Diversified Restaurant Holdings, Inc. Annual Report 2015

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FY2015 Annual Report · Diversified Restaurant Holdings, Inc.

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NASDAQ: SAUC

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RESTAURANT LOCATIONS

2015

ANNUAL REPORT

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Illinois

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Ohio

Missouri

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LOCATIONS

Adrian
Birch Run
Chesterﬁeld
Clinton Township
Detroit
Fenton
Flint

Brandon
Clearwater
Fort Myers
Lakeland
Largo

MICHIGAN
Gaylord
Grand Blanc
Lapeer
Marquette
Novi
Petoskey
Port Huron

FLORIDA
New Port Richey
North Port
Oldsmar
Pinellas Park
Riverview

INDIANA

Royal Oak
Sault Ste. Marie
Sterling Heights
Traverse City
Troy
Warren

Sarasota
Tyrone
University Park
Wesley Chapel
Ybor

Crown Point
Hammond

Hobart
Schererville

Valparaiso

Belleville
Calumet City
Chicago

Ballwin
Brentwood
Chesterﬁeld
Columbia
Creve Coeur

ILLINOIS

Edwardsville
Homewood

Lansing
O’Fallon

MISSOURI
Fenton
Jefferson City
Kirkwood
Lake Ozark
O’Fallon

Rolla
St. Charles
St. Louis
St. Peters
Wentzville

LOCATIONS

MICHIGAN

Ann Arbor
Berkley
Birch Run
Bloomﬁeld
Brighton
Canton

Cascade Township
Chesterﬁeld
East Lansing
Grand Blanc
Grand Rapids

Shelby Township
Traverse City
Novi
West Grand Rapids
Woodhaven

INDIANA

Fort Wayne

OHIO

Centerville

DEAR FELLOW SHAREHOLDERS, GUESTS, ASSOCIATES, AND FANS:

2015 began a transitional period for Diversified Restaurant Holdings that we believe will ultimately deliver
long-term benefits for our business and shareholders. Specifically, we took definitive steps to improve the
health of our portfolio which should ultimately lead to higher profitability and a stronger balance sheet.

Accordingly, we made the decision to close 12 underperforming locations and pause further development of
Dave’s Burger Tavern® (“Bagger Dave’s”). This was done so we can digest the many investments and
changes made to the brand over the years, including menu enhancements along with the increased level of
guest service. Looking forward, we plan to focus our attention and resources primarily on our Buffalo Wild
Wings® (“BWW”) business which represents the vast majority of both our revenue and Adjusted EBITDA.
We believe these actions provide us the best means to improve our business and grow shareholder value
over time from current levels.

To better align with our updated strategic direction and to emphasize the significance of BWW, we changed
our stock ticker symbol. Our shares now trade on the NASDAQ under SAUC, in tribute to BWW's New
York-style chicken wings prepared with the options of 21 different signature sauces and seasonings.

We were delighted to have been honored with the Buffalo Wild Wings' 2015 Franchise Founder’s Award,
which recognizes a franchisee owner or executive who has displayed enthusiasm, teamwork, leadership,
and an entrepreneurial spirit. The award was presented by Buffalo Wild Wings, Inc.'s Chief Executive
Officer, Sally Smith, during the company's recent annual meeting of its franchisees and suppliers.

From a financial standpoint, in 2015 we increased our top line by over 34% to a record $172.5 million. This
included a 2.9% increase in comparable-store sales, representing our fifth consecutive year of comparable-
store sales growth, and consisted of a 3.0% increase at BWW and 1.3% increase at Bagger Dave’s. We
also generated $17.2 million in Adjusted EBITDA.

We ended 2015 with 80 total restaurants, representing over 21% unit growth, comprising 62 Buffalo Wild
Wings and 18 Bagger Dave’s across major metropolitan areas such as Detroit, St. Louis, Chicago, and,
Florida's West Coast. During the year, we added eight new restaurants to our portfolio -- five Bagger
Dave's and three BWW, along with 18 highly-successful BWW in the St. Louis market we acquired last
July. We remain on track integrating this acquisition through investments in technology and are now
applying our operational best practices in the economies of scale to build margins.

We have signed an amended area development agreement with Buffalo Wild Wings, Inc. that gives us the
opportunity to open 15 additional BWW in Michigan and Florida over the next five years, inclusive of the two
A-Class locations planned for Florida’s West Coast in 2016. This agreement solidifies our near- to medium-
term development plans as Buffalo Wild Wings, Inc.’s largest franchisee and allows us to capitalize on the
brand’s long runway of expansion. We are also committed to brand re-investment by remodeling our BWW
and currently have 19 restaurants featuring the Stadia prototype design. We have two additional remodels
planned for completion in 2016 and anticipate that all of our BWW will showcase the stadium-like look and
feel by the end of 2020.

All in all, 2015 was a year in which we realized opportunities, but also took the necessary steps to position
ourselves for a better future. We will continue this work in 2016 with an emphasis on realizing at least
$4.0 million in cost savings as a result of restaurant closures and associated overhead reduction, vendor
consolidation, and other initiatives at both the restaurant and support levels. These cost reduction efforts
are expected to bolster margins and enable us to meaningfully grow Adjusted EBITDA. This will also
enable us to build cash and strengthen our balance sheet as we grow our top-line.

To our Board, my fellow associates, our guests and fans, and our shareholders, thank you for your support
of Diversified Restaurant Holdings. We are taking the right steps to strengthen our business as we position
ourselves for success in the years ahead.

Sincerely,

T. Michael Ansley
Chairman, President and CEO
April 20, 2016

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(cid:59)(cid:3)Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the fiscal year ended December 27, 2015
or
(cid:133)(cid:3)Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File No. 000-53577
DIVERSIFIED RESTAURANT HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Nevada

03-0606420

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

27680 Franklin Rd., Southfield, MI 48034
(248) 223-9160
(Address, including zip code and telephone number, including area code, of Registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Exchange Act:
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.0001 par value per share
(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:1407) No (cid:59)

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 (cid:1407) No (cid:59)
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 (cid:59) No (cid:1407)
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 (cid:59) No (cid:1407)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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. (cid:59)
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. (Check one):

Large accelerated filer (cid:1407)

Accelerated filer (cid:59)

Non-accelerated filer (cid:1407)

Smaller reporting company (cid:1407)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:1407) No (cid:59)
The aggregate market value of the Registrant’s voting common stock held by non-affiliates was $51.6 million based on the per share closing
price of the Company's common stock as reported on the NASDAQ stock market on June 28, 2015.
The number of shares outstanding of the registrant's common stock as of March 9, 2016 was 26,335,850 shares.

DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the registrant's definitive Proxy Statement for its Annual Meeting of Stockholders to be held on or about June 2, 2016 are
incorporated by reference in Part III herein. The registrant intends to file such Proxy Statement with the Securities and Exchange Commission
no later than 120 days after the end of the fiscal year covered by this report on Form 10-K.

TABLE OF CONTENTS

PART I ..........................................................................................................................................................................

Item 1. Business .....................................................................................................................................................

Item 1A. Risk Factors ............................................................................................................................................

Item 1B. Unresolved Staff Comments ...................................................................................................................

Item 2. Properties ...................................................................................................................................................

Item 3. Legal Proceedings .....................................................................................................................................

Item 4. Mine Safety Disclosures ............................................................................................................................

Page

PART II .........................................................................................................................................................................

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

Item 6. Selected Financial Data .............................................................................................................................

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

Item 7A. Quantitative and Qualitative Disclosures about Market Risk .................................................................

Item 8. Consolidated Financial Statements and Supplementary Data ...................................................................

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

Item 9A. Controls and Procedures .........................................................................................................................

Item 9B. Other Information ...................................................................................................................................

PART III ........................................................................................................................................................................

Item 10. Directors, Executive Officers and Corporate Governance ......................................................................

Item 11. Executive Compensation .........................................................................................................................

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

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

Item 14. Principal Accountant Fees and Services ..................................................................................................

PART IV .......................................................................................................................................................................

Item 15. Exhibits and Financial Statement Schedules ...........................................................................................

SIGNATURES ..............................................................................................................................................................

Exhibit 10.13

Exhibit 21

Exhibit 23

Exhibit 31.1

Exhibit 31.2

Exhibit 32.1

Exhibit 32.2

PART I

When used in this Form 10-K, the “Company” and “DRH” refers to Diversified Restaurant Holdings, Inc. and, depending on
the context, could also be used to refer generally to the Company and its subsidiaries, which are described below.

Cautionary Statement Regarding Forward-Looking Information

Some of the statements in the sections entitled “Business,” and “Risk Factors,” and statements made elsewhere in this Annual
Report may constitute forward-looking statements. These statements reflect the current views of our senior management
team with respect to future events, including our financial performance, business, and industry in general. Statements that
include the words “expect,” “intend,” “plan,” “believe,” “project,” “forecast,” “estimate,” “may,” “should,” “anticipate” and
similar statements of a future or forward-looking nature identify forward-looking statements for purposes of the federal
securities laws or otherwise.

Forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important
factors that could cause our actual results to differ materially from those indicated in these statements. We believe that these
factors include, but are not limited to, the following:

(cid:404)

the success of our existing and new restaurants;

our ability to identify appropriate sites and develop and expand our operations;

changes in economic conditions, including continuing effects from the recent recession;

damage to our reputation or lack of acceptance of our brands in existing or new markets;

economic and other trends and developments, including adverse weather conditions, in the local or
regional areas in which our restaurants are located;

the impact of negative economic factors, including the availability of credit, on our landlords and
surrounding tenants;

changes in food availability and costs;

labor shortages and increases in our compensation costs, including, as a result, changes in government
regulation;

increased competition in the restaurant industry and the segments in which we compete;

the impact of legislation and regulations regarding nutritional information, new information or attitudes
regarding diet and health, or adverse opinions about the health of consuming our menu offerings;

the impact of federal, state, and local beer, liquor, and food service regulations;

the success of our marketing programs;

the impact of new restaurant openings, including on the effect on our existing restaurants of opening
new restaurants in the same markets;

the loss of key members of our management team;

(cid:404)

inability or failure to effectively manage our growth, including without limitation, our need for liquidity
and human capital;

the impact of litigation;

the adequacy of our insurance coverage and fluctuating insurance requirements and costs;

the impact of our indebtedness on our ability to invest in the ongoing needs of our business;

our ability to obtain debt or other financing on favorable terms, or at all;

the impact of a potential requirement to record asset impairment charges in the future;

the impact of any security breaches of confidential guest information in connection with our electronic
processing of credit/debit card transactions;

our ability to protect our intellectual property;

the impact of any failure of our information technology system or any breach of our network security;

the impact of any materially adverse changes in our federal, state, and local taxes;

our ability to maintain our relationship with our franchisor on economically favorable terms;

the impact of future sales of our common stock in the public market, the exercise of stock options, and
any additional capital raised by us through the sale of our common stock; and

the effect of changes in accounting principles applicable to us.

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements
included in this Annual Report. If one or more of these or other risks or uncertainties materialize, or if our underlying
assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Any forward-looking
statements you read in this Annual Report reflect our views as of the date of this Annual Report with respect to future events
and are subject to these and other risks, uncertainties, and assumptions relating to our operations, results of operations, growth
strategy, and liquidity. You should carefully consider all of the factors identified in this Annual Report that could cause
actual results to differ.

ITEM 1. BUSINESS

Business Overview

DRH is a fast-growing restaurant company operating two complementary concepts: Buffalo Wild Wings ® Grill & Bar
(“BWW”) and Bagger Dave’s Burger Tavern ® (“Bagger Dave’s”). As the largest franchisee of BWW and as the creator,
developer, and operator of Bagger Dave’s, we provide a unique guest experience in a casual and inviting environment. We
were incorporated in 2006 and are headquartered in the Detroit metropolitan area. As of December 27, 2015, we had 80
restaurants in Florida, Illinois, Indiana, Michigan and Missouri.

In 2008, DRH became publicly-owned completing a self-underwritten initial public offering for $735,000 and 140,000
shares. We subsequently completed an underwritten, follow-on offering on April 23, 2013 of 6.9 million shares with net
proceeds of $31.9 million.

DRH and its wholly-owned subsidiaries (collectively, the “Company”), AMC Group, Inc. (“AMC”), AMC Wings, Inc.
(WINGS”), AMC Burgers, Inc. (“BURGERS”), and AMC Real Estate, Inc. (“REAL ESTATE”) own and operate Bagger
Dave's and DRH-owned BWW restaurants located throughout Florida, Illinois, Indiana, Michigan and Missouri.

DRH is the largest BWW franchisees and currently operates 62 DRH-owned BWW restaurants (20 in Michigan, 15 in both
Florida and Missouri, seven in Illinois, five in Indiana), including the nation’s largest BWW, based on square footage, in
downtown Detroit, Michigan. We remain on track to fulfill our area development agreement (“ADA”) with Buffalo Wild
Wings International, Inc.("BWLD") and expect to operate 77 DRH-owned BWW restaurants by the end of 2020, exclusive
of potential additional BWW restaurant acquisitions. In 2014, DRH was awarded the Franchisee of the Year and our Chief
Operating Officer received the Founders’ Award by BWLD.

DRH originated the Bagger Dave’s concept with our first restaurant opening in January 2008 in Berkley,
Michigan. Currently, there are 18 Bagger Dave’s restaurants, 16 in Michigan, one both in Indiana and Ohio.

The following organizational chart outlines the current corporate structure of DRH. A brief textual description of the entities
follows the organizational chart. DRH is incorporated in Nevada.

AMC was formed on March 28, 2007, and serves as our operational and administrative center. AMC renders management,
operational support, and advertising services to WINGS, BURGERS, REAL ESTATE and their subsidiaries. Services
rendered by AMC include marketing, restaurant operations, restaurant management consultation, hiring and training of
management and staff, and other management services reasonably required in the ordinary course of restaurant operations.

BURGERS was formed on March 12, 2007 and serves as a holding company for our Bagger Dave’s restaurants. Bagger
Dave’s Franchising Corporation, a subsidiary of BURGERS, was formed to act as the franchisor for the Bagger Dave’s
concept and has rights to franchise in Illinois, Indiana, Kentucky, Michigan, Missouri, Ohio and Wisconsin. We do not intend
to pursue franchise development at this time.

WINGS was formed on March 12, 2007, and serves as a holding company for our DRH-owned BWW restaurants. We are
economically dependent on retaining our franchise rights with BWLD. The franchise agreements have specific initial term
expiration dates ranging from December 2020 through December 2035, depending on the date each was executed and the
duration of its initial term. The franchise agreements are renewable at the option of the franchisor and are generally renewable
if the franchisee has complied with the franchise agreement. When factoring in any applicable renewals, the franchise
agreements have specific expiration dates ranging from December 2025 through December 2050. We believe we are in
compliance with the terms of these agreements.

REAL ESTATE was formed on March 18, 2013, and serves as the holding company for the real estate properties owned by
DRH. Currently, DRH owns one property. Due to the closure of the restaurant, DRH will be selling this property in fiscal
year 2016. Refer to Note 4 of the Consolidated Financial Statements for additional information on restaurant closures. DRH
also owned two Bagger Dave’s restaurants, which were sold as part of the sale leaseback transaction that occurred in the
Second and Third Quarters of 2015. Refer to Note 2 for additional information on the sale leaseback transactions of the
Consolidated Financial Statements for additional information.

Our headquarters are located at 27680 Franklin Road, Southfield, Michigan 48034. Our telephone number is (248) 223-
9160. We can also be found on the Internet at www.diversifiedrestaurantholdings.com and www.baggerdaves.com.

Background

Restaurant Concepts

Buffalo Wild Wings®

With 62 DRH-owned BWW restaurants (20 in Michigan, 15 in both Florida and Missouri, seven in Illinois and five in
Indiana), including the nation’s largest BWW, based on square footage, in downtown Detroit, Michigan, DRH is the largest
BWLD franchisee. As of December 27, 2015, BWLD reported over 1,100 BWW restaurants in North America that were
either directly owned or franchised. The restaurants feature a variety of boldly-flavored, craveable menu items in a welcoming
neighborhood atmosphere with an extensive multimedia social environment, a full bar and an open layout designed to create
a distinctive dining experience for sports fans and families alike. We believe the restaurants are differentiated by the social
environment we create and the connection the restaurants make with our team members, guests and the local community.
The inviting and energetic environment of the restaurants is complemented by furnishings that can easily be rearranged to
accommodate parties of various sizes. Guests have the option of watching various sporting events on projection screens or
approximately 50 additional televisions, competing in Buzztime Trivia or playing video games.

BWW restaurants have won dozens of “Best Wings” and “Best Sports Bar” awards across the country. We believe the BWW
menu is competitively priced between the quick-casual and casual dining segments. The menu features traditional chicken
wings, boneless wings and other items including chicken tenders, Wild Flatbreads ™ , popcorn shrimp, specialty hamburgers
and sandwiches, wraps, Buffalito® soft tacos, appetizers, and salads. The Buffalo Wild Wings® menu specializes in 21

mouth-watering signature sauces and seasonings with flavor sensations ranging from Sweet BBQ™ to Blazin’®. The
restaurants offer approximately 12 to 30 domestic and imported beers on tap, including several local or regional microbrews
and a wide selection of bottled beer, wine and liquor. We believe the award-winning food and memorable experience drives
guest visits and loyalty. For fiscal year 2015, our average DRH-owned BWW restaurant derived 81.2% of its revenue from
food, including non-alcoholic beverages, and 18.8% of its revenue from alcohol sales, primarily draft beer.

Bagger Dave’s Burger Tavern®

Launched in January 2008, Bagger Dave's is our first initiative to diversify our operations outside of the BWW concept by
developing our own unique, full-service, ultra-casual restaurant and bar concept. We have worked to create a concept that
provides a warm, inviting and entertaining atmosphere through a friendly and memorable guest experience. As of the date of
this report, there are 18 Bagger Dave's restaurants (16 in Michigan and one in both Indiana and Ohio).

Bagger Dave’s specializes in locally-sourced, never-frozen prime rib recipe burgers, all-natural lean turkey burgers, hand-cut
fries, locally crafted beers on draft, hand-dipped milk shakes, salads, black bean turkey chili and much more, delivered in a
warm, hip atmosphere with friendly "full" service. The concept differentiates itself from other full-service casual dining
establishments by the absence of walk-in freezers and microwaves, substantiating our fresh food offerings. The concept
focuses on local flair of the city in which the restaurant resides by showcasing historical photos. It also features an electric
train that runs above the dining room and bar areas.

The guiding principle of the Bagger Dave’s brand is to delight guests through fresh food offerings, exceptional service, and
an entertaining atmosphere. The menu focuses on burgers, with a variety of sides. Burgers are offered with a choice of four
proteins; USDA, fresh premium prime-rib recipe beef (offered in regular or petite size patties), Michigan ground turkey,
farm-raised, cage-free grilled chicken breasts and black bean patties. Guests can choose from our list of chef-created burgers
including the Train Wreck Burger ®, the Blues Burger ®, and Tuscan Chicken. Guests can also choose to “Create Your Own”
which allows them to totally customize their experience by choosing from a variety of proteins, buns, cheeses, house-recipe
sauces presenting bold and exciting new flavors, premium toppings such as bacon, egg, guacamole, and 19 complimentary
toppings, such as sautéed mushrooms and onions, barbecue sauce, and other standard condiments.

To further customize their experience, guests can choose from a selection of sides including fresh hand-cut fries, Dave’s
Sweet Potato Chips®, Amazingly Delicious Turkey Black Bean Chili® and our fresh, made from scratch Twisted Mac ‘N’
Cheese. The fries are cut in-house from domestic Northeastern potatoes and cooked in a cottonseed soy bean specialty oil,
using a seven-step Belgian-style process producing a fry reminiscent of those served at community fairs. Dave’s Sweet Potato
Chips ® are a Bagger Dave’s specialty using fresh-cut premium sweet potatoes from North Carolina. Guests can choose from
our own signature dipping sauces to complement their order entrée and sides. Since our fryers are dedicated to potatoes and
there are no breaded, frozen products offered at Bagger Dave’s, our potato fries and sweet potato chips are gluten free and
trans-fat free.

Beyond burger offerings, Bagger Dave’s offers other entrées such as an Awesome Grilled Cheese sandwich, a California
BLT sandwich, Sloppy Dave’s sandwich and entrée-sized chopped salads with grilled chicken breast. Bagger Dave’s also
offers hand-dipped ice cream and milkshakes with a variety of free mix-ins, adult shakes, sommelier-selected wines and a
full selection of liquors. For fiscal year 2015, our average Bagger Dave’s restaurant derived approximately 86.0% of its
revenue from food, including non-alcoholic beverages, and 14.0% of its revenue from alcohol sales, primarily draft beer.

Growth Strategy

We plan to drive top and bottom line growth through the development of new restaurant locations, achievement of positive
same-store-sales in comparable restaurant locations, and the successful implementation of cost reduction initiatives at the
restaurant and support level.

Our new restaurant growth strategy is to open DRH-owned BWW locations consistent with the ADA we have with BWLD,
calling for 15 additional locations by the end of 2021, most of which will be located in the Florida market. With the exception
of one new Bagger Dave’s location in early 2016, our focus at Bagger Dave's will be on sustaining higher average unit
volumes and restaurant-level profitability for our current restaurants. We currently own 62 DRH-owned BWW restaurants in
five states and 18 Bagger Dave’s in three states.

We intend to drive same-store-sales growth in all of our locations through the execution of local, traffic-driven marketing
and advertising strategies, continued support of the community through sponsorship programs and local charities and delivery
of quality food and service in a clean and modernized environment. One of our guiding principles is that a happy team member
translates to a happy guest. A happy guest drives repeat sales and word-of-mouth referrals; two key factors that are
fundamental and directly support our local marketing strategy.

We plan to improve our margins through a number of initiatives including; enhanced methods to manage cost of sales and
hourly labor with use of technology and improve application of standards; consolidation of vendors (local-to-regional and
regional-to national), leveraging our scale to obtain lower product pricing and distribution costs; bringing our accounting
process in-house which significantly reduces cost, and also dramatically enhances our ability to provide granular information
for more effective forecasting and cost control; working with all service vendors to obtain competitive pricing, optimal
frequency of service and productive billing which includes minimizing the number of invoices and securing highly-
predictable periodic pricing.

Site Selection

We consider the real estate selection process to be a key factor in the long-term success of each restaurant, and as such, devote
a significant amount of time and effort into identifying and evaluating each potential location. We consider several metrics
to assess the strength of each proposed site, including daytime population, accessibility, population density, visibility and
neighboring retailers.

For our restaurants, we prefer a strong end-cap position, which is a premier, highly visible corner positioned in a well-
anchored shopping center or lifestyle entertainment center. We also seek to develop freestanding locations, if the opportunity
meets our site selection criteria, along with specific economic thresholds.

Restaurant Operations

We believe retaining high quality restaurant managers, valuing our team members and providing fast, friendly service to our
guests are key to our continued success. In order to retain our unique culture as we grow, we devote substantial resources to
identifying, selecting, and training our restaurant-level team members. We typically have six in-restaurant trainers at each
existing location who provide both front- and back-of-house training on site. We also have a seven-week training program
for our restaurant managers, which consists of an average of four weeks of restaurant training and three weeks of cultural
training. During their training, managers observe our established restaurants’ operations and guest interactions. We believe
our focus on guest-centric training is a core aspect of our Company and reinforces our mission to delight our guests.

Management and Staffing

The core values that define our corporate culture are cleanliness, service and organization. Our restaurants are generally
staffed with one managing partner and up to five assistant managers depending on the sales volume of the restaurant. The
managing partner is responsible for day-to-day operations and for maintaining the standards of quality and performance that
define our corporate culture. We utilize regional managing partners to oversee our managing partners and supervise the
operation of our restaurants, including the continuing development of each restaurant’s management team. Through regular
visits to the restaurants and constant communication with the management team, the regional managing partners ensure
adherence to all aspects of our concept, strategy and standards of quality. We also have secret shoppers that visit our
restaurants on a monthly basis and provide guest satisfaction scores for the criteria we define.

Training, Development, and Recruiting

We believe that successful restaurant operations, guest satisfaction, quality, and cleanliness begin with the team member - a
key component of our strategy. We pride ourselves on facilitating a well-organized, thorough, hands-on training program. In
2013, after nine months of developing our new training program with the help of industry experts, we introduced our
Hospitality Excellence Academy ("HEA"). To ensure success of our organization, HEA was designed to foster our culture of
excellence by cultivating the leaders of tomorrow.

We offer an incentive program that we believe is very competitive in the restaurant industry. Aside from competitive base
salaries and benefits, management is incentivized with a performance-based bonus program. We also provide group health,
dental, and vision insurance, a company-sponsored 401(k) plan with a discretionary matching contribution feature, a tuition
reimbursement program, a referral bonus program and opportunities for career advancement.

We emphasize growth from within the organization as much as possible, giving our team members the opportunity to develop
and advance. We believe this philosophy helps build a strong, loyal management team with high team member retention
rates, giving us an advantage over our competitors. We strive for a balance of internal promotion and external hiring.

Restaurants

Our DRH-owned BWW restaurants range in size from 5,300 to 13,500 square feet, with a historical square foot average of
about 6,400. We anticipate that future restaurants will range in size from 5,500 to 6,500 square feet with an average cash
investment per restaurant of approximately $1.7 million to $2.1 million. From time to time, our restaurants may be smaller
or larger or cost more or less than our targeted range, depending on the particular circumstances of the selected site. Also,
from time to time, we may elect to purchase either the building or the land and building for certain restaurants, which would
require additional capital.

Our typical Bagger Dave's restaurants range in size from 3,800 to 6,100 square feet, with a historical square foot average of
about 4,300. We have paused further development of our Bagger Dave’s concept until we feel confident that we can achieve
and sustain average unit volumes that will provide adequate returns on investment.

We have a continuous capital improvement plan for our restaurants and plan major renovations every five to seven years. For
a more detailed discussion of our capital improvement plans, see the section entitled “Management’s Discussion and Analysis
of Financial Condition and Results of Operations,” and specifically, the subsection entitled “Liquidity and Capital Resources;
Expansion Plans”.

Quality Control and Purchasing

We strive to maintain high quality standards, protecting our food supply at all times.

Purchasing for DRH-owned BWW restaurants is primarily through channels established by BWLD corporate operations. We
do, however, negotiate directly with most of these channels a price and delivery terms. When we purchase directly, we seek
to obtain the highest quality ingredients, products, and supplies from reliable sources at competitive prices. For Bagger
Dave’s, we believe that we have been able to leverage our DRH-owned BWW purchasing power to develop supply sources
at a more reasonable cost than would be expected for a smaller restaurant concept.

To maximize our purchasing efficiencies, our centralized purchasing staff negotiates, when available, fixed-price contracts
(usually for a one-year period) or, where appropriate, commodity-price contracts.

Marketing and Advertising

In fiscal year 2015, we spent approximately 2.0% of all restaurant sales on marketing efforts. In addition, charitable donations
and local community sponsorships help us develop local public relations and are a major component of our marketing
efforts. We support programs that build traffic at the grass-roots level. We also participate in numerous local restaurant
marketing events for both DRH-owned BWW and Bagger Dave’s throughout the communities we serve.

BWW

We also pay an advertising fee to BWLD equal to 3.0% of net sales globally, which is supported by national advertising
designed to build brand awareness. Some examples include television commercials on ESPN and CBS during key games for
the NFL, MLB, NBA and March Madness NCAA basketball tournaments. In addition, we invest 0.25% - 0.5% of net sales
globally in a regional cooperative of BWW franchisees for certain metropolitan areas. The co-op was formed for the Indiana,
Illinois and Michigan markets through coordinated local restaurant marketing efforts and operating strengths that focus on
the guest experience.

Bagger Dave’s

The advertising and marketing plan for developing the Bagger Dave’s brand relies on local media, menu specials, promotions,
and community events. We are also building our marketing reach with our current guests by telling our story through social
media and Bagger Bucks loyalty rewards program. We attribute a large part of our Bagger Dave’s growth through word-of-
mouth.

Information Systems and Technology

Enhancing the security of our financial data and other personal information remains a high priority for us. We continue to
innovate and modernize our technology infrastructure to provide improved efficiency, control and security. Our ability to
accept credit cards as payment in our restaurants and for online gift card orders depends on us remaining compliant with
standards set by the PCI Security Standards Council (“PCI”). The standards set by PCI contain compliance guidelines and
standards with regard to our security surrounding the physical and electronic storage, processing and transmission of
individual cardholder data. We maintain security measures that are designed to protect and prevent unauthorized access to
such information.

We also believe that technology can provide a competitive advantage and enable our strategy for growth through efficient
restaurant operations, information analysis and ease and speed of guest service. We have a standard point-of-sale system in
our restaurants that is integrated to our corporate office through a web-based above-store business intelligence reporting and

analysis tool. Our systems are designed to improve operating efficiencies, enable rapid analysis of marketing and financial
information and improve administrative productivity. In 2012, we launched online ordering for our Bagger Dave’s restaurants
and recently launched tableside ordering devices that allow servers to create orders and send orders to the kitchen while
standing with the customer. We believe the table-side ordering will help decrease serving time and increase customer turnover
and satisfaction since these devices also accommodate credit card swipes so that the card never has to leave the customer’s
sight. Beginning in 2014, we also integrated the online ordering function for BWW and the Rockbot music experience where
guests can D.J. and select the music played throughout the restaurant using their mobile device.

We are constantly assessing new technologies to improve operations, back-office processes and overall guest experience.
This includes the implementation of mobile payment options, advanced programming of kitchen display units, tablet-based
wait-listing applications and a mobile-based loyalty program.

Competition

The restaurant industry is highly competitive. We believe we compete primarily with local and regional sports bars and
national casual dining and quick-casual establishments. Competition is expected to remain intense with respect to price,
service, location, concept and type and quality of food. There is also competition for real estate sites, qualified management
personnel and hourly restaurant staff. Many of our competitors have been in existence longer than we have and may be better
established in markets where we are currently located or may, in the future, be located. Accordingly, we strive to continually
improve our restaurants, maintain high quality standards and treat our guests in a manner that encourages them to return. We
believe our pricing communicates value to the guest in a comfortable, welcoming atmosphere that provides full service to the
guest.

Trademarks, Service Marks, and Trade Secrets

The BWW registered service mark is owned by BWLD.

Our domestically-registered trademarks and service marks include Bagger Dave’s Burger Tavern®, Sloppy Dave’s BBQ ®,
Railhouse Burger Sauce ®, The Blues Burger ®, Train Wreck Burger, Dave’s Sweet Potato Chips ®, Meaningless Free
Toppings®, Sloppy Dave’s Fries ® and Amazingly Delicious Turkey Black Bean Chili ®. We place considerable value on our
trademarks, service marks, trade secrets and other proprietary rights and believe they are important to our brand-building
efforts and the marketing of our Bagger Dave’s restaurant concept. We intend to actively enforce and defend our intellectual
property, however, we cannot predict whether the steps taken by us to protect our proprietary rights will be adequate to
prevent misappropriation of these rights or the use by others of restaurant features based upon or similar to our
concepts. Although we believe we have sufficient protections concerning our trademarks and service marks, we may face
claims of infringement that could interfere with our ability to market our restaurants and promote our brand.

Government Regulations

The restaurant industry is subject to numerous federal, state, and local governmental regulations, including those relating to
the preparation and sale of food and alcoholic beverages, sanitation, public health, nutrition labeling requirements, fire codes,
zoning, and building requirements and to periodic review by state and municipal authorities for areas in which the restaurants
are located. Each restaurant requires appropriate licenses from regulatory authorities allowing it to sell beer, wine and liquor
and each restaurant requires food service licenses from local health authorities. The majority of our licenses to sell alcoholic
beverages must be renewed annually and may be suspended or revoked at any time for cause, including violation by us or
our team members of any law or regulation pertaining to alcoholic beverage control, such as those regulating the minimum
age of team members or patrons who may serve or be served alcoholic beverages, the serving of alcoholic beverages to visibly
intoxicated patrons, advertising, wholesale purchasing and inventory control. In order to reduce this risk, restaurant team

members are trained in standardized operating procedures designed to assure compliance with all applicable codes and
regulations. We have not encountered any material problems relating to alcoholic beverage licenses or permits to date.

We are also subject to laws governing our relationship with team members. Our failure to comply with federal, state and
local employment laws and regulations may subject us to losses and harm our brands. The laws and regulations govern such
matters as: wage and hour requirements; workers’ compensation insurance; unemployment and other taxes; working and
safety conditions; overtime; and citizenship and immigration status. Significant additional government-imposed regulations
under the Fair Labor Standards Act and similar laws related to minimum wages, overtime, rest breaks, paid leaves of absence,
and mandated health benefits may also impact the performance of our operations. In addition, team member claims based
on, among other things, discrimination, harassment, wrongful termination, wages, hour requirements and payments to team
members who receive gratuities, may divert financial and management resources and adversely affect operations. The losses
that may be incurred as a result of any violation of such governmental regulations by the Company are difficult to quantify. To
our knowledge, we are in compliance in all material respects with all applicable federal, state and local laws affecting our
business.

The federal Patient Protection and Affordable Care Act (PPACA) was enacted in March 2010. On January 1, 2015, the
employer portion of the PPACA went into effect. In addition to being required to provide full-time employees with medical
insurance that meets minimum value and affordability standards, the employer mandate requires employers to provide
covered employees and the Internal Revenue Service with specific reportable benefit information. The Company’s 2015
medical plan has been offered to all full-time employees and meets the minimum value and affordability requirements of the
PPACA, and the Company believes that it will be able to meet the informational reporting requirements of the act when due.

Compliance with these laws and regulations may lead to increased costs and operational complexity and may increase our
exposure to governmental investigations or litigation. We may also be subject, in certain states, to “dram shop” statutes,
which generally allow a person injured by an intoxicated person to recover damages from an establishment that wrongfully
served alcoholic beverages to the intoxicated person. We carry liquor liability coverage as part of our existing comprehensive
general liability insurance which we believe is consistent with coverage carried by other companies in the restaurant industry
of similar size and scope of operations. Even though we carry liquor liability insurance, a judgment against us under a “dram
shop” statute in excess of our liability coverage could have a material adverse effect on our operations.

ITEM 1A. RISK FACTORS

This Form 10-K, including the discussions contained in Items 1 and 7, contains various “forward-looking statements” that
are based on current expectations or beliefs concerning future events. Such statements can be identified by the use of
terminology such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “could,” “possible,” “plan,”
“project,” “will,” “forecast” and similar words or expressions. Our forward-looking statements generally relate to our
growth strategy, financial results, sales efforts, franchise expectations, restaurant openings and related expense and cash
requirements. Although we believe there is a reasonable basis for the forward-looking statements, our actual results could
be materially different. While it is not possible to foresee all of the factors that may cause actual results to differ from our
forward-looking statements, such factors include, among others, the risk factors that follow. Investors are cautioned that all
forward-looking statements involve risks and uncertainties and speak only as of the date on which they are made, and we do
not undertake any obligation to update any forward-looking statement.

Risks Related to Our Business and Industry

Our Financial Results Depend Significantly Upon the Success of Our Existing and New Restaurants

Future growth in our revenue and profits will depend on our ability to maintain or grow sales and efficiently manage costs in
Currently, we have 62 DRH-owned BWW restaurants and 18 Bagger
our existing and new restaurants.
Dave’s restaurant. The results achieved by our current restaurants may not be indicative of longer-term performance or the
potential market acceptance of our restaurant concepts in other locations. Additionally, the success of one restaurant concept
may not be indicative or predictive of the success of the other.

The success of our restaurants depends principally upon generating and maintaining guest traffic, loyalty and achieving
positive margins. Significant factors that might adversely affect guest traffic and loyalty and profit margins include:

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economic conditions, including housing market downturns, rising unemployment rates, lower disposable
income, credit conditions, fuel prices and consumer confidence and other events or factors that adversely
affect consumer spending in the markets we serve;

competition in the restaurant industry, particularly in the casual and fast-casual dining segments;

changes in consumer preferences;

our guests’ failure to accept menu price increases that we may make to offset increases in certain operating
costs;

our reputation and consumer perception of our concepts’ offerings in terms of quality, price, value, ambiance
and service; and

our guests’ actual experiences from dining in our restaurants.

Our restaurants are also susceptible to increases in certain key operating expenses that are either wholly or partially beyond
our control, including:

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food and other raw materials costs, many of which we cannot effectively hedge;

compensation costs, including wage, workers’ compensation, health care and other benefits expenses;

rent expenses and construction, remodeling, maintenance and other costs under leases for our new and
existing restaurants;

compliance costs as a result of changes in regulatory or industry standards;

energy, water and other utility costs;

costs for insurance (including health, liability and workers’ compensation);

information technology and other logistical costs; and

expenses due to litigation against us.

We May Not Be Able to Manage Our Growth

Our expansion strategy will depend upon our ability to open and operate additional restaurants profitably. The opening of
new restaurants will depend on a number of factors, many of which are beyond our control. These factors include, among
others, the availability of management, restaurant staff, and other personnel, the cost and availability of suitable restaurant
locations, cost-effective and timely planning, design and build out of restaurants, acceptable leasing terms, acceptable
financing, and securing required governmental permits. Although we have formulated our business plans and expansion
strategies based on certain estimates and assumptions we believe are reasonable, we anticipate that we will be subject to
changing conditions that will cause certain of these estimates and assumptions to be incorrect. For example, our restaurants
may not open at the planned time due to factors beyond our control, including, among other factors, site selection, BWLD’s
approval with respect to new BWW openings, negotiations with landlord and construction or permitting delays.

We May Not Be Successful When Entering New Markets

When expanding the BWW and Bagger Dave's concepts, we will enter new markets in which we may have limited or no
operating experience. There can be no assurance that we will be able to achieve success and/or profitability in our new
markets or in our new restaurants. The success of these new restaurants will be affected by the different competitive
conditions, consumer taste, and discretionary spending patterns within the new markets, as well as by our ability to generate
market awareness of the Bagger Dave's and BWW brands. New restaurants typically require several months of operation
before achieving normal levels of profitability. When we enter highly competitive new markets or territories in which we
have not yet established a market presence, the realization of our revenue targets and desired profit margins may be more
susceptible to volatility and/or more prolonged than anticipated.

Competition in the Restaurant Industry May Affect Our Ability to Compete Effectively

The restaurant industry is intensely competitive. We believe we compete primarily with regional and local sports bars, burger
establishments, casual dining concept, and fast-casual establishments. Competition from “better burger” establishments has
recently been particularly intense. Many of our direct and indirect competitors are well-established national, regional or local
chains with a greater market presence than us. Further, some competitors have substantially greater financial, marketing and
other resources than us. In addition, independent owners of local or regional establishments may enter the wing-based or
burger-based restaurant businesses without significant barriers to entry and such establishments may provide price
competition for our restaurants. Competition in the casual dining, fast-casual and quick-service segments of the restaurant
industry is expected to remain intense with respect to price, service, location, concept and the type and quality of food. We
also face intense competition for real estate sites, qualified management personnel and hourly restaurant staff.

New Restaurants Added to Our Existing Markets May Take Sales From Existing Restaurants

New restaurants added to our existing markets, whether by us or others, may take sales away from our existing
restaurants. Because we intend to open restaurants in our existing markets, and others may intend the same, this may impact
revenue earned by our existing restaurants.

Higher-Than-Anticipated Costs Associated With the Opening of New Restaurants or With the Closing, Relocating, or
Remodeling of Existing Restaurants May Adversely Affect Our Results of Operations

Our revenue and expenses may be significantly impacted by the location, number and timing of the opening of new restaurants
and the closing, relocating and remodeling of existing restaurants. We incur substantial pre-opening expenses each time we
open a new restaurant and will incur other expenses if we close, relocate or remodel existing restaurants. These expenses are
generally higher when we open restaurants in new markets, but the costs of opening, closing, relocating or remodeling any

of our restaurants may be higher than anticipated. An increase in such expenses could have an adverse effect on our results
of operations.

Future Acquisitions May Have Unanticipated Consequences That Could Harm Our Business and Our Financial
Condition

We may seek to selectively acquire existing BWW restaurants. To do so, we would need to identify suitable acquisition
candidates, negotiate acceptable acquisition terms and obtain appropriate financing as needed. Any acquisitions we pursue,
whether successfully completed or not, may involve risks, including:

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material adverse effects on our operating results, particularly in the fiscal quarters immediately following
the acquisition as the acquired restaurants are integrated into our operations;

customary closing and indemnification risks associated with any acquisition;

funds used pursuing acquisitions we are ultimately unable to consummate because the transaction is subject
to a right of first refusal in favor of our franchisor, BWLD; and

diversion of management’s attention from other business concerns.

Future acquisitions of existing restaurants, which may be accomplished through a cash purchase transaction, the issuance of
our equity securities, or a combination of both, could result in potentially dilutive issuances of our equity securities, the
incurrence of debt and contingent liabilities and impairment charges related to intangible assets, any of which could harm our
business and financial condition.

We May Suffer Negative Consequences if New Restaurants Do Not Open in a Timely Manner

If we are unable to successfully open new restaurants in a timely manner, our revenue growth rate and profits may be adversely
affected. We must open restaurants in a timely and profitable manner to successfully expand our business. In the past, we
have experienced delays in restaurant openings, and we may face similar delays in the future. These delays may trigger
material financial penalties assessed against us by BWLD, as provided in our ADA. These delays may also not meet market
expectations, which may negatively affect our stock price. Our ability to expand successfully and in a timely manner will
depend on a number of factors, many of which are beyond our control. A few of the factors are listed below:

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Locating and securing quality locations in new and existing markets;

Negotiating acceptable leases or purchase agreements;

Securing acceptable financing for new locations;

Cost-effective and timely planning, design and build-out of restaurants;

Attracting, recruiting, training and retaining qualified team members;

Hiring reputable and satisfactory construction contractors;

Competition in new and existing markets;

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Obtaining and maintaining required local, state and federal government approvals and permits related to the
construction of sites and the sale of food and alcoholic beverages;

Creating brand awareness in new markets; and

General economic conditions.

The Loss of Key Executives Could Affect Our Performance

Our success depends substantially on the contributions and abilities of key executives and other team members. The loss of
any of our executive officers could jeopardize our ability to meet our financial targets. In particular, we are highly dependent
upon the services of T. Michael Ansley, David G. Burke and Jason T. Curtis. We do not have employment agreements with
these individuals or any of our other team members. Our inability to retain the full-time services of any of these people or to
attract other qualified executives could have an adverse effect on us, and there would likely be a difficult transition period in
finding suitable replacements for any of them.

We May Not Be Able to Attract and Retain Qualified Team Members to Operate and Manage Our Restaurants

The success of our restaurants depends on our ability to attract, motivate, develop and retain a sufficient number of qualified
restaurant team members, including managers and hourly team members. The inability to recruit, develop and retain these
individuals may delay the planned openings of new restaurants or result in high team member turnover in existing restaurants,
thus increasing the cost to efficiently operate our restaurants. This could inhibit our expansion strategy and business
performance and negatively impact our operating results

Fluctuations in the Cost of Food Could Impact Operating Results

Our primary food products are fresh bone-in chicken wings, ground beef and potatoes. Our food, beverage and packaging
costs could be significantly affected by increases in the cost of fresh chicken wings and ground beef, which can result from
a number of factors, including but not limited to, seasonality, cost of corn and grain, animal disease, drought and other weather
phenomena, increase in demand domestically and internationally, and other factors that may affect availability. Additionally,
if there is a significant rise in the price of chicken wings or ground beef, and we are unable to successfully adjust menu prices
or menu mix or otherwise make operational adjustments to account for the higher wing and beef prices, our operating results
could be adversely affected. We also depend on our franchisor, BWLD, as it relates to chicken wings, to negotiate prices and
deliver product to us at a reasonable cost. Chicken wing prices per pound averaged $1.81 in 2015, $0.28 higher than the
average of $1.53 in 2014. BWLD currently purchases and secures for its franchisees chicken wings at market price.

Shortages or Interruptions in the Availability and Delivery of Food and Other Supplies May Increase Costs or Reduce
Revenue

Possible shortages or interruptions in the supply of food items and other supplies to our restaurants caused by inclement
weather, terrorist attacks, natural disasters such as floods, drought, and hurricanes, pandemics, the inability of our vendors to
obtain credit in a tightened credit market, food safety warnings or advisories, or the prospect of such pronouncements or other
conditions beyond our control, could adversely affect the availability, quality and cost of items we buy and the operations of
our restaurants. Our inability to effectively manage supply chain risk could increase our costs and limit the availability of
products critical to our restaurant operations.

Our Success Depends Substantially on the Value of Our Brands and Unfavorable Publicity Could Harm Our Business

Multi-unit restaurant businesses such as ours can be adversely affected by publicity resulting from complaints, litigation or
general publicity regarding poor food quality, food-borne illness, personal injury, food tampering, adverse health effects of
consumption of various food products or high-calorie foods (including obesity) or other concerns. Negative publicity from
traditional media or online social network postings may also result from actual or alleged incidents or events taking place in
our restaurants.

There has been a marked increase in the use of social media platforms and similar devices, including weblogs (blogs), social
media websites, and other forms of Internet-based communications which allow individuals access to a broad audience of
consumers and other interested persons. Consumers value readily available information concerning goods and services that
they have or plan to purchase, and may act on such information without further investigation or authentication. The
availability of information on social media platforms is virtually immediate, as is its impact. Many social media platforms
immediately publish the content their subscribers and participants can post, often without filters or checks on accuracy of the
content posted. The opportunity for dissemination of information, including inaccurate information, is seemingly limitless
and readily available. Information concerning our Company may be posted on such platforms at any time. Information
posted may be adverse to our interests or may be inaccurate, each of which may harm our performance, prospects or
business. The harm may be immediate without affording us an opportunity for redress or correction. Such platforms also
could be used for dissemination of trade secret information, compromising valuable company assets. In summary, the
dissemination of information online could harm our business, prospects, financial condition and results of operations,
regardless of the information’s accuracy.

Regardless of whether any public allegations or complaints are valid, unfavorable publicity relating to a number of our
restaurants, or only to a single restaurant, could adversely affect public perception of the entire brand. Adverse publicity and
its effect on overall consumer perceptions of food safety, or our failure to respond effectively to adverse publicity, could have
a material adverse effect on our business. 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 significantly reduce their value. If
consumers perceive or experience a reduction in food quality, service, ambiance or in any way believe we failed to deliver a
consistently positive experience, the value of our brands could suffer.

Increases in Our Compensation Costs, Including as a Result of Changes in Government Regulation, Could Slow Our
Growth or Harm Our Business

We are subject to a wide range of compensation costs. Because our compensation costs are, as a percentage of revenue,
higher than other industries, we may be significantly harmed by compensation cost increases. Unfavorable fluctuations in
market conditions, availability of such insurance, or changes in state and/or federal regulations could significantly increase
our insurance premiums. In addition, we are subject to the risk of employment-related litigation at both the state and federal
levels, including claims styled as class action lawsuits, which are more costly to defend. Also, some employment-related
claims in the area of wage and hour disputes are not insurable risks.

Significant increases in health care costs may also continue to occur, and we can provide no assurance that we will be able to
effectively contain those costs. Further, we are continuing to assess the impact of recently-adopted federal health care
legislation on our health care benefit costs, and significant increases in such costs could adversely impact our operating
results.

In addition, many of our restaurant personnel are hourly team members subject to various minimum wage requirements or
changes to existing tip credit laws. Mandated increases in minimum wage levels and changes to the tip credit laws, which
dictate the amounts an employer is permitted to assume a team member receives in tips when calculating the team member’s
hourly wage for minimum wage compliance purposes, have recently been and continue to be proposed and implemented at

both federal and state government levels. Continued minimum wage increases or changes to allowable tip credits may further
increase our compensation costs or effective tax rate.

Various states in which we operate are considering or have already adopted new immigration laws, and the U.S. Congress
and Department of Homeland Security from time to time consider or implement changes to federal immigration laws,
regulations, or enforcement programs as well. Some of these changes may increase our obligations for compliance and
oversight, which could subject us to additional costs and make our hiring process more cumbersome, or reduce the availability
of potential team members. Although we require all team members to provide us with government-specified documentation
evidencing their employment eligibility, some of our team members may, without our knowledge, be unauthorized team
members. Unauthorized team members are subject to deportation and may subject us to fines or penalties, and if any of our
team members are found to be unauthorized, we could experience adverse publicity that negatively impacts our brand and
may make it more difficult to hire and keep qualified team members. Termination of a significant number of team members
that, unbeknownst to us, were unauthorized team members may disrupt our operations, cause temporary increases in our
compensation costs as we train new team members and result in additional adverse publicity. Our financial performance
could be materially harmed as a result of any of these factors.

Changes in Public Health Concerns and Legislation and Regulations Requiring the Provision of Nutritional Information
May Impact Our Performance

Government regulation and consumer eating habits may impact our business as a result of changes in attitudes regarding diet
and health or new information regarding the health effects of consuming our menu offerings. These changes have resulted
in, and may continue to result in, the enactment of laws and regulations that impact the ingredients and nutritional content of
our menu offerings, or laws and regulations requiring us to disclose the nutritional content of our food offerings. For example,
a number of states, counties and cities have enacted menu labeling laws requiring multi-unit restaurant operators to disclose
certain nutritional information available to guests, or have enacted legislation restricting the use of certain types of ingredients
in restaurants. The U.S. health care reform law included nation-wide menu labeling and nutrition disclosure requirements as
well, and our restaurants will be covered by these national requirements when they go into effect. The final rule was published
on December 1, 2014 and required implementation by end of 2016. Although the federal legislation is intended to preempt
conflicting state or local laws on nutrition labeling, until we are required to comply with the federal law, we will be subject
to a patchwork of state and local laws and regulations regarding nutritional content disclosure requirements. Many of these
requirements are inconsistent or are interpreted differently from one jurisdiction to another. The effect of such labeling
requirements on consumer choices, if any, is unclear at this time. We cannot make any assurances regarding our ability to
effectively respond to changes in consumer health perceptions or our ability to successfully implement the nutrient content
disclosure requirements and to adapt our menu offerings to trends in eating habits. The imposition of menu-labeling laws
could have an adverse effect on our results of operations and financial position, as well as the restaurant industry in general.

Multiple jurisdictions in which we operate could adopt recently enacted new requirements that require us to adopt and
implement a Hazard Analysis and Critical Control Points (“HACCP”) system for managing food safety and quality. HACCP
refers to a management system in which food safety is addressed through the analysis and control of potential hazards from
production, procurement and handling, to manufacturing, distribution and consumption of the finished product. We expect
to incur certain costs to comply with these regulations, and these costs may be more than we anticipate. If we fail to comply
with these laws or regulations, our business could experience a material adverse effect.

Further, growing movements to change laws relating to alcohol may result in a decline in alcohol consumption at our
restaurants or increase the number of dram shop claims made against us, either of which may negatively impact operations
or result in the loss of liquor licenses.

Changes in Consumer Preferences or Discretionary Consumer Spending Could Harm Our Performance

Our success depends, in part, upon the continued popularity of our chicken and boneless wings, hamburgers and turkey
burgers, other food and beverage items and the appeal of our restaurant concepts. We also depend on trends toward consumers
eating away from home. Shifts in these consumer preferences could negatively affect our future profitability. Such shifts
could be based on health concerns related to the cholesterol, carbohydrate, fat, calorie or salt content of certain food items,
including items featured on our menu. Negative publicity over the health aspects of such food items may adversely affect
consumer demand for our menu items and could result in a decrease in guest traffic to our restaurants, which could materially
harm our business. In addition, our success depends, to a significant extent, on numerous factors affecting discretionary
consumer spending, general economic conditions (including the continuing effects of the recent recession), disposable
consumer income, and consumer confidence. A decline in consumer spending or in economic conditions could reduce guest
traffic or impose practical limits on pricing, either of which could harm our business, financial condition, operating results or
cash flow.

Actions by Our Franchisor Could Negatively Affect Our Business and Operating Results

We are economically dependent on retaining our franchise rights with BWLD. Our DRH-owned BWW restaurant operations
depend, in part, on decisions made by our franchisor, including changes of distributors, food menu items and prices, policies
and procedures, and advertising programs. Business decisions made by BWLD could adversely impact our operating
performance and profitability. Under our ADA, BWLD has the right to immediately terminate the ADA if, among other
things, we are unable to comply with the development schedule, or if one of the Franchise Agreements entered into pursuant
to the area ADA is terminated. Termination of the ADA could adversely affect our growth strategy and, in turn, our financial
condition. Additionally, the ADA and the individual Franchise Agreements provide BWLD with the authority to approve the
location selected for our future BWLD franchises, as well as approve the design of the individual restaurant. BWLD must
give its consent prior to the opening of a new BWW restaurant and, once the restaurant is open, we are subject to various
operational requirements, including the use of specific suppliers and products. Delays in the approval of our locations or pre-
opening approval, as well as changes to the operational requirements, may impact our operating performance.

Our Operating Results May Fluctuate Due to the Timing of Special Events

Our operating results depend, in part, on special events, such as the Super Bowl® and other sporting events viewed by our
guests in our restaurants, including those sponsored by the National Football League, Major League Baseball, National
Basketball Association, National Hockey League and National Collegiate Athletic Association. Interruptions in the viewing
of these professional sporting league events due to strikes or lockouts may impact our business and operating
results. Additionally, our results are subject to fluctuations based on the dates of sporting events and their availability for
viewing through broadcast, satellite, and cable networks. Historically, sales in most of our restaurants have been higher
during fall and winter months based on the relative popularity and extent of national, regional and local sporting and other
events in the geographic regions in which we currently operate.

Our Inability to Renew Existing Leases or Enter Into New Leases For New or Relocated Restaurants on Favorable Terms
May Adversely Affect Our Results of Operations

As of December 27, 2015, all of our restaurants are located on leased premises and are subject to varying lease-specific
arrangements. For example, some of the leases require base rent that is subject to increase based on market factors, and other
leases include base rent with specified periodic increases. Some leases are subject to renewals, which could involve
substantial increases. Additionally, a few leases require contingent rent based on a percentage of gross sales. When our
leases expire in the future, we will evaluate the desirability of renewing such leases. While we currently expect to pursue all
renewal options, no guarantee can be given that such leases will be renewed or, if renewed, that rents will not increase
substantially. The success of our restaurants depends in large part on their leased locations. As demographic and economic

patterns change, current leased locations may or may not continue to be attractive or profitable. Possible declines in trade
areas where our restaurants are located or adverse economic conditions in surrounding areas could result in reduced revenue
in those locations. In addition, desirable lease locations for new restaurant openings or for the relocation of existing
restaurants may not be available at an acceptable cost when we identify a particular opportunity for a new restaurant or
relocation.

Economic Conditions Could Have a Material Adverse Impact on Our Landlords in Retail Centers in Which We Are
Located

Our landlords may be unable to obtain financing or remain in good standing under their existing financing arrangements,
resulting in failures to pay required construction contributions or satisfy other lease covenants to us. If our landlords fail to
satisfy required co-tenancies, such failures may result in us terminating leases or delaying openings in these locations. Also,
decreases in total tenant occupancy in retail centers in which we are located may affect guest traffic at our restaurants. All
of these factors could have a material adverse impact on our operations.

A Decline in Visitors to Any of the Business Districts Near the Locations of Our Restaurants Could Negatively Affect Our
Restaurant Sales

Some of our restaurants are located near high-activity areas such as retail centers, big-box shopping centers and entertainment
centers. We depend on high visitor rates at these businesses to attract guests to our restaurants. If visitors to these centers
decline due to economic conditions, closure of big-box retailers, road construction, changes in consumer preferences or
shopping patterns, changes in discretionary consumer spending or otherwise, our restaurant sales in these areas could decline
significantly and adversely affect the results of our operations.

Because Many of Our Restaurants are Concentrated in Local or Regional Areas, We are Susceptible to Economic and
Other Trends and Developments, Including Adverse Weather Conditions, in These Areas

Our financial performance is highly dependent on restaurants located in Florida, Illinois, Indiana, and Michigan. As a result,
adverse economic conditions in any of these areas could have a material adverse effect on our overall results of operations. In
recent years, certain of these states have been more negatively impacted by the housing decline, high unemployment rates
and the overall economic crisis than other geographic areas. In addition, other regional occurrences such as local strikes,
terrorist attacks, increases in energy prices, adverse weather conditions, hurricanes, droughts or other natural or man-made
disasters have occurred. In particular, adverse weather conditions can impact guest traffic at our restaurants, cause the
temporary underutilization of certain seating areas, and, in more severe cases, cause temporary restaurant closures, sometimes
for prolonged periods. As of December 27, 2015, approximately 81.3% of our total restaurants are located in Illinois, Indiana,
Michigan, Missouri and Ohio, which are particularly susceptible to snowfall, and approximately 18.7% of our total restaurants
are located in Florida, which is particularly susceptible to hurricanes.

Legal Actions Could Have an Adverse Effect on Us

We have faced in the past and could face in the future legal action from government agencies, team members, guests, or other
parties. Many state and federal laws govern our industry, and if we fail to comply with these laws, we could be liable for
damages or penalties. In October 2015, the Company settled two collective actions alleging violations of fair labor standards
acts and minimum wage laws. We are currently facing a similar claim and may face such claims in the future. Further, we
may face litigation from guests alleging that we were responsible for an illness or injury they suffered at or after a visit to our
restaurants, or alleging that we are not complying with regulations governing our food quality or operations. We may also
face employment-related litigation, including claims of age discrimination, sexual harassment, gender discrimination,
immigration violations, or other local, state, and federal labor law violations In light of the potential cost and uncertainty

involved in litigation, we may settle matters even when we believe we have a meritorious defense. Litigation and its related
costs may have a material adverse effect on our results of operations and financial condition.

We May Not Be Able to Obtain and Maintain Licenses and Permits Necessary to Operate Our Restaurants

The restaurant industry is subject to various federal, state and local government licensure and permitting requirements,
including those relating to the sale of food and alcoholic beverages. The failure to obtain and maintain these licenses, permits
and approvals, including food and liquor licenses, could adversely affect our operating results. Difficulties or failure to obtain
any required licenses, permits or other government approvals could delay or result in our decision to cancel the opening of
new restaurants. Local authorities may revoke, suspend or deny renewal of our food and liquor licenses if they determine
that our conduct violates applicable regulations.

The Sale of Alcoholic Beverages at Our Restaurants Subjects Us to Additional Regulations and Potential Liability

For fiscal year 2015, approximately 18.0% of our consolidated restaurant sales were attributable to the sale of alcoholic
beverages. Our restaurants sell alcoholic beverages, and as such, 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 on the premises and to provide service for extended hours and on
Sundays. Typically, the licenses are 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 team members, hours of operation, advertising, wholesale purchasing, inventory control and handling, 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.

In certain states, we are subject to “dram shop” statutes, which generally allow a person injured by an intoxicated person the
right to recover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated person. Some
dram shop litigation against restaurant companies has resulted in significant judgments, including punitive damages.

We May Not Be Able to Protect Our Trademarks, Service Marks, and Trade Secrets

We place considerable value on our trademarks, service marks, and trade secrets. We intend to actively enforce and defend
our intellectual property, although we may not always be successful. We attempt to protect our recipes as trade secrets by,
among other things, requiring confidentiality agreements with our suppliers and executive officers. However, we cannot be
sure that we will be able to successfully enforce our rights under our marks or prevent competitors from misappropriating
our recipes, nor can we be sure that out methods of safeguarding our information are adequate and effective. We also cannot
be sure that our marks are valuable; that using our marks does not, or will not, violate others' marks; that the registrations of
our marks would be upheld if challenged; or that we would not be prevented from using our marks in areas of the country
where others might have already established rights to them. Any of these uncertainties could have an adverse effect on us
and our expansion strategy.

We Are Dependent on Information Technology and Any Material Failure of That Technology Could Impair Our Ability
to Efficiently Operate Our Business

We rely on information systems across our operations, including, for example, point-of-sale processing in our restaurants,
management of our supply chain, collection of cash, payment of obligations, and various other processes and procedures. Our
ability to efficiently manage our business depends significantly on the reliability and capacity of these systems. The failure
of these systems to operate effectively, problems with maintenance, upgrading or transitioning to replacement systems, or a

breach in security of these systems could cause delays in guest service and reduce efficiency in our operations. Significant
capital investments might be required to remediate any problems.

Our Ability to Raise Capital in the Future May Be Limited, Which Could Adversely Impact Our Business

Changes in our restaurant operations, lower than anticipated restaurant sales, increased food or compensation costs, increased
property expenses, acceleration of our expansion plans or other events, including those described in this Annual Report, may
cause us to seek additional debt or equity financing on an accelerated basis. Financing may not be available to us on
acceptable terms, and our failure to raise capital when needed could negatively impact our restaurant growth plans as well as
our financial condition and the results of operations. Additional equity financing, if available, may be dilutive to the holders
of our common stock. Debt financing may involve significant cash payment obligations, covenants and financial ratios that
may restrict our ability to operate and grow our business.

There Can Be No Assurances That, in the Future, We Will Be in Compliance With All Covenants of Our Current or
Future Debt Agreements or That Our Lenders Will Waive Any Violations of Such Covenants

Non-compliance with our debt covenants could have a material adverse effect on our business, results of operations, and
financial condition. Non-compliance may result in us being in default under our debt agreements, which could cause a
substantial financial burden by requiring us to repay our debt earlier than otherwise anticipated.

Our Current Insurance May Not Provide Adequate Levels of Coverage Against Claims

We currently maintain insurance that is customary and required in our franchise agreements and leases. However, there are
types of losses we may incur that cannot be insured against or that we believe are not economically reasonable to insure
against, such as losses due to natural disasters. Such damages could have a material adverse effect on our business and the
results of operations. Additionally, there is no assurance that we will be able to maintain our current coverage at acceptable
premium rates or that any coverage will be available to us in the future.

An Impairment in the Carrying Value of Our Fixed Assets, Intangible Assets or Goodwill Could Adversely Affect Our
Financial Condition and Consolidated Results of Operations

Goodwill represents the excess of cost over the fair value of identified net assets of business acquired. We review goodwill
for impairment annually, or whenever circumstances change in a way which could indicate that impairment may have
occurred. Goodwill is tested at the reporting unit level. We identify potential goodwill impairments by comparing the fair
value of the reporting unit to its carrying amount, which includes goodwill and other intangible assets. If the carrying amount
of the reporting unit exceeds the fair value, this is an indication that impairment may exist. We calculate the amount of the
impairment by comparing the fair value of the assets and liabilities to the fair value of the reporting unit. The fair value of
the reporting unit in excess of the value of the assets and liabilities is the implied fair value of the goodwill. If this amount is
less than the carrying amount of goodwill, impairment is recognized for the difference. A significant amount of judgment is
involved in determining if an indication of impairment exists. Factors may include, among others: a significant decline in our
expected future cash flows; a sustained, significant decline in our stock price and market capitalization; a significant adverse
change in legal factors or in the business climate; unanticipated competition; the testing for recoverability of a significant
asset group within a reporting unit; and slower growth rates. Any adverse change in these factors would have a significant
impact on the recoverability of these assets and negatively affect our financial condition and consolidated results of
operations. We are required to record a non-cash impairment charge if the testing performed indicates that goodwill has been
impaired.

We evaluate the useful lives of our fixed assets and intangible assets to determine if they are definite- or indefinite-lived.
Reaching a determination on useful life requires significant judgments and assumptions regarding the lease term, future
effects of obsolescence, demand, competition, other economic factors (such as the stability of the industry, legislative action
that results in an uncertain or changing regulatory environment, and expected changes in distribution channels), the level of
required maintenance expenditures and the expected lives of other related groups of assets. We cannot accurately predict the
amount and timing of any impairment of assets. Should the value of fixed assets or intangible assets become impaired, there
could be an adverse effect on our financial condition and consolidated results of operations.

We May Incur Costs Resulting From Security Risks We Face in Connection With Our Electronic Processing and
Transmission of Confidential Guest Information

We accept electronic payment cards from our guests in our restaurants. For the fiscal year ended December 27, 2015,
approximately 74.5% of our sales were attributable to credit/debit card transactions, and credit/debit card usage could
continue to increase. A number of restaurant operators and retailers have experienced actual or potential security breaches in
which credit/debit card information may have been stolen. While we have taken reasonable steps to prevent the occurrence
of security breaches in this respect, we may in the future become subject to claims for purportedly fraudulent transactions
arising out of the actual or alleged theft of credit/debit card information, and we may also be subject to lawsuits or other
proceedings in the future relating to these types of incidents. Proceedings related to theft of credit/debit card information
may be brought by payment card providers, banks, and credit unions that issue cards, cardholders (either individually or as
part of a class action lawsuit), and federal and state regulators. Any such proceedings could distract our management team
members from running our business and cause us to incur significant unplanned losses and expenses.

We also receive and maintain certain personal information about our guests and team members. The use of this information
by us is regulated at the federal and state levels. If our security and information systems are compromised or our team
members fail to comply with these laws and regulations and this information is obtained by unauthorized persons or used
inappropriately, it could adversely affect our reputation, as well as the results of operations, and could result in litigation
against us or the imposition of penalties. In addition, our ability to accept credit/debit cards as payment in our restaurants
and online depends on us maintaining our compliance status with standards set by the PCI Security Standards Council. These
standards, set by a consortium of the major credit card companies, require certain levels of system security and procedures to
protect our guests’ credit/debit card information as well as other personal information. Privacy and information security laws
and regulations change over time, and compliance with those changes may result in cost increases due to necessary system
and process changes.

Failure to Establish and Maintain Our Internal Control Over Financial Reporting Could Harm Our Business and
Financial Results.

Our management team members are responsible for establishing and maintaining effective internal control over financial
reporting. We previously identified a material weakness in connection with our assessment of the effectiveness of internal
control over financial reporting as of December 28, 2014. As of December 27, 2015, management has remediated the
underlying causes of the material weakness. However, internal control over financial reporting is a process to provide
reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with accounting
principles generally accepted in the United States. Because of its inherent limitations, internal control over financial reporting
is not intended to provide absolute assurance that we would prevent or detect a misstatement of our financial statements or
fraud. Any failure to maintain an effective system of internal control over financial reporting could limit our ability to report
our financial results accurately and timely or to detect and prevent fraud. Any failure to remediate a material weakness or
the occurrence of additional material weaknesses in internal control over financial reporting could cause a loss of investor
confidence and decline in the market price of our stock.

Our Inability or Failure to Effectively Manage Our Marketing Through Social Media Could Materially Adversely Impact
Our Business.

As part of our marketing efforts, we rely on search engine marketing and social media platforms such as Facebook® and
Twitter® to attract and retain guests. We also are initiating a multi-year effort to implement new technology platforms that
should allow us to digitally engage with our guests and team members and strengthen our marketing and analytics capabilities.
These initiatives may not be successful, resulting in expenses incurred without the benefit of higher revenues or increased
employee engagement. In addition, a variety of risks are associated with the use of social media, including the improper
disclosure of proprietary information, negative comments about our company, exposure of personally identifiable
information, fraud, or out-of-date information. The inappropriate use of social media vehicles by our guests or team members
could increase our costs, lead to litigation or result in negative publicity that could damage our reputation.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our main office is located at 27680 Franklin Road, Southfield, Michigan 48034 and our telephone number is (248) 223-9160.
Our main office has approximately 5,340 square feet of office space. We occupy this facility under a lease that ends June 30,
2019. As of March 11, 2016, we operated 80 Company-owned restaurants, all of which are leased properties. Typically, our
operating leases contain renewal options under which we may extend the renewal lease terms for periods of five to 10 years.
Most of our leases include "exclusive use" provisions prohibiting our landlords from leasing space to other restaurants that
fall within certain specified criteria and incorporate incremental increases based on time passage and payment of certain
occupancy-related expenses.

We own all of the equipment, furnishings, and fixtures in our restaurants. The Company also owns a significant amount of
leasehold improvements in the leased facilities.

As of December 27, 2015, we operated restaurant properties for 36 locations in Michigan, 15 locations in both Florida and
Missouri, seven locations in Illinois, six locations in Indiana, and one in Ohio. Our BWW restaurants range in size from 5,300
square feet to 13,500 square feet and our typical Bagger Dave’s restaurants range in size from 3,800 square feet to 6,100
square feet. The majority of our restaurants are located in end-cap positions in strip malls, with a few being inline; 40 of our
restaurants are situated in stand-alone buildings.

ITEM 3. LEGAL PROCEEDINGS

The following information is incorporated by reference: the information set forth under the heading "Legal Proceedings" in
Note 14 "Commitments and Contingencies" of the "Notes to the Consolidated Financial Statements" of Part II, Item 8 to this
Report on Form 10-K.

In addition, we are occasionally a defendant in litigation arising in the ordinary course of our business, including claims
arising from personal injuries, contract claims, dram shop claims, employment-related claims, and claims from guests or team
members alleging injury, illness, or other food quality, health, or operational concerns. We have insured and continue to
insure against most of these types of claims. A judgment on any claim not covered by or in excess of our insurance coverage
could materially adversely affect our financial condition or results of operations.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

The Company's common stock is listed on the NASDAQ Capital Market under the symbol “SAUC”. The development and
maintenance of an active public trading market depends upon the existence of willing buyers and sellers, the presence of
which is beyond our control. While we are a publicly-traded company, the volume of trading activity in our stock is still
relatively limited.

The following table sets forth the high and low bid quotations for our common stock for the fiscal years ended December 27,
2015 and December 28, 2014, as reported by NASDAQ:

First Quarter .............................................................................. $
Second Quarter .........................................................................
Third Quarter ............................................................................
Fourth Quarter ..........................................................................

5.16 $
4.46
4.41
3.19

3.94 $
3.59
2.57
2.40

5.85 $
5.50
5.00
5.42

4.42
3.99
4.19
4.61

2015

2014

High

Low

High

Low

Holders

As of March 9, 2016, there were approximately 435 record holders of 26,335,850 shares of the Company's common stock,
excluding shareholders whose stock is held either in nominee name and/or street name brokerage accounts.

Dividends

We have not declared or paid any cash dividends on our common stock. It is our policy to preserve cash for development and
other working capital needs. Currently, DRH does not have plans to pay any cash dividends. Our future dividend policy will
be determined by our Board of Directors and will depend on various factors, including our results of operations, financial
condition, anticipated cash needs and plans for expansion.

Performance Graph

The following graph compares the cumulative total stockholder return from April 15, 2013 through December 27, 2015. The
graph below shows the cumulative total stockholder return assuming the investment of $100 on the date specified (assuming
reinvestment of dividends) in each of DRH common stock, the NASDAQ Composite Index and S&P 600 Restaurants Index.
The comparisons in the graph below are based upon historical data and are not indicative of, or intended to forecast, future
performance of our common stock.

Diversified Restaurant Holdings, Inc. ......................................... $
S&P 600 Restaurants ..................................................................
NASDAQ Composite .................................................................

100.00 $
100.00
100.00

95.40 $
138.17
127.93

99.80 $
174.54
147.24

52.20
167.33
154.64

4/15/2013 12/29/2013 12/28/2014 12/27/2015

Equity Compensation Plan Information

The following table sets forth information, as of December 27, 2015, with respect to compensation plans (including individual
compensation arrangements) under which our equity securities are authorized for issuance, aggregated as follows:

Number of
securities
to be issued
upon exercise
of outstanding
options,
warrants and
rights

Weighted-
average exercise
price of
outstanding
options,
warrants and
rights

Number of
securities
remaining
available for
future issuance
under equity
compensation
plans
(excluding
securities
reflected in
column (a))

—

180,000 $

N/A
2.50

365,051
N/A

Plan Category
Equity compensation plans approved by security holders 1 ..............
Equity compensation plans not approved by security holders 2 ........

1 In 2011, our Board of Directors and Stockholders approved the Stock Incentive Plan of 2011 (the “2011 Incentive Plan”)
authorizing the grant of equity-based incentives to employees. The 2011 Incentive Plan permits the grant and award of
750,000 shares of common stock by way of stock options and/or restricted stock.

2 On July 31, 2010, the Company granted options for the purchase of 210,000 shares of common stock to the directors of the
Company. These options vest ratably over a three-year period and expire six years from issuance. The options can be
exercised at a price of $2.50 per share.

ITEM 6. SELECTED FINANCIAL DATA

The following selected consolidated financial and operating data for each of the five fiscal years and are derived from our
audited consolidated financial statements. The following data should be read in conjunction with Item 7, Management's
Discussion and Analysis of Financial Condition and Results of Operations, and our audited financial statements included in
Item 8, Consolidated Financial Statements and Supplementary Data, within this Form 10-K. Historical results are not
necessarily indicative of future performance.

December 27,
2015

December 28,
2014

December 30,
2012

December 25,
2011

Fiscal Years Ended
December 29,
2013

Statements of Operations:
Revenue ............................................................ $172,485,378 $ 128,413,448 $ 108,886,139 $ 77,447,208 $ 60,707,475
3,600,163
Operating profit (loss) ......................................
1,842,186
Net income (loss) attributable to DRH .............

(22,789,283)
(16,192,492)

(642,280)
(1,268,497)

1,440,277
134,308

1,581,243
180,099

Per Share:
Basic earnings (loss) per share ......................... $
Diluted earnings (loss) per share ...................... $

Weighted average of common shares:

(0.62 ) $
(0.62 ) $

(0.05) $
(0.05) $

0.01 $
0.01 $

0.10
0.10

Basic ..............................................................
Diluted ..........................................................

26,211,669
26,211,669

26,092,919
26,092,919

23,937,188
24,058,072

18,949,556
19,091,849

18,902,782
19,055,500

Balance Sheet:
Goodwill ........................................................... $ 50,097,081 $ 10,998,630 $
Total assets ....................................................... 166,117,812 113,447,034
60,569,814
Total long term obligations .............................. 124,643,874

8,578,776 $
92,333,733
42,554,789

8,578,776 $
56,544,738
42,106,583

—
27,350,399
19,205,371

Statement of Cash Flows:

Cash flows provided by (used in)
Operating activities ........................................... $ 9,448,584 $ 11,295,253 $
(17,469,345)
Investing activities ............................................
15,299,900
Financing activities ...........................................

(78,026,376)
64,090,039

7,180,971 $
(33,950,993)
33,632,167

7,592,621 $
(31,228,585)
24,798,795

6,577,016

(8,215,522)
1,817,622

The Company utilizes a 52- or 53-week accounting period that ends on the last Sunday in December. Fiscal year 2015 ended
on December 27, 2015, fiscal year 2014 ended on December 28, 2014, and fiscal year 2013 ended December 29, 2013. Each
fiscal year was comprised of 52 weeks.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION

The following discussion and analysis of our financial condition should be read in conjunction with our consolidated financial
statements and the related notes to those statements included elsewhere in this document. The following discussion contains,
in addition to historical information, forward-looking statements that include risks and uncertainties. Our actual results may
differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set
forth under the heading “Risk Factors” and elsewhere in this document.

Overview

DRH is a fast-growing, multi-concept restaurant company operating two complementary concepts: BWW and Bagger Dave’s.
As the largest franchisee of BWLD and the developer and operator of Bagger Dave’s, we provide a unique guest experience
in a casual and inviting environment. We are committed to providing value to our guests by offering generous portions of
flavorful food in an upbeat and entertaining atmosphere. We believe BWW and Bagger Dave’s are uniquely positioned
restaurant brands designed to maximize guest appeal. Both restaurant concepts offer competitive price points and a family-
friendly atmosphere, which we believe enables strong performance through economic cycles. We were incorporated in
Nevada in 2006 and are headquartered in the Detroit metropolitan area. Currently, we have 80 locations in Florida, Illinois,
Indiana, Michigan, Missouri and Ohio.

Our Growth Strategies and Outlook

Our strategy is comprised of the following key growth components:

(cid:404)

pursue disciplined restaurant growth through a combination of both organic expansion and
strategic acquisitions;

deliver comparable restaurant sales growth by providing our guest with an exceptional
experience and executing effective marketing and advertising strategies; and

leverage our infrastructure to grow profit margins

We have an established growth pipeline and a disciplined strategy for opening new restaurants that includes the fulfillment
of our current franchise agreement with BWLD. We also evaluate the potential for strategic accretive acquisitions of Buffalo
Wild Wings franchises where we have an opportunity to leverage our operational expertise.

We will continue to grow our Buffalo Wild Wings restaurant base under our current ADA. In addition, we believe our
historical track record of acquiring and integrating Buffalo Wild Wings restaurants provides us with an additional future
growth opportunities and will seek to take advantage of strategic acquisitions that may be available in the marketplace. We
have suspended further development of our Bagger Dave’s concept until we feel confident that we can achieve and sustain
average unit volumes that will provide adequate returns on investment.

The Company opened eight new restaurants, acquired 18 BWW locations and closed 12 underperforming restaurants in 2015.
Over the next five years, we expect to open a minimum of 15 new DRH-owned BWW restaurants (for additional discussion
of our growth strategies and outlook, see the section entitled “Business - Growth Strategy”).

Performance Indicators

We use several metrics to evaluate and improve each restaurant’s performance that include: sales growth, ticket times, guest
satisfaction, hourly compensation costs and food, beverage and packaging costs.

We also use the following key performance indicators in evaluating restaurant performance:

(cid:404)

Comparable Restaurant Sales. We consider a restaurant to be comparable following the eighteenth or twenty-
fourth month of operations for BWW and Bagger Dave's respectively. Changes in comparable restaurant sales
reflect changes in sales for the comparable group of restaurants over a specified period of time. Changes in
comparable sales can also reflect changes in guest count trends and changes in average check.

Restaurant-Level Contribution. Also referred to as Restaurant-Level EBITDA, this metric presents a
restaurant's on-going profit contribution and is defined as net revenue less costs of sales, labor, occupancy
and operational expenses. It is representative of a restaurant's cash flow and is often times presented and
measured as a percentage of sales in comparison to other restaurants.

Restaurant Openings

The following table outlines the restaurant unit information for each fiscal year from 2011 through 2015.

Summary of restaurants open at the beginning of year

Openings:

DRH-owned BWW ............................................................
Bagger Dave’s ...................................................................
BWW Acquisitions ............................................................
Closures - Bagger Dave's ...................................................
Closures - DRH-owned BWW ..........................................
Total restaurants .................................................................

2015

2014

2013

2012

2011

42
24
66

3
5
18
(11)
(1)
80

36
18
54

3
6
3
—
—
66

33
11
44

3
7
—
—
—
54

22
6
28

3
5
8
—
—
44

19
3
22

3
3
—
—
—
28

Our Fiscal Year

The Company utilizes a 52- or 53-week accounting period that ends on the last Sunday in December. Fiscal year 2015 ended
on December 27, 2015, fiscal year 2014 ended on December 28, 2014 and fiscal year 2013 ended December 29, 2013. Each
fiscal year comprised of 52 weeks.

Key Financial Definitions

Revenue. Revenue primarily consists of food and beverage sales, and merchandise sales, such as BWW sauce and Bagger
Dave’s Craft Sodas. Revenue is presented net of discounts associated with each sale. Revenue in a given period is directly
influenced by the number of operating weeks in such period, the number of restaurants we operate and comparable restaurant
sales growth.

Food, Beverage, and Packaging Costs. Food, beverage and packaging costs consist primarily of food, beverage, packaging
and merchandise-related costs. The components of food, beverage and packaging costs are variable in nature, change with
sales volume and are subject to increases or decreases based on fluctuations in commodity costs.

Compensation Costs. Compensation costs include restaurant management salaries, front- and back-of-house hourly wages,
and restaurant-level manager bonuses, team member benefits and payroll taxes.

Occupancy Costs. Occupancy costs include rent charges, both fixed and variable, as well as common area maintenance costs,
property insurance and taxes, the amortization of tenant allowances and the adjustment to straight-line rent. These expenses
are generally fixed, but a portion may vary with an increase in sales if the lease contains a percentage rent provision.

Other Operating Costs. Other operating costs consist primarily of restaurant-related operating costs, such as supplies, utilities,
repairs and maintenance, travel cost, insurance, credit card fees, recruiting and security. These costs generally increase with
sales volume but decline as a percentage of revenue. For DRH-owned BWW restaurants, this expense category also includes
franchise royalty and national advertising fund expense.

General and Administrative Expenses. General and administrative expenses include costs associated with administrative and
operational support functions including senior and supervisory management and staff compensation costs (including stock-
based compensation) and benefits, marketing and advertising expenses, travel, legal and professional fees, information
systems, support office rent and other related support costs.

Pre-Opening Costs. Restaurant pre-opening costs consist of expenses incurred to open a new restaurant, including manager
salaries, relocation costs, supplies, recruiting expenses, initial new market public relations costs, pre-opening activities, team
member payroll and related training costs for new team members. Restaurant pre-opening expenses also include rent recorded
during the period between date of possession and the restaurant opening date. In addition, the Company includes restaurant
labor costs that exceed the historical average for the first three months of restaurant operations that are attributable to training
and initial staff turnover.

Depreciation and Amortization. Depreciation and amortization includes depreciation on fixed assets, including equipment
and leasehold improvements, and amortization of certain intangible assets for restaurants.

Interest Expense. Interest expense consists primarily of interest on our outstanding indebtedness and the amortization of our
debt issuance costs, reduced by capitalized interest.

RESULTS OF OPERATIONS

The following table presents the consolidated statements of operations for the fiscal years ended December 27, 2015,
December 28, 2014, and December 29, 2013 with each line item in dollars and as a percentage of revenue.

Total revenue

Fiscal Years-Ended

2015
100.0 %

2014
100.0 %

2013
100.0 %

Operating expenses
Food, beverage and packaging costs ..............................................................
Compensation costs .......................................................................................
Occupancy costs ............................................................................................
Other operating costs .....................................................................................
General and administrative expenses .............................................................
Pre-opening costs ...........................................................................................
Depreciation and amortization .......................................................................
Impairment and loss on asset disposal ..........................................................

28.7 %
26.9 %
7.2 %
21.9 %
8.9 %
1.9 %
9.6 %
8.3 %

28.9 %
26.0 %
5.6 %
21.2 %
6.8 %
2.7 %
8.5 %
0.8 %

Total operating expenses .............................................................................

113.2 %

100.5 %

30.0 %
25.8 %
5.9 %
19.9 %
6.7 %
3.0 %
7.3 %
0.1 %

98.7 %

Operating profit (loss) .................................................................................

(13.2)%

(0.5)%

1.3 %

Interest expense .............................................................................................
Other income, net...........................................................................................

(2.4)%
0.5 %

(1.8)%
0.0 %

(1.6)%
0.1 %

Loss before income taxes ...............................................................................

(15.2)%

(2.3)%

(0.1)%

Income tax benefit .........................................................................................

(5.8)%

(1.3)%

(0.2)%

Net income (loss) ..........................................................................................

(9.4)%

(1.0)%

0.1 %

FISCAL YEAR 2015 COMPARED WITH FISCAL YEAR 2014

Revenue

Total revenue for Fiscal Year 2015 was $172.5 million, an increase of $44.1 million, or 34.3%, over revenue generated during
Fiscal Year 2014. The increase was attributable to increased same store sales, two BWW acquisitions (three restaurants in
the Tampa, FL market June 28, 2014 and 18 restaurants in the St. Louis, MO market on June 29, 2015), and the opening of
eight DRH-owned restaurants (five Bagger Dave's and three BWW restaurants). $3.8 million of the increase was attributable
to 2.9% same store sales for 55 BWW and 10 Bagger Dave's restaurants. $24.1 million of the increase in sales was attributable
to the acquisition of 21 total BWW restaurants. The remaining $16.2 million increase is a result of restaurants opening prior
to entering the comparable sales base (18 months and 24 months for BWW and Bagger Dave's, respectively), including eight
Bagger Dave's and seven BWW restaurants. Same store sales increase by concept was 1.3% and 3.0% for Bagger Dave's and
BWW, respectively.

Operating Expenses

Food, beverage and packaging costs increased by $12.4 million, or 33.4%, to $49.4 million in Fiscal Year 2015 from $37.1
million in Fiscal Year 2014 as a result of the increase in the number of restaurants and inflationary factors. Food, beverage,
and packaging cost as a percentage of sales decreased to 28.7% in Fiscal Year 2015 from 28.9% in Fiscal Year 2014 primarily
due to increased menu pricing and waste reduction efforts which offset net commodity cost inflation driven primarily by
bone-in chicken wing prices. Average cost per pound for bone-in chicken wings increased 18.3% to $1.81 in Fiscal Year
2015 from $1.53 in Fiscal Year 2014.

Compensation costs increased by $13.0 million, or 38.9%, to $46.3 million in Fiscal Year 2015 from $33.3 million in Fiscal
Year 2014. The increase was primarily due to the increase in the number of restaurants operating in 2015. Eight new
restaurants were opened and 18 restaurants were acquired in Fiscal Year 2015. Compensation cost as a percentage of sales
increased to 26.9% in Fiscal Year 2015 from 26.0% in Fiscal Year 2014. A variance of 0.2% was attributable to the rollout
of the new chef-inspired menu at Bagger Dave's, 0.1% variance is due to increased hourly wages, primarily tipped wages,
0.3% is a result of our investment into the guest experience at Bagger Dave's by mandating minimum staffing levels, and the
remaining 0.2% is a result of turnover and productivity.

Occupancy costs increased by $5.2 million, or 71.8%, to $12.4 million in Fiscal Year 2015 from $7.2 million in Fiscal Year
2014 primarily due to the increase in the number of restaurants operating in 2015, including the acquisition of 18 BWW
restaurants. Occupancy cost as a percentage of sales increased to 7.2% in Fiscal Year 2015 from 5.6% in Fiscal Year 2014.
Approximately 100 basis points pertain to rents from the sale leaseback of the 12 previously owned properties and
approximately 40 basis points pertain to the one-time expense for lease liability of the12 restaurants closed restaurants.

Other operating costs increased by $10.5 million, or 38.6%, to $37.7 million in Fiscal Year 2015 from $27.2 million in Fiscal
Year 2014 primarily due to the increase in the number of restaurants operating in 2015. Other operating cost as a percentage
of sales increased to 21.9% in Fiscal Year 2015 from 21.2% in Fiscal Year 2014 primarily due to one-time expenses, much
of which is related to the Company's efforts to ensure that the 18 acquired restaurants operate to DRH standards. Investing in
equipment repairs and maintenance, restaurant supplies, team member incentives and leading-edge technology allows for
enhanced team member and guest experience which we anticipate will drive incremental sales in the St. Louis market.

General and administrative expenses increased by $6.6 million, or 74.7%, to $15.4 million in Fiscal Year 2015 from $8.8
million in Fiscal Year 2014. During fiscal year 2015. we executed two sale leasebacks, pursued several acquisitions,
successfully closed on a $54.0 million 18-restaurant acquisition, settled a class-action lawsuit for $1.9 million and transitioned
accounting in-house. General and administrative costs as a percentage of sales increased to 8.9% in Fiscal Year 2015 from
6.8% in Fiscal Year 2014 of which 2.0% was a result of the aforementioned projects and acquisition-related expenses.

Pre-opening costs decreased by $0.2 million, or 6.6%, to $3.2 million in Fiscal Year 2015 from $3.5 million in Fiscal Year
2014. The decrease in pre-opening costs was due to the timing and costs to open new restaurants during Fiscal Year 2015. The
Company opened eight new restaurants and relocated one in Fiscal Year 2015 versus nine new restaurant openings and two
relocations openings in Fiscal Year 2014. As a percentage of sales, pre-opening costs decreased to 1.9% in Fiscal Year 2015
from 2.7% in Fiscal Year 2014.

Depreciation and amortization increased by $5.6 million, or 51.3%, to $16.6 million in Fiscal Year 2015 from $11.0 million
in Fiscal Year 2014 primarily due to the increase in the total number of restaurants operating in 2015. Depreciation and
amortization as a percentage of sales increased to 9.6% in Fiscal Year 2015 from 8.5% in Fiscal Year 2014 partially due to
the 18 acquired restaurants and the cost of constructing a restaurant from the ground-up versus a build-out on existing
buildings.

Impairment and loss on asset disposal increased by $13.2 million, or 1,292.1%, to $14.2 million in Fiscal Year 2015 from
$1.0 million in Fiscal Year 2014. The increase was primarily due to the closure of 12 restaurants and the $10.0 million write
down of their remaining assets. In addition, we impaired $2.8 million of assets for four Bagger Dave's locations. Loss on
disposal of assets as a percentage of sales, increased to 8.3% in Fiscal Year 2015 from 0.8% in Fiscal Year 2014.

Interest and Taxes

Interest expense was $4.2 million and $2.3 million during the years ended December 27, 2015 and December 28, 2014,
respectively. Of the increase, $0.4 million is a result of expensing extinguished loan fees and expensing a portion of the
current loan fees and discounts and the remaining increase was a result of increased debt due to the acquisition and building
of new restaurants.

In Fiscal Year 2015, we recorded an income tax benefit of $10.0 million compared with Fiscal Year 2014, when we recorded
an income tax benefit of $1.7 million. The increase in the benefit is primarily due to the increased pre-tax loss.

FISCAL YEAR 2014 COMPARED WITH FISCAL YEAR 2013

Revenue

Total revenue for Fiscal Year 2014 was $128.4 million, an increase of $19.5 million, or 17.9%, over revenue generated during
Fiscal Year 2013. The increase was attributable to increased same store sales, acquisition of three BWW restaurants, and the
opening of nine DRH-owned restaurants (six Bagger Dave’s and three BWW restaurants). $3.4 million of the increase was
attributable to 3.5% same store sales increase for 37 BWW and 12 Bagger Dave’s restaurants. $3.1 million of the increase in
sales was attributable to the acquisition of three BWW restaurants on June 30, 2014. The remaining $13.0 million increase is
a result of restaurants opening within the last 18 months, including 12 Bagger Dave’s and five BWW restaurants. Breaking
down our same store sales increase of 3.5% into components, 3.4% was attributable to price increases from winter and fall
menu rollouts and 0.1% was attributable to increased traffic in our comparable locations.

Operating Expenses

Food, beverage, and packaging costs increased by $4.3 million, or 13.3%, to $37.1 million in Fiscal Year 2014 from $32.7
million in Fiscal Year 2013 as a result of the increase in the number of restaurants and inflationary factors. Food, beverage
and packaging cost as a percentage of sales decreased to 28.9% in Fiscal Year 2014 from 30.0% in Fiscal Year 2013 primarily
due to lower bone-in chicken wing costs. Average cost per pound for bone-in chicken wings decreased 13.1% to $1.53 in
Fiscal Year 2014 from $1.76 in Fiscal Year 2013.

Compensation costs increased by $5.2 million, or 18.7%, to $33.3 million in Fiscal Year 2014 from $28.1 million in Fiscal
Year 2013. The increase was primarily due to the increase in number of restaurants operating in 2014. Nine new restaurants
were opened and three restaurants were acquired in Fiscal Year 2014. Compensation costs as a percentage of sales increased
to 26.0% in Fiscal Year 2014 from 25.8% in Fiscal Year 2013.

Occupancy costs increased by $0.8 million, or 12.9%, to $7.2 million in Fiscal Year 2014 from $6.4 million in Fiscal Year
2013 primarily due to the increase in the number of restaurants operating in 2014, including the acquisition of three BWW
restaurants. Occupancy cost as a percentage of sales decreased to 5.6% in Fiscal Year 2014 from 5.9% in Fiscal Year 2013
due to the increase of purchased real estate versus leasing of property in late fiscal 2013 and throughout fiscal 2104. In Fourth
Quarter 2014, DRH finalized the sale-leaseback transaction for ten of the twelve Company owned properties, as further
discussed in Note 2 of the Consolidated Financial Statements.

Other operating costs increased by $5.5 million, or 25.6%, to $27.2 million in Fiscal Year 2014 from $21.7 million in Fiscal
Year 2013 primarily due to the increase in the number of restaurants operating in 2014. Other operating costs as a percentage
of sales increased to 21.2% in Fiscal Year 2014 from 19.9% in Fiscal Year 2013 due to implementing new information
technology initiatives as well as increased in third-party costs for hiring and accounts payable processing.

General and administrative expenses increased by $1.5 million, or 20.9%, to $8.8 million in Fiscal Year 2014 from $7.3
million in Fiscal Year 2013 due to additional hiring of support staff for our on-going growth, increased professional fees, a
result of the Florida BWW acquisition, and increased marketing costs, which historically ranges between 2.0% to 2.2% of
sales. General and administrative cost as a percentage of sales increased to 6.8% in Fiscal Year 2014 from 6.7% in Fiscal
Year 2013.

Pre-opening costs increased by $0.3, or 7.5%, to $3.5 million in Fiscal Year 2014 from $3.2 million in Fiscal Year 2013. The
increase in pre-opening costs was due to the timing and costs to open new restaurants during Fiscal Year 2014. The Company
had nine new restaurant openings and two relocations in Fiscal Year 2014 versus ten new restaurant openings and one
relocation openings in Fiscal Year 2013. As a percentage of sales, pre-opening costs decreased to 2.7% in Fiscal Year 2014
from 3.0%.

Depreciation and amortization increased by $3.0 million, or 37.4%, to $11.0 million in Fiscal Year 2014 from $8.0 million
in Fiscal Year 2013 primarily due to the increase in the total number of restaurants operating 2014. Depreciation and
amortization as a percentage of sales increased to 8.5% in Fiscal Year 2014 from 7.3% in Fiscal Year 2013 due to the increased
investment in ground-up development of the restaurants.

Impairment and loss on asset disposal increased by $0.9 million, or 942.3%, to $1.0 million in Fiscal Year 2014 from $0.1
million in Fiscal Year 2013. The increase was primarily due to a $0.5 million loss from our sale leaseback transaction and
$0.4 million of which was a direct consequence of transitioning all of our locations to a new point of sale system. Loss on
disposal of property and equipment as a percentage of sales increased to 0.8% in Fiscal Year 2014 from 0.1% in Fiscal Year
2013.

Interest and Taxes

Interest expense was $2.3 million and $1.7 million during the years ended December 28, 2014 and December 29, 2013,
respectively. The increase is associated with the $77.0 million senior secured credit facility with Citizens, N.A. ("Citizens")
which was effective December 16, 2014 and includes the write-off of loan fees of $0.3 million. Increased borrowings for new
restaurant development in 2014 was also a contributing factor.

In Fiscal Year 2014, we recorded an income tax benefit of $1.7 million compared with Fiscal Year 2013, when we recorded
an income tax benefit of $0.3 million. The increase in the benefit is primarily due to the increased pre-tax loss and the
increased tip credits.

LIQUIDITY AND CAPITAL RESOURCES; EXPANSION PLANS

On June 29, 2015, the Company, entered into a $155.0 million Senior Secured Credit Facility with Citizens (the “June 2015
Senior Secured Credit Facility”). The June 2015 Senior Secured Credit Facility consists of a $120.0 million Term Loan (the
"June 2015 Term Loan"), a $30.0 million development line of credit (the "June 2015 DLOC") and a $5.0 million revolving
line of credit (the "June 2015 RLOC"). The Company immediately used approximately $65.5 million of the June 2015 Term
Loan to refinance existing outstanding debt and $54.0 million of the June 2015 Term Loan to finance the acquisition. The
remaining balance of the June 2015 Term Loan, approximately $0.5 million, was used to pay the fees, costs and expenses
arising in connection with the closing of the loans constituting the June 2015 Senior Secured Credit Facility. The June 2015
Term Loan is for a term of five years. Payments of principal shall be based upon a 12-year straight-line amortization schedule,
with monthly principal payments of $833,333 plus accrued interest. The interest rate for the Term Loan is LIBOR plus an
applicable margin which ranges from 2.25% to 3.5%. The entire remaining outstanding principal and accrued interest on the
Term Loan is due and payable on the Term Loan maturity date of June 29, 2020. The June 2015 DLOC is for a term of two
years and is convertible upon maturity into a term note based on the terms of the agreement at which time monthly principal
payments will be due based on a 12-year straight-line amortization schedule, plus interest, through maturity on June 29, 2020.
The June 2015 RLOC is for a term of five years and bears interest at LIBOR plus an applicable margin, no amount was
outstanding as of December 27, 2015.

The current debt agreement contains various customary financial covenants generally based on the performance of the specific
borrowing entity and other related entities. The financial covenants consist of a minimum debt service coverage ratio and a
maximum lease adjusted leverage ratio. In connection with the closure of three locations discussed in Note 4, during the Third
Quarter the Company violated one of its non-financial loan covenants related to the number of allowable restaurant closures.
In the Third Quarter our primary lender modified our covenants within our debt agreement to allow for the closure of specified
locations and one time transaction fees associated with the St. Louis acquisition and the wage-claim settlement, discussed in
Note 14 of the Consolidated Financial Statements. As of December 27, 2015 the Company was in compliance with the loan
covenants.

We believe that along with our current cash balance, the cash flow from operations and availability of credit will be sufficient
to meet our operational, development and debt obligations for at least the next 12 months.

Our capital requirements are primarily dependent upon the pace of our new restaurant growth plan. The new restaurant growth
plan is primarily dependent upon economic conditions, the real estate market and resources to both develop and operate new
restaurants. In addition to new restaurants, our capital expenditure outlays are also dependent on the cost and potential
obligation to invest in maintenance, facility upgrades, capacity enhancements, information technology and other general
corporate capital expenditures.

The amount of capital required to open a new restaurant is largely dependent on whether we build-out an existing leased
space or build from the ground up. Our preference is to find leased space for new restaurant locations, but depending on the
availability of real estate in specific markets, we will take advantage of alternative strategies, which may include land
purchases, land leases, and ground-up construction of a building to house our restaurant operation. We expect that a build-
out of a new DRH-owned BWW restaurant will require an estimated cash investment of $1.7 million to $2.1 million
(excluding potential tenant incentives). Excluding land and building, we expect the build-out of a new Bagger Dave’s
restaurant will, on average, require a total cash investment of $1.1 million to $1.4 million (excluding potential tenant
incentives). We expect to spend up to $0.3 million per restaurant for pre-opening expenses. Depending on individual lease
negotiations, we may receive cash tenant incentives of up to $0.4 million. The projected cash investment per restaurant is
based on recent opening costs and future projections and may fluctuate based on construction costs specific to new restaurant
locations.

We target a cash on cash payback on our initial total capital investment of less than four years. The expected payback is
subject to how quickly we reach our target sales volume and the cost of construction.

Cash flow from operations for fiscal 2015, 2014, and 2013 was $9.4 million, $11.3 million and $7.2 million respectively. Net
cash provided by operating activities consisted primarily of net earnings adjusted for non-cash expenses.

Opening new restaurants, including construction of the buildings associated with the new restaurant openings, is our primary
use of capital and was 65.0% of our capital expenditures in 2015. For 2016, capital expenditures are anticipated to be between
$14.0 million and $16.0 million. We plan to use the capital as follows: 35.0% for new restaurant openings, 15.0% for
construction of buildings associated with new restaurant openings; and the remaining 50.0% for restaurant remodels, upgrades
and other general corporate purposes.

Although investments in new restaurants are an integral part of our strategic and capital expenditures plan, we also believe
that reinvesting in existing restaurants is an important factor and necessary to maintain the overall positive dining experience
for our guests. Depending on the age of the existing restaurants, upgrades range from $50,000 (for minor interior refreshes)
to $1.3 million (for a full extensive remodel of the restaurant), we target remodels of $0.6 million to upgrade a typical BWW
restaurant to the new Stadia design. The strategy of the Company is to fully remodel existing BWW restaurants to the new
Stadia design at time of scheduled refresh or remodel typically within seven years or less of opening.

Mandatory Upgrades

In fiscal 2015, we began seven mandatory remodels of existing DRH-owned BWW restaurants and completed four, which
were funded with cash from operations. We have four mandatory remodels for DRH-owned BWW locations in 2016
including three additional remodels that began in 2015 and carried over in 2016. All upgrades were funded with cash from
operations.

Discretionary Upgrades and Relocations

In fiscal year 2015, the Company invested additional capital to provide minor upgrades to a number of its existing locations,
all of which were funded by cash from operations. These improvements primarily consist of refreshing interior building
finishes audio/visual equipment upgrades, and patio upgrades. In fiscal 2015, we completed three discretionary remodels. In
First Quarter 2015, we relocated one DRH-owned BWW location in lieu of a remodel. The decision to relocate is typically
driven by timing of our current lease agreements and the availability of real estate that we deem to be a better long-term
investment. Relocations and discretionary remodels are funded by a combination of cash from operations and borrowing from
our credit facility.

2016 Capital Plan

We previously stated that we expected to operate between 35 and 39 Bagger Dave’s restaurants by the end of 2017, however,
we have paused the development of Bagger Dave's restaurants beginning in 2016, and as a result have shifted our focus
primarily to the growth of our BWW portfolio, which represents the overwhelming majority of both our revenue and
restaurant profit. Accordingly, we will not commit to further development of Bagger Dave’s restaurants beyond the one
restaurant currently under construction. We believe that following this strategy will significantly reduce our capital needs
and increase operating cash flow in the near term. In 2016, we anticipate our capital expenses to range between $14.0 million
and $16.0 million, nearly half of the 2015 capital expenditures. Our capital expenses for 2016 will include the development
of two BWW restaurants and one Bagger Dave’s restaurant, all of which are under construction. Our remaining capital needs
will include four BWW Stadia remodels of existing locations and various maintenance capital expenditures. Remodels and
refreshes represent roughly 50.0% of our current 2016 plan and although we can borrow on these items, we intend on funding
these remodels and refreshes using cash from operations. Additionally, we expect to increase profitability by reducing

preopening expenses, including training costs, and through gains in efficiency as we focus on improving operations and cost
management initiatives. Finally, we expect to improve our net debt coverage ratios by reducing our borrowing needs for the
development of new restaurants and by using excess cash to pay down debt.

Contractual Obligations

The following table presents a summary of our contractual obligations as of December 27, 2015:

Less than
one year

After 5
years

Total
Long-term debt 1 ................................................ $ 126,601,307 $ 9,918,827 $21,522,363 $ 95,160,117 $
Operating lease obligations ................................
Commitments for restaurants under
development 2 ...................................................

90,043,523 10,259,154 20,235,327

1 - 3 years 3 - 5 years

11,146,773

5,966,476

1,043,692

680,000

—
17,799,737 41,749,305

3,456,605

$ 227,791,603 $26,144,457 $42,437,690 $114,003,546 $45,205,910

Amount represents the expected principal cash payments relating to our long-term debt and do not include any fair
value adjustments or discounts/premiums or interest rate payments due to the variable of the rates. See Note 10 for
additional details.

Amount represents capital expenditures DRH is obligated to pay for restaurants under development in addition to

noncancelable operating leases for these restaurants.

Impact of Inflation

Our profitability is dependent, among other things, on our ability to anticipate and react to changes in the costs of key
operating resources, including food and other raw materials, labor, energy, and other supplies and services. Substantial
increases in costs and expenses could impact our operating results to the extent that such increases cannot be passed along to
our restaurant guests. The impact of inflation on food, labor, energy and occupancy costs can significantly affect the
profitability of our restaurant operations.

All of our restaurant staff members are paid hourly rates related to the federal minimum wage. Certain operating costs, such
as taxes, insurance and other outside services continue to increase with the general level of inflation or higher and may also
be subject to other cost and supply fluctuations outside of our control.

While we have been able to partially offset inflation and other changes in the costs of key operating resources by gradually
increasing prices for our menu items, more efficient purchasing practices, productivity improvements, and greater economies
of scale, there can be no assurance that we will be able to continue to do so in the future. From time to time, competitive
conditions could limit our menu pricing flexibility. In addition, macroeconomic conditions could make additional menu price
increases imprudent. There can be no assurance that all future cost increases can be offset by increased menu prices or that
increased menu prices will be fully absorbed by our restaurant guests without any resulting changes in their visit frequencies
or purchasing patterns. There can be no assurance that we will continue to generate increases in comparable restaurant sales
in amounts sufficient to offset inflationary or other cost pressures.

OFF-BALANCE SHEET ARRANGEMENTS

The Company's ADA requires DRH to open 42 BWW restaurants within its designated "development territory” by April 1,
2021. As of December 27, 2015, 27 of the required 42 ADA restaurants had been opened for business. We remain on track
to fulfill our obligation under the amended ADA, and we expect to operate a total of 77 BWW restaurants by the end of
2020, exclusive of potential acquisitions of additional BWW restaurants.

Critical Accounting Polices and Estimates

The preparation of financial statements and related disclosures in conformity with generally accepted accounting principles
in the United States of America (“GAAP”) and the Company’s discussion and analysis of its financial condition and operating
results require the Company’s management to make judgments, assumptions and estimates that affect the amounts reported
in its consolidated financial statements and accompanying notes. Note 1, “Nature of Business and Summary of Significant
Accounting Policies,” of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K describes the
significant accounting policies and methods used in the preparation of the Company’s consolidated financial statements.
Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under
the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
Actual results may differ from these estimates, and such differences may be material. We consider an accounting estimate to
be critical if it requires assumptions to be made and changes in these assumptions could have a material impact on our
consolidated financial condition or results of operations.

Management considers these policies critical because they are both important to the portrayal of the Company’s financial
condition and operating results, and they require management to make judgments and estimates about inherently uncertain
matters. The Company’s management has reviewed these critical accounting policies and related disclosures with the Audit
and Finance Committee of the Company’s Board of Directors.

Impairment or Disposal of Long-Lived Assets

We review long-lived assets quarterly to determine if triggering events have occurred which would require a test to determine
if the carrying amount of these assets may not be recoverable based on estimated future cash flows. Assets are reviewed at
the lowest level for which cash flows can be identified, which is at the individual restaurant level. In the absence of
extraordinary circumstances, restaurants are included in the impairment analysis after they have been open for two years. We
evaluate the recoverability of a restaurant’s long-lived assets, including buildings, intangibles, leasehold improvements,
furniture, fixtures and equipment over the remaining life of the primary asset in the asset group, after considering the potential
impact of planned operational improvements, marketing programs, and anticipated changes in the trade area. In determining
future cash flows, significant estimates are made by management with respect to future operating results for each restaurant
over the remaining life of the primary asset in the asset group. If assets are determined to be impaired, the impairment charge
is measured by calculating the amount by which the asset carrying amount exceeds its fair value based on our estimate of
discounted future cash flows. The determination of asset fair value is also subject to significant judgment. Based on
management's quantitative analysis, an impairment of $2.8 million was recorded for four Bagger Dave's locations as of
December 27, 2015. Refer to Note 4 of the Consolidated Financial Statements for additional information. For fiscal years
ended December 28, 2014 and December 29, 2013 no impairment losses were recognized.

We are currently monitoring several restaurants in regards to the valuation of long-lived assets and have developed plans to
continue improvement of operating results. As we periodically refine our estimated future operating results, changes in our
estimates and assumptions may cause us to realize impairment charges in the future that could be material.

We account for exit or disposal activities, including restaurant closures, in accordance with Financial Accounting Standards
Board ("FASB") Accounting Standards Codification ("ASC")Topic 420, Exit or Disposal Cost Obligations. Such costs
include the cost of disposing of the assets, as well as other facility-related expenses from previously closed restaurants. These
costs are generally expensed as incurred. Additionally, at the date we cease using a property under an operating lease, we
record a liability for the net present value of any remaining lease obligations, net of estimated sublease income. Any
subsequent adjustments to that liability as a result of lease termination or changes in estimates of sublease income are recorded
in the period incurred. In June 2015, DRH management had determined three Bagger Dave's locations were underperforming
and it was best to reallocate valuable resources to higher performing locations. In late July 2015, the Board of Directors
approved the closure of these three Bagger Dave's locations. The restaurants closed on August 7, 2015. Additionally, in the
Fourth Quarter 2015, DRH management determined nine additional restaurants were to be closed due to under-performance.
The Board of Directors approved the closure of the locations on December 15, 2015. Closures occurred on December 27,
2015. Refer to Note 4 for additional details.

Indefinite-Lived Intangible Assets

Liquor licenses, also a component of intangible assets, are deemed to have an indefinite life and, accordingly, are not
amortized. Management reviews liquor license assets on an annual basis or more frequently if impairment indicators are
present to determine whether carrying values have been impaired. We identify potential impairments for liquor licenses by
comparing the fair value with its carrying amount. If the fair value exceeds the carrying amount, the liquor licenses are not
impaired. If the carrying amount exceeds the fair value, an impairment loss is recorded for the difference. If the fair value of
the asset is less than the carrying amount, an impairment is recorded. No impairments were recognized in fiscal 2015, 2014
or 2013.

Goodwill

Goodwill is not amortized and represents the excess of cost over the fair value of identified net assets of businesses acquired.
Goodwill is subject to an annual impairment analysis or more frequently if indicators of impairment exist. At December 27,
2015 and December 28, 2014, we had goodwill of $50.1 million and $11.0 million that was assigned to our Buffalo Wild
Wings reporting unit.

The impairment analysis, if necessary, consists of a two-step process. The first step is to compare the fair value of the reporting
unit to its carrying value, including goodwill. We estimate fair value using market information (market approach) and
discounted cash flow projections (income approach). The income approach uses the reporting unit’s projection of estimated
operating results and cash flows that is discounted using a weighted-average cost of capital that reflects market conditions.
The projection uses management’s best estimates of projected revenue, costs and cash expenditures, including an estimate of
new restaurant openings and related capital expenditures. Other significant estimates also include terminal growth rates and
working capital requirements. We supplement our estimate of fair value under the income approach by using a market
approach which estimates fair value by applying multiples to the reporting unit’s projected operating performance. The
multiples are derived from comparable publicly traded companies with similar characteristics to the reporting unit. If the fair
value of the reporting unit is less than its carrying value, the second step of the impairment analysis must be performed in
order to determine the amount of impairment loss, if any. The second step compares the implied fair value of goodwill with
the carrying amount of that goodwill. If the carrying amount of the goodwill exceeds its implied fair value, an impairment
charge is recognized in an amount equal to that excess. As of December 27, 2015 and December 28, 2014 , based on our
quantitative analysis, goodwill was considered recoverable.

Investments

The Company’s investment securities are classified as available-for-sale. Investments classified as available-for-sale are
available to be sold in the future in response to the Company’s liquidity needs, changes in market interest rates, tax strategies,
and asset-liability management strategies, among other reasons. Available-for-sale securities are reported at fair value, with
unrealized gains and losses, net of taxes, reported in the accumulated other comprehensive income (loss) component of
stockholders’ equity, and accordingly, have no effect on net income. Realized gains or losses on sale of investments are
determined on the basis of specific costs of the investments. Dividend income is recognized when declared and interest
income is recognized when earned. Discount or premium on debt securities purchased at other than par value are amortized
using the effective yield method. See Note 5 for details.

Income Taxes

Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets
and liabilities that will result in taxable or deductible amounts in the future, based on enacted tax laws and rates applicable to
the periods in which the differences are expected to affect taxable income. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or
refundable for the period plus or minus the change during the period in deferred tax assets and liabilities.

In accordance with the provisions of FASB ASC 740, Income Taxes, (“ASC 740”) a valuation allowance is established when
it is more likely than not that some portion of the deferred tax assets will not be realized. Realization is dependent upon the
generation of future taxable income or the reversal of deferred tax liabilities during the periods in which those temporary
differences become deductible. We consider the reversal of deferred tax liabilities, projected future taxable income and tax
planning strategies. Since we believe sufficient future taxable income will be generated to utilize the benefits of the deferred
tax assets, a valuation allowance has not been recognized. In fiscal 2015, we had undergone significant changes to our
company structure. This includes the disposition and acquisition of assets, namely the closure of 12 underperforming
restaurants, impairment of four Bagger Dave’s restaurants and acquisition of 18 profitable BWW restaurants. As such, we
believe the changes to our company in fiscal 2015 combined with the planned opening of additional BWW restaurants will
provide future taxable income prior to the expirations of carryfowards, which begin in 2028. Management continually reviews
the likelihood that deferred tax assets will be realized and the Company recognizes these benefits only as reassessment
indicates that it is more likely than not that such tax benefits will be realized.

The Company applies the provisions of ASC 740, regarding the accounting for uncertainty in income taxes. The Company
classifies all interest and penalties as income tax expense. There are no accrued interest amounts or penalties related to
uncertain tax positions as of December 27, 2015 and December 28, 2014.

Interest Rate Swap Agreements

The Company utilizes interest rate swap agreements with Citizens Bank, N.A. (“Citizens”) to fix interest rates on a portion
of the Company’s portfolio of variable rate debt, which reduces exposure to interest rate fluctuations. Our derivative financial
instruments are recorded at fair value on the balance sheet. The effective portion of changes in the fair value of derivatives
which qualify for hedge accounting is recorded in accumulated other comprehensive income (loss) and is recognized in the
statement of operations when the hedged item affects earnings. Ineffective portion of the change in fair value of a hedge
would be recognized in income immediately. The Company does not use any other types of derivative financial instruments
to hedge such exposures, nor does it use derivatives for speculative purposes.

Sheet in other long-term assets or other liabilities depending on the fair value of the swaps. See Note 10 and Note 17 for
additional information on the interest rate swap agreements.

Stock Based Compensation

The Company estimates the fair value of stock option awards utilizing the Black-Scholes pricing model. The fair value of
the awards is amortized as compensation expense on a straight-line basis over the requisite service period of the award, which
is generally the vesting period. The fair value of restricted shares is equal to the number of restricted shares issued times the
Company’s stock price on the date of grant and is amortized as compensation expense on a straight-line basis over the service
period of the award.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

As a result of our normal borrowing activities, our operating results are exposed to fluctuations in interest rates. DRH has
short-term and long-term debt with both fixed and variable interest rates. The short-term debt comprises the current portion
of long-term debt maturing within twelve months from the balance sheet date. Long-term debt includes secured notes payable,
one line of credit and a revolving line of credit which is used to finance working capital requirements. To manage our
exposure, we have entered into interest rate swap agreements. The derivative instruments are not held for trading or other
speculative purposes.

As of December 27, 2015, DRH had $126.6 million of variable-rate debt with a weighted average interest rate of 3.86%,
which approximates fair value. Interest based on the debt agreement is based on one-month LIBOR plus an applicable margin,
which ranges from 2.25% to 3.15%, depending on the lease adjusted leverage ratio defined in the terms of the agreement.
DRH currently estimates that a 100 basis point fluctuation in LIBOR would result in an approximate $1.3 million fluctuation
in pretax income. See Notes 1, 10 and 17 of our audited Consolidated Financial Statements for additional information.

Inflation

The primary inflationary factors affecting our operations are food, labor and restaurant operating costs. Substantial increases
in these costs could impact operating results to the extent that such increases cannot be passed along through higher menu
prices. A large number of our restaurant personnel are paid at rates based on the applicable federal and state minimum wages,
and increases in the minimum wage rates and tip-credit wage rates could directly affect our labor costs. Many of our leases
require us to pay taxes, maintenance, repairs, insurance and utilities, all of which are generally subject to inflationary
increases.

Commodity Price Risk

Many of the food products purchased by us are affected by weather, production, availability and other factors outside our
control. We believe almost all of our food and supplies are available from several sources, which helps to control food product
risks. Our purchasing department for Bagger Dave’s negotiates directly with our independent suppliers for our supply of food
and paper products. As negotiated by BWLD, our DRH-owned BWW restaurants have a distribution contract with a BWLD
selected vendor for our supply of food, paper, and non-food products. We have minimum purchase requirements with some
of our vendors, but the terms of the contracts and our historical use of the products are such that we believe these minimum
purchase requirements do not create a material market risk. One of the primary food products used by our BWW restaurants
is chicken wings. We work to counteract the effect of the volatility of chicken wing prices, which can significantly change
our cost of sales and cash flow, with the introduction of new menu items, effective marketing promotions, focused efforts on
food costs and waste and menu price increases. We also explore purchasing strategies to reduce the severity of cost increases

and fluctuations. For the fiscal years ended December 27, 2015 and December 28, 2014, chicken wings accounted for
approximately 34.3% and 29.7%, with an average price per pound of $1.81 and $1.53, respectively.

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Consolidated Financial Statements, Notes to Consolidated Financial Statements, and the Report of Independent
Registered Accounting Firm are included in this Annual Report and are incorporated herein by reference.

DIVERSIFIED RESTAURANT HOLDINGS, INC.
Index to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM .........................................................

REPORT BY DIVERSIFIED RESTAURANT HOLDINGS, INC.'S MANAGEMENT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING .................................................................................................................................

CONSOLIDATED FINANCIAL STATEMENTS:

CONSOLIDATED BALANCE SHEETS ...............................................................................................................

CONSOLIDATED STATEMENTS OF OPERATIONS ........................................................................................

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) ..................................................

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY .................................................................

CONSOLIDATED STATEMENTS OF CASH FLOWS ........................................................................................

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS .............................................................................

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders
Diversified Restaurant Holdings, Inc. and Subsidiaries
Southfield, Michigan

We have audited the accompanying consolidated balance sheets of Diversified Restaurant Holdings, Inc. and Subsidiaries as
of December 27, 2015 and December 28, 2014 and the related consolidated statements of operations, comprehensive income
(loss), stockholders’ equity, and cash flows for each of the three fiscal years in the period ended December 27, 2015. These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these
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. An audit 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 financial
position of Diversified Restaurant Holdings, Inc. and Subsidiaries at December 27, 2015 and December 28, 2014, and the
results of its operations and its cash flows for each of the three fiscal years in the period ended December 27, 2015, in
conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
Diversified Restaurant Holdings, Inc. and Subsidiaries’ internal control over financial reporting as of December 27, 2015,
based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) and our report dated March 11, 2016 expressed an unqualified opinion
thereon.

/s/ BDO USA, LLP

Troy, Michigan
March 11, 2016

REPORT BY DIVERSIFIED RESTAURANT HOLDINGS, INC.'S MANAGEMENT
ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management is responsible for establishing and maintaining an effective system of internal control over financial reporting
that is designed to produce reliable financial statements presented in conformity with generally accepted accounting
principles. There are inherent limitations in the effectiveness of any system of internal control. Accordingly, even an effective
system of internal control can provide only reasonable assurance with respect to financial statement preparation.

Management assessed the Company's system of internal control over financial reporting that is designed to produce reliable
financial statements presented in conformity with generally accepted accounting principles as of December 27, 2015. This
assessment was based on criteria for effective internal control over financial reporting described in Internal Control —
Integrated Framework (2013 Framework) issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on this assessment, management believes that, as of December 27, 2015, Diversified Restaurant
Holdings, Inc. maintained an effective system of internal control over financial reporting that is designed to produce reliable
financial statements presented in conformity with generally accepted accounting principles based on those criteria.

The Company’s independent auditors have issued an audit report on the effectiveness of the Company’s internal control over
financial reporting.

Diversified Restaurant Holdings, Inc.

/s/ T. Michael Ansley
T. Michael Ansley
Chairman of the Board, President, Chief Executive
Officer, and Principal Executive Officer

Dated: March 11, 2016

/s/ David G. Burke
David G. Burke
Chief Financial Officer, Treasurer, Principal Financial
Officer, and Principal Accounting Officer

Dated: March 11, 2016

DIVERSIFIED RESTAURANT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

December 27,
2015

December 28,
2014

ASSETS

Current assets
Cash and cash equivalents ............................................................................................................ $
Investments...................................................................................................................................
Accounts receivable .....................................................................................................................
Inventory ......................................................................................................................................
Prepaid assets ...............................................................................................................................

14,200,528 $

—
620,942
1,934,584
1,618,429

18,688,281
2,917,232
1,417,510
1,335,774
397,715

Total current assets ....................................................................................................................

18,374,483

24,756,512

Deferred income taxes ..................................................................................................................
Property and equipment, net .........................................................................................................
Intangible assets, net .....................................................................................................................
Goodwill .......................................................................................................................................
Other long-term assets ..................................................................................................................
Total assets .................................................................................................................................. $

13,320,177
79,189,661
3,984,033
50,097,081
1,152,377
166,117,812 $

2,960,640
71,508,950
2,916,498
10,998,630
305,804
113,447,034

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
Accounts payable ......................................................................................................................... $
Accrued compensation .................................................................................................................
Other accrued liabilities ................................................................................................................
Current portion of long-term debt .................................................................................................
Current portion of deferred rent ....................................................................................................
Total current liabilities ...............................................................................................................

7,807,552 $
3,087,883
3,663,211
9,918,827
396,113
24,873,586

Deferred rent, less current portion ................................................................................................
Unfavorable operating leases ........................................................................................................
Other liabilities .............................................................................................................................
Long-term debt, less current portion ............................................................................................
Total liabilities ............................................................................................................................

2,826,210
671,553
4,463,631
116,682,480
149,517,460

7,043,143
2,786,830
1,357,510
8,155,903
377,812
19,721,198

3,051,445
693,497
3,212,376
53,612,496
80,291,012

Commitments and contingencies (Notes 13 and 14)

Stockholders' equity
Common stock - $0.0001 par value; 100,000,000 shares authorized; 26,298,725 and

26,149,824, respectively, issued and outstanding ......................................................................
Additional paid-in capital .............................................................................................................
Accumulated other comprehensive loss .......................................................................................
Accumulated deficit .....................................................................................................................

2,584
36,136,332
(1,006,667 )
(18,531,897 )

2,582
35,668,001
(175,156)
(2,339,405)

Total stockholders' equity ..........................................................................................................

16,600,352

33,156,022

Total liabilities and stockholders' equity .................................................................................. $

166,117,812 $

113,447,034

See accompanying notes to consolidated financial statements.

DIVERSIFIED RESTAURANT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

Fiscal Years Ended

December 27,
2015

December 28,
2014

December 29,
2013

Revenue............................................................................................ $ 172,485,378 $ 128,413,448 $ 108,886,139

Operating expenses
Restaurant operating costs (exclusive of depreciation and

amortization shown separately below):

Food, beverage, and packaging ...................................................
Compensation costs .....................................................................
Occupancy ...................................................................................
Other operating costs ...................................................................
General and administrative expenses ................................................
Pre-opening costs ..............................................................................
Depreciation and amortization ..........................................................
Impairment and loss on asset disposals ............................................
Total operating expenses ................................................................

49,437,576
46,315,042
12,377,659
37,723,846
15,351,440
3,244,157
16,582,236
14,242,705
195,274,661

37,058,821
33,337,000
7,205,420
27,214,208
8,786,520
3,473,664
10,956,951
1,023,144
129,055,728

32,719,254
28,096,721
6,381,052
21,675,473
7,270,597
3,230,122
7,974,481
98,162
107,445,862

Operating profit (loss) ....................................................................

(22,789,283)

(642,280)

1,440,277

Interest expense ................................................................................
Other income (expense), net .............................................................

(4,211,255)
822,039

(2,274,041)
(58,912)

(1,718,711)
151,292

Loss before income taxes ................................................................

(26,178,499)

(2,975,233)

(127,142)

Income tax benefit ............................................................................

(9,986,007)

(1,706,736)

(261,450)

Net income (loss) ............................................................................. $

(16,192,492) $

(1,268,497) $

134,308

Basic earnings per share ................................................................... $

Fully diluted earnings per share ........................................................ $

(0.62) $

(0.05) $

0.01

Weighted average number of common shares outstanding
Basic .................................................................................................
Diluted ..............................................................................................

26,211,669
26,211,669

26,092,919
26,092,919

23,937,188
24,058,072

See accompanying notes to consolidated financial statements.

DIVERSIFIED RESTAURANT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Fiscal Years Ended

December 27,
2015

December 28,
2014

December 29,
2013

Net income (loss) ............................................................................. $

(16,192,492) $

(1,268,497) $

134,308

Other comprehensive income (loss)

Unrealized changes in fair value of interest rate swaps, net of

tax of $430,468, $23,097 and $35,084. ....................................

(835,315)

44,836

68,106

Unrealized changes in fair value of investments, net of tax of

$1,959, $13,071 and $15,030. ..................................................

3,804

Total other comprehensive income (loss) .........................................

(831,511)

25,372

70,208

(29,176)

38,930

Comprehensive income (loss) ......................................................... $

(17,024,003) $

(1,198,289) $

173,238

See accompanying notes to consolidated financial statements.

DIVERSIFIED RESTAURANT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Additional

Accumulated
Other

Common Stock

Amount

Paid-in

Capital

Comprehensive Accumulated

Loss

Deficit

Equity

Total
Stockholders'

Balances - December 30, 2012 ...............

18,951,700

1,888

2,991,526

(284,294) $

(1,205,216) $

1,503,904

Issuance of restricted shares .....................

145,575

Forfeitures of restricted shares .................

(57,108)

—
—

Sale of common stock from follow-on

public offering, net of fees and
expenses ................................................

6,900,000

690

31,906,990

Stock options exercised ............................

104,638

Employee stock purchase plan .................

4,773

Share-based compensation .......................

Other comprehensive income ...................

Net income ................................................

—

—
—

—

—
—

74,997

23,452

278,290

—

—
—

—

—
—

38,930

—

—
—

—

134,308

—
—

31,907,680

74,999

23,452

278,290

38,930

134,308

Balances - December 29, 2013 ...............

26,049,578

2,580

$ 35,275,255

(245,364) $

(1,070,908) $ 33,961,563

Issuance of restricted shares .....................

Forfeitures of restricted shares .................

Employee stock purchase plan .................

Share-based compensation .......................

Other comprehensive income ...................

Net loss ......................................................

91,966

(2,735)

11,015

—

53,936

338,810

—

70,208

—

53,938

338,810

70,208

—

(1,268,497)

Balances - December 28, 2014 ...............

26,149,824

2,582

$ 35,668,001

(175,156) $

(2,339,405) $ 33,156,022

Issuance of restricted shares .....................

131,752

Forfeitures of restricted shares .................

(8,587)

Shares effectively repurchased for

required employee withholding taxes ...

Employee stock purchase plan .................

Share-based compensation .......................

(1,387)

21,623

—

(4,443 )

71,614

424,414

Stock repurchase .......................................

(24,500)

(2)

(98,250 )

Stock options exercised ............................

30,000

Other comprehensive loss .........................

Net loss ......................................................

—

74,996

—

(831,511)

—

(4,443)

71,615

424,414

(98,252)

74,999

(831,511)

—

(16,192,492)

Balances - December 27, 2015 ...............

26,298,725

2,584

$ 36,136,332

(1,006,667) $ (18,531,897) $ 16,600,352

See accompanying notes to consolidated financial statements.

DIVERSIFIED RESTAURANT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

December 27, 2015 December 28, 2014 December 29, 2013

Fiscal Years Ended

Cash flows from operating activities

Net income (loss) ........................................................................................................ $

(16,192,492 ) $

(1,268,497) $

134,308

Adjustments to reconcile net income (loss) to net cash provided by operating

activities

Depreciation and amortization ................................................................................

16,582,236

10,956,951

Amortization and write-off of debt discount and loan fees ....................................

Realized gain on sale leaseback ..............................................................................

Realized loss on investments ..................................................................................

240,036

(157,208 )

—

Impairment and loss on asset disposals ..................................................................

14,242,705

Share-based compensation ......................................................................................

424,414

331,650

—

33,406

1,023,144

338,810

Deferred income taxes ............................................................................................

(9,986,007 )

(1,834,048)

Changes in operating assets and liabilities that provided (used) cash

Accounts receivable .............................................................................................

Inventory ..............................................................................................................

796,568

(207,329 )

Prepaid assets .......................................................................................................

(1,220,714 )

Intangible assets ...................................................................................................

Other long-term assets .........................................................................................

Accounts payable .................................................................................................

Accrued liabilities ................................................................................................

(86,907 )

(846,573 )

3,291,684

2,775,105

(168,570)

(264,148)

157,429

(123,345)

(184,136)

1,470,923

1,123,372

Deferred rent ........................................................................................................

(206,934 )

(297,688)

Net cash provided by operating activities ..............................................................

9,448,584

11,295,253

7,974,481

76,407

—

98,162

278,290

(336,223)

(1,000,537)

(208,542)

(107,715)

(660,966)

(3,523)

(497,999)

208,742

1,226,086

7,180,971

Cash flows from investing activities

Purchases of investments ........................................................................................

—

(7,469,555)

(13,883,671)

Proceeds from sale of investments .........................................................................

2,952,302

13,111,935

5,278,048

Purchases of property and equipment .....................................................................

(32,502,997 )

(38,988,376)

(25,345,370)

Acquisition of business, net of cash acquired.........................................................

(54,041,489 )

(3,202,750)

Proceeds from sale leaseback transaction ...............................................................

5,565,808

19,079,401

—

Net cash used in investing activities ........................................................................

(78,026,376 )

(17,469,345)

(33,950,993)

Cash flows from financing activities

Proceeds from issuance of long-term debt .............................................................

72,963,858

84,008,979

61,743,866

Repayments of long-term debt ................................................................................

(8,166,667 )

(68,513,901)

(60,117,830)

Payment of loan fees ...............................................................................................

(751,071 )

(249,116)

Proceeds from employee stock purchase plan ........................................................

Repurchase of stock ................................................................................................

Stock options exercised...........................................................................................

Tax withholding for restricted stock units ..............................................................

Proceeds from sale of common stock, net of underwriter fees ..............................

71,615

(98,252 )

74,999

(4,443 )

—

53,938

—

Net cash provided by financing activities ...............................................................

64,090,039

15,299,900

—

23,452

—

31,982,679

33,632,167

Net increase (decrease) in cash and cash equivalents ...........................................

(4,487,753 )

9,125,808

6,862,145

Cash and cash equivalents, beginning of period ........................................................

18,688,281

9,562,473

2,700,328

Cash and cash equivalents, end of period .............................................................. $

14,200,528

18,688,281

9,562,473

See accompanying notes to consolidated financial statements.

DIVERSIFIED RESTAURANT HOLDINGS AND SUBSIDIARIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Diversified Restaurant Holdings, Inc. (“DRH”) is a fast-growing restaurant company operating two complementary
concepts: Buffalo Wild Wings ® Grill & Bar (“BWW”) and Bagger Dave’s Burger Tavern ® (“Bagger Dave’s”). As the
largest franchisee of BWW and as the creator, developer, and operator of Bagger Dave’s, we provide a unique guest
experience in a casual and inviting environment. We were incorporated in 2006 and are headquartered in the Detroit
metropolitan area. As of December 27, 2015 we had 80 restaurants in Florida, Illinois, Indiana, Michigan, Missouri and
Ohio.

In 2008, DRH became publicly-owned completing a self-underwritten initial public offering for $735,000 and 140,000 shares.
We subsequently completed an underwritten, follow-on offering on April 23, 2013 of 6.9 million shares with net proceeds of
$31.9 million.

DRH and its wholly-owned subsidiaries (collectively, the “Company”), AMC Group, Inc. (“AMC”), AMC Wings, Inc.
(“WINGS”), AMC Burgers, Inc. (“BURGERS”), and AMC Real Estate, Inc. (“REAL ESTATE”) own and operate Bagger
Dave's and DRH-owned BWW restaurants located throughout Florida, Illinois, Indiana, Michigan and Missouri.

DRH is the largest BWW franchisee and currently operates 62 DRH-owned BWW restaurants (20 in Michigan, 15 in both
Florida and Missouri, seven in Illinois and five in Indiana), including the nation’s largest BWW, based on square footage, in
downtown Detroit, Michigan. We remain on track to fulfill our area development agreement (“ADA”) with Buffalo Wild
Wings International, Inc. ("BWLD") and expect to operate 77 DRH-owned BWW restaurants by the end of 2020, exclusive
of potential additional BWW restaurant acquisitions. In 2014, DRH was awarded the Franchisee of the Year and our COO
received the Founder’s Award by BWLD.

DIVERSIFIED RESTAURANT HOLDINGS AND SUBSIDIARIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following organizational chart outlines the current corporate structure of DRH. A brief textual description of the entities
follows the organizational chart. DRH is incorporated in Nevada.

AMC was formed on March 28, 2007 and serves as our operational and administrative center. AMC renders management,
operational support, and advertising services to WINGS, BURGERS, REAL ESTATE and their subsidiaries. Services
rendered by AMC include marketing, restaurant operations, restaurant management consultation, hiring and training of
management and staff, and other management services reasonably required in the ordinary course of restaurant operations.

BURGERS was formed on March 12, 2007 and serves as a holding company for our Bagger Dave’s restaurants. Bagger
Dave’s Franchising Corporation, a subsidiary of BURGERS, was formed to act as the franchisor for the Bagger Dave’s
concept and has rights to franchise in Illinois, Indiana, Kentucky, Michigan, Missouri, Ohio, and Wisconsin. We do not
intend to pursue franchise development at this time.

WINGS was formed on March 12, 2007 and serves as a holding company for our DRH-owned BWW restaurants. We are
economically dependent on retaining our franchise rights with BWLD. The franchise agreements have specific initial term
expiration dates ranging from December 2020 through December 2035, depending on the date each was executed and the
duration of its initial term. The franchise agreements are renewable at the option of the franchisor and are generally renewable
if the franchisee has complied with the franchise agreement. When factoring in any applicable renewals, the franchise
agreements have specific expiration dates ranging from December 2025 through December 2050. We believe we are in
compliance with the terms of these agreements.

REAL ESTATE was formed on March 18, 2013, and serves as the holding company for the real estate properties owned by
DRH. Currently, DRH owns one property. Due to the closure of the restaurant in 2015, DRH will be selling this property in
fiscal 2016. Refer to Note 4 for additional information on restaurant closures. DRH also owned two Bagger Dave’s
restaurants, which were sold as part of the sale leaseback transaction that occurred in Second Quarter and Third Quarter of
2015. Refer to Note 2 for additional information on the sale leaseback transactions.

DIVERSIFIED RESTAURANT HOLDINGS AND SUBSIDIARIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We follow accounting standards set by the Financial Accounting Standards Board ("FASB"). The FASB sets generally
accepted accounting principles in the United States of America ("GAAP") that we follow to ensure we consistently report
our financial condition, results of operations, and cash flows. References to GAAP issued by the FASB in these footnotes are
to the FASB Accounting Standards Codification ("ASC").

Principles of Consolidation

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the
United States of America and include the accounts of the Company and its wholly-owned subsidiaries. All inter-company
accounts and transactions have been eliminated.

Fiscal Year

Segment Reporting

The Company has two operating segments, BWW and Bagger Dave’s. The brands operate within the ultra-casual, full-service
dining industry, providing similar products to similar customers. The brands also possess similar economic characteristics,
resulting in similar long-term expected financial performance. Sales from external customers are derived principally from
food and beverage sales. We do not rely on any major customers as a source of sales. We believe we meet the criteria for
aggregating our operating segments into a single reporting segment.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand and demand deposits in banks. The Company considers all highly-liquid
investments purchased with original maturities of three months or less to be cash and cash equivalents. The Company, at
times throughout the year, may, in the ordinary course of business, maintain cash balances in excess of federally-insured
limits. Management does not believe the Company is exposed to any unusual risks on such deposits.

Investments

DIVERSIFIED RESTAURANT HOLDINGS AND SUBSIDIARIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accounts Receivable

Accounts receivable primarily consist of contractually determined receivables for leasehold improvements and are stated at
the amount management expects to collect. Balances that are outstanding after management has used reasonable collection
efforts are written off with a corresponding charge to bad debt expense or deferred rent as applicable. There was no allowance
for doubtful accounts necessary at December 27, 2015 and December 28, 2014.

Gift Cards

Buffalo Wild Wings

The Company records gift cards under a BWLD system-wide program. Gift cards sold are recorded as a gift card
liability. When redeemed, the gift card liability account is offset by recording the transaction as revenue. At times, gift card
redemptions can exceed amounts due to BWLD for gift card purchases resulting in an asset balance. Under this centralized
system, any breakage would be recorded by Blazin Wings, Inc., a subsidiary of BWLD, and is subject to the breakage laws
in the state of Minnesota, where Blazin Wings, Inc. is located.

Bagger Dave’s

The Company records Bagger Dave's gift card sales as a gift card liability when sold. When redeemed, the gift card liability
account is offset by recording the transaction as revenue. Michigan law states that gift cards cannot expire and any post-sale
fees cannot be assessed until 5 years after the date of gift card purchase by the consumer. There is no breakage attributable
to Bagger Dave's restaurants for the Company to record as of December 27, 2015 and December 28, 2014.

The Company's net gift card asset/liability was a liability of $136,874 and $10,706 as of December 27, 2015 and December 28,
2014, respectively.

Inventory

Inventory consists mainly of food and beverage products and is accounted for at the lower of cost or market using the first
in, first out method of inventory valuation. Cash flows related to inventory sales are classified in net cash used by operating
activities in the Consolidated Statements of Cash Flows.

Prepaids and Other Long-Term Assets

Prepaid assets consist principally of prepaid rent, insurance and contracts and are recognized ratably as operating expense
over the period of future benefit. Other assets consist primarily of security deposits for operating leases and utilities.

DIVERSIFIED RESTAURANT HOLDINGS AND SUBSIDIARIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Property and Equipment

Property and equipment are recorded at cost. Buildings are depreciated using the straight-line method over the estimated
useful life, which is typically 39 years. Equipment and furniture and fixtures are depreciated using the straight-line method
over the estimated useful lives of the assets, which range from three to seven years. Leasehold improvements, which include
the cost of improvements funded by landlord incentives or allowances, are amortized using the straight-line method over the
lesser of the term of the lease, with consideration of renewal options if renewals are reasonably assured because failure to
renew would result in an economic penalty, or the estimated useful lives of the assets, which is typically five - 15 years.
Maintenance and repairs are expensed as incurred. Upon retirement or disposal of assets, the cost and accumulated
depreciation are eliminated from the respective accounts and the related gains or losses are credited or charged to earnings.

The Company capitalizes items associated with construction but not yet placed into service, known as construction in progress
(“CIP”). Items capitalized include fees associated with the design, build out, furnishing of the restaurants, leasehold
improvements, construction period interest (when applicable), equipment, and furniture and fixtures. Restaurant CIP is not
amortized or depreciated until the related assets are placed into service. Items are placed into service according to their asset
category when the restaurant is open for service.

Intangible Assets

Amortizable intangible assets consist of franchise fees, trademarks, non-compete agreements, favorable and unfavorable
operating leases, and loan fees and are stated at cost, less accumulated amortization. Intangible assets are amortized on a
straight-line basis over the estimated useful life, as follows: Franchise fees- 10 – 20 years, Trademarks- 15 years, Non-
compete- 3 years, Favorable and unfavorable leases- over the term of the respective leases and Loan fees- over the term of
the respective loan.

Impairment or Disposal of Long-Lived Assets

We review long-lived assets quarterly to determine if triggering events have occurred which would require a test to determine
if the carrying amount of these assets may not be recoverable based on estimated future cash flows. Assets are reviewed at
the lowest level for which cash flows can be identified, which is at the individual restaurant level. In the absence of
extraordinary circumstances, restaurants are included in the impairment analysis after they have been open for two years. We
evaluate the recoverability of a restaurant’s long-lived assets, including buildings, intangibles, leasehold improvements,
furniture, fixtures, and equipment over the remaining life of the primary asset in the asset group, after considering the potential
impact of planned operational improvements, marketing programs, and anticipated changes in the trade area. In determining
future cash flows, significant estimates are made by management with respect to future operating results for each restaurant
over the remaining life of the primary asset in the asset group. If assets are determined to be impaired, the impairment charge
is measured by calculating the amount by which the asset carrying amount exceeds its fair value based on our estimate of
discounted future cash flows. The determination of asset fair value is also subject to significant judgment. Refer to Note 4 for
additional information.

We account for exit or disposal activities, including restaurant closures, in accordance with ASC Topic 420, Exit or Disposal
Cost Obligations. Such costs include the cost of disposing of the assets as well as other facility-related expenses from
previously closed restaurants. These costs are generally expensed as incurred. Additionally, at the date we cease using a
property under an operating lease, we record a liability for the net present value of any remaining lease obligations, net of
estimated sublease income. Any subsequent adjustments to that liability as a result of lease termination or changes in estimates
of sublease income are recorded in the period incurred. Refer to Note 4 for additional information.

DIVERSIFIED RESTAURANT HOLDINGS AND SUBSIDIARIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Indefinite-Lived Intangible Assets

Liquor licenses also a component of intangible assets, are deemed to have an indefinite life and, accordingly, are not
amortized. Management reviews liquor license assets on an annual basis (at year-end) to determine whether carrying values
have been impaired. We identify potential impairments for liquor licenses by comparing the fair value with its carrying
amount. If the fair value exceeds the carrying amount, the liquor licenses are not impaired. If the carrying amount exceeds
the fair value, an impairment loss is recorded for the difference. If the fair value of the asset is less than the carrying amount,
an impairment is recorded. No impairments were recognized in fiscal 2015, 2014 or 2013.

Goodwill

The second step compares the implied fair value of goodwill with the carrying amount of that goodwill. If the carrying amount
of the goodwill exceeds its implied fair value, an impairment charge is recognized in an amount equal to that excess. All
goodwill was considered recoverable as of December 27, 2015 and December 28, 2014 based on our quantitative analysis.

Deferred Rent

Certain operating leases provide for minimum annual payments that increase over the life of the lease. Typically, our
operating leases contain renewal options under which we may extend the initial lease terms for periods of five to 10 years.
The aggregate minimum annual payments are expensed on a straight-line basis commencing at the start of our construction
period and extending over the term of the related lease, including option renewals as deemed reasonably assured. The amount
by which straight-line rent exceeds actual lease payment requirements in the early years of the lease is accrued as deferred
rent liability and reduced in later years when the actual cash payment requirements exceed the straight-line expense. The
Company also accounts, in its straight-line computation, for the effect of any "rental holidays", "free rent periods", and
"landlord incentives or allowances".

DIVERSIFIED RESTAURANT HOLDINGS AND SUBSIDIARIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Deferred Gains

Deferred gains on the sale leaseback transaction described in Note 2, are recognized into income over the life of the related
operating lease agreements.

Revenue Recognition

Revenues from food and beverage sales are recognized and generally collected at the point of sale. All sales taxes are
presented on a net basis and are excluded from revenue.

Advertising

Advertising expenses associated with contributions to the BWLD advertising fund (3.0% of net sales globally plus an
additional 0.25% or 0.5% of net sales for certain metropolitan cities) are expensed as contributed and all other advertising
expenses are expensed as incurred. Advertising expenses of $3.4 million, $2.3 million and $0.5 million are included in general
and administrative expenses in the Consolidated Statements of Operations and advertising expense of $4.6 million, $3.5
million and $2.8 million are included in other operating costs in the Consolidated Statements of Operations for the years
ended December 27, 2015, December 28, 2014 and December 29, 2013, respectively.

Pre-opening Costs

Pre-opening costs are those costs associated with opening new restaurants and will vary based on the number of new locations
opening and under construction. The Company also reclassifies labor costs that exceed the historical average for the first
three months of restaurant operations that are attributable to training. These costs are expensed as incurred. Pre-opening costs
were $3.2 million, $3.5 million, and $3.2 million for the years ended December 27, 2015, December 28, 2014 and
December 29, 2013, respectively. Excess labor cost incurred after restaurant opening and included in pre-opening cost were
approximately $903,000, $516,000 and $1.1 million for the years ended December 27, 2015, December 28, 2014 and
December 29, 2013, respectively.

Income Taxes

The Company applies the provisions of FASB ASC 740, Income Taxes, (“ASC 740”) regarding the accounting for uncertainty
in income taxes. The Company classifies all interest and penalties as income tax expense. There are no accrued interest
amounts or penalties related to uncertain tax positions as of December 27, 2015 and December 28, 2014.

DIVERSIFIED RESTAURANT HOLDINGS AND SUBSIDIARIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Earnings Per Common Share

Earnings per share are calculated under the provisions of FASB ASC 260, Earnings per Share, which requires a dual
presentation of "basic" and "diluted" earnings per share on the face of the Consolidated Statements of Operations. Basic
earnings per common share excludes dilution and is computed by dividing the net earnings available to common stockholders
by the weighted-average number of common shares outstanding during the period. Diluted earnings per common share
include dilutive common stock equivalents consisting of stock options determined by the treasury stock method. Restricted
stock awards contain nonforfeitable rights to dividends, making such awards participating securities. The calculation of basic
and diluted earnings per share uses an earnings allocation method to consider the impact of restricted stock.

Stock Based Compensation

Concentration Risks

Approximately 79.9%, 79.1%, and 80.9% of the Company's revenues for the years ended December 27, 2015, December 28,
2014 and December 29, 2013, respectively, were generated from food and beverage sales from restaurants located in the
Midwest region.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the consolidated financial statements and the reported amounts of income and expenses during the reporting period.
Actual results could differ from those estimates.

Interest Rate Swap Agreements

The Company utilizes interest rate swap agreements with Citizens Bank, N.A. (“Citizens”) to fix interest rates on a portion
of the Company’s portfolio of variable rate debt, which reduces exposure to interest rate fluctuations. Our derivative financial
instruments are recorded at fair value on the Consolidated Balance Sheets. The effective portion of changes in the fair value
of derivatives which qualify for hedge accounting is recorded in other comprehensive income and is recognized in the
Consolidated Statements of Operations when the hedged item affects earnings. Ineffective portion of the change in fair value
of a hedge would be recognized in income immediately. The Company does not use any other types of derivative financial
instruments to hedge such exposures, nor does it use derivatives for speculative purposes.

The interest rate swap agreements associated with the Company’s current debt agreements qualify for hedge accounting. As
such, the Company records the change in the fair value of its swap agreements as a component of accumulated other
comprehensive income (loss), net of tax. The Company records the fair value of its interest swaps on the Consolidated Balance
Sheets in other long-term assets or other liabilities depending on the fair value of the swaps. See Note 10 and Note 17 for
additional information on the interest rate swap agreements.

DIVERSIFIED RESTAURANT HOLDINGS AND SUBSIDIARIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Recent Accounting Pronouncements

In February 2016, FASB issued ASU 2016-02, Leases. ASU 2016-02 requires that lease arrangements longer than 12 months
result in a lessee recognizing a lease asset and liability. Leases will be classified as either finance or operating, with
classification affecting the pattern of expense recognition in the income statement. The updated guidance is effective for
interim and annual periods beginning after December 15, 2018, and early adoption is permitted. We are currently evaluating
the impact of the updated guidance on our consolidated financial statements.

In November 2015, the FASB issued ASU 2015-17, Topic 740: Balance Sheet Classification of Deferred Taxes (“ASU No.
2015-17”), which simplifies the presentation of deferred income taxes. ASU No. 2015-17 provides presentation requirements
to classify deferred tax assets and liabilities as noncurrent in a classified statement of financial position. The Company adopted
this standard as of December 27, 2015, with prospective application. The adoption of ASU No. 2015-17 had no impact on
the Company’s Consolidated Statements of Operations and Comprehensive Income.

In April 2015, the FASB issued ASU No. 2015-03, Interest-Imputation of Interest, which updates guidance on the
presentation of debt issuance costs. The guidance requires debt issuance costs to be presented as a direct deduction of debt
balances on the statement of financial position, similar to the presentation of debt discounts. The guidance is effective for
fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015, with early adoption
permitted. We will comply with this guidance in fiscal year 2016. We do not expect the standard will have a significant
impact on our consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"), which
supersedes nearly all existing revenue recognition guidance under GAAP. The core principle of ASU 2014-09 is to recognize
revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which
an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core
principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are
required under existing GAAP. The standard is effective for annual periods beginning after December 15, 2017, and interim
periods therein. We are currently evaluating the impact of our pending adoption of ASU 2014-09, although based on the
nature of our business we do not expect the standard will have a significant impact on our consolidated financial statements.

We reviewed all other significant newly-issued accounting pronouncements and concluded that they either are not applicable
to our operations or that no material effect is expected on our consolidated financial statements as a result of future adoption.

2. SIGNIFICANT BUSINESS TRANSACTIONS

2013 follow-on offering

On April 23, 2013, the Company completed an underwritten, follow-on equity offering of 6.9 million shares of common stock
at a price of $5.00 per share to the public. After deducting underwriting discounts, commissions, and other offering expenses,
the net proceeds to DRH from the offering were $31.9 million. Refer to our Form S-1/A filed on April 15, 2013 for additional
information.

DIVERSIFIED RESTAURANT HOLDINGS AND SUBSIDIARIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Sale leaseback transactions

On October 6, 2014, the Company entered into a sale leaseback agreement for $24.6 million with a third-party Real Estate
Investment Trust (“REIT”). The arrangement includes the sale of 12 properties, six Bagger Dave’s locations and six BWW
locations. In Q4 2014, we closed on ten of the 12 properties, with total proceeds of $19.1 million. In connection with the
closing of the sale-leaseback transactions in Q4 2014, the Company recorded losses of approximately $0.5 million, which is
included in loss on disposal of property and equipment on the Consolidated Statements of Operations. The Company also
recorded deferred gains of $2.3 million for the properties sold at a gain as of December 28, 2014. We closed on the two
remaining properties in June 2015 and August 2015. We received total proceeds of $5.6 million and recorded losses of $0.4
million, which is recorded in impairment and loss on asset disposals on the Consolidated Statements of Operations. In
pursuant to the terms of each sale-leaseback transaction, we transferred title of the real property to the purchaser after
final inspection and, in turn, entered into separate leases with the purchaser having a 15-year basic operating lease term plus
four separate 5-year renewal options. At December 27, 2015, $0.2 million of the deferred gain was recorded in other accrued
liabilities and $2.0 million of the deferred gain was recorded in other liabilities on the Consolidated Balance Sheets. The
gains will be recognized into income as an offset to rent expense over the life of the related lease agreements. See Notes 6
and 13 for additional information.

3. ACQUISITIONS

Florida – June 30, 2014

On June 30, 2014, the Company completed the acquisition of substantially all of the assets of Screamin’ Hot Florida, LLC
and Screamin’ Hot Trinity, LLC, each a Florida limited liability company. The assets consist of three BWW restaurants in
Clearwater, Port Richey and Oldsmar, Florida (collectively, the “Florida 2014 Acquisition”). The purchase price was $3.2
million in cash, subject to working capital adjustment, and one-half of the transfer fees imposed by BWLD under its franchise
agreements for Florida 2014 Acquisition. After the acquisition, the Company owns the entire Tampa, FL BWW market,
giving DRH control of the local Advertising Co-Op. This ownership provides DRH a unique opportunity to gain local market
scale, in addition to providing greater geographic diversity to the Company’s restaurant portfolio.

The following table summarizes the estimated fair values of net assets acquired and liabilities assumed:

Working capital ............................................................................................................................................. $
Property and equipment .................................................................................................................................
Franchise fees ................................................................................................................................................
Goodwill ........................................................................................................................................................
Net Cash paid for acquisition ..................................................................................................................... $

57,600
656,146
72,750
2,419,854
3,206,350

The excess of the purchase price over the aggregate fair value of assets acquired is allocated to goodwill, which will be
deductible for tax purposes. The results of operations of these locations are included in our Consolidated Statements of
Operations from the date of acquisition. The Company found it impracticable to report the supplemental pro forma
information for the Florida 2014 Acquisition due to the lack of available information.

DIVERSIFIED RESTAURANT HOLDINGS AND SUBSIDIARIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The results of operations from the acquisition are included in the Company's results beginning June 30, 2014. The actual
amounts of revenue and operating loss included in the accompanying Consolidated Statements of Operations for the year
ended December 28, 2014 are $3.1 million and $135,796, respectively.

St. Louis - June 29, 2015

On June 29, 2015, the Company, completed the acquisition of substantially all of the assets of A Sure Wing, LLC, a Missouri
limited liability company (“ASW”). The assets acquired consist primarily of 18 existing BWW restaurants, 15 in Missouri
and three in Illinois. As consideration for the acquisition of the assets, the Company paid $54.0 million in cash at closing,
subject to adjustment for cash on hand, inventory and certain prorated items. Seller reimbursed the Company for one-half of
all fees imposed by BWLD under its franchise agreements for the transfer of these restaurants. The acquisition provides
greater geographic diversity to the Company’s restaurant portfolio.

The following table summarizes the estimated fair values of net assets acquired and liabilities assumed:

Working capital ............................................................................................................................................. $
Fixed assets ....................................................................................................................................................
Intangible assets .............................................................................................................................................
Favorable lease ..............................................................................................................................................
Unfavorable lease ..........................................................................................................................................
Goodwill ........................................................................................................................................................

413,232
13,993,000
505,000
112,344
(58,797)
39,098,451

Net Cash paid for acquisition ..................................................................................................................... $

54,063,230

The following table summarizes the unaudited pro forma financial information as if the acquisition had occurred at the
beginning of the periods presented:

Fiscal Years Ended

December 27,
2015

December 28,
2014

Revenue ............................................................................................................................. $ 193,481,326 $ 168,221,665
684,575
Net income (loss) ..............................................................................................................
0.03
Basic earnings (loss) per share ...........................................................................................
0.03
Diluted earnings (loss) per share .......................................................................................

(15,250,523)
(0.58)
(0.58)

The results of operations from the acquisition are included in the Company's results beginning June 29, 2015. The actual
amounts of revenue and net income that are included in the accompanying Consolidated Statements of Operations for the
period of June 29, 2015 to December 27, 2015 is $20.9 million and $25,095, respectively. For additional information
pertaining to the ASW acquisition refer to the 8-K/a filed on September 3, 2015.

DIVERSIFIED RESTAURANT HOLDINGS AND SUBSIDIARIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. IMPAIRMENTS, DISPOSALS AND EXIT COSTS

During 2015, the Company decided to close 12 underperforming locations, eight in Indiana, three in Michigan and one in
Florida (the “ 2015 Restaurant Closures”). The Company closed these restaurants during the third and fourth quarters of 2015.
In connection with the 2015 Restaurant Closures, the Company recorded expenses of $10.9 million, including property and
equipment impairment charges, exit costs associated with lease obligations, employee terminations and other closure related
obligations. The Company expects to incur minimal charges in fiscal 2016 related to these closures.

The following table summarizes the Company’s accrual activity related to facility closure and other costs, primarily associated
with the 2015 Restaurant Closures during the fiscal year ended December 27, 2015:

Fiscal
2015

Beginning of the year ....................................................................................................................................... $
Charges ............................................................................................................................................................
Cash payments .................................................................................................................................................

—
1,414,308
(75,122)

End of the year ................................................................................................................................................. $ 1,339,186

At December 27, 2015, $0.9 million of fixed and intangible assets for the closed locations are held for sale, which is recorded
in Property and equipment on the Consolidated Balance Sheets. We anticipate auctioning the assets held for sale in First
Quarter 2016.

Based on impairment indicators that existed at December 27, 2015, the Company performed an impairment analysis on its
long-lived assets subject to amortization and recorded a fixed asset impairment of $2.8 million related to four
underperforming Bagger Dave's locations. The impairment charge was recorded to the extent that the carrying amount of the
assets were not considered recoverable based on the estimated discounted cash flows and the underlying fair value of the
assets, which was recorded in impairment and loss on asset disposals on the Consolidated Statements of Operations for 2015.
For fiscal years ended December 28, 2014 and December 29, 2013, no impairment losses were recognized.

The following is a summary of the expenses recognized in the Consolidated Statement of Operations during the year ended
December 27, 2015 related to the restaurant closures and impairment of property and equipment:

Description
Property and equipment impairments ......................................... Impairment and loss on asset disposals
Facility closure and other expenses ............................................ Occupancy costs
Severance expense ...................................................................... Compensation costs

Location in the Consolidated
statement of Operations

Fiscal
2015
12,778,155
733,834
154,764

13,666,753

During 2015, 2014 and 2013, the Company recorded other asset disposal losses of $1.5 million, $1.0 million and $.1 million,
respectively.

DIVERSIFIED RESTAURANT HOLDINGS AND SUBSIDIARIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. INVESTMENTS

Investments consist of available-for-sale securities that are carried at fair value. Available-for-sale securities are classified as
current assets based upon our intent and ability to use any and all of the securities as necessary to satisfy the operational
requirements of our business. Based on the call date of the investments, all securities have maturities of one year or less.
Unrealized losses are charged against net earnings when a decline in fair value is determined to be other than temporary. In
the First Quarter 2015, DRH opted to discontinue investing in debt securities and determined investing in a highly liquid
money market account was a better fit for the Company's liquidity needs. As of December 27, 2015, the outstanding
investments held at December 28, 2014 had fully matured and have been redeemed.

The amortized cost, gross unrealized holding gains, gross unrealized holding loss, and fair value of available-for-sale
securities by type are as follows:

December 28, 2014

Amortized
Cost

Unrealized
Gains

Unrealized
Loss

Estimated
Fair Value

Debt securities:
Obligations of states/municipals ................................................. $ 1,190,261 $
Corporate securities .................................................................... 1,732,734
Total debt securities .................................................................. $ 2,922,995 $

— $
—
— $

(4,278) $ 1,185,983
(1,485 ) 1,731,249
(5,763) $ 2,917,232

Gross unrealized gains and losses on available-for-sale securities, recorded in accumulated other comprehensive loss were as
follows:

Unrealized gain .............................................................................................................. $
Unrealized loss ..............................................................................................................
Net unrealized loss .........................................................................................................
Deferred federal income tax benefit ..............................................................................
Net unrealized loss on investments, net of deferred income tax .................................... $

— $

(5,763)
(5,763)
1,959
(3,804) $

236
(44,442)
(44,206)
15,030
(29,176)

December 28,
2014

December 29,
2013

DIVERSIFIED RESTAURANT HOLDINGS AND SUBSIDIARIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. PROPERTY AND EQUIPMENT, NET

Property and equipment are comprised of the following:

December 27,
2015

Land ............................................................................................................................... $
Building .........................................................................................................................
Equipment ......................................................................................................................
Furniture and fixtures ....................................................................................................
Leasehold improvements ...............................................................................................
Restaurant construction in progress ...............................................................................
Total ...............................................................................................................................
Less accumulated depreciation ......................................................................................
Property and equipment, net ...................................................................................... $

37,500 $

2,339,219
32,912,992
8,194,060
72,148,545
1,768,027
117,400,343
(38,210,682)
79,189,661 $

December 28,
2014
3,087,514
2,339,219
29,251,119
7,458,292
56,971,815
4,731,045
103,839,004
(32,330,054)
71,508,950

Depreciation expense was $16.6 million, $10.9 million, and $7.9 million during the years ended December 27, 2015,
December 28, 2014 and December 29, 2013, respectively.

At December 28, 2014, approximately $2.2 million of our restaurant construction in progress was subject to the sale leaseback
transaction described in Note 2.

7. INTANGIBLE ASSETS

Intangible assets are comprised of the following:

December 27,
2015

December 28,
2014

Amortized intangible assets
Franchise fees ................................................................................................................ $
Trademark ......................................................................................................................
Non-compete .................................................................................................................
Favorable operating leases .............................................................................................
Loan fees ........................................................................................................................
Total ...............................................................................................................................

1,278,142 $
66,826
76,560
351,344
751,070
2,523,942

647,363
64,934
76,560
239,000
130,377
1,158,234

Less accumulated amortization ......................................................................................
Amortized intangible assets, net .................................................................................

(557,527)
1,966,415

(377,839)
780,395

Unamortized intangible assets
Liquor licenses ...............................................................................................................
Total intangible assets, net .......................................................................................... $

2,017,618
3,984,033 $

2,136,103
2,916,498

DIVERSIFIED RESTAURANT HOLDINGS AND SUBSIDIARIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Amortization expense for the years ended December 27, 2015, December 28, 2014 and December 29, 2013 was $102,736,
$62,008 and $55,469, respectively. Amortization of favorable/unfavorable leases and loan fees are reflected as part of
occupancy and interest expense, respectively. Loan fees written off to interest expense during the years ended December 27,
2015, December 28, 2014 and December 29, 2013 were $117,339, $308,497 and $76,407, respectively.

Based on the current intangible assets and their estimated useful lives, future intangible-related expense for the next five years
and thereafter is projected as follows:

Year

2016 ............................................................................................................................................................... $
2017 ...............................................................................................................................................................
2018 ...............................................................................................................................................................
2019 ...............................................................................................................................................................
2020 ...............................................................................................................................................................
Thereafter .......................................................................................................................................................

Amount

262,945
261,409
259,734
259,176
182,973
740,178

Total .............................................................................................................................................................. $

1,966,415

The aggregate weighted-average amortization period for intangible assets is 11.3 years.

8. OTHER ACCRUED LIABILITES

Sales tax payable............................................................................................................ $
Accrued interest .............................................................................................................
Closure liability - current ..............................................................................................
Other ..............................................................................................................................

987,795 $
495,365
1,008,707
1,171,344

770,938
138,538
—
448,034

Total accrued other liabilities ..................................................................................

3,663,211

1,357,510

December 27,
2015

December 28,
2014

9. RELATED PARTY TRANSACTIONS

Fees for monthly accounting and financial statement services are paid to an entity owned by a member of the DRH Board of
Directors and a stockholder of the Company. Fees paid during the years ended December 27, 2015, December 28, 2014 and
December 29, 2013 were $596,856, $515,948 and $405,187, respectively. As of December 27, 2015 and December 28, 2014,
we had unpaid fees of $14,631 and $900, respectively.

See Note 13 for related party operating lease transactions.

DIVERSIFIED RESTAURANT HOLDINGS AND SUBSIDIARIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10. LONG-TERM DEBT

Long-term debt consists of the following obligations:

Note payable - $120.0 million term loan; payable to Citizens with a senior lien on all the
Company’s personal property and fixtures. Scheduled monthly principal payments are
approximately $833,333 plus accrued interest through maturity in June 2020. Interest is
charged based on one-month LIBOR plus an applicable margin, which ranges from 2.25% to
3.5%, depending on the lease adjusted leverage ratio defined in the terms of the agreement.
The rate at December 27, 2015 was approximately 3.86%. ......................................................... $

115,833,333 $

—

December 27,
2015

December 28,
2014

Note payable - $30.0 million development line of credit; payable to Citizens with a senior lien
on all the Company’s personal property and fixtures. Payments are due monthly once fully
drawn and matures in June 2020. Interest is charged based on one-month LIBOR plus an
applicable margin, which ranges from 2.25% to 3.5%, depending on the lease adjusted
leverage ratio defined in the terms of the agreement. Once fully drawn, payments will be due
monthly; the note matures June 2020. The rate at December 27, 2015 was approximately
3.86%. .........................................................................................................................................

11,090,323

Note payable - $56.0 million term loan; payable to Citizens with a senior lien on all the
Company’s personal property and fixtures. Scheduled monthly principal payments are
approximately $666,667 plus accrued interest through maturity in December 2019. Interest was
charged based on one-month LIBOR plus an applicable margin, which ranges from 2.25% to
3.15%, depending on the lease adjusted leverage ratio defined in the terms of the agreement.
The rate at December 28, 2014 was approximately 2.7%. ............................................................

Note payable - $20.0 million development line of credit; payable to Citizens with a senior lien
on all the Company’s personal property and fixtures. Payments are due monthly once fully
drawn and matures in December 2019. Interest was charged based on one-month LIBOR plus
an applicable margin, which ranges from 2.25% to 3.15%, depending on the lease adjusted
leverage ratio defined in the terms of the agreement. The rate at December 28, 2014 was
approximately 2.7%. .....................................................................................................................

—

56,000,000

—

5,768,399

Unamortized discount ...................................................................................................................

(322,349)

—

Total debt .....................................................................................................................................

126,601,307

61,768,399

Less current portion ......................................................................................................................

(9,918,827)

(8,155,903)

Long-term debt, net of current portion .................................................................................... $

116,682,480 $

53,612,496

DIVERSIFIED RESTAURANT HOLDINGS AND SUBSIDIARIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On December 16, 2014, the Company entered into a $77.0 million senior secured credit facility with Citizens (the “December
2014 Senior Secured Credit Facility”). The December 2014 Senior Secured Credit Facility consist of a $56.0 million term
loan (the “December 2014 Term Loan”), a $20.0 million development line of credit (the “December 2014 DLOC”), and a
$1.0 million revolving line of credit (the “December 2014 RLOC”). The Company used approximately $35.5 million of the
December 2014 Term Loan to refinance existing outstanding debt with Citizens and used approximately $20.0 million of the
December 2014 Term Loan to refinance and term out the outstanding balance of the existing development line of credit loan
between the Company and Citizens. The remaining balance of the December 2014 Term Loan, approximately $0.5 million,
was used to pay the fees, costs, and expenses associated with the closing of the December 2014 Senior Secured Credit
Facility. The December 2014 Term Loan was for a period of five years. Payments of principal were based upon an 84
months straight-line amortization schedule, with monthly principal payments of $666,667 plus accrued interest. The interest
rate for the December 2014 Term Loan was LIBOR plus an applicable margin, which ranged from 2.25% to 3.15%, depending
on the lease adjusted leverage ratio defined in the terms of the agreement. The entire remaining outstanding principal and
accrued interest on the December 2014 Term Loan was due and payable on the maturity date of December 16, 2019. The
December 2014 DLOC was for a term of two years and was convertible upon maturity into a term note based on the terms of
the agreement at which time monthly principal payments would be due based on a 84 months straight-line amortization
schedule, plus interest, through maturity on December 16, 2014. The December 2014 RLOC was for a term of two years and
no amount was outstanding as of December 28, 2014.

In conjunction with the June 29, 2015 acquisition described in Note 3, the Company, entered into a $155.0 million Senior
Secured Credit Facility (the “June 2015 Senior Secured Credit Facility”) with Citizens as administrative agent for the Lenders
party thereto. The June 2015 Senior Secured Credit Facility consists of a $120.0 million term loan ("June 2015 Term Loan"),
a $30.0 million development line of credit ("June 2015 DLOC"), and a $5.0 million revolving line of credit ("June 2015
RLOC"). The Company immediately used approximately $65.5 million of the June 2015 Term Loan to refinance existing
outstanding debt and $54.0 million of the June 2015 Term Loan to finance the acquisition. The remaining balance of the June
2015 Term Loan, approximately $0.5 million, was used to pay the fees, costs and expenses arising in connection with the
closing of the loans constituting the June 2015 Senior Secured Credit Facility.

The June 2015 Term Loan is for a term of five years. Payments of principal shall be based upon a 12-year straight-line
amortization schedule, with monthly principal payments of $833,333 plus accrued interest. The interest rate for the June 2015
Term Loan is LIBOR plus an applicable margin which ranges from 2.25% to 3.5%. The entire remaining outstanding principal
and accrued interest on the June 2015 Term Loan is due and payable on June 29, 2020. The June 2015 DLOC is for a term
of two years and is convertible upon maturity into a term note based on the terms of the agreement at which time monthly
principal payments will be due based on a 12-year straight-line amortization schedule, plus interest at LIBOR plus an
applicable margin, through maturity on June 29, 2020. The June 2015 RLOC is for a term of five years and bears interest at
LIBOR plus an applicable margin. As of December 27, 2015 no amounts were outstanding. Fees related to the term debt and
paid directly to lenders were recorded as debt discount. Debt discount totaled $322,349, net of accumulated amortization at
December 27, 2015. Debt issuance costs represents legal, consulting, and financial costs associated with debt financing,
which totaled approximately $674,955 at December 27, 2015. Debt discount and debt issuance cost are amortized over the
life of the debt and are recorded in interest expense using the effective interest method. The Company’s evaluation of the
June 2015 debt refinancing concluded that the terms of the debt were not substantially modified.

DIVERSIFIED RESTAURANT HOLDINGS AND SUBSIDIARIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Based on the long-term debt terms that existed at December 27, 2015, the scheduled principal maturities, net of unamortized
discount, for the next five years and thereafter are summarized as follows:

Amount

9,918,827
10,480,330
11,042,033
11,047,760
84,112,357
—

Total .............................................................................................................................................................. $ 126,601,307

Interest expense was $4.2 million, $2.3 million and $1.7 million for the years ended December 27, 2015, December 28, 2014
and December 29, 2013, respectively.

The current debt agreement contains various customary financial covenants generally based on the performance of the specific
borrowing entity and other related entities. The more significant covenants consist of a minimum debt service coverage ratio
and a maximum lease adjusted leverage ratio. In connection with the August 2015 closure of three locations discussed in
Note 4, during the Third Quarter the Company violated one of its non-financial loan covenants related to the number of
allowable restaurant closures. In the Third Quarter our primary lender modified our covenants within our debt agreement to
allow for the closure of specified locations and one time transaction fees associated with the St. Louis acquisition and the
wage-claim settlement, discussed in Note 14. As of December 27, 2015 the Company was in compliance with the loan
covenants.

At December 27, 2015, the Company has six interest rate swap agreements to fix a portion of the interest rates on its variable
rate debt. The swap agreements all qualify for hedge accounting. Under the swap agreements, the Company receives interest
at the one-month LIBOR and pays a fixed rate. Since these swap agreements qualify for hedge accounting, the changes in
fair value are recorded in other comprehensive income (loss), net of tax. See Note 1 and Note 17 for additional information
pertaining to interest rate swaps.

DIVERSIFIED RESTAURANT HOLDINGS AND SUBSIDIARIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following summarizes the fair values of derivative instruments designated as cash flow hedges which were outstanding:

Notional amounts Derivative assets

Derivative liabilities

December 27, 2015

Interest rate swaps

Expires
April 2019

Rate
April 2012 .................. 1.4%
October 2012 .............. 0.9% October 2017
July 2013 .................... 1.4%
May 2014.................... 1.5%
January 2015 .............. 1.8% December 2019
August 2015 ............... 2.3%

April 2018
April 2018

June 2020

7,619,048 $
3,214,286
8,190,476
11,428,571
20,547,619
49,696,875

Total ................................

100,696,875 $

— $
—
—
—
—
—

— $

56,280
3,027
60,164
122,716
415,459
867,609

1,525,255

Interest rate swaps

Rate
April 2012 .................. 1.4%
October 2012 .............. 0.9% October 2017
July 2013 .................... 1.4%
May 2014.................... 1.5%

April 2018
April 2018

Expires
April 2019

Total ................................

11. STOCK-BASED COMPENSATION

Notional amounts Derivative assets

Derivative liabilities

December 28, 2014

9,904,762 $
4,071,429
11,619,048
12,857,143

38,452,382 $

— $

3,119
—
—

3,119 $

73,492
—
106,061
83,192

262,745

The Company established a Stock Incentive Plan in 2011 (“Stock Incentive Plan”) to attract and retain directors, consultants,
and team members and to align their interests with the interests of the Company’s shareholders through the opportunity for
increased stock ownership. The plan permits the grant and award of 750,000 shares of common stock by way of stock options
and/or restricted stock. Stock options must be awarded at exercise prices at least equal to or greater than 100.0% of the fair
market value of the shares on the date of grant. The options will expire no later than 10 years from the date of grant, with
vesting terms to be defined at grant date, ranging from a vesting schedule based on performance to a vesting schedule that
extends over a period of time as selected by the Compensation Committee of the Board of Directors (the “Committee”) or
another committee as determined by the Board of Directors. The Committee also determines the grant, issuance, retention,
and vesting timing and conditions of awards of restricted stock. The Committee may place limitations, such as continued
employment, passage of time, and/or performance measures, on restricted stock. Awards of restricted stock may not provide
for vesting or settlement in full of restricted stock over a period of less than one year from the date the award is made.

DIVERSIFIED RESTAURANT HOLDINGS AND SUBSIDIARIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restricted stock awards

During fiscal 2015, 2014, and 2013, restricted shares were issued to certain team members at a weighted-average grant date
fair value of $3.56, $4.82, and $5.85, respectively. Restricted shares are generally granted with a per share purchase price at
100.0% of the fair market value on the date of grant. Based on the Stock Award Agreement, shares vest ratably over a three
or one year period or upon the three years anniversary of the granted shares, the vesting terms are determined by the
Committee. Unrecognized stock-based compensation expense of $559,509 at December 27, 2015 will be recognized over
the remaining weighted-average vesting period of 1.9 years. The total fair value of shares vested during years ended
December 27, 2015, December 28, 2014, and December 29, 2013 was $197,045, $193,996, and $169,593,
respectively. Under the Stock Incentive Plan, there are 365,051 shares available for future awards at December 27, 2015.

The following table presents the restricted stock transactions for fiscal 2015:

Unvested, December 28, 2014 .....................................................................................................................
Granted ..........................................................................................................................................................
Vested ............................................................................................................................................................
Vested shares tax portion ...............................................................................................................................
Forfeited.........................................................................................................................................................
Unvested, December 27, 2015 .....................................................................................................................

The following table presents the restricted stock transactions for fiscal 2014:

Unvested, December 29, 2013 .....................................................................................................................
Granted ..........................................................................................................................................................
Vested ............................................................................................................................................................
Forfeited.........................................................................................................................................................
Unvested, December 28, 2014 .....................................................................................................................

The following table presents the restricted stock transactions for fiscal 2013:

Number of
Restricted
Stock Shares
164,867
131,752
(45,521)
(1,387)
(8,587)
241,124

Number of
Restricted
Stock Shares
116,667
91,966
(41,031)
(2,735)
164,867

Number of
Restricted
Stock Shares

Unvested, December 30, 2012 .....................................................................................................................
Granted ..........................................................................................................................................................
Vested ............................................................................................................................................................
Forfeited.........................................................................................................................................................
Unvested, December 29, 2013 .....................................................................................................................

54,900
145,575
(26,700)
(57,108)
116,667

DIVERSIFIED RESTAURANT HOLDINGS AND SUBSIDIARIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On July 30, 2007, DRH granted options for the purchase of 150,000 shares of common stock to the directors of the Company
at an exercise price of $2.50 per share. These options vested ratably over a three year period and were set to expire six years
from issuance, July 30, 2013. At December 29, 2013, all 150,000 options were fully vested and were exercised either through
cash or cashless exercise at a price of $2.50 per share. The intrinsic value of options exercised in 2013 was $679,680.

On July 30, 2010, prior to the Stock Incentive Plan, DRH granted options for the purchase of 210,000 shares of common
stock to the directors of the Company. These options are fully vested and expire six years from issuance, July 30, 2016. Once
vested, the options can be exercised at a price of $2.50 per share. On August 13, 2015, 30,000 shares were exercised at a
price of $2.50 per share. The intrinsic value of options exercised were $6,300. At December 27, 2015, 180,000 shares of
authorized common stock are reserved for issuance to provide for the exercise of these options. The intrinsic value of
outstanding options was $19,800, $522,900, and $514,500 as of December 27, 2015, December 28, 2014 and December 29,
2013, respectively.

Employee stock purchase plan

The Company also reserved 250,000 shares of common stock for issuance under the Employee Stock Purchase Plan (“ESPP”).
The ESPP is available to team members subject to employment eligibility requirements. Participants may purchase common
stock at 85.0% of the lesser of the start or end price for the offering period. The plan has four offering periods, each start/end
dates coincide with the fiscal quarter and are awarded on the last day of the offering period. During the December 27,
2015, December 28, 2014 and December 29, 2013 we issued 21,623, 11,015 and 4,624 shares, respectively. Under the ESPP,
there are 212,589 shares available for future purchase at December 27, 2015.

Share repurchase program

In March 2015, the Board of Directors authorized a program to repurchase up to $1.0 million of the Company's common
stock in open market transactions at market prices or otherwise. In April 2015, we repurchased $98,252 in outstanding shares,
representing 24,500 shares. The weighted average purchase price per share was $4.01. Upon receipt, the repurchased shares
were retired and restored to authorized but unissued shares of common stock.

Stock-based compensation

Stock-based compensation of $424,414, $338,810 and $278,290 was recognized during the years ended December 27, 2015,
December 28, 2014 and December 29, 2013, respectively, as compensation costs in the Consolidated Statements of
Operations and as additional paid-in capital on the Consolidated Statements of Stockholders' Equity to reflect the fair value
of shares vested.

Preferred stock

The Company has authorized 10,000,000 shares of preferred stock at a par value of $0.0001. No preferred shares are issued
or outstanding as of December 27, 2015. Any preferences, rights, voting powers, restrictions, dividend limitations,
qualifications, and terms and conditions of redemption shall be set forth and adopted by a Board of Directors' resolution prior
to issuance of any series of preferred stock.

DIVERSIFIED RESTAURANT HOLDINGS AND SUBSIDIARIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. INCOME TAXES

The benefit for income taxes consists of the following components for the fiscal years ended December 27, 2015,
December 28, 2014 and December 29, 2013:

Fiscal Years Ended

December 27,
2015

December 28,
2014

December 29,
2013

Federal
Current .............................................................................................. $
Deferred ............................................................................................
State
Current ..............................................................................................
Deferred ............................................................................................
Income tax benefit ........................................................................... $

— $

(9,073,787)

(1,628,568)

—
(306,951)

—
(912,220)
(9,986,007) $

127,312
(205,480)
(1,706,736) $

74,773
(29,272)
(261,450)

The benefit for income taxes is different from that which would be obtained by applying the statutory federal income tax rate
to loss before income loss. The items causing this difference are as follows:

Fiscal Years Ended

December 27,
2015

December 28,
2014

December 29,
2013

Income tax benefit at federal statutory rate ....................................... $
State income tax, net of federal benefit ............................................
Permanent differences ......................................................................
Tax credits ........................................................................................
Income tax benefit ........................................................................... $

(8,900,690) $
(912,221)
1,219,947
(1,393,043)
(9,986,007) $

(1,011,580) $
(51,689)
346,388
(989,855)
(1,706,736) $

(43,228)
30,032
271,151
(519,405)
(261,450)

DIVERSIFIED RESTAURANT HOLDINGS AND SUBSIDIARIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company expects the deferred
tax assets to be fully realizable prior to expiration. Significant components of the Company's deferred income tax assets and
liabilities are summarized as follows:

December 27,
2015

December 28,
2014

Deferred tax assets:

Net operating loss carry-forwards ............................................................................... $
Deferred rent expense .................................................................................................
Start-up costs ..............................................................................................................
Tax credit carry-forwards ...........................................................................................
Interest rate swaps .......................................................................................................
Investments .................................................................................................................
Sale leaseback deferred gain .......................................................................................
Stock-based compensation ..........................................................................................
Accrued closure liabilities ..........................................................................................
Other ...........................................................................................................................
Total deferred tax assets ................................................................................................

7,368,309 $
505,995
138,832
4,810,760
518,589
—
734,744
457,680
455,324
835,018
15,825,251

915,900
481,543
99,261
3,417,716
88,121
1,959
788,195
310,790
—
397,117
6,500,602

Deferred tax liabilities:

Tax depreciation in excess of book .............................................................................
Goodwill amortization in excess of book ...................................................................
Total deferred tax liability .............................................................................................

1,296,243
1,208,831
2,505,074

3,069,315
470,647
3,539,962

Net deferred income tax assets.................................................................................... $

13,320,177 $

2,960,640

In accordance with the provisions of ASC 740 a valuation allowance is established when it is more likely than not that some
portion of the deferred tax assets will not be realized. Realization is dependent upon the generation of future taxable income
or the reversal of deferred tax liabilities during the periods in which those temporary differences become deductible. We
consider the reversal of deferred tax liabilities, projected future taxable income and tax planning strategies. Since we believe
sufficient future taxable income will be generated to utilize the benefits of the deferred tax assets, a valuation allowance has
not been recognized. In fiscal 2015, we had undergone significant changes to our company structure. This includes the
disposition and acquisition of assets, namely the closure of 12 underperforming restaurants, impairment of four Bagger
Dave’s restaurants and acquisition of 18 profitable BWW restaurants. As such, we believe the changes to our company in
fiscal 2015 combined with the planned opening of additional BWW restaurants will provide future taxable income prior to
the expirations of carryfowards, which begin in 2028. Management continually reviews the likelihood that deferred tax assets
will be realized and the Company recognizes these benefits only as reassessment indicates that it is more likely than not that
such tax benefits will be realized.

DIVERSIFIED RESTAURANT HOLDINGS AND SUBSIDIARIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company expects to use net operating loss and general business tax credit carryforwards before their 20-year expiration.
A significant amount of net operating loss carry forwards were created in the past two years with expiration between 2034
and 2035. As of December 27, 2015, the Company has available federal and state net operating loss carryforwards of
approximately $21.4 million and $17.6 million, respectively. Of that amount, approximately $600,000 relates to stock-based
compensation tax deductions in excess of book compensation expense that will be credited to additional paid in capital in
future periods when such deductions reduce taxes payable as determined based on a "with-and-without" approach. Net
operating losses relating to such benefits are not included in the table above. General business tax credits of $4.8 million will
expire between 2028 and 2035.

The Company applies the provisions of ASC 740 regarding the accounting for uncertainty in income taxes. There are no
amounts recorded on the Company's consolidated financial statements for uncertain positions. The Company classifies all
interest and penalties as income tax expense. There are no accrued interest amounts or penalties related to uncertain tax
positions as of December 27, 2015.

The Company files income tax returns in the United States federal jurisdiction and various state jurisdictions, and is subject
to U.S. Federal, state, and local income tax examinations for tax years 2011 through 2014.

13. OPERATING LEASES (INCLUDING RELATED PARTIES)

The Company's lease terms generally include renewal options, and frequently require us to pay a proportionate share of real
estate taxes, insurance, common area maintenance, and other operating costs. Some restaurant leases provide for contingent
rental payments based on sales thresholds.

Total rent expense was $10.0 million, $5.5 million and $5.0 million for the fiscal years ended December 27, 2015,
December 28, 2014 and December 29, 2013, respectively (of which $0, $112,955 and $80,216 for the fiscal years ended
December 27, 2015, December 28, 2014 and December 29, 2013, respectively, were paid to a related parties). On October
30, 2014, Detroit Burgers, Inc., one of our wholly-owned subsidiaries, acquired 100.0% of the membership interests of DMM
Group, LLC from a trust controlled by the spouse of our President, CEO and Chairman, T. Michael Ansley for $250,000.
DMM Group’s sole asset is the land and improvements used for our Detroit Bagger Dave’s restaurant. Also, on October 30,
2014 Berkley Burgers, Inc., owned by a related party, sold 100.0% of their membership interests to a third-party REIT, which
was also the group that purchased a number of locations from the Company as part of our sales leaseback transaction, as
described in Note 2.

DIVERSIFIED RESTAURANT HOLDINGS AND SUBSIDIARIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Scheduled future minimum lease payments for each of the five years and thereafter for non-cancelable operating leases for
existing restaurants with initial or remaining lease terms in excess of one year at December 27, 2015 are summarized as
follows:

Year

Amount

10,997,865
10,954,711
10,444,798
9,599,795
9,156,279
45,131,930

Total .............................................................................................................................................................. $

96,285,378

Scheduled future minimum lease payments for each of the five years and thereafter for non-cancelable operating leases for
restaurants under development, with initial or remaining lease terms in excess of one year at December 27, 2015 are
summarized as follows:

Year

Total .............................................................................................................................................................. $

Amount

224,167
340,000
340,000
340,000
340,000
3,820,297
5,404,464

14. COMMITMENTS AND CONTINGENCIES

The Company’s ADA requires DRH to open 42 restaurants by April 1, 2021. As of December 27, 2015, we have opened 27
of the 42 restaurants required by the ADA. With the remaining 15 restaurants, we expect the Company will operate 77 BWW
restaurants by 2020, exclusive of potential additional BWW restaurant acquisitions.

The Company is required to pay BWLD royalties (5.0% of net sales) and advertising fund contributions (3.0% of net sales
globally plus an additional 0.25% or 0.5% of net sales for certain metropolitan cities) for the term of the individual franchise
agreements. The Company incurred $7.2 million, $5.3 million, and $4.7 million in royalty expense for the fiscal years ended
December 27, 2015, December 28, 2014 and December 29, 2013, respectively. Advertising fund contribution expenses were
$4.6 million, $3.5 million, and $2.8 million for the fiscal years ended December 27, 2015, December 28, 2014 and
December 29, 2013, respectively. Amounts are recorded in Other operating cost on the Consolidated Statement of Operations.

DIVERSIFIED RESTAURANT HOLDINGS AND SUBSIDIARIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company is required by its various BWLD franchise agreements to modernize the restaurants during the term of the
agreements. The individual agreements generally require improvements between the fifth and tenth year to meet the most
current design model that BWLD has approved. The modernization costs for a restaurant can range from approximately
$50,000 to approximately $1.3 million depending on an individual restaurant's needs.

In 2013 we had a defined contribution 401(k) plan whereby eligible team members could contribute pre-tax wages in
accordance with the provisions of the plan. We matched 100.0% of the first 3.0% and 50.0% of the next 2.0% of contributions
made by eligible team members. Matching contributions of approximately $250,001 were made by us during the year ended
December 29, 2013. Effective January 1, 2014, the Company ceased the matching program in favor of an annual discretionary
contribution to the 401(k) plan. For fiscal 2015 and 2014, the discretionary match was 100.0% of 2.0% contributed, which
equated to $156,472 and $168,446, respectively.

In October 2015, the Company settled two collective actions alleging violations of fair labor standards acts and minimum
wage laws. The first action, Tammy Wolverton et al v. Diversified Restaurant Holdings, Inc. et al, was filed on March 31,
2014, in the United States District Court for the Eastern District of Michigan and made allegations regarding employees in
Michigan. The second action, Lisa Murphy & Andre D. Jordan, Jr. v. Diversified Restaurants Holdings, Inc., et al, was filed
on May 19, 2014, in United States District Court for the Northern District of Illinois, and made allegations involving
employees in Illinois, Indiana and Florida.

The actions, in which the plaintiffs were represented by the same legal counsel, contained mirror allegations that tipped
servers and bartenders in the Company’s restaurants were required to perform general preparation and maintenance duties,
or “non-tipped work,” for which they should be compensated at the minimum wage.

We believe that the Company’s wage and hour policies comply with the law and that we had meritorious defenses to the
substantive claims in these matters. However, in light of the potential cost and uncertainty involved, we settled with the
plaintiffs for $1.9 million plus payroll taxes.

Prior to June 2015, the Company had not received a specific demand from the plaintiff’s for any calculable amount of damages
and an actuarial expert retained by the Company estimated potential damages of an immaterial amount. As a result, the
Company could not have reasonably concluded whether any significant damages were likely or reasonably possible to result
prior to June 2015. During mediation conducted in June and July of 2015, the Company first received settlement demands
from the plaintiffs and a reassessment of the matter that provided the Company with information needed to reassess its overall
risk exposure. Following this mediation process, the Company determined based on the damages sought, cost of defense, and
cost of human capital, the Company’s best course of action was to move forward with settlement negotiations.

On December 18, 2015, a collective action was filed against AMC Wings, Inc., and the Company in the U.S. District Court
for the Southern District of Illinois by plaintiffs, David, et. al. A Sure Wing, LLC, the seller of the 18 St. Louis BWW
restaurants acquired by the Company on June 29, 2015, was also named as a defendant. Plaintiffs primarily allege that former
and current tipped workers at the above-mentioned companies were assigned to perform tasks outside the scope of their tipped
positions, in violation of Illinois and federal law. The defendant companies filed their answers to the complaint on February
22, 2016, and the next status hearing is scheduled for March 18, 2016. At this stage in the process, plaintiffs have not specified
the amount of their damages claim. The Company has filed an indemnity claim against A Sure Wing, LLC and has received
a reciprocal indemnity claim from A Sure Wing, LLC. A Sure Wing, LLC and the Company have agreed to toll their
respective indemnity claims pending resolution of the matter. This case is in the early stages and the plaintiffs have not
specified the amount of damages, the Company is unable to reasonably estimate a possible loss or range of loss.

DIVERSIFIED RESTAURANT HOLDINGS AND SUBSIDIARIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Additionally, the Company is subject to ordinary and routine legal proceedings, as well as demands, claims and threatened
litigation, which arise in the ordinary course of its business. The ultimate outcome of any litigation is uncertain. We have
insured and continue to insure against most of these types of claims. A judgment on any claim not covered by or in excess of
our insurance coverage could materially adversely affect our financial condition or results of operations.

15. EARNINGS PER COMMON SHARE

The following is a reconciliation of basic and fully diluted earnings per common share for the years ended December 27,
2015, December 28, 2014 and December 29, 2013:

Fiscal Years Ended

December 27,
2015

December 28,
2014

December 29,
2013

Income (loss) available to common stockholders ............................. $

(16,192,492) $

(1,268,497 ) $

134,308

Weighted-average shares outstanding ...............................................
Effect of dilutive securities ...............................................................

26,211,669
—

26,092,919
—

23,937,188
120,884

Weighted-average shares outstanding - assuming dilution ...............

26,211,669

26,092,919

24,058,072

Earnings per common share .............................................................. $
Earnings per common share - assuming dilution .............................. $

(0.62) $
(0.62) $

(0.05 ) $
(0.05 ) $

0.01
0.01

16. SUPPLEMENTAL CASH FLOWS INFORMATION

Other Cash Flows Information

Cash paid for interest was $3.1 million, $1.9 million, and $1.7 million during the years ended December 27, 2015,
December 28, 2014 and December 29, 2013, respectively.

Cash paid for income taxes was $94,290, $22,000 and $65,500 during the years ended December 27, 2015, December 28,
2014 and December 29, 2013, respectively.

Supplemental Schedule of Non-Cash Operating, Investing, and Financing Activities

Noncash investing transactions for property and equipment not yet paid for December 27, 2015, December 28, 2014 and
December 29, 2013 was $0.5 million, $3.1 million, and $1.9 million.

DIVERSIFIED RESTAURANT HOLDINGS AND SUBSIDIARIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

17. FAIR VALUE OF FINANCIAL INSTRUMENTS

The guidance for fair value measurements, FASB ASC 820, Fair Value Measurements and Disclosures, establishes the
authoritative definition of fair value, sets out a framework for measuring fair value, and outlines the required disclosures
regarding fair value measurements. Fair value is the price that would be received to sell an asset or paid to transfer a liability
(an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market
participants at the measurement date. We use a three-tier fair value hierarchy based upon observable and non-observable
inputs as follows:

(cid:404)

Level 1 Quoted market prices in active markets for identical assets and liabilities;

Level 2

Inputs, other than level 1 inputs, either directly or indirectly observable; and

Level 3 Unobservable inputs developed using internal estimates and assumptions (there is little or no market

data) which reflect those that market participants would use.

As of December 27, 2015 and December 28, 2014, respectively, our financial instruments consisted of cash and cash
equivalents; including money market funds, accounts receivable, available-for-sale investments, accounts payable, and debt.
The fair value of cash and cash equivalents, accounts receivable, and accounts payable approximate carrying value, due to
their short-term nature.

The fair value of our interest rate swaps is determined based on valuation models, which utilize quoted interest rate curves to
calculate the forward value and then discount the forward values to the present period. The Company measures the fair value
using broker quotes which are generally based on market observable inputs including yield curves and the value associated
with counterparty credit risk. Our interest rate swaps are classified as a Level 2 measurement as these securities are not
actively traded in the market, but are observable based on transactions associated with bank loans with similar terms and
maturities. See Note 1 and Note 10 for additional information pertaining to interest rates swaps.

The estimated fair values of the Company’s investment portfolio are based on prices provided by a third party pricing service
and a third party investment manager. The prices provided by these services are based on quoted market prices, when
available, non-binding broker quotes, or matrix pricing. The third party pricing service and the third party investment manager
provide a single price or quote per security and the Company has not historically adjusted security prices. The Company
obtains an understanding of the methods, models and inputs used by the third party pricing service and the third party
investment manager, and has controls in place to validate that amounts provided represent fair values. Our investments are
classified as a Level 2 measurement as these securities are not actively traded in the market, but are observable based on the
quoted prices provided by our Portfolio managers

As of December 27, 2015 and December 28, 2014, our total debt was approximately $126.6 million and $61.8 million ,
respectively, which approximated fair value because the applicable interest rates are adjusted frequently based on short-term
market rates (Level 2).

There were no transfers between levels of the fair value hierarchy during the fiscal years ended December 27, 2015 and
December 28, 2014, respectively.

DIVERSIFIED RESTAURANT HOLDINGS AND SUBSIDIARIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the fair values for those assets and liabilities measured on a recurring basis as of December 27,
2015:

FAIR VALUE MEASUREMENTS

Description

Level 1

Level 2

Level 3

Asset/(Liability)
Total
2,000,000
(1,525,255)

— $
—

Cash equivalents ..................................................................... $2,000,000 $
Interest rate swaps ..................................................................

— (1,525,255)

— $

Total ........................................................................................ $2,000,000 $(1,525,255) $

— $

474,745

The following table presents the fair values for those assets and liabilities measured on a recurring basis as of December 28,
2014:

FAIR VALUE MEASUREMENTS

Description

Interest rate swaps ................................................................... $
Debt securities ..........................................................................
Obligations of states/municipals ................................................
Corporate securities ...................................................................
Total debt securities .................................................................
Total ......................................................................................... $

18. ACCUMULATED OTHER COMPREHENSIVE LOSS

Level 1

Level 2
— $ (259,626) $

Level 3

Asset/(Liability)
Total

— $

(259,626)

— 1,185,983
— 1,731,249
— 2,917,232
— $2,657,606 $

—
—
—
— $

1,185,983
1,731,249
2,917,232
2,657,606

The following table summarizes each component of Accumulated Other Comprehensive Loss ("OCL"):

Year Ended December 27, 2015

Interest Rate
Swaps

Investments

Total

Beginning balance ............................................................................ $
Gain (loss) recorded to other comprehensive income .......................
Tax benefit (expense) .......................................................................
Other comprehensive income (loss) ..................................................

(171,352) $

(1,265,783)
430,468
(835,315)

(3,804) $
5,763
(1,959)
3,804

(175,156)
(1,260,020)
428,509
(831,511)

Accumulated OCL .......................................................................... $

(1,006,667) $

— $

(1,006,667)

DIVERSIFIED RESTAURANT HOLDINGS AND SUBSIDIARIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 28, 2014

Interest Rate
Swaps

Investments

Total

Beginning balance ............................................................................ $
Gain (loss) recorded to other comprehensive income .......................
Tax benefit (expense) .......................................................................
Other comprehensive income ...........................................................

(216,188) $
67,933
(23,097)
44,836

(29,176) $
38,443
(13,071)
25,372

(245,364)
106,376
(36,168)
70,208

Accumulated OCL .......................................................................... $

(171,352) $

(3,804) $

(175,156)

Year Ended December 29, 2013

Interest Rate
Swaps

Investments

Total

(284,294) $
103,190
(35,084)
68,106

— $

(44,206)
15,030
(29,176)

(284,294)
58,984
(20,054)
38,930

Accumulated OCL .......................................................................... $

(216,188) $

(29,176) $

(245,364)

19. SUMMARY QUARTERLY FINANCIAL DATA (unaudited)

Fiscal Quarters

March 29,
2015

June 28,
2015

September 27,
2015

December 27,
2015

Revenue...................................................................... $ 39,440,332 $ 36,871,838 $ 47,077,816 $ 49,095,392

Operating profit (loss) ..............................................

608,504

(5,509,546)

(3,140,137)

(14,748,104)

Income (loss) before income taxes ...........................

193,284

(5,341,323)

(4,948,302)

(16,082,158)

Net income (loss) ....................................................... $

262,642 $

(3,318,343) $ (3,581,535) $ (9,555,256)

Basic earnings per share ............................................. $

Fully diluted earnings per share .................................. $

0.01 $

(0.13) $

(0.14) $

(0.36)

Weighted average number of common
shares outstanding
Basic ...........................................................................
Diluted ........................................................................

26,149,184
26,248,424

26,151,853
26,151,853

26,251,621
26,251,261

26,294,530
26,294,530

DIVERSIFIED RESTAURANT HOLDINGS AND SUBSIDIARIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fiscal Quarters

March 30,
2014

June 29,
2014

September 28,
2014

December 28,
2014

Revenue...................................................................... $ 30,473,014 $ 30,009,621 $ 32,782,092 $ 35,148,721

Operating profit (loss) ..............................................

778,170

291,659

185,059

(1,897,168)

Income (loss) before income taxes ...........................

314,799

(179,368)

(230,209)

(2,880,455)

Net income (loss) ....................................................... $

367,857 $

(100,496) $

(182,109) $ (1,353,749)

Basic earnings per share ............................................. $

Fully diluted earnings per share .................................. $

0.01 $

— $

(0.01) $

(0.05)

26,048,805
26,153,595

26,067,958
26,067,958

26,107,627
26,107,627

26,147,287
26,147,287

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of December 27, 2015, an evaluation was performed under the supervision of and with the participation of our
management, including our principal executive and principal financial officers, of the effectiveness of the design and
operation of our disclosure controls and procedures. Based on that evaluation, our management, including our principal
executive and principal financial and accounting officers, concluded that our disclosure controls and procedures were
effective as of December 27, 2015.

Evaluation of Internal Control and Procedures

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such
term is defined in Exchange Act Rules 13a-15(f). There are inherent limitations in the effectiveness of any system of internal
control. Accordingly, even an effective system of internal control can provide only reasonable assurance with respect to
financial statement preparation.

Under the supervision and with the participation of our management, including our principal executive and principal financial
and accounting officers, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of
December 27, 2015. This evaluation was based on criteria for effective internal control over financial reporting described in
Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 Framework). Based on our evaluation under the framework in Internal Control — Integrated Framework,
our management concluded that our internal control over financial reporting was effective as of December 27, 2015. Refer to
the management's report in Item 8 "Consolidated Financial Statements" of this Annual Report.

Our independent registered public accounting firm has issued an audit report on our internal control over financial reporting
which is included in this Annual Report on the following page.

Remediation of Prior Material Weakness in Internal Control Over Financial Reporting

As reported in our Form 10-K for the year ended December 28, 2014, we did not maintain effective internal control over
financial reporting as of December 28, 2014. Our management determined that our internal control related to financial
reporting was not effective to ensure the effective design of internal control and that an effective evaluation and review of
complex accounting matters had occurred prior to presentation to our external auditors. As of December 27, 2015,
management has remediated the underlying causes of the material weakness by engaging third party public accounting
advisers to assist with non-recurring and complex accounting matters and by accelerating our internal schedule for the
preparation of year-end financial information.

We will continue to develop and implement policies and procedures to improve the overall effectiveness of internal control
over financial reporting.

Changes in Internal Control Over Financial Reporting

Other than the steps taken to remediate the material weakness described above, there have been no changes in the Company’s
internal control over financial reporting that occurred during the year ended December 27, 2015 that have materially affected,
or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

Not applicable.

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders
Diversified Restaurant Holdings, Inc. and Subsidiaries
Southfield, Michigan

We have audited Diversified Restaurant Holdings, Inc. and Subsidiaries’ internal control over financial reporting as of
December 27, 2015, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Diversified Restaurant Holdings, Inc. and
Subsidiaries’ management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Report By
Diversified Restaurant Holding, Inc.’s Management on Internal Controls Over Financial Reporting”. Our responsibility is to
express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit 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 effective internal
control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the
design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such
other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for
our opinion.

A company’s internal control over financial reporting is a process 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. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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.

In our opinion, Diversified Restaurant Holdings, Inc. and Subsidiaries maintained, in all material respects, effective internal
control over financial reporting as of December 27, 2015, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the consolidated balance sheets of Diversified Restaurant Holdings, Inc. and Subsidiaries as of December 27, 2015 and
December 28, 2014 and the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity,
and cash flows for each of the three fiscal years in the period ended December 27, 2015 and our report dated March 11, 2016
expressed an unqualified opinion on those consolidated financial statements.

/s/ BDO USA, LLP

Troy, Michigan
March 11, 2016

PART III

Certain information required by this Part III is omitted from this report and is incorporated by reference to our Definitive
Proxy Statement to be filed with the Securities and Exchange Commission in connection with the Annual Meeting of
Stockholders to be held in 2016 (the “Proxy Statement”).

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this item is incorporated by reference to the Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is incorporated by reference to the Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

The information required by this item is incorporated by reference to the Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE

The information required by this item is incorporated by reference to the Proxy Statement.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item is incorporated by reference to the Proxy Statement.

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

PART IV

(a) (1) Financial Statements. The following financial statements and reports of independent registered public accounting firms
of Diversified Restaurant Holdings and its subsidiaries are filed as part of this report:

•
•
•
•

•

Reports of Independent Registered Public Accounting Firm — BDO USA, LLP
Report by Diversified Restaurant Holdings, Inc.’s Management on Internal Control Over Financial Reporting
Consolidated Balance Sheets as of December 27, 2015 and December 28, 2014
Consolidated Statements of Operations for the Fiscal Years Ended December 27, 2015, December 28, 2014, and
December 29, 2013
Consolidated Statement of Comprehensive Income for the Fiscal Years Ended December 27, 2015, December 28,
2014, and December 29, 2013
Consolidated Statement of Stockholders' Equity for the Fiscal Years Ended December 27, 2015, December 28, 2014,
and December 29, 2013
Consolidated Statements of Cash Flows for the Fiscal Years Ended December 27, 2015, December 28, 2014, and
December 29, 2013
Notes to Consolidated Financial Statements

The consolidated financial statements, the notes to the consolidated financial statements, and the reports of independent
registered public accounting firm listed above are contained in Item 8 of this report.

(2) Financial Statement Schedules

Not applicable

(b) Index to Exhibits required by Item 601 of Regulation S-K:

EXHIBIT
NO.

EXHIBIT DESCRIPTION

2.1

2.2

2.3

2.4

2.5

2.6

Asset Purchase Agreement between the Company and Screamin’ Hot Florida, LLC and Screamin’ Hot
Trinity, LLC, dated April 1, 2014 (incorporated by reference to Exhibit 10.2 of our Form 10-Q filed May 9,
2014).

First Amendment to Asset Purchase Agreement, dated May 27, 2014 (incorporated by reference to Exhibit
2.2 of our Form 8-K filed July 2, 2014).

Purchase and Sale Agreement dated as of October 6, 2014 (incorporated by reference to Exhibit 2.1 of our
Form 8-K filed November 6, 2014)

Amendment to Purchase and Sale Agreement dated as of October 30, 2014 (incorporated by reference to
Exhibit 2.2 of our Form 8-K filed November 6, 2014)

Form of Lease (incorporated by reference to Exhibit 2.3 of our Form 8-K filed November 6, 2014)

Form of Lease Amendment (incorporated by reference to Exhibit 2.4 of our Form 8-K filed November 6,
2014)

2.7

3.1

3.2

3.3

4.1

10.1

10.3

10.5

10.6

10.7

10.8

10.9

10.10

10.13

10.14

10.15

Asset Purchase Agreement dated May 13, 2015 (incorporated by reference to Exhibit 2.1 of our Form 8-K
filed August 19, 2015)

Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of our registration statement on Form
SB-2 (SEC File Number 333-145316) filed on August 10, 2007)

Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 of our Form 8-K filed August 29,
2012)

First Amendment to Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 of our Form 8-
K filed October 31, 2012)

Specimen Stock Certificate (incorporated by reference to Exhibit 4.1 of our registration statement on Form
SB-2 (SEC File Number 333-145316) filed on August 10, 2007)

Buffalo Wild Wings Area Development Agreement dated July 18, 2003, by and between Buffalo Wild Wings
International, Inc. and MCA Enterprises, Inc. (subsequently assigned to AMC Wings, Inc., a wholly-owned
subsidiary of the Company) (incorporated by reference to Exhibit 10.3 of our Form 10-Q filed November 12,
2010)

Amendment to Buffalo Wild Wings Area Development Agreement dated December 27, 2003 (incorporated
by reference to Exhibit 10.12 of our Form 10-Q filed November 12, 2010)

Amendment to Buffalo Wild Wings Area Development Agreement dated March 20, 2007 (incorporated by
reference to Exhibit 10.5 of our Form 10-Q filed November 12, 2010)

Amendment to Buffalo Wild Wings Area Development Agreement dated November 5, 2007 (incorporated
by reference to Exhibit 10.5 of our Form 10-Q filed November 12, 2010)

Form of Stock Option Agreement (incorporated by reference to Exhibit 10.1 of our Form 8-K filed August 5,
2010)*

Form of Stock Option Agreement, dated July 30, 2007, entered into by and between the Company and
Directors Gregory Stevens, T. Michael Ansley, Jay Alan Dusenberry, Jason T. Curtis and David Ligotti
(incorporated by reference to Exhibit 10.24 of our Form 10-K filed March 26, 2010)*

Diversified Restaurant Holdings, Inc. Performance Bonus Plan (incorporated by reference to Exhibit 10.1 of
our Form 8-K filed March 11, 2013)*

2013 Diversified Restaurant Holdings, Inc. Short-Term Incentive Program (incorporated by reference to
Exhibit 10.2 of our Form 8-K filed March 11, 2013)*

$77.0M Senior Secured Credit Facility with RBS Citizens, N.A., as administrative agent, dated December 16,
2014

Amendment to Area Development Agreement, dated August 13, 2015 (incorporated by reference to Exhibit
10.1 of our Form 8-K filed August 19, 2015)

Credit Agreement dated June 29, 2015 (incorporated by reference to Exhibit 10.1 of our Form 8-K filed July
1, 2015)

Subsidiaries of Diversified Restaurant Holdings, Inc.

Consent of BDO USA, LLP

31.1

Certification of Chief Executive Officer pursuant to Rule 13a-14(a)

31.2

32.1

Certification of Chief Financial Officer pursuant to Rule 13a-14(a)

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350

32.2

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350

101.INS

XBRL Instance Document

101.SCH XBRL Taxonomy Extension Schema Document

101.CAL XBRL Taxonomy Extension Calculation Document

101.DEF XBRL Taxonomy Extension Definition Document

101.LAB XBRL Taxonomy Extension Labels Document

101.PRE XBRL Taxonomy Extension Presentation Document

Management contract or compensatory plan

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.

Dated: March 11, 2016

DIVERSIFIED RESTAURANT HOLDINGS, INC.

By: /s/ T. Michael Ansley
T. Michael Ansley
President, Chief Executive Officer, Director
Chairman of the Board and Principal Executive Officer

In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.

/s/ T. Michael Ansley
T. Michael Ansley
President, Chief Executive Officer, Director,
Chairman of the Board and Principal Executive Officer

/s/ David G. Burke
David Gregory Burke
Treasurer, Chief Financial Officer, Director, Principal Financial Officer
and Principal Accounting Officer

/s/ Jay Alan Dusenberry
Jay Alan Dusenberry
Secretary, Director

/s/ David Ligotti
David Ligotti
Director

/s/ Gregory J. Stevens
Gregory J. Stevens
Director

/s/ Joseph M. Nowicki
Joseph M. Nowicki
Director

/s/ Philip Friedman
Philip Friedman
Director

Dated: March 11, 2016

LEADERSHIP

T. Michael Ansley
President, Chief Executive Officer,
and Chairman of the Board of Directors

David G. Burke
Chief Financial Officer, Treasurer, and Director

Jason Curtis
Chief Operating Officer

Brad Haber
President of Bagger Dave’s

Toni Werner
Controller

Misty Sirch
Director of Real Estate

Lupita Distaso
Vice President of Purchasing

2015

ANNUAL REPORT

BOARD OF DIRECTORS

T. Michael Ansley*
Chairman of the Board of Directors,
President and Chief Executive Officer –
Diversified Restaurant Holdings, Inc.

David G. Burke
Chief Financial Officer and Treasurer –
Diversified Restaurant Holdings, Inc.

Jay Alan Dusenberry 1,2,*
Vice President – Marisa Manufacturing

Philip Friedman 1,2
Chief Executive Officer – Salsarita’s Fresh Cantina

David Ligotti
Owner – Oakwood Business Services, LLC

Joseph M. Nowicki 1,*
Executive Vice President and Chief Financial Officer –
Beacon Roofing Supply

Gregory J. Stevens 2
Strategic Engineer and Partner – Cold Heading Company

1 Audit Committee
2 Compensation Committee
* Committee Chairman

SHAREHOLDER’S INFORMATION

CORPORATE HEADQUARTERS
Diversified Restaurant Holdings, Inc.
27680 Franklin Road
Southfield, Michigan 48034
248.223.9160
www.diversifiedrestaurantholdings.com

ANNUAL MEETING
Diversified Restaurant Holdings’ Annual Meeting of
Shareholders will be held on Thursday, June 2, 2016
at 10:00 am at:

1218 Randolph St.,
Detroit, Michigan 48226

INVESTOR RELATIONS
Investors, stockbrokers, security
analysts and others seeking information about
Diversified Restaurant Holdings should contact:

Deborah K. Pawlowski
Kei Advisors LLC
716-843-3908
dpawlowski@keiadvisors.com

ATTORNEYS
Dickinson Wright PLLC
Troy, Michigan

TRANSFER AGENT
For services such as change of address, replacement of
lost certificates and changes in registered ownership,
or for inquiries as to your account, contact:

INDEPENDENT AUDITORS
BDO USA, LLP
Troy, Michigan

Computershare
250 Royall St.
Canton, Massachusetts 02021
(800) 368-5948
www.computershare.com

STOCK INFORMATION
Diversified Restaurant Holdings’stock is quoted on the
NASDAQ Capital Market under the symbol SAUC.

L
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D
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27680 Franklin Road • Southﬁeld, MI 48034 • 248.223.9160

www.diversiﬁedrestaurantholdings.com

NASDAQ: SAUC