,000
Noncontrolling interests		7,899,000			6,602,000
Total equity		26,628,000			23,924,000
Total liabilities and equity	$	46,744,000		$	38,166,000

See notes to consolidated financial statements

F- 2

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F LANIGAN’S E NTERPRISES, I NC. AND S UBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

Years Ended September 29, 2012 and October 1, 2011

(rounded to the nearest thousandth, except per share amounts)

	2012			2011
Revenues:
Restaurant food sales	$	48,943,000		$	45,951,000
Restaurant beverage sales		13,255,000			11,814,000
Package goods sales		13,214,000			13,141,000
Franchise-related revenues		1,133,000			1,023,000
Owner's fee		157,000			161,000
Other operating income		158,000			219,000
Rental income		475,000			—
		77,335,000			72,309,000
Costs and Expenses:
Cost of merchandise sold:
Restaurants and lounges		22,139,000			19,908,000
Package goods		9,112,000			8,760,000
Payroll and related costs		23,354,000			21,712,000
Occupancy costs		4,328,000			4,264,000
Selling, general and administrative expenses		14,831,000			14,538,000
		73,764,000			69,182,000

Income from Operations		3,571,000			3,127,000

Other Income (Expense):
Interest expense		(806,000	)		(615,000	)
Interest and other income		73,000			367,000
		(733,000	)		(248,000	)

Income Before Provision for Income Taxes		2,838,000			2,879,000

Provision for Income Taxes		(765,000	)		(598,000	)

Net Income		2,073,000			2,281,000

Less: Net Income Attributable to Noncontrolling Interests		(660,000	)		(832,000	)

Net Income Attributable to Stockholders	$	1,413,000		$	1,449,000



Net Income Per Common Share:
Basic and Diluted	$	0.76		$	0.78

Weighted Average Shares and Equivalent Shares Outstanding:
Basic and Diluted		1,860,231			1,861,103

See notes to consolidated financial statements

F- 3

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F LANIGAN’S E NTERPRISES, I NC. AND S UBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

YEARS ENDED SEPTEMBER 29, 2012 AND OCTOBER 1, 2011

(rounded to nearest thousandth, except share amounts)

	Common Stock				Capital in					Treasury Stock
					Excess of		Retained								Noncontrolling
	Shares		Amount		Par Value		Earnings			Shares		Amount			Interests			Total
Balance, October 2, 2010		4,197,642	$	420,000	$	6,240,000	$	15,456,000			2,335,727	$	(6,049,000	)	$	7,456,000		$	23,523,000

Year Ended October 1, 2011:
Net income		—		—		—		1,449,000			—		—			832,000			2,281,000
Purchase of treasury stock		—		—		—		—			868		(6,000	)		—			(6,000	)
Distributions to noncontrolling interests		—		—		—		—			—		—			(1,669,000	)		(1,669,000	)
Purchase of noncontrolling interests		—		—		—		—			—		—			(17,000	)		(17,000	)
Dividends paid		—		—		—		(188,000	)		—		—			—			(188,000	)
Balance, October 1, 2011		4,197,642		420,000		6,240,000		16,717,000			2,336,595		(6,055,000	)		6,602,000			23,924,000

Year Ended September 29, 2012:
Net income		—		—		—		1,413,000			—		—			660,000			2,073,000
Purchase of treasury stock		—		—		—		—			800		(6,000	)		—			(6,000	)
Distributions to noncontrolling interests		—		—		—		—			—		—			(1,255,000	)		(1,255,000	)
Contributions by noncontrolling interests		—		—		—		—			—		—			1,895,000			1,895,000
Purchase of noncontrolling interests		—		—		—		—			—		—			(3,000	)		(3,000	)
Balance, September 29, 2012		4,197,642	$	420,000	$	6,240,000	$	18,130,000			2,337,395	$	(6,061,000	)	$	7,899,000		$	26,628,000

See notes to consolidated financial statements

F- 4

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F LANIGAN’S E NTERPRISES, I NC. AND S UBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED SEPTEMBER 29, 2012 AND OCTOBER 1, 2011

(rounded to nearest thousandth)

	2012			2011
Cash Flows from Operating Activities:
Net income	$	2,073,000		$	2,281,000
Adjustments to reconcile net income to net cash and cash equivalents provided by
operating activities:
Depreciation and amortization		2,377,000			2,358,000
Amortization of leasehold interests		151,000			212,000
Loss on abandonment of property and equipment		66,000			61,000
Gain on sale of guaranteed leasehold		—			(231,000	)
Deferred income taxes		(70,000	)		(42,000	)
Deferred rent		(17,000	)		(26,000	)
Income from unconsolidated limited partnership		(45,000	)		(12,000	)
Recognition of deferred revenues		—			(7,000	)
Changes in operating assets and liabilities:
(Increase) decrease in:
Due from franchisees		—			2,000
Other receivables		(55,000	)		33,000
Prepaid income taxes		219,000			(219,000	)
Inventories		(331,000	)		(200,000	)
Prepaid expenses		422,000			749,000
Other assets		193,000			(387,000	)
Increase (decrease) in:
Accounts payable and accrued expenses		591,000			66,000
Income taxes payable		39,000			(269,000	)
Due to franchisees		599,000			(17,000	)
Net cash and cash equivalents provided by operating activities		6,212,000			4,352,000

Cash Flows from Investing Activities:
Collections on notes and mortgages receivable		—			8,000
Purchase of property and equipment		(1,670,000	)		(4,436,000	)
Deposit on purchase of fixed assets		(315,000	)		(36,000	)
Proceeds from sale of fixed assets		39,000			66,000
Proceeds from sale of guaranteed leasehold		—			231,000
Distributions from unconsolidated limited partnership		14,000			12,000
Purchase of leasehold interest		(95,000	)		—
Purchase of limited partnership interests		(3,000	)		(17,000	)
Net cash and cash equivalents used in investing activities		(2,030,000	)		(4,172,000	)

Cash Flows from Financing Activities:
Payments of long-term debt		(1,859,000	)		(1,350,000	)
Proceeds from long-term debt		—			850,000
Dividends paid		—			(188,000	)
Purchase of treasury stock		(6,000	)		(6,000	)
Distributions to noncontrolling interests		(1,255,000	)		(1,669,000	)
Contributions from noncontrolling interests		1,895,000			—
Net cash and cash equivalents used in financing activities		(1,225,000	)		(2,363,000	)

Net Increase (Decrease) in Cash and Cash Equivalents		2,957,000			(2,183,000	)

Cash and Cash Equivalents, Beginning		4,264,000			6,447,000

Cash and Cash Equivalents, Ending	$	7,221,000		$	4,264,000

See notes to consolidated financial statements

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F LANIGAN’S E NTERPRISES, I NC. AND S UBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Continued)

(rounded to nearest thousandth)

	2012		2011
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest	$	806,000	$	615,000
Income taxes	$	577,000	$	1,128,000

Supplemental Disclosure for Non-Cash Investing and Financing Activities:
Financing of insurance contracts	$	421,000	$	1,082,000
Purchase deposits transferred to property and equipment	$	30,000	$	28,000
Purchase of vehicles in exchange for debt	$	—	$	122,000
Purchase of property in exchange for debt	$	6,100,000	$	—

See notes to consolidated financial statements

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NOTE 1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Capitalization

The Company was incorporated in 1959 and operates in South Florida as a chain of full-service restaurants and package liquor stores. Restaurant food and beverage sales make up the majority of our total revenue. At September 29, 2012, we (i) operated 24 units, (excluding the adult entertainment club referenced in (ii) below), consisting of restaurants, package liquor stores and combination restaurants/package liquor stores that we either own or have operational control over and partial ownership in; (ii) own but do not operate one adult entertainment club; and (iii) franchise an additional five units, consisting of two restaurants (one of which we operate), and three combination restaurants/package liquor stores. With the exception of one restaurant we operate under the name “The Whale’s Rib”, and in which we do not have an ownership interest, all of the restaurants operate under our service mark “Flanigan’s Seafood Bar and Grill” and all of the package liquor stores operate under our service mark “Big Daddy’s Liquors”.

The Company’s Articles of Incorporation, as amended, authorize us to issue and have outstanding at any one time 5,000,000 shares of common stock at a par value of $0.10 per share.

We operate under a 52-53 week year ending the Saturday closest to September 30. Our fiscal years 2012 and 2011 are each comprised of a 52-week period.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and our subsidiaries, all of which are wholly owned, and the accounts of the nine limited partnerships in which we act as general partner and have controlling interests. All significant intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The consolidated financial statements and related disclosures are prepared in conformity with accounting principles generally accepted in the U.S. We are required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and revenue and expenses during the period reported. These estimates include assessing the estimated useful lives of tangible assets and the recognition of deferred tax assets and liabilities. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in our consolidated financial statements in the period they are determined to be necessary. Although these estimates are based on our knowledge of current events and actions we may undertake in the future, they may ultimately differ from actual results.

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NOTE 1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Cash and Cash Equivalents

We consider all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents.

Inventories

Our inventories, which consist primarily of package liquor products, are stated at the lower of average cost or market.

Liquor Licenses

In accordance with the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 350, “ Intangibles - Goodwill and Other ”, our liquor licenses are indefinite lived assets, which are not being amortized, but are tested annually for impairment (see Note 5).

Property and Equipment

Our property and equipment are stated at cost. We capitalize expenditures for major improvements and depreciation commences when the assets are placed in service. We record depreciation on a straight-line basis over the estimated useful lives of the respective assets. We charge maintenance and repairs, which do not improve or extend the life of the respective assets, to expense as incurred. When we dispose of assets, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in income.

Our estimated useful lives range from three to five years for vehicles, and three to seven years for furniture and equipment. Leasehold improvements are currently being amortized over the shorter of the life of the lease or the life of the asset up to a maximum of 20 years. The building and building improvements of our corporate offices in Fort Lauderdale, Florida; our combination restaurant and package liquor stores in Hallandale, Florida, Hollywood, Florida and North Miami, Florida; our restaurant in Fort Lauderdale, Florida; and our shopping center in Miami, Florida, all of which we own, are being depreciated over forty years.

Leasehold Interests

Our purchase of an existing restaurant location usually includes a lease to the business premises. As a result, a portion of the purchase price is allocated to the leasehold interest. We capitalize the cost of the leasehold interest and amortization commences upon our assumption of the lease. We amortize leasehold interests on a straight line basis over the remaining term of the lease.

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NOTE 1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Investment in Limited Partnerships

We use the consolidation method of accounting when we have a controlling interest in other companies and limited partnerships. We use the equity method of accounting when we have an interest between twenty to fifty percent in other companies and limited partnerships, but do not exercise control. Under the equity method, our original investments are recorded at cost and are adjusted for our share of undistributed earnings or losses. All significant intercompany profits are eliminated.

Concentrations of Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk are cash and cash equivalents.

Cash and Cash Equivalents

We maintain deposit balances with financial institutions which balances may, from time to time, exceed the federally insured limits which are $250,000 for interest bearing accounts. In addition, from December 31, 2010 through December 31, 2012, our financial banking institutions participate in the Temporary Liquidity Guarantee Program, which program provides FDIC coverage on the full balance of non-interest bearing deposits, but effective January 1, 2013 the balance of our non-interest bearing deposits will no longer receive full FDIC insurance coverage. FDIC insurance coverage on non-interest bearing deposits will be limited to the standard $250,000 maximum deposit insurance amount. At September 29, 2012, we have no deposits in excess of federally insured limits. We have not experienced any losses in such accounts.

Major Supplier

Throughout our fiscal years 2012 and 2011, we purchased substantially all of our food products from one major supplier pursuant to a master distribution agreement which entitled us to receive certain purchase discounts, rebates and advertising allowances. We believe that several other alternative vendors are available, if necessary.

Revenue Recognition

We record revenues from normal recurring sales upon the sale of food and beverages and the sale of package liquor products. We report our sales net of sales tax. Continuing royalties, which are a percentage of net sales of franchised stores, are accrued as income when earned.

Pre-opening Costs

Our pre-opening costs are those typically associated with the opening of a new restaurant and generally include payroll costs associated with the “new restaurant openers” (a team of select

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NOTE 1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Pre-opening Costs (Continued)

employees who travel to new restaurants to ensure that our high standards for quality are met), rent and promotional costs. We expense pre-opening costs as incurred. During our fiscal year 2012, we reported losses of $107,000 primarily due to pre-opening costs associated with the new limited partnership restaurant in Miami, Florida. During our fiscal year 2011, we had no limited partnership restaurants under development and therefore no limited partnerships reported losses primarily due to pre-opening costs.

Advertising Costs

Our advertising costs are expensed as incurred. Advertising costs incurred during our fiscal years ended September 29, 2012 and October 1, 2011 were approximately $531,000 and $318,000 respectively.

General Liability Insurance

We have general liability insurance which incorporates a semi-self-insured plan under which we assume the full risk of the first $50,000 of exposure per occurrence, while the limited partnerships assume the full risk of the first $10,000 of exposure per occurrence. Our insurance carrier is responsible for $1,000,000 coverage per occurrence above our self-insured deductible, up to a maximum aggregate of $2,000,000 per year. During our fiscal years ended September 29, 2012 and October 1, 2011, we were able to purchase excess liability insurance, whereby our excess insurance carrier is responsible for $6,000,000 coverage above our primary general liability insurance coverage. With the exception of one (1) limited partnership which has higher general liability insurance coverage to comply with the terms of its lease for the business premises, we are un-insured against liability claims in excess of $7,000,000 per occurrence and in the aggregate.

Our general policy is to settle only those legitimate and reasonable claims asserted and to aggressively defend and go to trial, if necessary, on frivolous and unreasonable claims. Under our current liability insurance policy, any expense incurred by us in defending a claim, including adjusters and attorney's fees, are a part of our $50,000 or $10,000, as applicable, self-insured retention.

Fair Value of Financial Instruments

The respective carrying value of certain of our on-balance-sheet financial instruments approximated their fair value. These instruments include cash and cash equivalents, other receivables, accounts payables, accrued expenses and debt. We have assumed carrying values to approximate fair values for those financial instruments, which are short-term in nature or are receivable or payable on demand. We estimated the fair value of debt based on current rates offered to us for debt of comparable maturities and similar collateral requirements.

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NOTE 1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Fair Value of Financial Instruments (continued)

In accordance with FASB ASC Topic 820-10-50-1, we utilized a valuation model to determine the fair value of our swap agreements. As the valuation models for the swap agreements were based upon observable inputs, they are classified as Level 2 (see Note 9).

Derivative Instruments

We account for derivative instruments in accordance with FASB ASC Topic 815-10-05-4, “ Accounting for Derivative Instruments and Hedging Activities” as amended, which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and hedging activities. In accordance with FASB ASC Topic 815-10-05-4, derivative instruments are recognized as assets or liabilities in the Company’s consolidated balance sheets and are measured at fair value. We recognized all changes in fair value through earnings unless the derivative is determined to be an effective hedge. We currently have two derivatives which we have designated as effective hedges (See Note 9).

Income Taxes

We account for our income taxes using FASB ASC Topic 740, “ Income Taxes ”, which requires the recognition of deferred tax liabilities and assets for expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

We adopted the provisions regarding Accounting for Uncertainty in Income Taxes, which require the recognition of a financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. We applied these changes to tax positions for our fiscal years ending September 29, 2012 and October 1, 2011. We had no material unrecognized tax benefits and no adjustments to our financial position, results of operations or cash flows were required. Generally, federal, state and local authorities may examine the Company’s tax returns for three years from the date of filing and the current and prior three years remain subject to examination as of September 29, 2012. We do not expect that unrecognized tax benefits will increase within the next twelve months. We recognize accrued interest and penalties related to uncertain tax positions as income tax expense.

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NOTE 1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Stock-Based Compensation

We follow FASB ASC Topic 718, “ Compensation – Stock Compensation ” to account for stock-based employee compensation, which generally requires, among other things that all employee share-based compensation be measured using a fair value method and that resulting compensation costs be recognized in the consolidated financial statements. We had no unvested stock options as of January 1, 2006 and granted no stock options subsequent thereto, including our fiscal years 2012 and 2011, so there is no compensation expense recorded in our consolidated financial statements for our fiscal years 2012 or 2011.

Long-Lived Assets

We continually evaluate whether events and circumstances have occurred that may warrant revision of the estimated life of our intangible and other long-lived assets or whether the remaining balance of our intangible and other long-lived assets should be evaluated for possible impairment. If and when such factors, events or circumstances indicate that intangible or other long-lived assets should be evaluated for possible impairment, we will determine the fair value of the asset by making an estimate of expected future cash flows over the remaining lives of the respective assets and compare that fair value with the carrying value of the assets in measuring their recoverability. In determining the expected future cash flows, the assets will be grouped at the lowest level for which there are cash flows, at the individual store level.

Earnings Per Share

We follow FASB ASC Topic 260 - “ Earnings per Share .” This section provides for the calculation of basic and diluted earnings per share. Basic earnings per share includes no dilution and is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share assumes the exercise of options granted if the weighted average market price exceeds the exercise price. Earnings per share are computed by dividing income available to common stockholders by the basic and diluted weighted average number of common shares.

Recently Adopted and Recently Issued Accounting Pronouncements

Adopted

There were no recently adopted accounting pronouncements during our fiscal year 2012 that had a material impact on our consolidated financial statements.

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NOTE 1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recently Adopted and Recently Issued Accounting Pronouncements (Continued)

Issued

In May 2011, the FASB issued an update to ASC Topic 820 - Fair Value Measurements and Disclosures . This update provides guidance on how fair value accounting should be applied where its use is already required or permitted by other standards and does not extend the use of fair value accounting. The Company will adopt this guidance effective in fiscal year 2013 as required and does not expect the adoption to have a significant impact on our consolidated financial statements.

NOTE 2.

PROPERTY AND EQUIPMENT

	2012		2011

Furniture and equipment	$	10,269,000	$	10,004,000
Leasehold improvements		18,905,000		18,035,000
Land and land improvements		12,030,000		8,260,000
Building and improvements		10,557,000		8,049,000
Vehicles		751,000		726,000
		52,512,000		45,074,000
Less accumulated depreciation and amortization		20,917,000		18,892,000
	$	31,595,000	$	26,182,000

Depreciation and amortization expense for the fiscal years ended September 29, 2012 and October 1, 2011 was approximately $2,377,000 and $2,358,000, respectively.

NOTE 3.

LEASEHOLD INTERESTS

	2012		2011

Leasehold interests, at cost	$	3,024,000	$	2,929,000
Less accumulated amortization		1,847,000		1,696,000
	$	1,177,000	$	1,233,000

Future leasehold amortization as of September 29, 2012 is as follows:


2013	$	134,000
2014		134,000
2015		128,000
2016		122,000
2017		122,000
Thereafter		537,000
Total	$	1,177,000

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NOTE 4.

INVESTMENTS IN LIMITED PARTNERSHIPS

We have invested with others (some of whom are or are affiliated with our officers and directors) in eight limited partnerships which own and operate eight South Florida based restaurants under our service mark “Flanigan’s Seafood Bar and Grill”. We have also invested with others, (some of whom are or are affiliated with our officers and directors), in one limited partnership which owns and renovated a location in Miami, Florida which opened for business under our service mark “Flanigan’s Seafood Bar and Grill” on December 27, 2012. During the fourth quarter of our fiscal year 2011, we purchased from our limited partnership, the operating assets of the restaurant located at 950 S. Federal Highway, Stuart, Martin County, Florida and on July 31, 2011 this restaurant began operating as a Company-owned restaurant. In addition to being a limited partner in these limited partnerships, we are the sole general partner of all of these limited partnerships and manage and control the operations of the restaurants except for the restaurant located in Fort Lauderdale, Florida where we only hold a limited partnership interest.

Generally, the terms of the limited partnership agreements provide that until the investors’ cash investment in a limited partnership including any cash invested by us is returned in full, the limited partnership distributes to the investors annually out of available cash from the operation of the restaurant, as a return of capital, up to 25% of the cash invested in the limited partnership, with no management fee paid to us. Any available cash in excess of the 25% of the cash invested in the limited partnership distributed to the investors annually, is paid one-half (½) to us as a management fee and one-half (1/2) to the investors (including us) prorata based upon the investors’ investment, as a return of capital. Once all of the investors, (including us), have received, in full, amounts equal to their cash invested, an annual management fee becomes payable to us equal to one-half (½) of cash available to be distributed, with the other one half (½) of available cash distributed to the investors (including us) as a profit distribution, pro-rata based upon the investors’ investment.

As of September 29, 2012, limited partnerships owning three (3) restaurants, (Surfside, Florida, Kendall, Florida and West Miami, Florida locations), have returned all cash invested and we receive an annual management fee equal to one-half (½) of the cash available for distribution by the limited partnership. In addition to our receipt of distributable amounts from the limited partnerships, we receive a fee equal to 3% of gross sales for use of our “Flanigan’s Seafood Bar and Grill” service mark, which use is authorized only while we act as general partner. This 3% fee is “earned” when sales are made by the limited partnerships and is paid weekly, in arrears. The new restaurant developed in Miami, Florida uses the same financial arrangement.

Surfside, Florida

We are the sole general partner and a 45% limited partner in this limited partnership which has owned and operated a restaurant in Surfside, Florida under our “Flanigan’s Seafood Bar and

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NOTE 4.

INVESTMENTS IN LIMITED PARTNERSHIPS (Continued)

Surfside, Florida (continued)

Grill” service mark since March 6, 1998. 34.9% of the remaining limited partnership interest is owned by persons who are either our officers, directors or their family members. This limited partnership has returned to its investors all of their initial cash invested and we receive an annual management fee equal to one-half (½) of the cash available for distribution by the limited partnership. This entity is consolidated in the accompanying financial statements.

Kendall, Florida

West Miami, Florida

Weston, Florida

We are the sole general partner and a 30% limited partner in this limited partnership which has owned and operated a restaurant in Weston, Florida under our “Flanigan’s Seafood Bar and Grill” service mark since January 20, 2003. 35.1% of the remaining limited partnership interest is owned by persons who are either our officers, directors or their family members. As of the end of our fiscal year 2012, this limited partnership has returned to its investors approximately 81.25% of their initial cash invested. During our fiscal year 2012, no distributions were made to limited partners as this limited partnership had limited positive cash flow generated by this restaurant. This entity is consolidated in the accompanying financial statements.

Wellington, Florida

We are the sole general partner and a 28% limited partner in this limited partnership which has owned and operated a restaurant in Wellington, Florida under our “Flanigan’s Seafood Bar and

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NOTE 4.

INVESTMENTS IN LIMITED PARTNERSHIPS (Continued)

Wellington, Florida (continued)

Grill” service mark since May 27, 2005. 25.7% of the remaining limited partnership interest is owned by persons who are either our officers, directors or their family members. As of the end of our fiscal year 2012, this limited partnership has returned to its investors approximately 56% of their initial cash invested, increased from approximately 52% as of the end of our fiscal year 2011. This entity is consolidated in the accompanying financial statements.

Pinecrest, Florida

Pembroke Pines, Florida

Davie, Florida

Fort Lauderdale, Florida

A corporation, owned by a member of our Board of Directors, acts as sole general partner of a limited partnership which has owned and operated a restaurant in Fort Lauderdale, Florida under our “Flanigan’s Seafood Bar and Grill” service mark since April 1, 1997. We have a 25% limited

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NOTE 4.

INVESTMENTS IN LIMITED PARTNERSHIPS (Continued)

Fort Lauderdale, Florida (continued)

partnership interest in this limited partnership. 60.1% of the remaining limited partnership interest is owned by persons who are either our officers, directors or their family members. We have a franchise arrangement with this limited partnership. For accounting purposes, we do not consolidate the operations of this limited partnership into our operations. This entity is reported using the equity method in the accompanying consolidated financial statements. The following is a summary of condensed unaudited financial information pertaining to our limited partnership investment in Fort Lauderdale, Florida:

	2012		2011
Financial Position:
Current assets	$	277,000	$	150,000
Non-current assets		439,000		452,000
Current liabilities		141,000		152,000

Operating Results:
Revenues		2,641,000		2,401,000
Gross profit		1,751,000		1,605,000
Net income		181,000		50,000

NOTE 5.

LIQUOR LICENSES

Liquor licenses, which are indefinite lived assets, are tested for impairment in September of each of our fiscal years. The fair value of liquor licenses at September 29, 2012, exceeded the carrying amount; therefore, we recognized no impairment loss. The fair value of the liquor licenses was evaluated by comparing the carrying value to recent sales for similar liquor licenses in the County issued. At September 29, 2012 and October 1, 2011, the total carrying amount of our liquor licenses was $470,000. We acquired no liquor licenses in our fiscal years 2012 or 2011.

NOTE 6.

INCOME TAXES

The components of our provision for income taxes for our fiscal years 2012 and 2011 are as follows:

	2012			2011
Current:
Federal	$	660,000		$	502,000
State		175,000			138,000
		835,000			640,000
Deferred:
Federal		(63,000	)		(36,000	)
State		(7,000	)		(6,000	)
		(70,000	)		(42,000	)
	$	765,000		$	598,000

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NOTE 6.

INCOME TAXES (Continued)

A reconciliation of income tax computed at the statutory federal rate to income tax expense is as follows:

	2012			2011

Tax provision at the statutory rate of 34%	$	741,000		$	617,000
State income taxes, net of federal income tax		94,000			85,000
FICA tip credit		(227,000	)		(200,000	)
Tax effect of consolidation elimination entry		—			76,000
True up adjustment		110,000			—
Other permanent items		47,000			20,000
	$	765,000		$	598,000

We have deferred tax assets which arise primarily due to depreciation recorded at different rates for tax and book purposes offset by cost basis differences in depreciable assets due to the deferral of the recognition of insurance recoveries on casualty losses for tax purposes, investments in and management fees paid by limited partnerships, accruals for potential uninsured claims, bonuses accrued for book purposes but not paid within two and a half months for tax purposes, the capitalization of certain inventory costs for tax purposes not recognized for financial reporting purposes, the recognition of revenue from gift cards not redeemed within twelve months of issuance, allowances for uncollectable receivables, unfunded limited retirement commitments and tax credit carryforwards generated as a result of the application of alternative minimum taxes.

The components of our deferred tax assets at September 29, 2012 and October 1, 2011 were as follows:

	2012		2011

Current:
Reversal of aged payables	$	27,000	$	27,000
Capitalized inventory costs		25,000		22,000
Accrued bonuses		188,000		164,000
Accruals for potential uninsured claims		30,000		19,000
Gift cards		72,000		48,000
Limited partnership management fees		29,000		74,000
	$	371,000	$	354,000
Long-Term:
Book/tax differences in property and equipment	$	540,000	$	459,000
Limited partnership investments		386,000		418,000
Accrued limited retirement		35,000		31,000
	$	961,000	$	908,000

NOTE 7.

DEBT

Long-Term Debt

2012

2011

Mortgage payable to lender, secured by a first mortgage on real property and improvements, bearing interest at BBA LIBOR – 1 Month +2.25%, (2.46% at September 29, 2012), but with $3,750,000 of the principal amount fixed at 4.51% pursuant to a swap agreement, amortized over 20 years, payable in monthly installments of principal and interest of approximately $23,700, and our current monthly payment of principal and interest as to that portion of the principal amount not fixed by the interest rate swap agreement, ($750,000), is payable at BBA LIBOR - 1 month, + 2.25% interest rate, (2.46% as of September 29, 2012). The entire principal balance and all accrued but unpaid interest is due on December 1, 2019.

4,331,000

—

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Mortgage payable to lender, secured by a first mortgage on real property and improvements, bearing interest at 7.5% payable in monthly installments of principal and interest of $28,600, with a balloon payment of approximately $2,833,000 in October, 2013.	2,958,000	3,070,000
Term loan payable to lender, secured by a blanket loan on all Company assets, bearing interest at BBA LIBOR – 1 Month + 2.25%, (2.46% at September 29, 2012), but fixed at 3.43%, pursuant to a swap agreement, payable in monthly installments of principal and interest of approximately $38,000, payable interest only for 3 months and then fully amortized over 45 months, with the final payment due December 1, 2015.	1,387,000	—
Term loan payable to lender, secured by a blanket lien on all Company assets and a second mortgage on a building, bearing interest at BBA LIBOR +3.25%, (3.46% at September 29, 2012), but fixed at 4.55%, pursuant to a swap agreement, payable in monthly installments of principal and interest of approximately $50,000, fully amortized over 36 months, with the final payment due August, 2013.	508,000	1,038,000
Mortgage payable to a related third party, secured by first mortgage on real property and improvements, bearing interest at 10%, amortized over 15 years, payable in monthly installments of principal and interest of approximately $10,800, with a balloon payment of approximately $658,000 due in September, 2018.	939,000	972,000
Mortgage payable to lender, secured by a first mortgage on real property and improvements, bearing interest at BBA LIBOR +2.25%, (2.46% at September 29, 2012), but fixed at 5.11% pursuant to a swap agreement, amortized over 20 years, payable in monthly installments of principal and interest of approximately $4,600, with a balloon payment of approximately $720,000 due in August, 2017.	879,000	907,000

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Mortgage payable to unrelated third party, secured by first mortgage on real property and improvements, bearing interest at 8½%, amortized over 15 years, payable in monthly installments of principal and interest of approximately $8,400, with a balloon payment of approximately $528,000 in November, 2017.		760,000		794,000
Mortgage payable to unrelated third party, secured by first mortgage on real property and improvements, bearing interest at 10.0%; amortized over 30 years, payable in monthly installments of principal and interest of approximately $4,000, with a balloon payment of approximately $413,000 in May, 2017.		433,000		437,000
Financed insurance premiums, secured by all insurance policies, bearing interest between 2.99% and 4.89%, payable in monthly installments of principal and interest in the aggregate amount of $24,000 a month through June 1, 2013.		333,000		573,000
Mortgage payable to related third party, secured by first mortgage on real property and improvements, bearing interest at 10%, amortized over 15 years, payable in monthly installments of principal and interest of approximately $9,100, with a balloon payment of approximately $555,000 due in January, 2019.		806,000		833,000

Other		84,000		133,000
		13,418,000		8,757,000
Less current portion		1,732,000		1,151,000
	$	11,686,000	$	7,606,000

Long-term debt at September 29, 2012 matures as follows:

2013		1,732,000
2014		3,729,000
2015		828,000
2016		513,000
2017		1,541,000
Thereafter		5,075,000
	$	13,418,000

As of September 29, 2012, we are in compliance with the covenants of all loans with our lender.

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NOTE 8.

COMMITMENTS, CONTINGENCIES AND OTHER MATTERS

Legal Matters

We are a party to various claims, legal actions and complaints arising in the ordinary course of our business. It is our opinion that all such matters are without merit or involve such amounts that an unfavorable disposition would not have a material adverse effect on our financial position or results of operations.

Leases

We lease a substantial portion of the land and buildings used in our operations under leases with initial terms expiring between 2013 and 2049. Renewal options are available on many of our leases. Most of our leases are fixed rent agreements. For one Company-owned restaurant/package liquor store combination unit, lease rental is subject to sales overrides ranging from 3% to 4% of annual sales in excess of established amounts. For another Company-owned restaurant, lease rental is subject to sales overrides of 7.3% of annual sales in excess of the base rent paid. For five limited partnership restaurants, lease rentals are subject to sales overrides ranging from 2% to 5.5% of annual sales in excess of the base rent paid. We recognize rent expense on a straight line basis over the term of the lease and percentage rent as incurred.

We have a ground lease for an out parcel in Hollywood, Florida where we constructed a 4,120 square foot stand-alone building, one-half (1/2) of which is used by us for the operation of our Company-owned package liquor store and the other one-half (1/2) of which is subleased to an unrelated third party as retail space. Rent for the retail space commenced January 1, 2005, and we generated approximately $54,000 and $57,000 of revenue from this source during our fiscal years ended September 29, 2012 and October 1, 2011, respectively. Total future minimum sublease payments under the non-cancelable sublease are $137,000, including Florida sales tax (currently 6%).

Future minimum lease payments, including Florida sales tax (currently 6% to 7%) under our non-cancelable operating leases as of September 29, 2012 are as follows:

2013	$	2,642,000
2014		2,481,000
2015		2,206,000
2016		1,840,000
2017		1,582,000
Thereafter		4,373,000
Total	$	15,124,000

Total rent expense for all of our operating leases was approximately $2,922,000 and $2,980,000 in our fiscal years 2012 and 2011, respectively, and is included in “Occupancy costs” in our accompanying consolidated statements of income. This total rent expense is comprised of the following:

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NOTE 8.

COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)

Leases (Continued)

	2012		2011

Minimum Base Rent	$	2,451,000	$	2,537,000
Contingent Percentage Rent		471,000		443,000
Total	$	2,922,000	$	2,980,000

We guarantee various leases for franchisees and stores sold in prior years. During the second quarter of our fiscal year 2011, we sold our interest, as guarantor, of a nine (9) year leasehold interest in premises we do not currently use in our operations to an unrelated third party. The lease for the location was terminated, thereby also terminating our guaranty of the leasehold interest. Remaining rental payments required under these leases total approximately $29,000.

We account for such lease guarantees in accordance with FASB ASC Topic 460, “ Guarantees ”. Under that standard, we would be required to recognize the fair value of guarantees issued or modified after December 31, 2002, for non-contingent guarantee obligations, and also a liability for contingent guarantee obligations based on the probability that the guaranteed party will not perform under the contractual terms of the guaranty agreement.

We do not believe it is probable that we will be required to perform under the remaining lease guarantees and therefore, no liability has been accrued in our consolidated financial statements.

Purchase Commitments

In order to fix the cost and ensure adequate supply of baby back ribs for our restaurants during calendar year 2013, on September 19, 2012, we entered into a purchase agreement with a new rib supplier, whereby we agreed to purchase approximately $3,800,000 of baby back ribs from this vendor at a fixed cost. We contract for the purchase of baby back ribs on an annual basis to fix the cost and ensure adequate supply for the calendar year. We anticipate purchasing all of our rib supply from this vendor, but we believe that several other alternative vendors are available, if necessary.

Franchise Program

At September 29, 2012 and October 1, 2011, we were the franchisor of five units under franchise agreements. Of the five franchised stores, three are combination restaurant/package liquor stores and two are restaurants (one of which we operate). During the fourth quarter of our fiscal year ended 2012, a franchised package liquor store located in Deerfield Beach, Florida, franchised to members of the family of our Chairman of the Board, officers and/or directors, with our consent, ceased operations in order to permit expanded operations of the jointly operated restaurant at the location. Three franchised stores are owned and operated by related parties. Under the franchise agreements, we provide guidance, advice and management assistance to the franchisees. In addition and for an additional annual fee of approximately $25,000, we also

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NOTE 8.

COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)

Franchise Program (Continued)

act as fiscal agent for the franchisees whereby we collect all revenues and pay all expenses and distributions. We also, from time to time, advance funds on behalf of the franchisees for the cost of renovations. The resulting amounts receivable from and payable to these franchisees are reflected in the accompanying consolidated balance sheet as either an asset or a liability. We also agree to sponsor and manage cooperative buying groups on behalf of the franchisees for the purchase of inventory. The franchise agreements provide for royalties to us of approximately 3% of gross restaurant sales and 1% of gross package liquor sales. We are not currently offering or accepting new franchises.

Employment Agreement/Bonuses

As of September 29 2012 and October 1, 2011, we had no employment agreements.

Our Board of Directors approved an annual performance bonus, with 14% of the corporate pre-tax net income, plus or minus non-recurring items, but before depreciation and amortization in excess of $650,000 paid to the Chief Executive Officer and 6% paid to other members of management. Bonuses for our fiscal years 2012 and 2011 amounted to approximately $739,000 and $647,000, respectively.

Our Board of Directors also approved an annual performance bonus, with 5% of the pre-tax net income before depreciation and amortization from our restaurants in excess of $1,875,000 and our share of the pre-tax net income before depreciation and amortization from the restaurants owned by the limited partnerships paid to the Chief Operating Officer and 5% paid to the Chief Financial Officer. Bonuses for our fiscal years 2012 and 2011 amounted to approximately $460,000 and $392,000, respectively.

Our Board of Directors approved an annual performance bonus, with 3% of the pre-tax net income before depreciation and amortization from the package liquor stores paid to the Vice President of Package Operations. Bonuses for our fiscal years 2012 and 2011 amounted to approximately $33,000 and $37,000, respectively.

Management Agreements

Atlanta, Georgia

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NOTE 8.

COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)

Management Agreements (Continued)

Deerfield Beach, Florida

Since January 2006, we have managed “The Whale’s Rib”, a casual dining restaurant located in Deerfield Beach, Florida, pursuant to a management agreement. We paid $500,000 in exchange for our rights to manage this restaurant. The management agreement is being amortized on a straight line basis over the life of the initial term of the agreement, ten (10) years. As of September 29, 2012 and October 1, 2011, the balance of our management agreement of $162,000 and $212,000 was included in other assets in the accompanying consolidated balance sheet. The restaurant is owned by a third party unaffiliated with us. In exchange for providing management, bookkeeping and related services, we receive one-half (½) of the net profit, if any, from the operation of the restaurant. During the third quarter of our fiscal year 2011, the term of the management agreement was extended through January 9, 2036. For our fiscal years ended September 29, 2012 and October 1, 2011, we generated $320,000 and $250,000 of revenue, respectively, from providing these management services. As of September 29, 2012, we have generated revenue in excess of the purchase price of the management agreement.

NOTE 9.

FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS

As of September 29, 2012, we have fully adopted FASB (ASC) Topic 820, “ Fair Value Measurements and Disclosures ”, for financial assets and liabilities and for non-financial assets and liabilities that are recognized or disclosed at fair value on at least an annual basis. Topic 820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, we consider the principal or most advantageous market in which it would transact and consider assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions and risk of non-performance. Topic 820 establishes a fair market hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Topic 820 establishes three levels of inputs that may be used to measure fair value:

•

Level 1 Inputs – Unadjusted quoted prices in active markets for identical assets or liabilities.

•

Level 2 Inputs -- Inputs other than quoted prices included in Level 1 that are either directly or indirectly observable through correlation with market data. These include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and inputs to evaluation models or other pricing methodologies that do not require significant judgment because the inputs used in the model, such as interest rates and volatility, can be corroborated by readily observable market data.

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NOTE 9.

FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS (Continued)

•

Level 3 Inputs -- One or more significant inputs that are unobservable and supported by little or no market activity, and that reflect the use of significant management judgment. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, and significant management judgment or estimation.

Interest Rate Swap Agreements

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NOTE 9.

FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS (Continued)

2.25%, on the same amortizing notional principal amount. We determined that at September 29, 2012, the interest rate swap agreement is an effective hedging agreement and not material; and

NOTE 10.

COMMON STOCK

Treasury Stock

Purchase of Common Shares

Pursuant to a discretionary plan approved by the Board of Directors, during our fiscal year 2012, we purchased 800 shares of our common stock from the Joseph G. Flanigan Charitable Trust for a purchase price of $6,000. During our fiscal year 2011, we purchased 868 shares of our common stock for an aggregate purchase price of $6,000. Of the shares purchased, we purchased 800 shares of our common stock from the Joseph G. Flanigan Charitable Trust for $5,500, 18 shares of our common stock were purchased in a private transaction for $100 and 50 shares of our common stock from an employee for $400 in an off market transaction, which reflected an actual per share purchase price which was equal to the average per share market price on the date of purchase.

Sale of Common Shares

During our fiscal years 2012 and 2011, we did not sell any shares of our common stock.

Stock Options

We granted no options during our fiscal years 2012 and 2011. We have no options outstanding at September 29, 2012.

NOTE 11.

BUSINESS SEGMENTS

We operate principally in two reportable segments – package stores and restaurants. The operation of package stores consists of retail liquor sales and related items. Information concerning the revenues and operating income for our fiscal years ended 2012 and 2011, and identifiable assets for the two reportable segments in which we operate, are shown in the following table. Operating income is total revenue less cost of merchandise sold and operating expenses relative to each segment. In computing operating income, none of the following

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NOTE 11.

BUSINESS SEGMENTS (Continued)

items have been included: interest expense, other non-operating income and expense and income taxes. Identifiable assets by segment are those assets that are used in our operations in each segment. Corporate assets are principally cash and real property, improvements, furniture, equipment and vehicles used at our corporate headquarters. We do not have any operations outside of the United States and transactions between restaurants and package liquor stores are not material.

	2012			2011
Operating Revenues:
Restaurants	$	62,198,000		$	57,765,000
Package stores		13,214,000			13,141,000
Other revenues		1,923,000			1,403,000
Total operating revenues	$	77,335,000		$	72,309,000

Income from Operations Reconciled to Income before Income Taxes and Net Income Attributable to Noncontrolling Interests
Restaurants	$	5,269,000		$	4,245,000
Package stores		874,000			1,006,000
		6,143,000			5,251,000
Corporate expenses, net of other revenues		(2,572,000	)		(2,124,000	)
Income from Operations		3,571,000			3,127,000
Other Income		73,000			231,000
Net Income Attributable to Noncontrolling Interests		(660,000	)		(832,000	)
Interest expense, net of interest income		(806,000	)		(479,000	)
Income Before Income Taxes	$	2,178,000		$	2,047,000

Identifiable Assets:
Restaurants	$	22,133,000		$	22,543,000
Package store		4,952,000			4,045,000
		27,085,000			26,588,000
Corporate		19,659,000			11,578,000
Consolidated Totals	$	46,744,000		$	38,166,000

Capital Expenditures:
Restaurants	$	1,144,000		$	3,563,000
Package stores		101,000			577,000
		1,245,000			4,140,000
Corporate		6,555,000			446,000
Total Capital Expenditures	$	7,800,000		$	4,586,000

Depreciation and Amortization:
Restaurants	$	1,704,000		$	1,985,000
Package stores		388,000			228,000
		2,092,000			2,213,000
Corporate		436,000			357,000
Total Depreciation and Amortization	$	2,528,000		$	2,570,000

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NOTE 12.

QUARTERLY INFORMATION (UNAUDITED)

The following is a summary of our unaudited quarterly results of operations for the quarters in our fiscal years 2012 and 2011.

	Quarter Ended
	Dec. 31, 2011		March 31, 2012		June 30, 2012		Sept 29, 2012

Revenues	$	18,952,000	$	20,618,000	$	19,382,000	$	18,383,000
Income from operations		660,000		1,113,000		969,000		829,000
Net income attributable to stockholders		336,000		509,000		236,000		332,000
Net income per share – Basic		0.18		0.27		0.13		0.18
Net income per share – Diluted		0.18		0.27		0.13		0.18
Weighted average common
stock outstanding – basic		1,860,752		1,860,057		1,860,057		1,860,057
Weighted average common
stock outstanding – diluted		1,860,752		1,860,057		1,860,057		1,860,057

	Quarter Ended
	January 1, 2011		April 2, 2011		July 2, 2011		October 1, 2011

Revenues	$	17,788,000	$	19,164,000	$	18,120,000	$	17,237,000
Income from operations		668,000		1,207,000		822,000		430,000
Net income attributable to stockholders		350,000		735,000		345,000		19,000
Net income per share – Basic		0.19		0.39		0.19		0.01
Net income per share – Diluted		0.19		0.39		0.19		0.01
Weighted average common stock outstanding – basic		1,861,699		1,860,912		1,860,907		1,860,616
Weighted average common
stock outstanding – diluted		1,861,699		1,860,912		1,860,907		1,860,616

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Quarterly operating results are not necessarily representative of our operations for a full year for various reasons including the seasonal nature of both the restaurant and package store segments.

NOTE 13.

401(k) PLAN

Effective July 2004, we began sponsoring a 401(k) retirement plan covering substantially all employees who meet certain eligibility requirements. Employees may contribute elective deferrals to the plan up to amounts allowed under the Internal Revenue Code. We are not required to contribute to the plan but may make discretionary profit sharing and matching contributions. During our fiscal years 2012 and 2011, we made discretionary contributions of $23,000 and $24,000, respectively.

NOTE 14.

SUBSEQUENT EVENTS

(a)

Purchase of Real Property, (N. Miami, FL.):

(b)

Line of Credit

Subsequent to the end of our fiscal year 2012, we were in the process of finalizing on a $500,000 line of credit from a non affiliated third party lender, (the “Line of Credit”), to insure that we have adequate working capital and cash reserves after the purchase of the two parcels of property adjacent to the Company owned property where our combination package liquor store and restaurant located at 13205 Biscayne Boulevard, North Miami, Florida, (Store #20) operates. The Line of Credit bears interest at the floating rate of prime plus 1%. The entire principal balance and all accrued but unpaid interest is due in four months. We granted our lender a security interest in substantially all of our assets as collateral to secure our repayment obligations under our Line of Credit.

Subsequent events have been evaluated through the date these consolidated financial statements were issued. No events, other than the events described above, required disclosure.

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LIMITED PARTNERSHIP CERTIFICATE AND AGREEMENT

THIS LIMITED PARTNERSHIP CERTIFICATE AND AGREEMENT , (the “Agreement”), made and entered into this _ 20 ^th _ day of January, 2012, by and among FLANIGAN’S ENTERPRISES, INC. , a Florida corporation, (the “General Partner” ), and all other parties who shall execute this Agreement or any counterpart thereof, collectively, (the “Limited Partners” ). The Limited Partners, as constituted from time to time, and the General Partner are sometimes herein collectively referred to as the “Partners” .

W I T N E S S E T H :

WHEREAS , the Partners desire to form a limited partnership (the “Partnership” ) pursuant to the Uniform Limited Partnership Act of the State of Florida upon the terms and conditions hereinafter set forth;

NOW THEREFORE , intending to be legally bound hereby, the Partners agree as follows:

ARTICLE I

DEFINITIONS

The following terms used in this Agreement shall (unless otherwise expressly provided herein or unless the context clearly requires otherwise) have the following meanings:

1.1 Additional Capital Balance . The Additional Capital Contributions, if any, of the General Partner, as reduced from time to time by all cash distributions to such General Partner which, pursuant to the terms of this Agreement, are in reduction of the General Partner’s Additional Capital Balance, and as increased from time to time by any contributions of the General Partner which are Additional Capital Contributions.

1.2 Additional Capital Contributions . Any additional cash contributions of the General Partner to the capital of the Partnership pursuant to Section 3.5 hereof.

1.3 Agreement . This Limited Partnership Certificate and Agreement.

1.4 Capital Balance . The Initial Capital Contribution made by a Partner in cash and the fair market value of any contributions in kind, (as set forth in this Agreement), as reduced from time to time by all cash distributions to such Partner which, pursuant to the terms of this Agreement, are in reduction of a Partner’s Capital Balance.

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1.5 Capital Commitment . The Capital Commitment with respect to any Limited Partner is his obligation to contribute the aggregate amount to be paid for the Units (computed at the rate of $5,000.00 per Unit) subscribed for by him pursuant to his Subscription Agreement and set opposite his name on the signature page attached to this Agreement, and with respect to the General Partner, is its obligation to make its original Capital Contribution pursuant to Section 3.1 hereof.

1.6 Initial Capital Contribution . The Contribution made by each Partner pursuant to its Capital Commitment.

1.7 Code . The Internal Revenue Code of 1954, as amended.

1.8 General Partner . The General Partner is FLANIGAN’S ENTERPRISES, INC. or any successor general partner as provided herein.

1.9 General Partner’s Capital . The combined total Capital Balance and Additional Capital Balance of the General Partner.

1.10 Law . The Uniform Limited Partnership Act of the State of Florida in effect from time to time during the term hereof.

1.11 Limited Partner . The Limited Partners hereunder and any such persons admitted to the Partnership as substituted Limited Partners.

1.12 Limited Partners’ Capital . The total of the Capital Balance of all Limited Partners.

1.13 Limited Partner Percentage . In respect of any Limited Partner the percentage obtained by converting to a percentage the fraction having the Initial Capital Contribution of such Limited Partner as its numerator and having the Limited Partners’ Capital as its denominator.

1.14 Net Cash Flow . Net Cash Flow of the Partnership, with respect to a fiscal period, shall mean Net Income of the Partnership for such period, reduced by (i) any repayments of principal on loans of the Partnership, (excluding General Partner’s Loans, the principal amounts of which are payable out of Net Cash Flow as stated in Article VIII hereof), (ii) any capital expenditures and prepaid expenses to the extent not included in the determination of Net Income, (iii) any Net Sale Proceeds to the extent included in the determination of Net Income, and (iv) reasonable additions to a reserve, (as determined in the sole discretion of the General Partner); and increased by any receipts by the Partnership which are not included in the determination of Net Income.

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1.15 Net Income . Net Income of the Partnership with respect to any fiscal period shall mean the excess of the gross sales for such period over all operating expenses for such period, as those terms are defined herein, determined on an accrual basis and determined without regard to amounts deducted by the Partnership for cost recovery of tangible assets or amortization of capitalized or other capital accounts.

1.16 Net Loss . Net Loss of the Partnership with respect to any fiscal period shall mean that excess of all operating expenses for such period over the gross sales for such period, as those terms are defined herein, determined on an accrual basis and determined without regard to amounts deducted by the Partnership for cost recovery of tangible assets or amortization of capitalized expenditures or other capital accounts.

1.17 Net Sale Proceeds . The proceeds realized by the Partnership upon the sale, exchange or other disposition of all or any substantial part of the Partnership property, net of expenses incident to such sale, the payment of any Partnership indebtedness secured by or related to any such assets and satisfaction of any right of any creditor of the partnership (other than a Partner) to receive such proceeds.

1.18 Participation Percentage . Throughout the term of this Agreement, the Participation Percentage of the Limited Partners is fifty percent (50%) (allocated to each Limited Partner in proportion to his Limited Partnership Percentage) and the Participation Percentage of the General Partner is fifty percent (50%).

1.19 General Partner’s Loans . All amounts loaned by the General Partner to the Partnership pursuant to Section 3.5 hereof.

1.20 Subscription Agreement . The Instrument by which each prospective Limited Partner agrees to purchase Units.

1.21 Substitute Limited Partner . A person admitted to all of the rights of a Limited Partner who has died or assigned his interest in the Partnership, or in the case of a Limited Partner that is a partnership, joint venture, association, corporation or trust, that has been dissolved or assigned its interest in the Partnership.

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1.22 Unit . A Unit means an interest of a Limited Partner in the Limited Partners’ Capital of the Partnership with an original subscription value of $5,000.00.

ARTICLE II

THE LIMITED PARTNERSHIP

2.1 Formation of Partnership . The parties hereto agree to form and by execution of this Agreement do hereby enter into a limited partnership pursuant to Chapter 620, et seq ., of the Florida Statutes, entitled “Uniform Limited Partnership Act” ( “Law” ) which Law shall govern the rights and liabilities of the parties hereto, except as otherwise herein expressly stated.

2.2 Partnership Name . The name of the Partnership is CIC INVESTORS #90, LTD. The General Partner, in its sole discretion, may change the name of the Partnership at any time and from time to time. The General Partner and the Limited Partners hereto shall promptly execute and the General Partner shall file and record with the proper offices in each state, including any political subdivision thereof, in which the Partnership does, or elects to do, business and publish such certificates or other statements or instruments as are required by the Limited Partnership Law, Beverage Regulations, Fictitious Name Law, Assumed Name Law or any other similar statute in effect from time to time in such state or political subdivision in order to validly conduct the business of the Partnership therein as a limited partnership.

2.3 Character of Business and Purpose of the Partnership . The business and purpose of the Partnership shall be to own, renovate and operate a restaurant located at 9857 SW 40 ^th Street, Miami, Miami-Dade County, Florida and most recently operating as “LATIN CORNER SPORTS BAR AND GRILL” , (the “Business” ), but specifically excludes any interest of any kind in the property owned by the landlord.

2.4 Principal Place of Business . The principal place of business of the Partnership shall be at 5059 NE 18th Avenue, Fort Lauderdale, Florida 33334. The General Partner may change the principal place of business or establish such other place or places of business for the Partnership as it may, from time to time, deem necessary or appropriate, provided however, that the General Partner shall give the Limited Partners notice of any change of address of the principal place of business of the Partnership at least ten (10) days prior to any such change.

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2.5 Term of Partnership . The Partnership shall commence on the date that this Agreement has been filed in accordance with the provision of the Law and shall continue until the earlier of the following:

(i)

Failure of the Partners to have a liquor license issued for the Business by the Division of Alcoholic Beverages and Tobacco within one (1) year of the date of this Agreement; or

(ii)

Revocation of the liquor license for the Business by the Division of Alcoholic Beverage and Tobacco followed by the inability of the Partners, after the exercise of their best efforts, to cause such liquor license to be reinstated within a ninety (90) day period; or

(iii)

Dissolution or termination pursuant to the provisions of Article X of this Agreement.

2.6 Names and Residences of Partners .

A. The name and address of the General Partner is:

Flanigan’s Enterprises, Inc.

5059 NE 18th Avenue

Fort Lauderdale, Florida 33334

The names and places of residences of the Limited Partners are set forth on the signature pages attached hereto together with those persons who may, from time to time, be admitted by the General Partner as Substitute Limited Partners in accordance with the terms of this Agreement.

2.7 Nature of Partners’ Interests . The interests of the Partners in the Partnership shall be personal property for all purposes. All property owned by the Partnership, whether real or personal, tangible or intangible, shall be owned by the Partnership as an entity and no Partner, individually, shall have any ownership of such property.

2.8 Non-Partition . No Partner shall be entitled to seek partition of any Partnership property.

ARTICLE III

CAPITAL CONTRIBUTIONS;

ADDITIONAL CAPITAL CONTRIBUTIONS;

GENERAL PARTNER’S LOANS; AND

REIMBURSEMENT OF EXCESS CAPITAL CONTRIBUTION

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3.1 General Partner . The General Partner shall contribute to the Partnership cash in an amount equal to one percent (1%) of the total Initial Contributions of the Partners and other property as set opposite its name on the signature page attached to this Agreement.

3.2 Limited Partners . The Limited Partners’ Capital shall be measured in terms of Units and a Limited Partner shall contribute $5,000.00 for each Unit purchased. Each Limited Partner shall purchase a minimum of one (1) Unit. Each Limited Partner shall contribute to the Partnership as his Initial Capital Contribution an amount equal to the amount of his Capital Commitment as set forth in the Subscription Agreement executed by him and set opposite his name on the signature page attached to this Agreement. The amount of Capital Commitment shall be paid in cash by the Limited Partner upon execution and delivery of the Subscription Agreement.

3.3 Capital Accounts . The Partnership will maintain for each Partner an account to be designated “Capital Account”, to which will be added the Partner’s Initial Capital Contribution, Additional Capital Contributions and distributive share of the profits of the Partnership, and against which will be deducted the Partner’s distributive share of the losses of the Partnership and all distributions made to the Partner. A Partner’s Capital Account may, at any point in time, be the same as or different from such Partner’s Capital Balance and may have a negative balance resulting from the Partner’s share of distributions and losses in excess of the Partner’s Initial Capital Contribution and Additional Capital Contributions.

3.4 Use of Capital Contributions and Loans . The Initial Capital Contributions of the Partners, all proceeds of Partnership borrowings, and any Additional Capital Contributions or General Partner’s Loans made pursuant to this Agreement, shall be used to change and convert the business premises of the Business to the General Partner’s “Flanigan’s Seafood Bar and Grill” restaurant concept and as working capital.

3.5 Additional Capital Contributions and General Partner’s Loans .

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A. Other than as expressly set forth in this Article III, no Limited Partner shall be required or permitted to make any Additional Capital Contributions, Partner’s Loans, or other contributions, loans or advances to the Partnership; however, the General Partner may make, in its sole discretion, Additional Capital Contributions, Loans, or advances to the Partnership.

B. If the General Partner advances any funds to the Partnership after the date of this Agreement (except in the case of Additional Capital Contributions), such advances will be treated as General Partner’s Loans, will not increase the General Partner’s Participation Percentage, and the amount thereof will be a debt due from the Partnership to the General Partner, entitled to the priorities described in Sections 8.1 and 8.2 hereof, to be repaid with such interest as provided.

3.6 Withdrawal of Capital . Prior to the dissolution and liquidation of the Partnership, no Partner shall have the right, during the term of the Partnership, to require the return of all or any portion of his Initial Capital Contribution, except that distributions made in accordance with Article VIII may represent in whole or in part a return of capital. Upon any return of partnership capital this Agreement shall be amended as provided by the Law.

3.7 Interest on Capital Contributions . No interest shall be payable with respect to any capital contributed to the Partnership.

3.8 No Priority Among Limited Partners . No Limited Partner shall have any priority over any other Limited Partner as to the return of his Initial Capital Contribution or as to compensation by way of income or as to allocation of profits and losses or distributions of cash.

3.9 Excess Capital Contribution . In the event that the cost to change and convert the business premises of the Business, including both cash and the fair market value of any property contributed in kind, reasonable reserves and organizational costs hereof do not equal or exceed Two Million Dollars ($2,000,000.00), any excess shall be returned to the Limited Partners, pro-rata, as a partial refund of their Initial Capital Contribution. Upon any return of partnership capital, this Agreement shall be amended as required by Law.

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ARTICLE IV

LIMITED PARTNERS

4.1 Limited Liability of Limited Partners . No Limited Partner shall be liable for any of the losses, debts or obligations of the Partnership beyond the amount of his Capital Commitment or be required to contribute any capital beyond his Capital Commitment, or be required to lend any funds to the Partnership, except that a Limited Partner may be required by law to return any or all of that portion of his Initial Capital Contribution which has been distributed to him, with interest, if necessary to discharge Partnership liabilities to all creditors who extended credit or whose claims arose prior to such return of capital.

4.2 Restrictions on Limited Partners .

A. No Limited Partner shall participate in the management and control of the business of the Partnership, transact any business for the Partnership, or attempt to do so; and

B. No Limited Partner shall have the power to represent, sign for or bind the General Partner or the Partnership.

4.3 Rights and Powers of Limited Partners .

A. Any Limited Partner may engage in or own an interest in any other business ventures which may be engaged in the same or similar businesses as that of the Partnership.

B. Each Limited Partner shall be entitled to participate in meetings regarding the affairs of the Partnership and to do all other things with respect to the business and affairs of the Partnership permitted by the Law.

4.4 Admission of Additional Limited Partners . No additional Limited Partners shall be admitted to the Partnership; provided however, that the General Partner may admit Substitute Limited Partners at any time pursuant to Article IX.

ARTICLE V

GENERAL PARTNER

5.1 Rights and Powers .

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A. The General Partner shall have the full and exclusive discretion, right and power to manage, control and operate the Partnership and to do all things necessary to operate the Business. The General Partner shall change and convert the existing facility to its “Flanigan’s Seafood Bar and Grill” restaurant concept. During the term of this Agreement and while the General Partner continues to act in the capacity of General Partner of the Partnership, and while the Partnership continues to pay a servicemark fee equal to three (3%) percent of gross sales from the Business, as provided in Section VII hereof, but not thereafter, the General Partner shall permit the Partnership to use the servicemark “Flanigan’s Seafood Bar and Grill” for the Business and shall supervise the day to day operation of the same under the same format and standards as used in its existing “Flanigan’s Seafood Bar and Grill” restaurants. The Business shall include exclusive management of the restaurant located within the business premises for the service of lunch and dinner each day.

B. The General Partner is specifically authorized and empowered, on behalf of the Partnership, and without any further consent of the Limited Partners, to do any act or execute any document or enter into any contract or any agreement of any nature necessary or desirable, in the sole discretion of the General Partner, in pursuance of the business and purposes of the Partnership, including but not limited to the operation of the Business. Without limiting the generality of the foregoing, and subject to the provisions of Section 5.2, the General Partner shall have the following rights and powers to act on behalf of the Partnership, which it may exercise at the cost, expense and risk of the Partnership:

(i)

Purchase such furniture, fixtures and equipment and make such leasehold improvements as are required by the General Partner for the renovation of the business premises of the Business.

(ii)

Place record title to, or the right to use, the property or other assets of the Partnership in the name or names of a nominee or nominees for any purpose convenient or beneficial to the Partnership.

(iii)

Execute contracts, leases, licenses, options to lease or purchase, rental agreements, concession agreements, use agreements and the like, of and with respect to Partnership property.

(iv)

Make elections under the tax laws of the United States or any state as to the treatment of Partnership income, gains, loss, deduction and credit, and as to all relevant matters.

(v)

Provide or contract for such management services as may be required for the operation of the Business, including but not limited to full payroll services, all accounting and bookkeeping services for the operation of the Business, as an expense of the Business, (including the preparation and forwarding of monthly sales tax returns, monthly liquor excise taxes and annual federal partnership returns), and prompt payment of all bills incurred in the normal operation of the Business.

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(vi)

Establish overall business policy and objectives.

(vii)

Provide overall executive supervision of operations of the Business.

(viii)

Generally supervise employees and others performing services for the benefit of and in the operation of the Business.

(ix)

Provide, advise and arrange for advertising, display and sales promotion of the Business.

(x)

Oversee the operation of the Business in the areas of management, sales and purchasing.

(xi)

Arrange for the supervision of the daily operations of the Business with responsibility for (1) hiring and firing employees and other service personnel, (2) salary administration and compensation policies, (3) incentive programs, (4) inventory purchase and control, (5) pricing of all goods and services, (6) business procedures, and (7) controlling daily operational expenses.

(xii)

Keep the Business insured against liability claims arising out of the operation of the restaurant, as an operating expense of the Business, with insurance coverage in an amount not less than One Million Dollars ($1,000.000.00), combined single limit, including liquor liability and products liability. The General Partner shall cause the Partnership, itself and the landlord of the business premises, to be named as additional insureds on the liability insurance policy and provide the Partnership, itself and the landlord of the business premises with Certificates of Insurance as evidence of its compliance with the provisions hereof.

(xiii)

Purchase and maintain worker’s compensation insurance for the employees of the Business, as an operating expense of the Business.

(xiv)

Keep the business premises reasonably insured against damage by fire and other casualty and maintain insurance in accordance with the provisions of the Lease for the business premises. The General Partner shall cause the Partnership, itself and the landlord of the business premises to be named as additional insureds on the property insurance policy and provide the Partnership, itself and the landlord of the business premises with Certificates of Insurance as evidence of its compliance with the provisions hereof.

(xv)

Keep the personal property, fixtures and equipment of the Business reasonably insured against damage by fire and other casualty, in an amount equal to its highest insurable value, with replacement cost endorsement, as an expense of the Business.

(xvi)

Keep the Business reasonably insured against loss of business due to fire and other casualty with business interruption insurance, in an amount to be determined by the General Partner, as an expense of the Business.

(xvii)

Arrange and pay all charges for telephone services, all utilities, including without limitation, electrical, gas and water, and cable or other electronic transmission necessary for operation of the Business, as an expense of the Business.

(xviii)

Arrange for trash collection and removal from the Business, as an expense of the Business.

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(xix)

Make all normal repairs and replacements to the kitchen equipment and interior, external, non-structural and structural repairs and replacements of the Business and the business premises, in order to keep the same in good condition and good working order to the extent that the General Partner deems it necessary and in accordance with the provisions of the Lease for the business premises.

(xx)

To pay, collect, compromise, arbitrate, resort to legal action or otherwise adjust claims or demands of or against the Partnership.

(xxi)

To borrow money for any Partnership purpose and to make all required payments of principal and interest with respect thereto.

(xxii)

To timely comply with and abide by all of those obligations, terms, covenants and conditions imposed upon the Partnership as tenant of the Lease for the business premises of the Business, including but not limited to the timely payment of rent, as an expense of the Business.

(xxiii)

To promptly comply with, execute and fulfill all governmental statutes, ordinances and regulations applicable to the Partnership in connection with the Business, including without limitation, all orders and requirements imposed by the Board of Health, sanitation, fire and police departments including without exception those for the correction, prevention and abatement of nuisances in or upon or connected with the business premises of the Business, as an expense of the Business.

The General Partner shall be responsible for the procurement and hiring of all employees, agents and independent contractors required for on site operation on a day to day basis including, but not limited to, a manager. The General Partner shall control all of the day to day operations of the Business and shall handle all negotiations, complaints, objections and other matters involving the operation of the Business, the patrons of the Business, and the employees and staff or any sublessee of or operator of any portion of the Business in connection with activities at the Business. The General Partner shall hire, instruct, maintain and supervise personnel to properly staff the Business and shall maintain the Business, the interior, exterior, non-structural and structural portions of the building it occupies, its fixtures and its premises in a reasonable manner and condition, keeping it clean and serviceable, including arranging for janitorial services as an expense of the Business. The General Partner shall have the full responsibility to collect for all services and sales from the Business, except as hereinafter provided, to daily deposit all receipts in bank account(s) designated by the General Partner, shall arrange for advertising for the Business to the extent deemed desirable by the General Partner and maintain all necessary licenses, including liquor license, and permits required in connection with the operation of the Business. The cost of such activities, including license renewal fees, incurred for the Business shall be borne by the Business.

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In discharging the foregoing duties, the General Partner shall act and conduct the Business in a reasonable manner. In order for the General Partner to have the greatest opportunity to discharge such duties and to maximize profits from the Business, the Limited Partners shall cooperate fully with the General Partner and shall promptly provide the General Partner with all information and assistance as the General Partner may reasonably request pursuant to this Agreement. The General Partner shall devote such time to the Business as, in its judgment, the supervision of the Business shall reasonably require, but shall not be obligated to do or perform any act or thing in connection with the Business not expressly set forth herein.

5.2 Certain Limitations . In addition to other acts expressly prohibited by this Agreement or by the Law, the General Partner shall not have any authority to:

A. Do any act in contravention of this Agreement;

B. Do any act which would make it impossible to operate the Business or to otherwise carry on the ordinary business of the Partnership or any phase thereof, except as expressly provided in this Agreement;

C. Assign the rights of the Partnership in specific property for other than a Partnership purpose;

D. Admit a person or entity as a General Partner or as a Limited Partner, except as otherwise provided in this Agreement;

E. Knowingly or willingly do any act which would cause the Partnership to become an association taxable as a corporation;

5.3 Contracts with Affiliates . Except as herein specified, all services which the General Partner is not obligated to perform under the terms of this Agreement and the materials necessary for the operation of the Business may be provided by the General Partner, or any entity affiliated with the General Partner, and the General Partner shall be compensated for such services or materials on such terms and conditions no less favorable than those obtainable in the marketplace, and such amounts shall be deemed to be operating expenses of the Business.

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5.4 Liability of General Partner . The General Partner shall be liable to the Limited Partners for willful misconduct, bad faith or gross negligence, but shall not be liable for errors in judgment or for any acts or omissions that do not constitute willful misconduct, bad faith or gross negligence. In all transactions for or with the Partnership, the General Partner shall act in good faith and for the benefit of the Partnership. The Limited Partners shall look solely to the assets of the Partnership for the return of their Initial Capital Contributions and if the assets of the Partnership remaining after payment or discharge of the debts and liabilities of the Partnership are insufficient to return such Initial Capital Contributions, they shall have no recourse against the General Partner for such purpose. The doing of any act or the failure to do any act by the General Partner, the effect of which may cause or result in loss or damage of the Partnership, if done pursuant to advise of legal counsel or accountants employed by the General Partner on behalf of the Partnership, shall be conclusively presumed not to constitute willful misconduct, bad faith or gross negligence on the part of the General Partner.

5.5 Indemnification . The General Partner, including any employee of the General Partner, shall not be liable for, and to the extent of its assets, the Partnership shall indemnify the General Partner or any such employee, against liabilities arising out of their activities as or for the General Partner resulting from errors in judgment or any acts or omissions, whether or not disclosed, unless caused by willful misconduct, bad faith or gross negligence; provided, however, that this provision shall not constitute a waiver by the Limited Partners of any rights it may have under applicable securities laws.

ARTICLE VI

ALLOCATION OF PROFITS AND LOSSES

6.1 General . All Partnership items of income, gain, loss, deduction, credits, or tax preference items, (the “Tax Incidents” ), shall be determined as of the end of each fiscal year. As between a Partner and his transferee, Tax Incidents for any fiscal year (or portion thereof, as the case may be) shall be apportioned in accordance with the ratio that the number of days in the Partnership fiscal year prior to the effective date of transfer bears to the number of such days thereafter (including the effective date of the transfer).

6.2 Allocation . The Tax Incidents shall be allocated as follows:

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A. Cost recovery deductions, amortization expense (including amortization of organizational expenses, start up costs, intangible assets, or other capital accounts), investment tax credits (including recapture of investment tax credits), and tax preference items shall be allocated ninety-nine percent (99%) to the Limited Partners and one percent (1%) to the General Partner (in proportion to each Partner’s Initial Capital Contribution), if incurred with respect to the expenditure by the Partnership of the aggregate Initial Capital Contributions of the Partners, (which shall be deemed expended prior to any other amounts available to the Partnership), otherwise to the Partners in accordance with their respective Participation Percentages.

B. Gains and losses from (i) sale, exchange or other disposition of all or any substantial part of the Partnership property, or (ii) from liquidation of the Partnership property following dissolution, as the case may be, shall be allocated on an asset by asset basis, as follows:

(1)

Gains, to the extent of cost recovery deductions or amortization expense claimed by the Partnership with respect to the particular Partnership assets which are sold, exchanged or otherwise disposed of, shall be allocated ninety-nine percent (99%) to the Limited Partners and one percent (1%) to the General Partner (in proportion to each Partner’s Initial Capital Contribution), if realized with respect to an asset acquired by the Partnership through the expenditure of the aggregate Initial Capital Contributions of the Partners, (which shall be deemed expended prior to any other amounts available to the Partnership), otherwise to the Partners in accordance with their respective Participation Percentages;

(2)

Gains in excess of cost recovery deductions or amortization expense claimed by the Partnership with respect to the particular Partnership assets which are sold, exchanged or otherwise disposed of, shall be allocated to all Partners in the same proportion that the Partners actually receive distributions of proceeds from Net Sale Proceeds as provided in Section 8.2 hereof, (except distributions pursuant to Section 8.2(a)); and

(3)

All losses shall be allocated ninety-nine percent (99%) to the Limited Partners and one percent (1%) to the General Partner (in proportion to each Partner’s Initial Capital Contribution), if realized with respect to an asset acquired by the Partnership through the expenditure of the aggregate Initial Capital Contributions of the Partners, (which shall be deemed expended prior to any other amounts available to the Partnership), otherwise to the Partners in accordance with their respective Participation Percentages.

C. All Tax Incidents other than those specifically allocated by subparagraph (A) and (B), ( “Other Tax Incidents” ), shall be allocated to the Partners in the same proportion that the Partners actually receive in that same fiscal year cash distributions from Net Cash Flow as provided in Section 8.2 hereof, (except cash distributions pursuant to Section 8.2(a)), (the “Cash Distributions” ), provided nevertheless as follows:

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(1)

Other Tax Incidents shall be allocated in any fiscal year to the Partners so receiving Cash Distributions in the same proportion that such Cash Distributions actually are received only if such Cash Distributions actually distributed equal or are greater than the Partnership’s Net Income for the same fiscal year;

(2)

To the extent the Partnership’s Net Income for that same fiscal year exceeds such Cash Distributions, Other Tax Incidents shall be allocated to the Partners in accordance with their respective Participation Percentages, except that (i) Net Income, in an amount equal to Cash Distributions actually received, shall be allocated to the Partners so receiving such Cash Distributions in the same proportion that such Cash Distributions actually are received, and (ii) any excess of Net Income over Cash Distributions actually received shall be allocated to the Partners in accordance with their respective Participation Percentages;

(3)

In the absence of any such Cash Distributions the Other Tax Incidents shall be allocated to the Partners in accordance with their respective Participation Percentages; and

(4)

Notwithstanding clauses (1) and (2) of this Subparagraph (C), Net Loss, (whether or not Cash Distributions are actually made), shall be allocated to the Partners in accordance with their respective Participation Percentages.

ARTICLE VII

ACCOUNTING

7.1 Accounting and Bookkeeping . The General Partner shall prepare and keep, for a period of not less than three (3) years, generally accepted accounting records, including cash registers having cumulative totals, bank books and duplicate deposit slips, records showing inventories and receipts of merchandise and other records from the operation of the Business which would normally be required to be kept or examined by an independent accountant pursuant to generally accepted auditing standards. The Limited Partners shall at all times during normal business hours have free access to and the right to inspect and copy the accounting records of the Business and/or Partnership, at the principal place of business of the Partnership.

The General Partner, as an expense of the Business, shall prepare for the Partnership and provide the Limited Partners with a complete monthly accounting of the operation of the Business on a form similar to that attached hereto as Exhibit “C”, within thirty (30) days of the end of each month during the term hereof. The monthly report shall also contain a statement of cumulative gross sales from the operation of the Business for the current year of this Agreement for purposes of determining any distributions pursuant to Article VIII below. The General Partner shall also provide copies of such other accounting records as may be reasonably requested by the Limited Partners and the Limited Partners may inspect the originals thereof at any reasonable time.

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The General Partner shall mail within seventy five (75) days after the close of each fiscal year, an annual report to the Limited Partners, which annual report shall constitute the accounting of the Partnership for such year. The annual report shall contain unaudited financial statements, certified by the Treasurer of the General Partner as accurate and correct, and shall otherwise be in such form and have such content as the General Partner deems proper. Such annual report shall include from every source, including net gains from disposition or sale of Partnership properties.

Subject to the right of the Limited Partners to receive their share of the distributions pursuant to Article VIII hereof, all receipts from the operation of the Business, deposited into an account of the Partnership and/or the General Partner at a bank designated by the General Partner, shall only be withdrawn upon the direction of the General Partner, but cannot be unreasonably withheld. The Partners anticipate that payment of liquor purchases, payroll and general operations may be made from one or more additional accounts at one or more banks, selected by the General Partner. Funds from those accounts shall only be withdrawn by or at the direction of the General Partner.

7.2 Fiscal Year and Method of Accounting . The fiscal year of the Partnership shall be a calendar year and the books of the Partnership for income tax and accounting purposes shall be kept on the accrual method. All financial determinations hereunder made by the General Partner with respect to the calculation of profits and losses, all distributions pursuant to Article VIII and other accounting decisions shall be determined by the General Partner in accordance with generally accepted accounting principles consistently applied by the General Partner in making said determinations.

7.3 Audit . The Limited Partners shall have the right from time to time, upon two (2) business days prior notice to the General Partner, to cause a complete audit to be made of the business affairs conducted at the Business, and all of the books and records referred to in Article VII hereof. Such audit shall be performed by any person designated, selected and paid for by the Limited Partners, except as otherwise provided herein. The General Partner shall make all records and books relevant in any manner to the operation at the Business and/or Partnership available for audit at 5059 NE 18th Avenue, Fort Lauderdale, Florida 33334. If the results of such audit show that the “Net Income” for any month or year have been understated, the General Partner shall immediately pay to the Limited Partners the additional amount due and if such understatement amounts to three percent (3%) or more of “Net Income”, then the General Partner shall pay the cost of such audit, in addition to any deficiency payment required. If the audit shows that the General Partner has overpaid or the Limited Partners have received overpayment of any amount, the Limited Partners shall immediately repay such amount to the General Partner. Any accounting deficiencies revealed by such audit, which accounting deficiencies shall be defined as any accounting practices not in accordance with generally accepted accounting principles consistently applied, shall be corrected by the General Partner within fifteen (15) days of its receipt of notice of such deficiency.

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7.4 Definitions .

A. “Gross Sales” shall mean the gross income, price, money, cover charges, or other consideration charged or received from the operation of the Business, whether in cash, on credit, barter, exchange, or otherwise.

Gross sales as used herein shall not include, and the General Partner shall deduct from its calculations of gross sales, to the extent it has been included:

(i)

Any sales or excise tax imposed by any governmental authority upon customers and added to the price of a sale or service and collected from the customer and in turn paid to such governmental authority;

(ii)

The amount of any credit or refund for any merchandise returned or exchanged or any allowance made for loss of or damage to merchandise sold but not in excess of original cost and only to the extent that it was previously included in the calculation of gross sales;

(iii)

Fees or discounts paid to bona fide credit card agencies;

(iv)

Amounts paid to third party vending machine and coin operated devise operators as their share of proceeds from such machines and device; and

(v)

Complimentary and/or discounted sales made at the direction of the General Partner, including but not limited to discounted sales to the employees of the Business.

B. “Operating Expenses” shall mean all cash expenses and liabilities incurred in the operation of the Business, and shall include, by way of example and without limitation hereby, rent, servicemark fee, personal property taxes on personal property, fixtures and equipment used in the Business; liability insurance; real estate taxes; hazard insurance; trash collections; cleaning services; accounting and bookkeeping fees; advertising; telephone charges; utilities, including but not limited to electric, water and gas; cable; salaries for personnel employed at the business premises only; repairs and maintenance of kitchen equipment, furniture, fixtures, equipment and personal property used in the Business; repairs and maintenance of the interior and exterior of the business premises; cost of inventory; liquor license renewal fees; but excluding any allocation of salaries and expenses of “off-site” personnel of the General Partner.

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7.5 Tax Matters .

A. The General Partner shall cause, as a part of its bookkeeping and accounting responsibilities, to be prepared and filed all income tax returns for the Partnership on an accrual basis. Necessary tax information shall be provided to the Limited Partners.

B. In connection with the assignment of a Limited Partner’s interest in the Partnership permitted by Article X hereof, the General Partner, (in its sole discretion), shall have the right, but shall not be obligated, on behalf of the Partnership and at the time and in the manner provided by Section 754 of the Code, (or any successor section thereto), and the Regulations thereunder, to make an election to adjust the basis of Partnership property in the manner provided in Sections 734(b) and 743(b) of the Code, (or any successor sections thereto).

7.6 Contracting for Accounting Services . The General Partner shall, as an expense of the Business, provide the accounting and bookkeeping services provided in this Article VII at the same rate charged to its other franchisees.

ARTICLE VIII

DISTRIBUTIONS

8.1 Distributions of Net Cash Flow . All Net Cash Flow, if any, realized by or available to the Partnership shall first be applied or added to a reasonable reserve retained for working capital needs or to provide funds for contingencies and expenses of the Partnership, (all as determined in the sole discretion of the General Partner or as required by any loan agreement or instrument of the Partnership), and the balance, if any, shall be distributed, (from time to time in the sole discretion of the General Partner, but in the event, no less frequently than quarterly), in the following order of priority to the extent available:

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A. To the General Partner in repayment of the entire principal amounts of any outstanding General Partner’s loans, together with all accrued but unpaid interest thereon, first on account of interest accrued thereon and then on account of the principal amounts thereof;

B. To the General Partner in reduction of its then outstanding Additional Capital Balance;

C. To the Limited Partners, until such time as the Limited Partners have received the aggregate sum of Two Million Dollars ($2,000,000.00), which aggregate sum shall be reduced by an amount equal to the amount of initial working capital returned by the Partnership to the Limited Partners, a sum equal to the amount necessary to increase the aggregate distribution to the Limited Partners for the fiscal year to Five Hundred Thousand Dollars ($500,000.00) shall be paid to the Limited Partners. Thereafter, any remaining amounts shall be distributed to the Partners in accordance with their respective Participation Percentages; and

D. Once the Limited Partners have received the aggregate sum of Two Million Dollars ($2,000,000.00), which aggregate sum shall be reduced by an amount equal to the amount of initial working capital returned by the Partnership to the Limited Partners, any remaining amounts shall be distributed to the Partners in accordance with their respective Participation Percentages.

8.2 Distributions of Net Sale Proceeds . All Net Sale Proceeds, if any, realized by or available to the Partnership shall first be applied or added to a reasonable reserve or escrow account retained to provide funds for contingencies and expenses of the Partnership, (all as determined by the General Partner or as required by any loan, escrow or other agreement or instrument of the Partnership), and the balance, if any, shall be distributed in the following order of priority to the extent available:

A. To the General Partner, in repayment of the entire principal amounts of any outstanding General Partner’s loans, together with all accrued but unpaid interest thereon, first on account of interest accrued thereon and then on account of the principal amounts thereof;

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B. To the General Partner in reduction of its then outstanding Additional Capital Balance, except as provided in Subparagraph E. of this section;

C. To the Partners in reduction of their then outstanding Capital Balances, (in proportion to the respective amounts of any such Capital Balances), except as provided in Subparagraph E. of this section;

D. Any remaining amounts (i) fifty one percent (51%) thereof to the Limited Partners and (ii) forty nine percent (49%) to the General Partner; and

E. Notwithstanding anything to the contrary in the above priority order, if there is an insufficient balance available to fully return to each Partner an amount equal to his then outstanding Capital Balance, the balance, if any, shall be distributed to the Partners in proportion to the combined amount of their then outstanding Capital Balance.

ARTICLE IX

TRANSFER OF PARTNERSHIP INTERESTS

9.1 General Partner .

A. The General Partner shall not sell, assign, or otherwise dispose of all or any portion of its interest as General Partner in the Partnership, or enter into any agreement as a result of which any person, firm or corporation shall become interested with it in its interest in the Partnership without the prior consent in writing of the Limited Partners. No person shall be admitted as a substitute or additional General Partner without the prior written consent of the General Partner and the Limited Partners as set forth herein. The General Partner may not retire or withdraw as a General Partner unless it designates a nominee willing to serve as a General Partner which shall be an individual or corporation having the capacity to serve as such and who is able to meet any requirements then imposed by the Code or any rulings or regulations thereunder with respect to general partners or limited partnerships in order that the Partnership not become an association taxable as a corporation. Subject to the foregoing, the General Partner shall give the Limited Partners at least ninety (90) days notice of its proposed retirement or withdrawal as General Partner, in which event the Partnership shall be dissolved and terminated as provided in Article X hereof unless the Limited Partners select a new General Partner within said ninety (90) day period. Such new General Partner may be, but need not be, the nominee designated by the retiring or withdrawing General Partner.

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B. The General Partner shall immediately be removed and cease to be a General Partner upon the dissolution of the General Partner.

9.2 Substitute Limited Partner . A Limited Partner or the transferee of a Limited Partner may transfer all, but not a part of his Unit(s) to a Substitute Limited Partner provided:

A. That the transferee, if an individual, is at least 21 years of age;

B. That the transferee executes an instrument satisfactory to the General Partner accepting and adopting the provisions and agreements set forth herein and pays any reasonable expenses in connection with his admission as a Substitute Limited Partner; and

C. That the General Partner shall consent to such transfer, which consent may be given or withheld in the General Partner’s sole discretion, and shall be withheld if:

(1)

In the opinion of counsel for the Partnership such transfer would result in the close of the Partnership’s taxable year with respect to all Partners, in the termination of the Partnership within the meaning of Section 708(b) of the Code, or in the termination of its status as a partnership under the Code; or

(2)

In the opinion of such counsel such transfer would be in violation of the Securities Act of 1933, as amended, or the securities laws of any other jurisdiction.

9.3 Death, etc. of a Limited Partner . Upon the death, bankruptcy, legal incompetency or insolvency of a Limited Partner, (or, in the case of a Limited Partner that is a partnership, joint venture, association, corporation or trust, the dissolution of such Limited Partner), the personal representative, guardian or other successor in interest of such Limited Partner shall have the right of the Limited Partner for the sole purpose of settling the estate of such person pursuant to the provisions of Section 9.2, but such assignee may become a Substitute Limited Partner in the Partnership only in accordance with the provisions of Section 9.2.

9.4 Effective Date of Transfers . Permissible transfers of a Limited Partner’s Units shall be effective for purposes of allocations of distributions, profits and losses on the first day of the fiscal quarter following compliance with Section 9.2 and following amendment of this Agreement as required by the Law. Until such effective date, the General Partner may act and proceed as if no transfer had been made.

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9.5 Transfers Other Than in Accordance Herewith . No transfers of Units or any part thereof which is in violation of this Article IX shall be valid or effective, and the Partnership shall not recognize the same for the purposes of making allocations or distributions of profits, losses, return of Capital Contribution or other distribution with respect to such Units or part thereof. The Partnership may enforce this provision either directly or indirectly or through its agents by entering an appropriate stop-transfer order on its books or otherwise refusing to register or transfer or permit the registration or transfer on its books of any proposed transfers not in accordance with this Article IX.

ARTICLE X

DISSOLUTION AND SUCCESSOR PARTNERSHIP

10.1 Dissolution of Partnership . The Partnership shall be dissolved upon the earlier occurrence of any of the following events:

A. The bankruptcy, insolvency, liquidation or dissolution of the General Partner;

B. Upon the written consent of all Partners;

C. The sale of all or substantially all of the assets of the Partnership;

D. Pursuant to the provisions of Article II and IX hereof; or

E. Otherwise by operation of law.

10.2 Successor Partnership . If the Partnership is dissolved or to be dissolved for any reason specified in Section 10.1, and any Limited Partner shall deliver to each of the other Limited Partners within thirty (30) days of such event, a written notice demanding that a meeting of Limited Partners be held at the principal place of business of the Partnership at the time set forth in such notice (which shall be not less than ten (10) nor more than thirty (30) days after the date of such notice) the Limited Partners shall hold such meeting. Limited Partners attending such meeting, either in person or by proxy, and having an aggregate Limited Partner Percentage of not less than one hundred percent (100%) may continue the business of the Partnership and reconstitute the Partnership as a successor limited partnership with a new General Partner having the capacity to serve as such and who is able to meet any requirements then imposed by the Code or any rulings or regulations thereunder with respect to general partners of limited partnerships in order that the Partnership not become an association taxable as a corporation. If such Limited Partners shall exercise such right to continue the business of the Partnership, the person appointed by them as the new General Partner and each of the Limited Partners shall execute, acknowledge and file a Limited Partnership Certificate and Agreement. The Limited Partnership Certificate and Agreement shall contain substantially the same provisions as those contained herein, except that the new General Partner shall be allocated such share of the profits, losses and distributions of the Partnership as the Limited Partners appointing such new General Partner shall determine. Such new General Partner shall indicate his acceptance of the appointment by the execution of such Limited Partnership Certificate and Agreement.

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10.3 Procedure . Unless the Business of the Partnership is continued pursuant to Section 10.2, upon the dissolution of the Partnership, the General Partner or the person required by law to wind up the Partnership’s affairs shall cause the cancellation of this Agreement and shall liquidate the assets of the Partnership and apply the proceeds of such liquidation in the order of priority provided in Article VIII of this Agreement, unless the law requires distribution be made in a different order in which case the assets of the Partnership shall be distributed in accordance with the law.

ARTICLE XII

LIMITED POWER OF ATTORNEY

12.1 Appointment . Each Limited Partner hereby makes, constitutes and appoints the General Partner his true and lawful attorney-in-fact for him and in his name, place and stead and for his use and benefit, from time to time:

A. To make all agreements amending this Agreement, as now or hereafter amended, that may be appropriate to reflect or effect, as the case may be, the following:

(1)

A change of the name or the location of the principal place of business of the Partnership;

(2)

The transfer or acquisition of any Units by a Limited Partner in any manner permitted by this Agreement;

(3)

A person becoming a Substitute Limited Partner of the Partnership as permitted by this Agreement;

(4)

A change in any provision of this Agreement effected by the exercise by any person of any right or rights hereunder;

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(5)

The dissolution of the Partnership pursuant to this Agreement;

(6)

Such amendments which are of an inconsequential nature and do not affect the rights of the Limited Partners in any material respect;

(7)

To execute such certificates, instruments and documents as may be required or may be appropriate in connection with the use of the name of the Partnership by the Partnership; and/or

(8)

To execute such certificates, instruments and documents as may be required, or as may be appropriate for the Limited Partner to make to reflect:

(a)

A change in the name or address of such Limited Partner;

(b)

Any changes in or amendments of this Agreement, or pertaining to the Partnership, of any kind referred to in this Section 12.1; and

(c)

Any other changes in or amendments of this Agreement but only if and when the consent thereto has been obtained from the General Partner and Limited Partners, having the aggregate Limited Partnership Percentage required by Section 13.6 hereof.

B. Each of the agreements, certificates, instruments and documents made pursuant to Section 12.1(A) shall be in such form as the General Partner and counsel for the Partnership shall deem appropriate. The powers conferred by Section 12.1(A) to execute agreements, certificates, instruments and documents, shall be deemed to include without limitation the powers to sign, acknowledge, swear to, verify, deliver, file, record or publish the same.

C. Each Limited Partner authorizes the General Partner as such attorney-in-fact to take any further action which the General Partner shall consider necessary or advisable in connection with any action taken pursuant to this Section 12.1 hereby giving the General Partner as such attorney-in-fact full power and authority to do and perform each and every act or thing whatsoever requisite or advisable to be done in and about any action taken pursuant to this Section 12.1 as fully as such Limited Partner might or could do if personally present, and hereby ratifying and confirming all that the General Partner as such attorney-in-fact shall lawfully do or cause to be done by virtue of this Section.

12.2 Irrevocability; Manner of Exercise . The power of attorney granted pursuant to Section 12.1:

A. Is a special power of attorney coupled with an interest and is irrevocable;

B. May be exercised by the General Partner as such attorney-in-fact by listing all of the Limited Partners executing any agreement, certificate, instrument or document with the single signature of the President or any Vice President of the General Partner acting as attorney-in-fact for all of them; and

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C. Shall survive the transfer by a Limited Partner of all or a portion of his interest in the Partnership, except that where the purchaser, transferee or assignee thereof with the consent of the General Partner is admitted as a Substitute Limited Partner, the power of attorney shall survive the transfer for the sole purpose of enabling such attorney-in-fact to execute, acknowledge and file any such agreement, certificate, instrument or document necessary to effect such substitution.

ARTICLE XIII

MISCELLANEOUS PROVISIONS

13.1 Notices . All notices or other communications required or permitted to be given pursuant to the Agreement shall in the case of notices or communications required or permitted to be given to Limited Partners, be in writing and shall be considered as properly given or made if personally delivered or if mailed by United States certified or registered mail, return receipt requested, postage prepaid, or if sent by prepaid telegram, and addressed to such Limited Partner’s address for notices as it appears on the records of the Partnership, and in the case of notices or communications required or permitted to be given to the General Partner, shall be in writing and shall be considered as properly given or made if personally delivered or if mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed to the General Partner at the principal place of business of the Partnership. Any Limited Partner may change his address for notices by giving notice in writing, stating his new address for notices, to the General Partner, and the General Partner may change its address for notices by giving such notice to all Limited Partners. Commencing on the tenth (10th) day after the giving of such notice, such newly designated address shall be such Partner’s address for the purpose of all notices or other communications required or permitted to be given pursuant to the Agreement.

13.2 Choice of Law . This Agreement and all rights and liabilities of the parties hereto with reference to the Partnership shall be subject to, construed in accordance with and governed by the laws of the State of Florida. To the extent that any provision hereof is in contravention with the Law, as in effect from time to time, the provisions of the Law shall supersede and replace any provision herein which is in contravention thereof. Additionally, the appropriate forum and jurisdiction for any legal action shall be the Courts of the County of Broward, State of Florida, and each party consents to such jurisdiction.

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13.3 Titles and Captions . All article, section and subsection titles or captions contained in this Agreement are inserted for convenience only and are not deemed part of the text hereof.

13.4 Sole Agreement . This Agreement constitutes the entire understanding of the parties hereto with respect to the subject matter hereof.

13.5 Execution in Counterparts . This Agreement may be executed in any number of counterparts with the same effect as if all parties had all signed the same document. All counterparts shall be construed together and shall constitute one (1) agreement.

13.6 Amendments . The General Partner may submit to the Partners in writing the text of any proposed amendment to this Agreement and a statement by the proposer of the purpose of such amendment. The General Partner shall include in any submission its view as to the proposed amendment. Any such amendment shall be adopted if, within ninety (90) days after the notice of such amendment is given to all Partners, the General Partner shall have approved such amendment in writing and shall have received written approval thereof from Limited Partners having a Limited Partnership Percentage aggregating eighty percent (80%) or more. A written approval may not be withdrawn or voided once it is filed with the General Partner. A Limited Partner filing a written objection may thereafter file a valid written approval. The date of adoption of an amendment pursuant to this Section 13.6 shall be the date on which the General Partner shall have received the requisite written approvals. Any proposed amendment which is not adopted may be resubmitted. In the event any proposed amendment is not adopted, any written approval received with respect thereto shall become void and shall not be effective with respect to any resubmission of the proposed amendment. Notwithstanding the foregoing provisions of this Section 13.6, no amendment may, without the prior written approval of all Partners;

A. Enlarge the obligations of any Partner under this Agreement;

B. Enlarge the liability of the General Partner to the Limited Partners;

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C. Amend this Article 13.6;

D. Alter the Partnership in such manner as will result in the Partnership no longer being classified as a limited partnership for Federal income tax purposes; or

E. Reduce any requirements for the prior approval of Substitute Limited Partners set forth in this Agreement.

13.7 Waiver of Action for Partition . Each of the parties hereto irrevocably waives during the term of the Partnership any right that he may have to maintain any action for partition with respect to the property of the Partnership.

13.8 Assignability . Subject to the restrictions on transferability contained herein, each and all of the covenants, terms, provisions and agreements herein contained shall be binding upon and inure to the benefit of the successors, assigns and legal representatives of the respective parties hereto.

13.9 Independent Activities . Except as otherwise provided herein, the General Partner and its affiliates, and its (and its affiliates’), officers, directors, shareholders and employees, and each Limited Partner may, notwithstanding the existence of this Agreement, engage in whatever activities they choose, whether the same be competitive with the Business of the Partnership or otherwise, without having or incurring any obligation to offer any interest in such activities to any party hereto. Neither this Agreement nor any activity undertaken pursuant hereto shall prevent such persons from engaging in such activities, and as a material part of the consideration for the General Partner’s execution hereof, each Limited Partner hereby waives, relinquishes and renounces any such right or claim of participation. Nothing in the foregoing, however, shall be deemed to reduce any of the liabilities of the General Partner under this Agreement.

13.10 Right to Rely on Authority of General Partner . No person dealing with the General Partner shall be required to determine its authority to make any undertaking on behalf of the Partnership, nor to determine any fact or circumstance bearing upon the existence of its authority.

13.11 Arbitration . Except as otherwise provided in this Agreement, any dispute or controversy arising out of or relating to this Agreement shall be determined and settled by arbitration in the City of Fort Lauderdale, Florida, in accordance with the rules of the American Arbitration Association then in effect, and judgment upon the award rendered by the arbitrator(s) may be entered in any court of competent jurisdiction. Except as set forth in Sections 5.4 and 5.5, the expenses of the arbitration shall be borne equally by the parties to the arbitration.

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13.12 Gender and Number . Whenever the context requires, the gender of all words used herein shall include the masculine, feminine and neuter and the singular and plural of all words shall include the singular and plural.

13.13 Meetings . The Partnership shall hold an annual meeting in each fiscal year of its existence on such date and at such place and time as the General Partner shall determine, notice of the date and time to be given to all Limited Partners whose addresses are on record with the General Partner not later than fourteen (14) days prior to such date. Notwithstanding the foregoing, at any time or from time to time, Limited Partners having a Limited Partner Percentage aggregating fifty percent (50%) may by written notice to the General Partner specifying in general terms the subject to be considered require the General Partner to call, or the General Partner may on its own motion call, a special meeting of the Limited Partners and the General Partner shall within ten (10) days after any such notice is given, give notice of such special meeting in the same manner as is required for the annual meeting including in such notice a copy of the notice requiring the call. Any Limited Partner shall have the right, upon notice in writing, to require the General Partner to furnish by mail a list of the names, addresses and respective interest in the Partnership of all other Limited Partners in the Partnership as shown on the records of the Partnership at the time of the notice. Any Limited Partner, or his representative, shall have the right to inspect and copy the names and addresses of all other Limited Partners in the Partnership.

13.14 Severability . If any provision of this Agreement, or the application thereof, shall, for any reason and to any extent, be invalid or unenforceable, or contrary to law, the remainder of this Agreement and the application of such provision to other persons or circumstances shall not be affected thereby, but rather shall be enforced to the maximum extent permissible under applicable law.

IN WITNESS WHEREOF , this Limited Partnership Certificate and Agreement has been sworn to and executed as of the date above written.

	GENERAL PARTNER:
	FLANIGAN’S ENTERPRISES, INC.

/w/	By:	/s/
		Jeffrey D. Kastner, Secretary
/w/

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STATE OF FLORIDA	)
	) ss:
COUNTY OF BROWARD	)

The foregoing instrument was acknowledged before me this date by JEFFREY D. KASTNER , as Secretary of FLANIGAN’S ENTERPRISES, INC. on behalf of the said corporation. He is well known to me or produced ________________ as identification.

WITNESS my hand and official seal on this the ____ day of _____________, 2012.

NOTARY PUBLIC - State of Florida

My commission expires:

SEE SIGNATURE PAGES FOR LIMITED PARTNERS ATTACHED HERETO

(Signature Pages Intentionally Omitted)

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31.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, J ames G. Flanigan , certify that:

I have reviewed this Annual Report on Form 10-K of Flanigan’s Enterprises, Inc. for the period ended September 29, 2012;

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 periods covered by this report;

Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects of the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

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 my 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 annual 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 annual 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 that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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 or registrant’s board of directors or persons performing the equivalent function:

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting that 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.

	/s/ James G. Flanigan
	Name: James G. Flanigan
	Chief Executive Officer and President
	Date: December 28, 2012

31.2

CERTIFICATION PURSUANT TO 18 U. S. C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jeffrey D. Kastner , certify that:

I have reviewed this Annual Report on Form 10-K of Flanigan’s Enterprises, Inc. for the period ended September 29, 2012;

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.

	/s/ Jeffrey D. Kastner
	Name: Jeffrey D. Kastner
	Chief Financial Officer and Secretary
	Date: December 28, 2012

32.1 CERTIFICATION PURSUANT TO 18 U. S. C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Flanigan’s Enterprises, Inc., (the “Company”) on Form 10-K for the fiscal year ended September 29, 2012, as filed with the Securities and Exchange Commission of the date hereof (the “Annual Report”), I, James G. Flanigan , Chief Executive Officer and President of the Company, certify, pursuant to 18 U.S.C. SS.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, that:

1) This Annual Report on Form 10-K of the Company, to which this certification is attached as a Exhibit, fully complies with the requirements of Section 13 (a) or 15(d) of the Securities Exchange Act of 1934; and

2) The information contained in this Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/ James G. Flanigan
	Name: James G. Flanigan
	Chief Executive Officer and President
	Date: December 28, 2012

The foregoing certificate is provided solely for the purpose of complying with Section 906 of the Sarbanes-Oxley Act of 2002 and for no other purpose whatsoever. Notwithstanding anything to the contrary set forth herein or in any of the Company’s previous filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate the Company’s future filings, including this annual report on Form 10-K, in whole or in part, this certificate shall not be incorporated by reference into any such filings. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

32.2

CERTIFICATION PURSUANT TO 18 U. S. C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Flanigan’s Enterprises, Inc., (the “Company”) on Form 10-K for the fiscal year ended September 29, 2012, as filed with the Securities and Exchange Commission of the date hereof (the “Annual Report”), I, Jeffrey D. Kastner , Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. SS.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, that:

1) This Annual Report on Form 10-K of the Company, to which this certification is attached as an Exhibit, fully complies with the requirements of Section 13 (a) or 15(d) of the Securities Exchange Act of 1934; and

2) The information contained in this Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/ Jeffrey D. Kastner
	Name: Jeffrey D. Kastner
	Chief Financial Officer and Secretary
	Date: December 28, 2012