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

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.

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.

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.

         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

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.

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.

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. Interest 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.

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. We 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.

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.

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.

(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:

                                           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 . . .