NATHANS FAMOUS INC
For the period ended Dec 29, 2024. Filed Feb 6, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Dec 29, 2024 · Filed Feb 6, 2025
NATH$102.05+0.1%Stored close · as of Oct 23, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-29; filed 2024-11-07.
0001437749-24-033728
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-12-29; filed 2025-02-06.
0001437749-25-002936
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 131 previous paragraphs and 134 current paragraphs.
56 unchanged; 69 reworded; 9 added; 5 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 2 previous and 2 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (9)
Current report
Critical Accounting Estimates
Current report
General and administrative expenses decreased by $759,000 or 18% to $3,450,000 in the third quarter fiscal 2025 as compared to $4,209,000 in the third quarter fiscal 2024. The decrease in general and administrative expenses was primarily attributable to lower professional fees of $149,000, lower consulting fees of $60,000 and a cash bonus payment of $500,000 to the Company’s Executive Chairman of the Board in the third quarter fiscal 2024.
Current report
On October 10, 2024, the Company made a voluntary prepayment of $8,000,000 of its Term Loan borrowings under the Credit Agreement and recorded a loss on debt extinguishment of $55,000 related to the write-off of a portion of previously recorded debt issuance costs on the Term Loan borrowings.
Current report
On December 19, 2023, the Company completed the partial redemption, in the principal amount of $20,000,000 of the 2025 Notes. In connection with this transaction, the Company recorded a loss on extinguishment of debt of $169,000 that reflected the write-off of a portion of previously recorded debt issuance costs.
Current report
On December 19, 2023, the Company completed the partial redemption, in the principal amount of $20,000,000 of the 2025 Notes. In connection with this transaction, the Company recorded a loss on extinguishment of debt of $169,000 that reflected the write-off of a portion of previously recorded debt issuance costs.
Current report
2025 Notes
Current report
Unsecured Credit Agreement
Current report
On September 30, 2024 and December 31, 2024, we paid our mandatory debt principal repayments of $600,000 each, or $1,200,000 in the aggregate, on our Term Loan borrowings under the Credit Agreement. On October 10, 2024, we made a voluntary principal prepayment of $8,000,000 on our outstanding Term Loan borrowings under the Credit Agreement. The prepayment was primarily funded by operating cash flows. As of December 29, 2024, the Company has made cash interest payments of approximately $1,602,000 on the Term Loan borrowings under the Credit Agreement.
Current report
Inflationary Pressures
Removed paragraphs (5)
Previous report
Critical Accounting Policies and Estimates
Previous report
General and administrative expenses increased by $23,000 or 1% to $3,252,000 in the second quarter fiscal 2025 as compared to $3,229,000 in the second quarter fiscal 2024. The increase in general and administrative expenses was primarily attributable to higher stock compensation expense of $47,000 and higher incentive compensation expense of $44,000 which were offset, in part, by lower professional fees of $39,000.
Previous report
Sources and uses of cash
Previous report
On July 2, 2024 and September 6, 2024, we paid our first and second quarterly cash dividends of fiscal 2025 aggregating $4,085,000. We expect to pay our third quarterly dividend on December 6, 2024.
Previous report
Inflationary Impact
Reworded paragraphs (69)
Previous wording
Statements in this Form 10-Q quarterly report may be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. These risks and uncertainties, many of which are not within our control, include but are not limited to: the impact of disease epidemics such as the COVID-19 pandemic; increases in the cost of food and paper products; the impact of price increases on customer visits; the status of our licensing and supply agreements, including our licensing revenue and overall profitability being substantially dependent on our agreement with Smithfield Foods, Inc.; the impact of our debt service and repayment obligations under our Credit Agreement, including the effect on our ability to fund working capital, operations and make investments; economic (including inflationary pressures like those currently being experienced); weather (including the impact on sales at our restaurants particularly during the summer months); changes in the price of beef and beef trimmings; our ability to pass on the cost of any price increases in beef and beef trimmings; legislative and business conditions; the collectability of receivables; changes in consumer tastes; the continued viability of Coney Island as a destination location for visitors; the ability to attract franchisees; the impact of the minimum wage legislation on labor costs in New York State or other changes in labor laws, including regulations which could render a franchisor as a “joint employer” or the impact of our union contracts; our ability to attract competent restaurant and managerial personnel; the enforceability of international franchising agreements; the future effects of any food borne illness such as bovine spongiform encephalopathy, BSE or e-coli; as well as those risks discussed from time to time in this Form 10-Q and our Form 10-K annual report for the year ended March 31, 2024, and in other documents we file with the U.S. Securities and Exchange Commission. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in the forward-looking statements. We generally identify forward-looking statements with the words “believe,” “intend,” “plan,” “expect,” “anticipate,” “estimate,” “will,” “should” and similar expressions. Any forward-looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect event…
Excerpt shortened here; the source contains the full paragraph.
Current wording
Statements in this Form 10-Q quarterly report may be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. These risks and uncertainties, many of which are not within our control, include but are not limited to: the impact of disease epidemics such as the COVID-19 pandemic; increases in the cost of food and paper products; the impact of price increases on customer visits; the status of our licensing and supply agreements, including our licensing revenue and overall profitability being substantially dependent on our agreement with Smithfield Foods, Inc.; the impact of our debt service and repayment obligations under our Credit Agreement, including the effect on our ability to fund working capital, operations and make investments; economic (including inflationary pressures like those currently being experienced); weather (including the impact on sales at our restaurants particularly during the summer months); changes in the price of beef and beef trimmings; our ability to pass on the cost of any price increases in beef and beef trimmings; legislative and business conditions; potential changes in U.S. income tax or tariff policies; the collectability of receivables; changes in consumer tastes; the continued viability of Coney Island as a destination location for visitors; the ability to attract franchisees; the impact of the minimum wage legislation on labor costs in New York State or other changes in labor laws, including regulations which could render a franchisor as a “joint employer” or the impact of our union contracts; our ability to attract competent restaurant and managerial personnel; the enforceability of international franchising agreements; the future effects of any food borne illness such as bovine spongiform encephalopathy, BSE or e-coli; as well as those risks discussed from time to time in this Form 10-Q and our Form 10-K annual report for the year ended March 31, 2024, and in other documents we file with the U.S. Securities and Exchange Commission. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in the forward-looking statements. We generally identify forward-looking statements with the words “believe,” “intend,” “plan,” “expect,” “anticipate,” “estimate,” “will,” “should” and similar expressions. Any forward-looking statements speak only as of the date on which they are made, and we do not undertake any obligation…
Excerpt shortened here; the source contains the full paragraph.
Previous wording
At September 29, 2024, our restaurant system, excluding virtual kitchens, consisted of 243 locations, including 128 Branded Menu Program locations, and four Company-owned restaurants (including one seasonal unit), located in 17** **states, and 13 foreign countries.
Current wording
At December 29, 2024, our restaurant system, excluding virtual kitchens, consisted of 240 locations, including 128 Branded Menu Program locations, and four Company-owned restaurants (including one seasonal unit), located in 17 states, and 12 foreign countries.
Previous wording
At September 24, 2023, our restaurant system, excluding virtual kitchens, consisted of 235** locations, including 117 Branded Menu Program locations, and four Company-owned restaurants (including one seasonal unit), located in 17 **states, and 13 foreign countries.
Current wording
At December 24, 2023, our restaurant system, excluding virtual kitchens, consisted of 238 locations, including 117 Branded Menu Program locations, and four Company-owned restaurants (including one seasonal unit), located in 17 states, and 13 foreign countries.
Previous wording
On July 10, 2024, the Company entered into a five-year unsecured Credit Agreement with Citibank, N.A. and borrowed $60,000,000 in Term Loan borrowings to refinance and redeem the 6.625% Senior Secured Notes due 2025 (the “2025 Notes”). See NOTE P – LONG TERM DEBT of the preceding consolidated financial statements and “Liquidity and Capital Resources” for additional information on the Credit Agreement and refinancing. Our future results may be impacted by our debt service and repayment obligations under our Credit Agreement.
Current wording
On July 10, 2024, the Company entered into a five-year unsecured Credit Agreement (the “Credit Agreement”) with Citibank, N.A. and borrowed $60,000,000 in Term Loan borrowings to refinance and redeem the 6.625% Senior Secured Notes due 2025 (the “2025 Notes”). See NOTE P – LONG TERM DEBT of the preceding condensed consolidated financial statements and “Liquidity and Capital Resources” for additional information on the Credit Agreement and refinancing. Our future results may be impacted by our debt service and repayment obligations under our Credit Agreement.
Previous wording
Inflationary pressures impacted our results of operations during the first half of fiscal 2025, including higher commodity prices on beef and beef trimmings. This trend may continue throughout the remainder of fiscal year 2025. In general, we have been able to offset cost increases resulting from inflation by increasing prices and adjusting product mix. We continue to monitor these inflationary pressures and will continue to implement mitigation measures as needed. Inherent volatility in commodity markets, including beef and beef trimmings, could have a significant impact on our results of operations. Delays in implementing price increases, competitive pressures, a decline in consumer spending levels and other factors may limit our ability to implement further price increases in the future.
Current wording
Inflationary pressures negatively impacted our earnings during the thirty-nine week period ended December 29, 2024, most notably within our Branded Product Program segment, due primarily to commodity prices on beef and beef trimmings. This trend may continue throughout the remainder of fiscal year 2025. In general, we have been able to offset cost increases resulting from inflation by increasing prices and entering into sales agreements with our Branded Product Program customers that are correlated to our cost of beef and beef trimmings. We continue to monitor these inflationary pressures and will continue to implement mitigation measures as needed. Inherent volatility in commodity markets, including beef and beef trimmings, could have a significant impact on our results of operations. Delays in implementing price increases, competitive pressures, a decline in consumer spending levels and other factors may limit our ability to implement further price increases in the future.
Previous wording
As discussed in our Form 10-K for the fiscal year ended March 31, 2024, the discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”). The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses reported in those consolidated financial statements. These judgments can be subjective and complex, and consequently, actual results could differ from those estimates. Our most critical accounting policies and estimates relate to impairment of intangible assets; impairment of long-lived assets; current expected credit losses and income taxes (including uncertain tax positions). There have been no changes to our critical accounting estimates or significant accounting policies as disclosed in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024.
Current wording
As discussed in our Form 10-K for the fiscal year ended March 31, 2024, the discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”). The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses reported in those condensed consolidated financial statements. These judgments can be subjective and complex, and consequently, actual results could differ from those estimates. Our most critical accounting estimates relate to impairment of intangible assets; impairment of long-lived assets; current expected credit losses and income taxes (including uncertain tax positions). During the thirty-nine week period ended December 29, 2024, there have been no changes to our critical accounting estimates from those disclosed in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024.
Previous wording
Please refer to Note B of the preceding consolidated financial statements for our discussion of the New Accounting Standards Not Yet Adopted.
Current wording
Please refer to Note B of the preceding condensed consolidated financial statements for our discussion of New Accounting Standards Not Yet Adopted.
Previous wording
Our routine business pattern is affected by seasonal fluctuations, including the effects of weather and economic conditions. Historically, sales from our Company-owned restaurants, principally at Coney Island, and franchised restaurants from which franchised royalties are earned and the Company’s earnings have been highest during our first two fiscal quarters, with the fourth quarter representing the slowest period. Additionally, revenues from our Branded Product Program, Branded Menu Program and retail licensing program generally follow similar season fluctuations, although not to the same degree. We expect that this seasonality will continue. Working capital requirements may vary throughout the year to support these seasonal patterns.
Current wording
Our routine business pattern is affected by seasonal fluctuations, including the effects of weather and economic conditions. Historically, sales from our Company-owned restaurants, principally at Coney Island, and franchised restaurants from which franchised royalties are earned and the Company’s earnings have been highest during our first two fiscal quarters, with the fourth quarter representing the slowest period. Additionally, revenues from our Branded Product Program, Branded Menu Program and retail licensing program generally follow similar seasonal fluctuations, although not to the same degree. We expect that this seasonality will continue. Working capital requirements may vary throughout the year to support these seasonal patterns.
Previous wording
Due to the above seasonal factors, as well as inflationary pressures, our results of operations for the thirteen and twenty-six weeks ended September 29, 2024 are not necessarily indicative of those for a full fiscal year.
Current wording
Due to the above seasonal factors, as well as inflationary pressures, our results of operations for the thirteen and thirty-nine weeks ended December 29, 2024 are not necessarily indicative of those for a full fiscal year.
Previous wording
Total revenues increased by approximately 6% to $41,109,000 for the thirteen weeks ended September 29, 2024 (“second quarter fiscal 2025”) as compared to $38,744,000 for the thirteen weeks ended September 24, 2023 (“second quarter fiscal 2024”).
Current wording
Total revenues increased by approximately 9% to $31,519,000 for the thirteen weeks ended December 29, 2024 (“third quarter fiscal 2025”) as compared to $28,890,000** **for the thirteen weeks ended December 24, 2023 (“third quarter fiscal 2024”).
Previous wording
Foodservice sales from the Branded Product Program increased by approximately 5% to $24,536,000 for the second quarter fiscal 2025 as compared to $23,352,000 for the second quarter fiscal 2024. During the second quarter fiscal 2025, the volume of hot dogs sold in the Branded Product Program increased by approximately 4% as compared to the second quarter fiscal 2024. Our average selling prices increased by approximately 1.4% as compared to the second quarter fiscal 2024.
Current wording
Foodservice sales from the Branded Product Program increased by approximately 7% to $21,099,000 for the third quarter fiscal 2025 as compared to $19,688,000 for the third quarter fiscal 2024. During the third quarter fiscal 2025, the volume of hot dogs sold in the Branded Product Program was comparable to the third quarter fiscal 2024. Our average selling prices increased by approximately 6% as compared to the third quarter fiscal 2024.
Previous wording
Total Company-owned restaurant sales increased by approximately 3% to $5,348,000 during the second quarter fiscal 2025 as compared to $5,193,000 during the second quarter fiscal 2024. Restaurant sales were impacted by higher sales at our Coney Island locations due to an increase in our average check, offset by lower sales at our locations in Oceanside and Yonkers, New York.
Current wording
Total Company-owned restaurant sales increased by approximately 9% to $1,804,000 during the third quarter fiscal 2025 as compared to $1,661,000 during the third quarter fiscal 2024. Restaurant sales were primarily impacted by higher sales at our Coney Island locations due to an increase in our average check.* *
Previous wording
License royalties increased by approximately 14% to $9,491,000 in the second quarter fiscal 2025 as compared to $8,339,000 in the second quarter fiscal 2024. Total royalties earned on sales of hot dogs from our license agreement with Smithfield Foods, Inc. at retail and foodservice, increased* 14% to $8,595,000 for the second quarter fiscal 2025 as compared to $7,507,000 in the second quarter fiscal 2024. The increase is due to an 18% increase in retail volume which was offset, in part, by a 4% decrease in net selling price.*The foodservice business earned higher royalties of $39,000 as compared to the second quarter fiscal 2024. Royalties earned from all other licensing agreements for the manufacture and sale of Nathan’s products increased by $64,000 during the second quarter fiscal 2025 as compared to the second quarter fiscal 2024 primarily due to higher royalties earned on sales of proprietary spices, franks-in-a-blanket, mozzarella sticks and other hors d’oeuvres.
Current wording
License royalties increased by approximately 17% to $7,105,000 in the third quarter fiscal 2025 as compared to $6,078,000 in the third quarter fiscal 2024. Total royalties earned on sales of hot dogs from our license agreement with Smithfield Foods, Inc. at retail and foodservice increased 16% to $6,146,000 for the third quarter fiscal 2025 as compared to $5,279,000 in the third quarter fiscal 2024. The increase is due to a 19% increase in retail volume which was offset, in part, by a 2% decrease in net selling price.* The foodservice business royalties were $15,000 lower as compared to the third quarter fiscal 2024. Royalties earned from all other licensing agreements for the manufacture and sale of Nathan’s products increased by $160,000 during the third quarter fiscal 2025 as compared to the third quarter fiscal 2024 primarily due to higher royalties earned on sales of French fries, onion rings, proprietary spices, franks-in-a-blanket, mozzarella sticks and bottled mustard. *
Previous wording
Franchise fees and royalties decreased by approximately 9% to $1,174,000 in the second quarter fiscal 2025 as compared to $1,291,000 in the second quarter fiscal 2024. Total royalties were $1,066,000 in the second quarter fiscal 2025 as compared to $1,148,000 in the second quarter fiscal 2024. Royalties earned under the Branded Menu Program were $248,000 in the second quarter fiscal 2025 as compared to $272,000 in the second quarter fiscal 2024. Royalties earned under the Branded Menu Program are not based upon a percentage of restaurant sales but are based upon product purchases. Virtual kitchen royalties were $11,000 in the second quarter fiscal 2025 as compared to $18,000 in the second quarter fiscal 2024. Traditional franchise royalties were $807,000 in the second quarter fiscal 2025 as compared to $858,000 in the second quarter fiscal 2024. Franchise restaurant sales decreased to $18,681,000 in the second quarter fiscal 2025 as compared to $19,171,000 in the second quarter fiscal 2024 primarily due to lower traffic at international locations and other seasonal entertainment venues. Comparable domestic franchise sales (consisting of 59** **Nathan’s outlets, excluding sales under the Branded Menu Program) were $14,961,000 in the second quarter fiscal 2025 as compared to $15,286,000 in the second quarter fiscal 2024.
Current wording
Franchise fees and royalties were $991,000 in the third quarter fiscal 2025 as compared to $955,000 in the third quarter fiscal 2024. Total royalties were $897,000 in the third quarter fiscal 2025 as compared to $868,000 in the third quarter fiscal 2024. Royalties earned under the Branded Menu Program were $182,000 in the third quarter fiscal 2025 as compared to $150,000 in the third quarter fiscal 2024. Royalties earned under the Branded Menu Program are not based upon a percentage of restaurant sales but are based upon product purchases. Virtual kitchen royalties were $16,000 in the third quarter fiscal 2025 as compared to $14,000 in the third quarter fiscal 2024. Traditional franchise royalties were $699,000 in the third quarter fiscal 2025 as compared to $704,000 in the third quarter fiscal 2024. Franchise restaurant sales increased to $16,066,000** **in the third quarter fiscal 2025 as compared to $15,635,000 in the third quarter fiscal 2024 primarily due to higher sales at airport locations, travel plazas and casino locations primarily in Las Vegas, Nevada. Comparable domestic franchise sales (consisting of 59 Nathan’s outlets, excluding sales under the Branded Menu Program) were $12,805,000 in the third quarter fiscal 2025 as compared to $12,377,000 in the third quarter fiscal 2024.
Previous wording
At September 29, 2024, 243** **franchised locations, including domestic, international and Branded Menu Program units were operating as compared to 235 franchised locations, including domestic, international and Branded Menu Program units at September 24, 2023. Total franchise fee income was $108,000 in the second quarter fiscal 2025 as compared to $143,000 in the second quarter fiscal 2024. Domestic franchise fee income was $35,000 in the second quarter fiscal 2025 as compared to $28,000 in the second quarter fiscal 2024. International franchise fee income was $59,000 in the second quarter fiscal 2025 as compared to $60,000 in the second quarter fiscal 2024.
Current wording
At December 29, 2024, 236 franchised locations, including domestic, international and Branded Menu Program units were operating as compared to 238 franchised locations, including domestic, international and Branded Menu Program units at December 24, 2023. Total franchise fee income was $94,000 in the third quarter fiscal 2025 as compared to $87,000 in the third quarter fiscal 2024. Domestic franchise fee income was $25,000 in the third quarter fiscal 2025 as compared to $26,000 in the third quarter fiscal 2024. International franchise fee income was $59,000 in the third quarter fiscal 2025 as compared to $61,000 in the third quarter fiscal 2024.
Previous wording
We recognized $14,000 and $55,000 in forfeited fees in the second quarter fiscal 2025 and the second quarter fiscal 2024, respectively.* * During the second quarter fiscal 2025, eighteen franchise locations opened and six franchise locations closed. During the second quarter fiscal 2024, seven franchise locations opened and seven franchise locations closed.
Current wording
We recognized $10,000 in forfeited fees in the third quarter fiscal 2025. We did not recognize any forfeited fees in the third quarter fiscal 2024. During the third quarter fiscal 2025, three franchise locations opened and ten franchise locations closed. During the third quarter fiscal 2024, three franchised locations opened.
Previous wording
Advertising fund revenue, after eliminating Company contributions, was $560,000 during the second quarter fiscal 2025 as compared to $569,000 during the second quarter fiscal 2024.
Current wording
Advertising fund revenue, after eliminating Company contributions, was $520,000 during the third quarter fiscal 2025 as compared to $508,000 during the third quarter fiscal 2024 period.
Previous wording
Overall, our cost of sales increased* *by approximately 8% to $26,029,000 in the second quarter fiscal 2025 as compared to $24,187,000 in the second quarter fiscal 2024. Our gross profit (calculated as total Branded Products sales plus total Company-owned restaurant sales less cost of sales) was $3,855,000 or 13% during the second quarter fiscal 2025 as compared to $4,358,000 or 15% during the second quarter fiscal 2024.
Current wording
Overall, our cost of sales increased by approximately 10% to $19,571,000 in the third quarter fiscal 2025 as compared to $17,872,000 in the third quarter fiscal 2024. Our gross profit (calculated as total Branded Products sales plus total Company-owned restaurant sales less cost of sales) was $3,332,000 or 15% of sales during the third quarter fiscal 2025 as compared to $3,477,000 or 16% of sales during the third quarter fiscal 2024.
Previous wording
Cost of sales in the Branded Product Program increased by 9% to $23,318,000 in the second quarter fiscal 2025 as compared to $21,442,000 in the second quarter fiscal 2024, primarily due to a 4% increase in the volume of hot dogs sold, as well as a 5% increase in the average cost per pound of our hot dogs. A shrinking supply of cattle, combined with industry demand and inflationary pressures have resulted in higher commodity prices, including beef and beef trimmings, contributing to the increase in the average cost per pound of our hot dogs. We did not make any purchase commitments of beef during the second quarter fiscal 2025 or the second quarter fiscal 2024. If the cost of beef and beef trimmings increases and we are unable to pass on these higher costs through price increases or otherwise reduce any increase in our costs through the use of purchase commitments, our margins will be adversely impacted. With respect to Company-owned restaurants, our cost of sales during the second quarter fiscal 2025 was $2,711,000 or 51% of restaurant sales as compared to $2,745,000 or 53% of restaurant sales during the second quarter fiscal 2024. Food and paper costs as a percentage of Company-owned restaurant sales were 24.2%, down from 27.6% in the comparable period of the prior year driven, in part, by price increases across most menu offerings. Labor and related expenses as a percentage of Company-owned restaurant sales were 26.5%, up from 25.3% in the comparable period of the prior year due to higher salaries expense attributable to minimum wage increases as well as higher incentive compensation expense.
Current wording
Cost of sales in the Branded Product Program increased by 10% to $18,336,000 in the third quarter fiscal 2025 as compared to $16,688,000 in the third quarter fiscal 2024, primarily due to an 8.5% increase in the average cost per pound of our hot dogs. A shrinking supply of cattle, combined with industry demand and inflationary pressures have resulted in higher commodity prices, including beef and beef trimmings, contributing to the increase in the average cost per pound of our hot dogs.* * We did not make any purchase commitments of beef during the third quarter fiscal 2025 or the third quarter fiscal 2024. If the cost of beef and beef trimmings increases and we are unable to pass on these higher costs through price increases or otherwise reduce any increase in our costs through the use of purchase commitments, our margins will be adversely impacted. With respect to** *Company-owned restaurants, our cost of sales during the third quarter fiscal 2025 was $1,235,000 or 68% of restaurant sales as compared to $1,184,000 or 71% of restaurant sales in the third quarter fiscal 2024. Food and paper costs as a percentage of Company-owned restaurant sales were 26%, down from 29% in the comparable period of the prior year driven, in part, by price increases across most menu offerings. Labor and related expenses as a percentage of Company-owned restaurant sales were 42% which was comparable to the third quarter fiscal 2024. *
Previous wording
Restaurant operating expenses were $1,389,000 in the second quarter fiscal 2025 as compared to $1,340,000 in the second quarter fiscal 2024. The increase is due primarily to higher occupancy expenses of $103,000 and higher insurance costs of $26,000 which were offset, in part, by lower marketing expenses of $23,000 and lower delivery charges of $23,000. As a percentage of Company-owned restaurant sales, restaurant operating expenses were 26% in the second quarter fiscal 2025 as compared to 25.8% in the second quarter fiscal 2024.
Current wording
Restaurant operating expenses were $991,000 in the third quarter fiscal 2025 as compared to $896,000 in the third quarter fiscal 2024*.*The increase is due primarily to higher occupancy expenses of $50,000, higher repairs and maintenance expenses of $16,000, and higher utilities expenses of $11,000. As a percentage of Company-owned restaurant sales, restaurant operating expenses were 55% in the third quarter fiscal 2025 as compared to 54% in the third quarter fiscal 2024.
Previous wording
Depreciation and amortization, which primarily consists of the depreciation of fixed assets, including leasehold improvements and equipment, and the amortization of a definite-lived intangible asset, was $247,000 in the second quarter fiscal 2025 as compared to $315,000 in the second quarter fiscal 2024.
Current wording
Depreciation and amortization, which primarily consists of the depreciation of fixed assets, including leasehold improvements and equipment, and the amortization of a definite-lived intangible asset, was $235,000 in the third quarter fiscal 2025 as compared to $268,000 in the third quarter fiscal 2024.
Previous wording
Advertising fund expense, after eliminating Company contributions, was $560,000 during the second quarter fiscal 2025 as compared to $569,000 in the second quarter fiscal 2024.
Current wording
Advertising fund expense, after eliminating Company contributions, was $520,000 during the third quarter fiscal 2025 as compared to $508,000 in the third quarter fiscal 2024.
Previous wording
Interest expense of $1,441,000 in the second quarter fiscal 2025 represented interest expense of $458,000** and $930,000 on the 2025 Notes and the Secured Overnight Financing Rate (“SOFR”) Term Loan borrowings, respectively, and amortization of debt issuance costs of $35,000 and $18,000 **on the 2025 Notes and the SOFR Term Loan borrowings, respectively.
Current wording
Interest expense of $842,000 in the third quarter fiscal 2025 represented interest expense of $825,000 on the Secured Overnight Financing Rate (“SOFR”) Term Loan borrowings and amortization of debt issuance costs of $17,000.
Previous wording
Interest expense of $1,413,000 in the second quarter fiscal 2024 represented interest expense of $1,321,000 on the 2025 Notes and amortization of debt issuance costs of $92,000.
Current wording
Interest expense of $1,392,000 in the third quarter fiscal 2024 represented interest expense of $1,300,000 on the 2025 Notes and amortization of debt issuance costs of $92,000.
Previous wording
Interest and dividend income of $219,000 in the second quarter fiscal 2025 represented amounts earned by the Company on its interest bearing bank and money market accounts and mutual funds as compared to $150,000 in the fiscal 2024 period.
Current wording
Interest and dividend income of $183,000** in the third quarter fiscal 2025 represented amounts earned by the Company on its interest bearing bank and money market accounts and mutual funds as compared to **$138,000 in the third quarter fiscal 2024. The increase is due to a larger balance of cash and cash equivalents earning interest at higher rates in the third quarter fiscal 2025 as compared to the third quarter of fiscal 2024.
Previous wording
Other income, net was $23,000 in the second quarter fiscal 2025 and the second quarter fiscal 2024 which primarily relates to sublease income from a franchised restaurant.
Current wording
Other income, net was $21,000 in the third quarter fiscal 2025 and the third quarter fiscal 2024, which primarily relates to sublease income from a franchised restaurant.
Previous wording
The effective income tax rate for the second quarter fiscal 2025 was 25.5% compared to 27.4% in the second quarter fiscal 2024. The effective income tax rate for the second quarter fiscal 2025 reflected income tax expense of $2,069,000 recorded on $8,099,000 of pre-tax income. The effective income tax rate for the second quarter fiscal 2024 reflected income tax expense of $2,153,000 recorded on $7,864,000 of pre-tax income. The effective tax rates are higher than the U.S. Federal statutory rates primarily due to state and local taxes as well as non-deductible compensation under the Internal Revenue Code Section 162(m). The effective tax rate for the second quarter fiscal 2024 included a discrete adjustment of 0.8%.
Current wording
The effective income tax rate for the third quarter fiscal 2025 was 26.0% as compared to 30.2% in the third quarter fiscal 2024. The effective income tax rate for the third quarter fiscal 2025 reflected income tax expense of $1,575,000 recorded on $6,059,000 of pre-tax income. The effective income tax rate for the third quarter fiscal 2024 reflected income tax expense of $1,128,000 recorded on $3,735,000 of pre-tax income. The effective tax rates are higher than the U.S. Federal statutory rates primarily due to state and local taxes, as well as non-deductible executive compensation under the Internal Revenue Code Section 162(m).
Previous wording
The amount of unrecognized tax benefits at September 29, 2024 was $494,000 all of which would impact the Company’s effective tax rate, if recognized. As of September 29, 2024, the Company had approximately $379,000 accrued for the payment of interest and penalties in connection with unrecognized tax benefits.
Current wording
The amount of unrecognized tax benefits at December 29, 2024 was $506,000 all of which would impact the Company’s effective tax rate, if recognized. As of December 29, 2024, the Company had approximately $392,000 accrued for the payment of interest and penalties in connection with unrecognized tax benefits.
Previous wording
Twenty-six weeks ended September 29, 2024 compared to twenty-six weeks ended September 24, 2023
Current wording
Thirty-nine weeks ended December 29, 2024 compared to thirty-nine weeks ended December 24, 2023
Previous wording
Total revenues increased by approximately 6% to $85,876,000 for the twenty-six weeks ended September 29, 2024 (“fiscal 2025 period”) as compared to $80,729,000 for the twenty-six weeks ended September 24, 2023 (“fiscal 2024 period”).
Current wording
Total revenues increased by approximately 7% to $117,395,000 for the thirty-nine weeks ended December 29, 2024 (“fiscal 2025 period”) as compared to $109,619,000 for the thirty-nine weeks ended December 24, 2023 (“fiscal 2024 period”).
Previous wording
Foodservice sales from the Branded Product Program increased by approximately 4% to $50,682,000 for the fiscal 2025 period as compared to $48,522,000 for the fiscal 2024 period. During the fiscal 2025 period, the volume of hot dogs sold in the Branded Product Program increased by approximately 2% as compared to the fiscal 2024 period. Our average selling prices increased by approximately 2.5% as compared to the fiscal 2024 period.
Current wording
Foodservice sales from the Branded Product Program increased by approximately 5% to $71,781,000 for the fiscal 2025 period as compared to $68,210,000 for the fiscal 2024 period. During the fiscal 2025 period, the volume of hot dogs sold in the Branded Product Program increased by approximately 1.5% as compared to the fiscal 2024 period. Our average selling prices increased by approximately 3.5% as compared to the fiscal 2024 period.
Previous wording
Total Company-owned restaurant sales increased by approximately 8% to $9,547,000 during the fiscal 2025 period as compared to $8,851,000 during the fiscal 2024 period. Restaurant sales were impacted by higher sales at our Coney Island locations due to an increase in our average check, offset by lower sales at our location in Oceanside, New York.
Current wording
Total Company-owned restaurant sales increased by approximately 8% to $11,351,000 during the fiscal 2025 period as compared to $10,512,000 during the fiscal 2024 period. Restaurant sales were primarily impacted by higher sales at our Coney Island locations due to an increase in our average check.
Previous wording
License royalties increased by approximately 12% to $22,412,000 in the fiscal 2025 period as compared to $19,997,000 in the fiscal 2024 period. Total royalties earned on sales of hot dogs from our license agreement with Smithfield Foods, Inc. at retail and foodservice, increased 13% to $20,605,000 for the fiscal 2025 period as compared to $18,303,000 in the fiscal 2024 period. The increase is due to a 14%** **increase in retail volume which was offset, in part, by a 2% decrease in net selling price. The foodservice business earned higher royalties of $107,000 as compared to the fiscal 2024 period. Royalties earned from all other licensing agreements for the manufacture and sale of Nathan’s products increased by $113,000 during the fiscal 2025 period as compared to the fiscal 2024 period primarily due to higher royalties earned on sales of French fries, onion rings, and proprietary spices, offset by lower royalties earned on sales of pickles, franks-in-a-blanket, mozzarella sticks and other hors d’oeuvres.
Current wording
License royalties increased by approximately 13% to $29,517,000 in the fiscal 2025 period as compared to $26,075,000 in the fiscal 2024 period. Total royalties earned on sales of hot dogs from our license agreement with Smithfield Foods, Inc. at retail and foodservice, increased 13% to $26,751,000 for the fiscal 2025 period as compared to $23,582,000 in the fiscal 2024 period. The increase is due to a 15%** **increase in retail volume which was offset, in part, by a 2% decrease in net selling price. The foodservice business earned higher royalties of $91,000 as compared to the fiscal 2024 period. Royalties earned from all other licensing agreements for the manufacture and sale of Nathan’s products increased by $273,000 during the fiscal 2025 period as compared to the fiscal 2024 period primarily due to higher royalties earned on sales of French fries, onion rings, proprietary spices, franks-in-a-blanket, mozzarella sticks and bottled mustard.
Previous wording
Franchise fees and royalties decreased by approximately 5% to $2,247,000 in the fiscal 2025 period as compared to $2,366,000 in the fiscal 2024 period. Total royalties were $2,047,000 in the fiscal 2025 period as compared to $2,128,000 in the fiscal 2024 period. Royalties earned under the Branded Menu Program were $423,000 in the fiscal 2025 period as compared to $453,000 in the fiscal 2024 period. Royalties earned under the Branded Menu Program are not based upon a percentage of restaurant sales but are based upon product purchases. Virtual kitchen royalties were $25,000 in the fiscal 2025 period as compared to $50,000 in the fiscal 2024 period. Traditional franchise royalties were $1,599,000 in the fiscal 2025 period as compared to $1,625,000 in the fiscal 2024 period. Franchise restaurant sales decreased to $36,334,000 in the fiscal 2025 period as compared to $36,433,000 in the fiscal 2024 period primarily due to lower traffic at international locations, seasonal entertainment venues, and travel plazas which were offset, in part, by higher traffic at casino locations primarily in Las Vegas, Nevada.* * Comparable domestic franchise sales (consisting of 58 Nathan’s outlets, excluding sales under the Branded Menu Program) were $29,037,000 in the fiscal 2025 period as compared to $29,388,000 in the fiscal 2024 period.
Current wording
Franchise fees and royalties were $3,238,000 in the fiscal 2025 period as compared to $3,321,000 in the fiscal 2024 period. Total royalties were $2,944,000 in the fiscal 2025 period as compared to $2,996,000 in the fiscal 2024 period. Royalties earned under the Branded Menu Program were $604,000 in the fiscal 2025 period as compared to $603,000 in the fiscal 2024 period. Royalties earned under the Branded Menu Program are not based upon a percentage of restaurant sales but are based upon product purchases. Virtual kitchen royalties were $42,000 in the fiscal 2025 period as compared to $64,000 in the fiscal 2024 period. Traditional franchise royalties were $2,298,000 in the fiscal 2025 period as compared to $2,329,000 in the fiscal 2024 period. Franchise restaurant sales increased to $52,400,000 in the fiscal 2025 period as compared to $52,068,000 in the fiscal 2024 period primarily due to higher* traffic at casino locations primarily in Las Vegas, Nevada, which were offset, in part, by lower traffic at international locations and seasonal entertainment venues. * Comparable domestic franchise sales (consisting of 58** **Nathan’s units, excluding sales under the Branded Menu Program) were $42,305,000 in the fiscal 2025 period as compared to $41,666,000 in the fiscal 2024 period.
Previous wording
At September 29, 2024, 243** **franchised locations, including domestic, international and Branded Menu Program units were operating as compared to 235 franchised locations, including domestic, international and Branded Menu Program units at September 24, 2023. Total franchise fee income was $200,000 in the fiscal 2025 period as compared to $238,000 in the fiscal 2024 period. Domestic franchise fee income was $58,000 in the fiscal 2025 period as compared to $55,000 in the fiscal 2024 period. International franchise fee income was $119,000 in the fiscal 2025 period as compared to $120,000 in the fiscal 2024 period.
Current wording
At December 29, 2024, 236 franchised locations, including domestic, international and Branded Menu Program units were operating as compared to 238 franchised locations, including domestic, international and Branded Menu Program franchise units at December 24, 2023. Total franchise fee income was $294,000 in the fiscal 2025 period as compared to $325,000 in the fiscal 2024 period. Domestic franchise fee income was $83,000 in the fiscal 2025 period as compared to $81,000 in the fiscal 2024 period. International franchise fee income was $178,000 in the fiscal 2025 period as compared to $181,000 during the fiscal 2024 period.
Previous wording
We recognized $23,000** and $63,000 in forfeited fees in the fiscal 2025 period and fiscal 2024 period, respectively. During the fiscal 2025 period, twenty-one franchise locations opened and eight franchise locations closed. During the fiscal 2024 period, fourteen franchise locations opened and eleven **franchise locations closed.
Current wording
We recognized $33,000** **and $63,000 in forfeited fees in the fiscal 2025 period and fiscal 2024 period, respectively. During the fiscal 2025 period, twenty-four franchise locations opened and eighteen franchise locations closed. During the fiscal 2024 period, seventeen franchise locations opened and eleven franchise locations closed.
Previous wording
Advertising fund revenue, after eliminating Company contributions, was $988,000 during the fiscal 2025 period as compared to $993,000 during the fiscal 2024 period.
Current wording
Advertising fund revenue, after eliminating Company contributions, was $1,508,000 in the fiscal 2025 period, as compared to $1,501,000 during the fiscal 2024 period.
Previous wording
Overall, our cost of sales increased by approximately 5% to $51,270,000 in the fiscal 2025 period as compared to $48,871,000 in the fiscal 2024 period. Our gross profit (calculated as total Branded Products sales plus total Company-owned restaurant sales less cost of sales) was $8,959,000 or 15% during the fiscal 2025 period as compared to $8,502,000 or 15% during the fiscal 2024 period.
Current wording
Overall, our cost of sales increased by approximately 6% to $70,841,000 in the fiscal 2025 period as compared to $66,743,000 in the fiscal 2024 period. Our gross profit (calculated as total Branded Products sales plus total Company-owned restaurant sales less cost of sales) was $12,291,000 or 15% of sales during the fiscal 2025 period as compared to $11,979,000 or 15% of sales during the fiscal 2024 period.
Previous wording
Cost of sales in the Branded Product Program increased by 5% to $46,290,000 during the fiscal 2025 period as compared to $44,010,000 during the fiscal 2024 period, primarily due to a 2% increase in the volume of hot dogs sold, as well as a 3% increase in the average cost per pound of our hot dogs. A shrinking supply of cattle, combined with industry demand and inflationary pressures have resulted in higher commodity prices, including beef and beef trimmings, contributing to the increase in the average cost per pound of our hot dogs. We did not make any purchase commitments of beef during the fiscal 2025 and 2024 periods. If the cost of beef and beef trimmings increases and we are unable to pass on these higher costs through price increases or otherwise reduce any increase in our costs through the use of purchase commitments, our margins will be adversely impacted. With respect to Company-owned restaurants, our cost of sales during the fiscal 2025 period was $4,980,000 or 52% of restaurant sales, as compared to $4,861,000 or 55% of restaurant sales in the fiscal 2024 period. Food and paper costs as a percentage of Company-owned restaurant sales were 24.8%, down from 27.8% in the comparable period of the prior year driven, in part, by price increases across most menu offerings. Labor and related expenses as a percentage of Company-owned restaurant sales were 27.4%, up from 27.1% in the comparable period of the prior year due to higher salaries expense attributable to minimum wage increases as well as higher incentive compensation expense.** **
Current wording
Cost of sales in the Branded Product Program increased by 6% to $64,626,000 during the fiscal 2025 period as compared to $60,698,000 during the fiscal 2024 period, primarily due to a 1.5% increase in the volume of hot dogs sold, as well as a 4% increase in the average cost per pound of our hot dogs. A shrinking supply of cattle, combined with industry demand and inflationary pressures have resulted in higher commodity prices, including beef and beef trimmings, contributing to the increase in the average cost per pound of our hot dogs. We did not make any purchase commitments of beef during the fiscal 2025 and 2024 periods. If the cost of beef and beef trimmings increases and we are unable to pass on these higher costs through price increases or otherwise reduce any increase in our costs through the use of purchase commitments, our margins will be adversely impacted. With respect to Company-owned restaurants, our cost of sales during the fiscal 2025 period was $6,215,000 or 55% of restaurant sales as compared to $6,045,000 or 58% of restaurant sales in the fiscal 2024 period.** Food and paper costs as a percentage of Company-owned restaurant sales were 25%, down from 28% in the comparable period of the prior year driven, in part, by price increases across most menu offerings. Labor and related expenses as a percentage of Company-owned restaurant sales were 29% which was comparable to the fiscal 2024 period.
Previous wording
Restaurant operating expenses were $2,518,000 in the fiscal 2025 period as compared to $2,383,000 in the fiscal 2024 period. The increase is due primarily to higher occupancy expenses of $147,000 and higher insurance costs of $54,000 which were offset, in part, by lower marketing expenses of $16,000 and lower delivery charges of $37,000. As a percentage of Company-owned restaurant sales, restaurant operating expenses were 26.4% in the fiscal 2025 period as compared to 26.9% in the fiscal 2024 period.
Current wording
Restaurant operating expenses were $3,509,000 in the fiscal 2025 period as compared to $3,279,000 in the fiscal 2024 period. The increase is due primarily to higher occupancy expenses of $196,000, higher repairs and maintenance expenses of $26,000, and higher insurance costs of $51,000 which were offset, in part, by lower delivery charges of $48,000.* * As a percentage of Company-owned restaurant sales, restaurant operating expenses were 31% in the fiscal 2025 period which was comparable to the fiscal 2024 period.
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Previous report — wording carried elsewhere
On July 10, 2024, the Company refinanced and redeemed its outstanding 2025 Notes. In connection with this transaction, the Company recorded a loss on extinguishment of debt of $334,000 that reflected the write-off of the remainder of previously recorded debt issuance costs.