Nathan's(NATH) - 2021 Q4 - Annual Report

Franchise Operations - As of March 28, 2021, Nathan's franchise system included 213 units operating in 19 states and eight foreign countries[38] - Approximately 77% of the Company's franchise system is currently open, with many locations having temporarily closed due to the COVID-19 pandemic[29] - During fiscal 2021, franchisees opened seven new Nathan's Famous units and closed ten units, including one international unit[52] - The Nathan's Branded Menu Program allows foodservice operators to offer Nathan's products without the same reporting requirements as standard franchises[55] Financial Performance - Total revenue for fiscal 2021 was $1,102,000, a decrease from$4,872,000 in fiscal 2020, representing a decline of approximately 77.6%[67] - Gross profit for fiscal 2021 was $383,000, down from$1,962,000 in fiscal 2020, indicating a decrease of about 80.5%[67] - The licensing agreement with John Morrell & Co. generated royalties of approximately $27,778,000 in fiscal 2021, accounting for 36.6$1,137,000 in fiscal 2021, up from 719,000 in fiscal 2020[84] Marketing and Brand Development - The company plans to expand its retail licensing program with John Morrell & Co. to penetrate grocery and mass merchandising channels further[75] - The company continues to explore co-branding opportunities within its restaurant system and with other restaurant concepts[81] - In fiscal 2021, Nathan's marketing efforts focused on online media spending and third-party delivery platforms due to COVID-19[95] - Nathan's continues to upgrade its social media platforms to enhance brand awareness among younger demographics[96] Technology and Operations - The Company upgraded its technology resources by migrating to the PAR Brink Point-of-Sale application and partnering with Restaurant Magic for inventory and food management[47] - Nathan's maintains a cooperative distribution system with UniPro Foodservice, Inc. to enhance market expansion and cost efficiency[90] Employee and Workforce Management - Nathan's employs 146 people as of March 28, 2021, with 55% being female and 73% comprising racial and ethnic minorities[100] - The company has not experienced any strike or work stoppage for over 47 years, indicating effective workforce management[102] - The company has historically matched 401(k) contributions at a rate of 0.25 per dollar contributed by employees, up to 3% of their annual salary[106] Safety and Health Measures - The company has implemented various safety measures during COVID-19, including providing PPE and promoting social distancing[108] Cost and Pricing Strategy - Nathan's expects to experience price volatility for beef products during fiscal 2022, which could impact operational results[340] - The company has not attempted to hedge against fluctuations in commodity prices, leading to exposure to market changes in future purchases[341] - A short-term increase or decrease of 10% in the cost of food and paper products for the year ended March 28, 2021 would have increased or decreased Nathan's cost of sales by approximately $2,877,000[341] Revenue Trends - Revenues from company-owned locations and franchised restaurants are historically highest during the first two fiscal quarters, with the fourth quarter typically being the slowest[126] Product and Menu Development - The Company launched the Wings of New York virtual concept, offering a variety of chicken wing options and sides, during fiscal 2021[42] - Nathan's has developed various restaurant designs, including carts and kiosks, suitable for non-traditional sites like airports and stadiums[37] - Nathan's emphasizes its signature products and value pricing strategy to compete effectively in the fast food industry[129] Cash and Debt Management - As of March 28, 2021, Nathan's cash and cash equivalents totaled$81,064,000, with earnings on this cash expected to change by approximately $203,000 per annum for each 0.25$150.0 million of 2025 Notes outstanding, with interest expense on these borrowings expected to change by approximately $375,000 per annum for each 0.25% change in interest rates[337] Cost Analysis - The average cost of hot dogs between October 2019 and March 2020 was approximately 11.2% higher than the average cost between October 2018 and March 2019[338] - The average cost of hot dogs between April 2020 and March 2021 was approximately 0.8% lower than the average cost between April 2019 and March 2020[338]