Nathan's Famous, Inc. Annual Report 2019

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FY2019 Annual Report · Nathan's Famous, Inc.

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A N N U A L

R E P O R T

F I N A N C I A L H I G H L I G H T S

(In thousands, except share and per share amounts)

2019

2018

2017

2016

2015

Fiscal Year(1)

Selected Consolidated Financial Data:
As reported
Total revenues
Income from operations(2)
Net income
Income per share
Basic
Diluted
Weighted average shares used in computing income per share
Basic
Diluted
Supplemental Non-GAAP information(3)
EBITDA(4)
Adjusted EBITDA(5)

$101,849
$ 27,976
$ 21,493

$104,201
$ 27,100
$ 2,630

$96,256
$26,280
$ 7,485

$ 100,449
$ 24,963
$ 6,096

$ 98,649
$ 19,958
$ 11,703

$
$

5.13
5.09

$
$

0.63
0.62

$ 1.79
$ 1.78

$
$

1.38
1.37

$ 2.61
$ 2.55

4,187
4,220

4,181
4,221

4,172
4,206

4,430
4,463

4,486
4,588

$ 41,414
$ 30,399

$ 19,055
$ 29,115

$27,766
$28,348

$ 26,269
$ 27,155

$ 21,474
$ 22,497

(1) Our fiscal year ends on the last Sunday in March, which results in a 52- or 53-week year. The fiscal year ended March 31, 2019 consisted of 53 weeks. The fiscal years ended March

25, 2018, March 26, 2017, March 27, 2016 and March 29, 2015 consisted of 52 weeks.

(2) Represents total revenues less (i) cost of sales; (ii) restaurant operating expenses; (iii) general and administrative expenses; (iv) depreciation and amortization and (v) Advertising fund expense.
(3) The Company has provided EBITDA and Adjusted EBITDA that the Company believes will impact the comparability of its results of operations. The Company believes that
EBITDA and Adjusted EBITDA are useful to investors to assist in assessing and understanding the Company’s operating performance and underlying trends in the Company’s
business because EBITDA and Adjusted EBITDA are (i) among the measures used by management in evaluating performance and (ii) are frequently used by securities analysts,
investors and other interested parties as a common performance measure. EBITDA and Adjusted EBITDA are not recognized terms under US GAAP and should not be viewed as
alternatives to net income or other measures of financial performance or liquidity in conformity with US GAAP. Additionally, our definitions of EBITDA and Adjusted EBITDA
may differ from other companies. Analysis of results and outlook on a non-US GAAP basis should be used as a complement to, and in conjunction with, data presented in accor-
dance with US GAAP.

35000

30000

(4) EBITDA represents net income adjusted for the reversal of (i) interest expense; (ii) provision for income taxes and (iii) depreciation and amortization expense.
(5) Adjusted EBITDA represents EBITDA adjusted for the reversal of (i) gain on sale of property and equipment; (ii) loss on debt extinguishment in fiscal 2018; (iii) impairment charge on
long-lived assets in fiscal 2018; (iv) share-based compensation; (v) impairment charges on long-term investment in fiscal 2016; and (vi) amortization of bond premium on available-for-
sale securities in fiscal 2016 and 2015.

100000

30000

25000

30000

25000

120000

100000

80000

20000

25000

60000

Corporate Profile
60000
Over one hundred years ago, Nathan’s began as a nickel hot dog stand on Coney Island in 1916 and, over the past century, has become a
much-loved “New York institution” that has evolved into a highly recognized brand throughout the United States and the world.

15000

40000

10000

20000

Through our innovative points-of-distribution strategies, Nathan’s products are marketed within our restaurant system and throughout a
broad spectrum of other food-service and retail environments. Our programs provide for the sale of Nathan’s World Famous Beef Hot Dogs,
crinkle-cut French fries and other famous favorites to retail and food-service locations nationwide and within sixteen foreign territories and
countries. In total, Nathan’s products are marketed for sale in approximately 78,000 locations, including supermarkets, mass merchandisers
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and club stores throughout the United States. Last year, over 700 million Nathan’s Famous hot dogs were sold.

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5000

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10000

20000

Successful market penetration of our highly-recognized valued brand and products, through a wide variety of distribution channels, continues
to provide new and exciting growth opportunities.

TOTA L R E V E N U E S
( $ I N M I L L I O N S )

I N CO M E FR O M O P E R AT I O N S ( 2 )
( $ I N M I L L I O N S )

A D J U S T E D E B I T DA ( 5 )
( $ I N M I L L I O N S )

$98.6

$100.4

$98.6

$100.4

$98.6
$96.3

$104.2
$100.4

$96.3

$104.2

$101.8
$96.3

$104.2

$101.8

$25.0

$26.3

$25.0

$26.3

$27.1
$25.0

$27.1

$28.0
$26.3

$28.0

$27.1

$28.0

$28.3

$27.2

$28.3

$29.1
$27.2

$27.2

$30.4
$28.3

$29.1

$30.4

$29.1

$30.4

$20.0

$22.5

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S H A R E H O L D E R ’ S L E T T E R

Fiscal 2019 represented another successful year for Nathan’s
Famous, with the Company achieving record earnings and
operating profit through the continued expansion of its
business model aimed at increasing the number and types
of distribution points for its signature products.

Through our brand-marketing and product-distribution
strategy, which has been the driving force behind the
Company’s success over the last 15 years, we have trans-
formed a regional quick-service restaurant concept into
an internationally-recognized brand with a wide vari-
ety of quality products sold through varied channels of
distribution.

Today, in addition to a restaurant system comprised of
259 company-owned and franchised units, our prod-
ucts are offered for sale at over 70,000 different retail
and foodservice locations throughout all 50 States, the
District of Columbia, Puerto Rico, Guam, the U.S. Virgin
Island and 16 foreign countries. In the aggregate, more
than 700 million Nathan’s Famous hot dogs were sold
through all channels of distribution last year. The restau-
rant company I came to work for in 2003, which had an
EBITDA of approximately $3.2 Million and an operating
loss of approximately $1.5 Million, now has a normalized
run-rate EBITDA, a non-GAAP financial measure, in
excess of $30 Million,(1) over 90% of which is generated
through product distribution activities that were not
part of the primary business plan 16 years ago.

Operational and Financial Results
We achieved very strong operational and financial
results during fiscal 2019.

On an overall basis, results for fiscal 2019 compared
to fiscal 2018 were as follows: (1) EBITDA, a non-GAAP
financial measure, was $41.4 Million, an increase of
$22.36 Million or 117%(1); (2) pre-tax income was $29.4
Million, an increase of $25.3 Million or 615%; (3) net
income was $21.5 Million, an increase of $18.86 Million
or 717%; and (4) diluted earnings per share were $5.09,
an increase of $4.47 or 721%.

Adjusted EBITDA, a non-GAAP financial measure, was
$30.4 Million in fiscal 2019, an increase of $1.28 Million, or
4.4% from fiscal 2018. Income from operations of $27.98
Million in fiscal 2019 increased by $1.67 Million or 6.3%
over Adjusted income from operations in fiscal 2018 as
presented in the following schedule.

(In thousands)

As reported
Income from operations

Less: Impairment charge
long-lived assets(2)

Adjusted income from
operations

Fiscal Year

2019

2018

$ 27,976

$ 27,100

(790)

$ 27,976

$ 26,310

Product Licensing
Our licensing program, which consists primarily of the
sale of Nathan’s Famous branded consumer packaged
goods through supermarkets, club stores and mass mer-
chandisers, is the largest part of our business today, both
from the perspective of profit contribution and points of
distribution. Overall, license royalties during fiscal 2019
increased 2.6% to $23.62 Million.

Our most significant licensing agreement is with
Smithfield Foods/John Morrell & Co., and covers the
sale of our portfolio of consumer packaged and certain
bulk packaged Nathan’s Famous hot dog products to
retailers throughout the United States. In fiscal 2019, roy-
alties earned under this agreement increased by 2.1% to
$21.27 Million on a 3.4% increase in unit volume.

Other licenses in our licensing program include licenses
to sell at retail Nathan’s Famous Crinkle Cut French
Fries, Nathan’s Famous Beer Batter Onion Rings, mus-
tards, pickles, franks ’n blankets, mini bagel dogs and
mozzarella sticks.

The Branded Products Program
The Branded Products Program is our foodservice sales
program which features the bulk sale of Nathan’s Famous
hot dogs to the food service industry. Today, our prod-
ucts are sold through the Branded Products Program
at over 14,000 points of distribution, to include several
large national and regional restaurant, movie theater and
convenience store chains, as well as thousands of other
locations including ballparks, arenas, amusement parks,
college campuses, hospitals, casinos, resorts and school

systems. Through the Branded Products Program, we do
business with all of the major foodservice distributors in
the United States, including SYSCO, US Foodservice,
PFG and McLane, as well as many regional distributors.

sponsorship arrangements. We are proud to have our
brand and certain signature products featured at all
home games of the New York Yankees, New York Mets,
Brooklyn Nets, St. Louis Cardinals and Dallas Cowboys.

In fiscal 2019, unit volume purchased by our customers
increased 3.6% and operating profit increased by 8.8%
to $10.3 Million.

Restaurant Operations
At the end of fiscal 2019, our Restaurant Operations
consisted of 4 Company-owned locations and 255 fran-
chised units. Revenues from Restaurant Operations in
fiscal 2019 declined 4.2% to $17.8 Million. The decline
in revenues was split 60/40 between Company-owned
stores and franchising. During the year, we opened
13 new franchised units during the year, including 4
Branded Menu Program units and 5 international units.

As previously disclosed, in the 3rd quarter of fiscal
2019 we sold certain real property associated with our
Company-owned store on 86th Street in Brooklyn, New
York, which resulted in the closure of the restaurant in
January 2019. The closure of the store prior to the end of
fiscal 2019 negatively impacted comparative Company-
owned revenue by approximately $270,000. However, the
sale of the real property produced a $10.8 Million gain.

Brand Marketing
The Nathan’s Famous July 4th International Hot Dog
Eating Contest continues to be our most important mar-
keting initiative. As has been the case during each of
the last several years, we conducted several preliminary
qualifying contests at high profile locations throughout
the United States in advance of the July 4th contest. The
main event on July 4th, 2018 in Coney Island was once
again attended by more than 40,000 spectators and
broadcast to millions of viewers by ESPN. The great Joey
Chestnut won his 11th title by eating a Contest record 74
hot dogs and buns in 10 minutes, while Miki Sudo com-
pleted her quest for a 5-peat in the women’s contest by
eating 37!

Through our relationship with John Morrell, a number
of other significant promotions, sweepstakes, social
and digital ad campaigns and mobile events were con-
ducted throughout the year in association with our retail
products. Many of these activities are conducted with
major retailer tie-ins and all of them focus on consumer
engagement to create and reinforce brand affinity.

Returning Capital to Shareholders
The success of our current business model has allowed
us to return significant capital to our shareholders. Since
the early 2000s, we have repurchased more than 5 mil-
lion shares of our common stock. At an average price of
just over $15.00 per share, we reduced our outstanding
share count by more than 50%, creating significant value
for all of our shareholders.

In fiscal 2015, our capital return strategy shifted to div-
idends. At that time, and again in fiscal 2018, we paid
one-time special dividends to all of our shareholders.
Together, more than $137 Million, or $30 per share,
was returned to shareholders in a tax efficient manner
through dividends. In fiscal 2019, we declared and paid
the first regular quarterly dividend in the Company’s
long history—$0.25 per share per quarter, or $1.00 per
share for the fiscal year. For fiscal 2020, we have already
announced that the quarterly dividend will be raised to
$0.35 per share, or $1.40 for the fiscal year.

In all, between stock buybacks and cash dividends, a
total of approximately $220 Million has been returned
to shareholders over the last 18 years—not bad for a
company that had a market capitalization of less than
$30 Million at the beginning of those 18 years!

In Conclusion
Our focused strategies, creative approaches, and ever-
expanding opportunities should afford us with the ability
to continue to expose the Nathan’s Famous brand and
advance the sale of Nathan’s Famous products through a
broad variety of environments and distribution channels.
As we seek to continue to expand and pursue profitable,
new opportunities, we will retain our steadfast commit-
ment to quality and endeavor to serve our shareholders
responsibly. We remain extremely appreciative of your
continued support.

The Nathan’s Famous brand also continues to derive sig-
nificant marketing benefits from our professional sports

ERIC GATOFF
Chief Executive Officer

(1) Please see definition of EBITDA and Adjusted EBITDA and the reconciliation of EBITDA and Adjusted EBITDA to net income in the Annual Report on Form 10-K for

the fiscal year ended March 31, 2019, included herein.

(2) See Note B to our consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended March 31, 2019, included herein.

2 0 1 9 F O R M 1 0 - K

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

FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2019
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________to__________

Commission File No. 001-35962

NATHAN’S FAMOUS, INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)

11-3166443
(I.R.S. Employer Identification No.)

One Jericho Plaza, Jericho, New York
(Address of principal executive offices)

Registrant’s telephone number, including area code:

Title of each class
Common Stock, par value $.01 per share

Trading Symbol(s)
NATH

11753
(Zip Code)

516-338-8500

Name of each exchange on which
registered
The NASDAQ Global Market

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

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

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 _ No X

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 X No __

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted and
to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files). Yes X No __

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

Large accelerated filer
Non-accelerated filer

Accelerated filer
Smaller reporting company
Emerging growth company

X
X

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for

complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ___

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of the last business
day of the registrant’s most recently completed second fiscal quarter – September 23, 2018 - was approximately $249,335,000, which
value, solely for the purposes of this calculation excludes shares held by the registrant’s officers and directors. Such exclusion shall not be
deemed a determination by registrant that all such individuals are, in fact, affiliates of the registrant.

As of June 14, 2019, there were outstanding 4,210,692 shares of Common Stock, par value $.01 per share.

DOCUMENTS INCORPORATED BY REFERENCE– The information required by Part III, Items 10, 11, 12 and 13 is incorporated
by reference from the registrant’s definitive proxy statement for the 2019 Annual Meeting of Shareholders which is expected to be filed
pursuant to Regulation 14A of the Securities Exchange Act of 1934 no later than 120 days after the conclusion of Nathan Famous, Inc.’s
fiscal year ended March 31, 2019.

TABLE OF CONTENTS

PART I

Page

Item 1.
Business. ..................................................................................................................................................... 1
Item 1A. Risk Factors. ................................................................................................................................................ 16
Item 1B. Unresolved Staff Comments. ...................................................................................................................... 31
Properties..................................................................................................................................................... 32
Item 2.
Legal Proceedings. ...................................................................................................................................... 32
Item 3.
Mine Safety Disclosures. ............................................................................................................................. 32
Item 4.

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity

Securities. ................................................................................................................................................. 33
Selected Financial Data. .............................................................................................................................. 34
Item 6.
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations. ..................... 37
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. ................................................................... 54
Financial Statements and Supplementary Data. .......................................................................................... 55
Item 8.
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. .................... 55
Item 9A. Controls and Procedures. ............................................................................................................................. 56
Item 9B. Other Information. ....................................................................................................................................... 56

PART III

Item 10. Directors, Executive Officers and Corporate Governance. ......................................................................... 58
Executive Compensation. ............................................................................................................................ 58
Item 11.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. ... 58
Item 12.
Certain Relationships and Related Transactions, and Director Independence. ........................................... 58
Item 13.
Principal Accountant Fees and Services. ..................................................................................................... 59
Item 14.

PART IV

Item 15.
Item 16.

Exhibits and Financial Statement Schedules. .............................................................................................. 60
Form 10-K Summary .................................................................................................................................. 61

Signatures ...................................................................................................................................................................... 62

Index to Financial Statements and Financial Statement Schedule ........................................................................... F-1

This page intentionally left blank

PART I

Forward-Looking Statements

This Form 10-K contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of
1933, as amended and Section 21E of the Securities Exchange Act of 1933, as amended, that involve risks and uncertainties.
You can identify forward-looking statements because they contain words such as “believes”, “expects”, “projects”, “may”,
“would”, “should”, “seeks”, “intends”, “plans”, “estimates”, “anticipates” or similar expressions that relate to our strategy,
plans or intentions. All statements we make relating to our estimated and projected earnings, margins, costs, expenditures,
cash flows, growth rates and financial results or to our expectations regarding future industry trends are forward-looking
statements. In addition, we, through our senior management, from time to time make forward-looking public statements
concerning our expected future operations and performance and other developments. These forward-looking statements are
subject to known and unknown risks, uncertainties and other factors that may change at any time, and, therefore, our actual
results may differ materially from those that we expected. We derive many of our forward-looking statements from our
operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions
are reasonable, we caution that it is very difficult to predict the impact of known factors, and, of course, it is impossible for
us to anticipate all factors that could affect our actual results. All forward-looking statements contained in this Form 10-K
are based upon information available to us on the date of this Form 10-K.

Item 1. Business.

As used herein, unless we otherwise specify, the terms “we,” “us,” “our,” “Nathan’s,” “Nathan’s Famous” and
the “Company” mean Nathan’s Famous, Inc. and its subsidiaries, including NF Treacher’s Corp. References to the fiscal
2019 period mean the fiscal year ended March 31, 2019, references to the fiscal 2018 period mean the fiscal year ended
March 25, 2018 and references to the fiscal 2017 period mean the fiscal year ended March 26, 2017. In addition, references
to the “Notes”, “2025 Notes” or the “2025 Senior Secured Notes” refer to the $150,000,000 6.625% Senior Secured Notes
due 2025 and references to the “2020 Notes” or the “2020 Senior Secured Notes” refer to the $135,000,000 10.000% Senior
Secured Notes which were redeemed on November 16, 2017.

We are a leading branded licensor, wholesaler and retailer of products marketed under our Nathan’s Famous brand,
including our popular Nathan’s World Famous Beef Hot Dogs. What began as a nickel hot dog stand on Coney Island in
1916 has evolved into a highly recognized brand throughout the United States and the world. Our innovative business model
seeks to maximize the points of distribution for and the consumption of Nathan’s World Famous Beef Hot Dogs, crinkle-cut
French fries and our other products across a wide-range of grocery retail and foodservice formats. Our products are currently
marketed for sale in approximately 78,000 locations, including supermarkets, mass merchandisers and club stores, selected
foodservice locations and our Company-owned and franchised restaurants throughout the United States and in sixteen foreign
territories and countries. The Company considers itself to be in the foodservice industry, and has pursued co-branding
initiatives within other foodservice environments. Our major channels of distribution are as follows:

(cid:404) Our licensing program contracts with certain third parties to manufacture, distribute, market and sell a broad
variety of Nathan’s Famous branded products including our hot dogs, sausage and corned beef products, frozen
French fries and additional products through retail grocery channels and club stores throughout the United
States. As of March 31, 2019, packaged Nathan’s World Famous Beef Hot Dogs continued to be sold in
approximately 63,000 supermarkets, mass merchandisers and club stores including Kroger, Publix, ShopRite,
Walmart, Target, Sam’s Club, Costco and BJ’s Wholesale Club located in all 50 states. We earn revenue through
royalties on products sold by our licensees.

(cid:404) The Branded Product Program (“BPP”) provides foodservice operators in a variety of venues the opportunity
to capitalize on our Nathan’s Famous brand by marketing and selling certain Nathan’s Famous hot dog
products. We believe that the program has broad appeal to foodservice operators due to its flexibility to deliver
our products to a wide variety of distribution channels. In conjunction with the program, operators are granted
a limited use of the Nathan’s Famous trademark, as well as Nathan’s point of purchase materials. Unlike our
licensing and franchise programs, we do not generate revenue from royalties, but rather by selling our hot dog
products either directly to foodservice operators or to various foodservice distributors who resell the products
to foodservice operators.

(cid:404) Operating quick-service restaurants featuring Nathan’s World Famous Beef Hot Dogs, crinkle-cut French fries,
and a variety of other menu offerings, which operate under the name “Nathan’s Famous,” the name first used
at our original Coney Island restaurant which opened in 1916.

(cid:404) Our franchised restaurant operations are comprised predominately of our Nathan’s Famous concept, which
features a menu consisting of Nathan’s World Famous Beef Hot Dogs, crinkle-cut French fries and beverages
as well as other items. We earn royalties on restaurant sales at these franchise locations. In addition to our
traditional franchised restaurants, we enable approved foodservice operators to offer a Nathan’s Famous menu
of Nathan’s World Famous Beef Hot Dogs, crinkle-cut French fries, proprietary toppings and a limited menu
of other Nathan’s products through our Branded Menu Program (“BMP”). We earn royalties on Nathan’s
products purchased by our BMP franchise operators.

We also own, through our subsidiary NF Treacher’s Corp., the Arthur Treacher’s brand and trademarks. We use the
Arthur Treacher’s brand, products and trademarks as a branded seafood menu-line extension for inclusion in certain Nathan’s
Famous restaurants. Currently, we operate six Arthur Treacher’s BMP locations.

Our brand is widely recognized by virtue of our long history and broad geographic footprint, which allows us to
enjoy high consumer awareness in the United States and abroad and the ability to grow in markets and channels where the
brand is known but has not yet achieved optimal market penetration. We believe that our highly visible brand and reputation
for high quality products have allowed us to expand our food offerings beyond our signature hot dogs and command a price
premium across our portfolio of products. Over time, we have expanded menu options so that our Company-owned
restaurants and franchisees can supplement their core menu of Nathan’s World Famous Beef Hot Dogs, crinkle-cut French
fries and beverages with a variety of other quality menu choices. We have also developed a portfolio of licensed products
for sale at retail and grocery locations. We seek to maintain the same quality standard with each of our supplemental menu
items and licensed products as we do with our core hot dog and French fries menu. We intend to continue to leverage our
highly recognized global brand and iconic products to introduce new products into our existing distribution network, open
new points of distribution and grow our overall sales. We believe that there is great potential to increase our sales by
converting existing sales of non-branded products to Nathan’s branded products throughout the foodservice industry.

In recent years, our primary focus has been to expand the market penetration of the Nathan’s Famous brand.
Specifically, we have sought to increase the number of points of brand representation and grow product sales throughout our
various channels of distribution. In this regard, we have concentrated our efforts on:

(cid:404)

expanding our licensing programs for packaged Nathan’s Famous products through new product introductions
and geographic expansion; and

expanding the number of foodservice locations and distributors participating in the Nathan’s Famous Branded
Product Program;

expanding the number of domestic franchised Nathan’s Famous restaurant units through the opening of new
and innovative types of locations, including the Branded Menu Program, as well as continuing to develop master
franchising programs in foreign countries;

(cid:404)

continuing to profitably operate our iconic Company-owned restaurants, and opportunistically seek to invest in
Company-owned restaurant expansion.

As of March 31, 2019:

(cid:404) our Nathan’s Famous restaurant system consisted of 255 franchised units and four Company-owned units

(including one seasonal unit) located in 22 states and 14 foreign countries;

(cid:404) our Nathan’s Famous Branded Product Program distributes our Nathan’s World Famous Beef Hot Dogs
throughout all 50 states, the District of Columbia, Puerto Rico, Canada, the US Virgin Islands, Guam and
Mexico;

(cid:404) Nathan’s Famous packaged hot dogs and other products were offered for sale within approximately 63,000

supermarkets and club stores in all 50 states.

Our revenues are generated primarily from sales of products sold through our Branded Product Program and within
our Company-owned restaurants, as well as royalties from our retail licensing activities and the royalties, fees and other sums
we earn from our restaurant franchising activities.

We plan to expand the scope and market penetration of our Branded Product Program, further develop the restaurant
operations of existing Nathan’s Famous franchised and Company-owned outlets, open new Nathan’s Famous franchised
outlets in traditional or captive market environments and expand the Nathan’s Famous retail licensing programs. We also
plan to further expand our international presence through our franchise, and retail licensing programs. We may also
selectively consider opening new Company-owned restaurants.

We were incorporated in Delaware on July 10, 1992 under the name “Nathan’s Famous Holding Corporation” to
act as the parent of a Delaware corporation then-known as Nathan’s Famous, Inc. On December 15, 1992, we changed our
name to Nathan’s Famous, Inc., and our Delaware subsidiary changed its name to Nathan’s Famous Operating Corp. The
Delaware subsidiary was organized in October 1989 in connection with its re-incorporation in Delaware from that of a New
York corporation named “Nathan’s Famous, Inc.” The New York Nathan’s was incorporated on July 10, 1925, as a successor
to the sole-proprietorship that opened the first Nathan’s restaurant in Coney Island in 1916. On July 23, 1987, Equicor Group,
Ltd. merged with and into the New York Nathan’s in a “going private” transaction. The New York Nathan’s, the Delaware
subsidiary and Equicor may all be deemed to be our predecessors.

Restaurant Operations

Currently, our restaurant operations are comprised of 259 Nathan’s Famous restaurants, which have been co-

branded with Arthur Treacher’s and Kenny Rogers Roasters menu items in 37 and 12 units, respectively.

Nathan’s Famous Concept and Menus

Our Nathan’s Famous concept is scalable, offering a wide range of facility designs and sizes, suitable to a vast
variety of locations, featuring a core menu consisting of Nathan’s World Famous Beef Hot Dogs, crinkle-cut French fries
and beverages. Nathan’s menu is designed to take advantage of site-specific market opportunities by adding complementary
food items to the core menu. The Nathan’s concept is suitable to stand-alone or can be co-branded with other nationally
recognized brands.

Nathan’s World Famous Beef Hot Dogs are flavored with its secret blend of spices provided by Ida Handwerker in
1916, which historically have distinguished Nathan’s World Famous Beef Hot Dogs. Our hot dogs are prepared and served
in accordance with procedures which have not varied significantly since our inception over 100 years ago in our Company-
owned and franchised restaurants. Our signature crinkle-cut French fries, cooked in 100% trans-fat-free oil, are featured at
each Nathan’s restaurant. We believe the majority of sales in our Company-owned units consist of Nathan’s World Famous
Beef Hot Dogs, crinkle-cut French fries and beverages.

Individual Nathan’s restaurants supplement their core menu of Nathan’s World Famous Beef Hot Dogs, crinkle-cut
French fries and beverages with a variety of other quality menu choices including: char-grilled hamburgers, crispy chicken
tenders, crispy chicken and char-grilled chicken sandwiches, Philly cheese steaks, selected seafood items, a breakfast menu
and assorted desserts and snacks. We use the Arthur Treacher’s brand, products and trademarks as a branded seafood menu-
line extension for inclusion in certain Nathan’s Famous restaurants. While the number of supplemental menu items carried
varies with the size of the unit, the specific supplemental menus chosen are tailored to local food preferences and market
conditions. Each supplemental menu option consists of a number of variations; for example, the hamburger menu may
include char-grilled bacon cheeseburgers, double-burgers and super cheeseburgers. We seek to maintain the same quality
standard with each of Nathan’s supplemental menus as we do with Nathans’ core hot dog and French fries menu. Thus, for
example, hamburgers and sandwiches are prepared to order and not pre-wrapped or kept warm under lights. Nathan’s also
has a “Kids Meal” program in which various menu alternatives are combined with toys designed to appeal to the children’s
market. Soft drinks, iced tea, coffee and old fashioned lemonade and orangeade are also offered. The Company continually
evaluates new products. In the course of its evaluations, the Company seeks to respond to changing consumer trends,
including a trend toward perceived “healthier” products. In addition to its well-established, signature products, the Company
offers for sale in many of its restaurants up to seven chicken products, six fish products, and five salad and soup products.

Nathan’s restaurant designs are available in a range of sizes from 300 to 4,000 square feet. We have also developed
various Nathan’s carts, kiosks, mobile food carts, trucks and modular units. Our smaller units may not have customer seating
areas, although they may often share seating areas with other fast food or quick service outlets in food court settings. Other
units generally provide seating for 45 to 125 customers. Carts, trucks, kiosks and modular units generally carry only the core
menu. This menu is supplemented by a number of other menu selections in our other restaurant types.

We believe that Nathan’s carts, kiosks, modular units and food court designs are particularly well-suited for
placement in non-traditional sites, such as airports, travel plazas, stadiums, schools, convenience stores, entertainment
facilities, military facilities, business and industry foodservice, within larger retail operations and other captive markets.
Many of these settings may also be appropriate for our expanding Branded Menu Program or Branded Product Program. All
of these units feature the Nathan’s logo and utilize a contemporary design.

Franchise Operations

At March 31, 2019, our Nathan’s franchise system, including our Branded Menu Program, consisted of 255 units

operating in 22 states and 14 foreign countries.

Our franchise system includes among its 140 franchisees such well-known companies as HMS Host, Gourmet
Dining Services, Inc., CulinArt, National Amusements, Inc., Hershey Entertainment & Resorts Company, and Bruster’s Real
Ice Cream. We continue to market our franchising programs to larger, experienced and successful operators with the financial
and business capability to develop multiple franchise units, as well as to individual owner-operators with evidence of
restaurant management experience, net worth and sufficient capital.

During the fiscal 2019 period, no single franchisee accounted for over 10% of our consolidated revenue. At March
31, 2019, HMS Host operated 12 franchised outlets, including two units at airports, 9 units within highway travel plazas and
one unit within a mall. Additionally, at March 31, 2019, (i) HMS Host operated 47 locations featuring Nathan’s products
pursuant to our Branded Product Program, (ii) 35 mobile carts were registered to operate in New York, NY, and (iii) 15
Bruster’s Real Ice Cream shops were selling Nathan’s products under our Branded Menu Program.

Nathan’s Standard Franchise Program

Franchisees are required to execute a standard franchise agreement prior to opening each Nathan’s Famous unit.
Our current standard Nathan’s Famous franchise agreement provides for, among other things, a one-time $30,000 franchise
fee payable upon execution of the agreement, a monthly royalty payment based on 5.5% of restaurant sales and the
expenditure of up to 2.0% of restaurant sales on advertising. We may offer alternatives to the standard franchise agreement,
having to do with franchise royalties, fees or advertising requirements. The initial term of the typical franchise agreement is
20 years, with a 15-year renewal option by the franchisee, subject to conditions contained in the franchise agreement.

Franchisees are approved on the basis of their business background, evidence of restaurant management experience,

net worth and capital available for investment in relation to the proposed scope of the development agreement.

We provide numerous support services to our Nathan’s Famous franchisees. We assist in and approve all site
selections. Thereafter, we provide architectural plans suitable for restaurants of varying sizes and configurations for use in
food court, in-line and free standing locations. We also assist in establishing building design specifications, reviewing
construction compliance, equipping the restaurant and providing appropriate menus to coordinate with the restaurant design
and location selected by the franchisee. We typically do not sell food, equipment or supplies to our standard franchisees.

We offer various management-training courses for management personnel of Company-owned and franchised
Nathan’s Famous restaurants. A restaurant manager from each restaurant must successfully complete our mandated
management-training program. We also offer additional operations and general management training courses for all
restaurant managers and other managers with supervisory responsibilities. We provide standard manuals to each franchisee
covering training and operations, products and equipment and local marketing programs. We also provide ongoing advice
and assistance to franchisees. We meet with our franchisees to discuss upcoming marketing events, menu development and
other topics, each of which is designed to provide individual restaurant and system-wide benefits.

Franchised restaurants are required to be operated in accordance with uniform operating standards and specifications
relating to the selection, quality and preparation of menu items, signage, decor, equipment, uniforms, suppliers, maintenance
and cleanliness of premises and customer service. All standards and specifications are developed by us to be applied on a
system-wide basis. We regularly monitor franchisee operations and inspect restaurants. Franchisees are required to furnish
us with monthly sales or operating reports which assist us in monitoring the franchisee’s compliance with its franchise
agreement. We make both announced and unannounced inspections of restaurants to ensure that our practices and procedures
are followed. We have the right to terminate a franchise if a franchisee does not operate and maintain a restaurant in
accordance with the requirements of its franchise agreement, including for non-payment of royalties, sale of unauthorized
products, bankruptcy or conviction of a felony. During the fiscal 2019 period, franchisees opened 13 new Nathan’s Famous
franchised units in the United States (including 4 Branded Menu Program units), and 5 units internationally.

A franchisee who desires to open multiple units in a specific territory within the United States may enter into an
area development agreement under which we would expect to receive an area development fee based upon the number of
proposed units which the franchisee is authorized to open. With respect to our international development, we generally grant
exclusive territorial rights in foreign countries for the development of Nathan’s units based upon compliance with a
predetermined development schedule. Additionally, we may further grant exclusive manufacturing and distribution rights in
foreign countries, and we may require an exclusivity fee to be conveyed for such exclusive rights.

Nathan’s Branded Menu Program

Our Nathan’s Famous Branded Menu Program enables qualified foodservice operators to offer a Nathan’s Famous
menu of Nathan’s World Famous Beef Hot Dogs, crinkle-cut French fries, proprietary toppings, and a limited menu of other
Nathan’s products. Under the Branded Menu Program, the operator may use the Nathan’s Famous trademarks on signage
and as part of its menu boards. Additionally, the operator may use Nathan’s Famous paper goods and point of sale marketing
materials. Nathan’s also provides architectural and design services, training and operation manuals in conjunction with this
program. The operator provides Nathan’s with a fee and is required to sign a 10-year agreement. Nathan’s does not collect a
royalty based on the operator’s sales and the operator is not required to report sales to Nathan’s as required by the standard
franchise arrangements. Instead, the Branded Menu Program operator is required to purchase products from Nathan’s
approved distributors and; we earn our royalties from such purchases.

As of March 31, 2019, the Nathan’s Branded Menu Program was comprised of 115 outlets, which included 15
locations within Bruster’s Real Ice Cream shops, a premium ice cream franchisor headquartered in western
Pennsylvania.

Arthur Treacher’s

Arthur Treacher’s Fish-n-Chips, Inc. was originally founded in 1969. Arthur Treacher’s main product is its “Original
Fish-n-Chips,” consisting of fish fillets coated with a special batter prepared under a proprietary formula, deep-fried golden
brown, and served with English-style chips and corn meal “hush puppies.” Full menu restaurants emphasize the preparation
and sale of batter-dipped fried seafood and chicken dishes served in a quick-service environment.

We are the sole owner of all rights to the Arthur Treacher’s brand and the exclusive franchisor of the Arthur
Treacher’s restaurant system (subject to a limited license granted to PAT Franchise Systems, Inc. (“PFSI”)) in Indiana,
Michigan, Ohio, and Pennsylvania, (“the PFSI Markets”). Pursuant to the license, PFSI has no obligation to pay fees or
royalties to us in connection with its use of the Arthur Treacher’s intellectual property within the PFSI Markets. As a result
of PFSI’s failure to satisfy the Development Schedules for each of the territories, all future development rights have reverted
to Nathan’s.

As of March 31, 2019, Arthur Treacher’s, as a co-brand, was included within 37 Nathan’s Famous restaurants. Our
primary intention was to continue including co-branded Arthur Treacher’s operations within our Nathan’s Famous restaurants
and explore alternative distribution channels for Arthur Treacher’s products. We may seek to expand the opportunity for an
Arthur Treacher’s Branded Menu Program in the future. Currently we operate six Arthur Treacher’s BMP locations.

Kenny Rogers Roasters

We have the right to use the Kenny Rogers Roasters trademarks for the continued sale of the Kenny Rogers Roasters
products in the Nathan’s Famous restaurants existing at April 23, 2008, where the Kenny Rogers products had already been
introduced. As of March 31, 2019, the Kenny Rogers brand was being sold within 12 Nathan’s restaurants.

Company-owned Nathan’s Restaurant Operations

As of March 31, 2019, we operated four Company-owned Nathan’s units, including one seasonal location, in New
York. Since 2012, we have invested significantly in our Company-owned restaurants. In March 2012, we relocated our
seasonal Coney Island Boardwalk restaurant to a more prominent location. Our Coney Island flagship location was rebuilt
and re-opened on May 20, 2013 after suffering severe damage as a result of Superstorm Sandy on October 29, 2012. Our
Yonkers location was down-sized, relocated and re-opened on November 18, 2013 pursuant to its new lease, and our
Oceanside restaurant was also relocated and downsized and re-opened on March 25, 2015. Three of our Company-owned
restaurants range in size from approximately 2,650 square feet to 10,000 square feet and have seating to accommodate
between 60 and 125 customers. These restaurants are open seven days a week on a year-round basis and are designed to
appeal to consumers of all ages. We have established high standards for food quality, cleanliness, and service at our
restaurants and regularly monitor the operations of our restaurants to ensure adherence to these standards. We completed the
sale of the Company-owned restaurant, including the real estate, in Bay Ridge, Brooklyn, NY in October 2018. The Company
continued operating the restaurant under a Surrender Agreement with the purchaser until January 2019.

Two of our Company-owned restaurants have contemporary service areas, seating, signage, and general decor. Our

Coney Island restaurant, which first opened in 1916, remains unique in its presentation and operations.

Our Company-owned restaurants typically carry a broader selection of menu items than our franchise restaurants
and generally attain sales levels higher than the average of our newer franchise restaurants. The non-core menu items at the
Company-owned restaurants, tend to have lower margins than the core menu.

International Development

As of March 31, 2019, Nathan’s Famous franchisees operated 46 units in 14 foreign countries.

During fiscal 2019 our franchisees opened 5 new units internationally, including our first units in Spain and the
United Kingdom. Additionally, our franchisees opened one unit each in Kyrgyzstan, Kazakhstan and the Philippines,
pursuant to existing development agreements.

We may seek to continue granting exclusive territorial rights for franchising and for the manufacturing and
distribution rights in foreign countries, and we expect to require that an exclusivity fee be conveyed for these rights. We plan
to develop the restaurant franchising system internationally through the use of master franchising agreements based upon
individual or combined use of our existing restaurant concepts and for the distribution of Nathan’s products.

Following is a summary of our international operations for the fiscal years ended March 31, 2019, March 25, 2018

and March 26, 2017: See Item 1A-“Risk Factors.”

Total revenue ..................................................................................... $
Gross profit (a) .................................................................................. $

2019
3,978,000 $
1,403,000 $

2018
6,540,000 $
2,264,000 $

2017
6,186,000
2,591,000

March 31,

March 25,

March 26,

(a) Gross profit represents the difference between revenue and cost of sales.

Location Summary

The following table shows the number of our Company-owned and franchised units in operation at March 31, 2019

and their geographical distribution:

Domestic Locations
Arizona ......................................................................
California ...................................................................
Connecticut ...............................................................
Florida .......................................................................
Georgia ......................................................................
Illinois .......................................................................
Indiana .......................................................................
Kentucky ...................................................................
Maryland ...................................................................
Massachusetts ............................................................
Missouri .....................................................................
Nevada .......................................................................
New Jersey ................................................................
New York ..................................................................
North Carolina ...........................................................
Ohio ...........................................................................
Pennsylvania .............................................................
Rhode Island ..............................................................
South Carolina ...........................................................
Texas .........................................................................
Virginia .....................................................................
West Virginia ............................................................
Domestic Subtotal .....................................................

Company
-
-
-
-
-
-
-
-
-
-
-
-
-
4
-
-
-
-
-
-
-
-
4

Franchise (1)
1
1
4
22
7
1
1
3
3
7
1
10
24
98
2
3
10
2
6
1
1
1
209

Total (1)
1
1
4
22
7
1
1
3
3
7
1
10
24
102
2
3
10
2
6
1
1
1
213

International Locations

Company

Franchise (1)

Total (1)

Australia ....................................................................
Dominican Republic ..................................................
Egypt .........................................................................
Jamaica ......................................................................
Kazakhstan ................................................................
Kyrgyzstan ................................................................
Latvia.........................................................................
Malaysia ....................................................................
Panama ......................................................................
Philippines .................................................................
Russia ........................................................................
Spain ..........................................................................
Turkey .......................................................................
United Kingdom ........................................................
International Subtotal ................................................
Grand Total ...............................................................

-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4

7
5
1
2
5
4
1
4
3
3
8
1
1
1
46
255

7
5
1
2
5
4
1
4
3
3
8
1
1
1
46
259

(1) Amounts include 115 units operated pursuant to our Nathan’s and Arthur Treacher’s Branded Menu Programs. Units

operating pursuant to our Branded Product Program are excluded.

Branded Product Program

Through the Branded Product Program, Nathan’s provides qualified foodservice operators in a variety of venues
the opportunity to capitalize on Nathan’s valued brand by marketing and selling primarily Nathan’s Famous hot dog products.
We believe that the program is unique in its flexibility and broad appeal. Hot dogs are offered in a variety of sizes and
additional specialty products are available to satisfy consumer needs. In conjunction with the program, the operators are
granted a limited use of the Nathan’s Famous trademark, as well as Nathan’s point of purchase materials. We earn income
by selling our products either directly to the end users or to various foodservice distributors who resell the products to specific
operators.

As of March 31, 2019, the Branded Product Program distributed product in all 50 states, the District of Columbia,
Puerto Rico, Canada, the U.S. Virgin Islands, Guam and Mexico. During the fiscal 2019 period, we continued to open many
new locations offering Nathan’s branded products. Today, Nathan’s World Famous Beef Hot Dogs are being offered in
national restaurant chains such as Auntie Anne’s, Hot Dog On A Stick, Johnny Rockets, national movie theater chains such
as Regal Entertainment and National Amusements, casino hotels such as Foxwoods Casino in Connecticut, the Grand Casino
in Minnesota and convenience store chains such as Race Trac, Holiday Station stores, and the Cinemex movie chain in
Mexico. The Branded Products Program also distributes product in professional sports arenas with Nathan’s World Famous
Beef Hot Dogs now being served in stadiums and arenas that host the New York Yankees, New York Mets, Brooklyn Nets,
New York Islanders, Dallas Cowboys, Miami Marlins and Colorado Rockies.

Additionally, our products are offered in numerous other foodservice operations including cafeterias, snack bars
and vending machines located in many different types of foodservice outlets and venues, including airports, highway travel
plazas, colleges and universities, gas and convenience stores, military installations and Veteran’s Administration hospitals
throughout the United States.

Nathan’s expects to continue to seek out and evaluate a variety of alternative environments designed to maximize

the value of our Branded Product Program.

Expansion Program

We expect that our retail licensing program will continue to grow centered around our licensing program with John
Morrell & Co. John Morrell & Co. brings superior sales and marketing resources to our brand through its national scale,
broad distribution platform, strong retail relationships and research and development infrastructure capable of developing
and introducing attractive new products. As a result of our partnership with John Morrell & Co., we expect Nathan’s Famous
products to further penetrate the grocery, mass merchandising and club channels by expanding points of distribution in
targeted, underpenetrated regions and through the development of new products. John Morrell & Co. expects to leverage this
relationship with continued full-scale marketing efforts, both inside and outside of stores, highlighted by exciting customer
events and brand representation and support at numerous Hot Dog Eating Contest Qualifying Events.

We expect to continue the growth of our Branded Product Program through the addition of new points of sale. We
believe that the flexible design of the Branded Product Program makes it well-suited for sales to all segments of the broad
foodservice industry. We intend to keep targeting sales to a broad line of food distributors, which we believe complements
our continuing focus on sales to various foodservice retailers. We continue to believe that as consumers look to assure
confidence in the quality of the food that they purchase, there is great potential to increase our sales by converting existing
sales of non-branded products to Nathan’s branded products throughout the foodservice industry.

We seek to market our franchise restaurant program to large, experienced and successful operators with the financial
and business capability to develop multiple franchise units, as well as to individual owner-operators with evidence of
restaurant management experience, net worth and sufficient capital.

We also expect to continue opening Nathan’s Famous franchised units individually and on a co-branded basis,
expanding product distribution through various means such as branded products and retail licensing arrangements,
developing master franchising programs in foreign countries and including our Arthur Treacher’s signature products both
within our restaurant system and as a separate Branded Menu Program. We may selectively consider opening new Company-
owned Nathan’s units on an opportunistic basis. We may consider new opportunities in both traditional and captive market
settings.

We believe that our international development efforts will continue to garner a variety of interest as a result of the
unique product distribution opportunities that we offer. Because of the scalability of our concept and menu offerings, we
believe that there are also opportunities to co-brand our restaurant concept and/or menu items with other restaurant concepts
internationally. We believe that in addition to restaurant franchising, we could further increase revenues by continuing to
offer master development agreements to qualified persons or entities allowing for the operation of franchised restaurants,
sub-franchising of restaurants to others, licensing the manufacture of our signature products, selling our signature products
through supermarkets or other retail venues and further developing our Branded Product Program. Qualified persons or
entities must have satisfactory foodservice experience managing multiple units, the appropriate infrastructure and the
necessary financial resources to support the anticipated development of the business.

Co-branding

We believe that there is a continuing opportunity for co-branding of our restaurant concept and/or menu items with
other restaurant concepts, as well as within our restaurant system as new franchise opportunities are developed. Franchisees
that have co-branded a Nathan’s Famous restaurant with our other brands received a then-current Uniform Franchise Offering
Circular (“UFOC”) or Franchise Disclosure Document (“FDD”) and executed a participation agreement as a rider to their
franchise agreement. We initially implemented our co-branding strategy within the Nathan’s Famous restaurant system by
adding the Arthur Treacher’s and Kenny Rogers Roasters brands into Nathan’s Famous restaurants. Upon the sale of Kenny
Rogers Roasters in April 2008, we discontinued co-branding that brand within new restaurants in the Nathan’s Famous
system. We have continued our co-branding effort with the Arthur Treacher’s brand with new and existing Nathan’s Famous
franchisees and expect to do so in the future. We may seek to further explore opportunities to co-brand the Arthur Treacher’s
brand to other multi-unit foodservice operators in the future.

We believe that our diverse brand offerings complement each other, which has enabled us to market franchises of
co-branded units and continue co-branding within our franchised units. We also believe that our various restaurants’ products
provide us with strong lunch and dinner day-parts as well as snacking occasions.

We believe that a multi-branded restaurant concept offering strong lunch and dinner day-parts is appealing to both
consumers and potential franchisees. Such restaurants are designed to allow the operator to increase sales and leverage the
cost of real estate and other fixed costs to provide superior investment returns as compared to many restaurants that are single
branded. We have successfully co-branded Nathan’s with numerous business partners that were not Nathan’s franchisees
because of our adaptability of our menu, to be limited or extensive, and the uniqueness of our signature hot dog product.

Licensing Program

Pursuant to an Agreement expiring in March 2032, John Morrell & Co., a subsidiary of Smithfield Foods, Inc., has
been granted, among other things, (i) the exclusive right and obligation to manufacture, distribute, market and sell “Nathan’s
Famous” branded hot dog, sausage and corned beef products in refrigerated consumer packages to be resold through retail
channels (e.g., supermarkets, groceries, mass merchandisers and club stores) within the United States, (ii) a right of first offer
to license any other “Nathan’s Famous” branded refrigerated meat products in consumer packages to be resold through retail
channels within the United States, on terms to be negotiated in good faith, (iii) the right and obligation to manufacture
“Nathan’s Famous” branded hot dog and sausage products in bulk for use in the food service industry within the United
States, and (iv) the non-exclusive right and obligation to supply “Nathan’s Famous” natural casing and skinless hot dogs in
bulk for use in the “Nathan’s Famous” restaurant system within the United States. The Agreement provides for royalties on
packaged products sold to supermarkets, club stores and grocery stores, payable on a monthly basis to the Company equal to
10.8% of net sales, subject to minimum annual guaranteed royalties of at least $10 million in the first year of the term and
which minimum guaranteed royalties increase annually throughout the term. Nathan’s earned royalties of approximately
$19,733,000 in fiscal 2019 and $19,445,000 in fiscal 2018 representing 19.4% and 18.7% of total revenues, respectively. We
believe our future operating results will continue to be substantially impacted by the terms and conditions of the agreement
with John Morrell & Co., but there can be no assurance thereof (See Item 1A - “Risk Factors”). Since 2002, John Morrell &
Co. has licensed from us the right to manufacture and sell branded hot dogs and sausages to selected foodservice
accounts. Pursuant to this arrangement, we earned royalties of $1,538,000 and $1,388,000 during the fiscal 2019 period and
fiscal 2018 period, respectively. The majority of these royalties were earned from one company. As of March 31, 2019
packaged Nathan’s World Famous Beef Hot Dogs continued to be sold in approximately 63,000 supermarkets, mass
merchandisers and club stores including Kroger, Publix, ShopRite, Walmart, Target, Sam’s Club, Costco and BJ’s Wholesale
Club located in all 50 states. We believe that the overall exposure of the brand and opportunity for consumers to enjoy the
Nathan’s World Famous Beef Hot Dog in their homes helps promote “Nathan’s Famous” restaurant patronage. Royalties
earned from this agreement were approximately 90% of our fiscal 2019 period license revenues.

We license the manufacture of the proprietary spices which are used to produce Nathan’s World Famous Beef Hot
Dogs to Saratoga Specialties. During fiscal 2019 and fiscal 2018, we earned $1,091,000 and $1,062,000, respectively, from
this license. Through this agreement, we control the manufacture of all Nathan’s hot dogs.

During fiscal 2019, our licensee Lamb Weston, Inc., continued to produce and distribute Nathan’s Famous frozen
French fries and onion rings for retail sale pursuant to a license agreement. These products were distributed within 34 states,
primarily on the East Coast and in the South-West and West Coast during fiscal 2019. During fiscal 2019 and 2018, we
earned royalties of $586,000 and $518,000, respectively, under this agreement. For the contract year ended in July 2018, we
earned royalties of $137,000 in excess of the annual minimum. Lamb Weston, Inc. continues to seek to further expand its
market penetration in the Eastern United States and in the Mid-West. Lamb Weston, Inc. exercised its third option to extend
the license agreement through July 2023, pursuant to which the minimum royalties will increase 4% annually.

During fiscal 2019, we continued to license the right to manufacture and sell miniature bagel dogs, franks-in-a-
blanket and other hors d’oeuvres through club stores, supermarkets and other retail food stores. Royalties earned under this
agreement were approximately $210,000 during fiscal 2019 and $227,000 during fiscal 2018.

We also have licensing agreements with Hermann Pickle Packers, Inc., Gold Pure Food Products Co., Inc. and
others. These companies licensed the “Nathan’s Famous” name for the manufacture and sale of various products including
mustard, salsa, sauerkraut and pickles. These products have been distributed on a limited basis. Fees and royalties earned
from all of these products were approximately $389,000 during fiscal 2019 and $319,000 during fiscal 2018.

During fiscal 2019, Inventure Foods, Inc., pursuant to the terms of the license agreement, exercised its right to
terminate the agreement for the manufacture and sale of Nathan’s branded potato chips and other salty snack products
effective May 14, 2019. Royalties earned under this agreement were approximately $68,000 during fiscal 2019 and $60,000
during fiscal 2018.

Provisions and Supplies

Nathan’s World Famous Beef Hot Dogs are primarily manufactured by John Morrell & Co. for sale by our Branded
Product Program, our restaurant system, and at retail. John Morrell & Co. and other hot dog manufacturers supply the hot
dogs for our Company-operated and franchise-operated restaurants. All hot dogs are manufactured in accordance with
Nathan’s recipes, quality standards and proprietary spice formulations. Nathan’s believes that it has reliable sources of
supply; however, in the event of any significant disruption in supply, management believes that alternative sources of supply
are available. (See Item 1A- “Risk Factors”). Saratoga Specialties produces Nathan’s proprietary spice formulations and we
have, in the past, engaged Newly Weds Foods, Inc. as an alternative source of supply. Our frozen crinkle-cut French fries
have been produced primarily by Lamb Weston, Inc. McCain Foods USA is a secondary source of supply of our frozen
French fries for our restaurant system.

During fiscal 2019 McCain Foods USA provided approximately 10% of our frozen crinkle-cut French fries. Most
other Company provisions are purchased from multiple sources to prevent disruption in supply and to obtain competitive
prices. We approve all products and product specifications. We negotiate directly with our suppliers on behalf of the entire
system for all primary food ingredients and beverage products sold in the restaurants in an effort to ensure adequate supply
of high quality items at competitive prices.

We currently utilize a cooperative distribution system pursuant to an agreement with UniPro Foodservice, Inc., the
Multi-Unit Group, which is comprised of institutional food and non-food distributors organized to procure, distribute and
market food service and non-food merchandise for the distribution needs of our domestic restaurant system. The initial term
of the agreement is for five (5) years, through November 15, 2022 and continuing two successive one year renewal periods
upon mutual consent. Our former distribution agreement with US Foodservice, Inc. expired on July 31, 2018. We believe
this new arrangement allows for more flexibility in expanding into new markets throughout the U.S., as well as proves to be
more cost efficient for our current franchisees. The strategic distribution partners under this new agreement include: DiCarlo
Distributors, Inc., Tapia Brothers Co., Cheney Brothers, Inc., Feesers, Inc., Lipari Foods, LLC and Chain Distribution
Services LLC. Our branded products are delivered to our ultimate customers throughout the country by numerous
distributors, including US Foodservice, Inc., SYSCO Corporation, Vistar / PFG, McLane and DOT Foods.

Marketing, Promotion and Advertising

Nathan’s believes that an integral part of its brand marketing strategy is to continue to build brand awareness through
its complimentary points of distribution strategy of selling its signature products through restaurants, the Branded Product
Program, the Branded Menu Program, and within supermarkets and club stores. We believe that as we continue to build
brand awareness and expand our reputation for quality and value, we seek to grow existing markets and expand in new
markets. The Nathan’s Famous brand continues to enjoy tremendous exposure and awareness from our Nathan’s Hot Dog
Eating Contests. In 2018, we held regional contests at the Great American Ballpark, Cincinnati, OH, Busch Stadium, St
Louis, MO and Dutch Wonderland, Lancaster, PA and other cities across the U.S. In 2019, we expect to hold regional contests
in certain Major League Baseball stadiums, such as Marlins Park, Miami, FL, Coors Field, Denver, CO, the Great American
Ballpark, Cincinnati, Ohio, Busch Stadium, St. Louis, MO, as well as in theme parks and fairs throughout the U.S. In total,
this season, we will host 16 regional contests. These regional contests culminate on July 4th as the regional champions
converge at our flagship restaurant in Coney Island, NY, to compete for the coveted “Mustard Yellow Belt.” We also have a
women’s-only Hot Dog Eating Contest at Coney Island which includes the top finishing female competitors from each
qualifying regional contest. The regional contests typically garner significant amounts of local publicity and the national
championship contest that is held on July 4th generates significant brand exposure across major broadcast and cable networks,
as well as significant online awareness nationally. The national championship contest has been aired nationally on ESPN
since 2004.

Nathan’s Famous continues to look to sports sponsorships as a strategic marketing opportunity to further brand
recognition. In addition to the branded signage opportunity, Nathan’s sells its Nathan’s World Famous Beef Hot Dog and
crinkle-cut French fries. In many venues, Nathan’s World Famous Beef Hot Dogs and crinkle-cut French fries are currently
sold at Nathan’s concession stands and as menu items that are served in suites and throughout premium seating areas.
Nathans’ current sports sponsorships include:

(cid:404) Professional Baseball: Yankee Stadium – New York Yankees, Citi Field – New York Mets; Marlins Park –

Miami Marlins; Nationals Park – Colorado Rockies; and

(cid:404) Professional Basketball and Hockey: The Barclays Center – Brooklyn Nets and NY Islanders; the Nassau

Veteran’s Memorial Coliseum; and

(cid:404) Professional Football: AT&T Stadium – Dallas Cowboys.

We believe that the Company’s overall sales and exposure have also been complemented by the sales of Nathan’s
World Famous Beef Hot Dogs and other Nathan’s products through the publicity generated by our Hot Dog Eating Contests
and our affiliation with a number of high profile sports arenas. In addition to marketing our products at these venues, the
Nathan’s Famous brand has also been televised regionally, nationally and internationally.

We maintain an advertising fund for local, regional and national advertising under the Nathan’s Famous Systems,
Inc. Franchise Agreement. Nathan’s Famous franchisees are generally required to spend on local marketing activities or
contribute to the advertising fund up to 2.0% of restaurant sales for advertising and promotion. Franchisee contributions to
the advertising fund for national marketing support are generally based upon the type of restaurant and its location. The
difference, if any, between 2.0% and the contribution to the advertising fund are to be expended on local programs approved
by us as to form, content and method of dissemination. Certain franchisees, including those operating pursuant to our Branded
Menu Program were not obligated to contribute to the advertising fund during fiscal 2019. Vendors that supply products to
the Company and our restaurant system also contribute to the advertising fund based upon purchases made by our franchisees
and at Company-owned restaurants.

Throughout fiscal 2019, Nathan’s primary restaurant marketing emphasis focused on system-wide limited time
promotional offerings delivering menu variety to our customers. Those limited time offers worked in conjunction with local
store marketing efforts supporting restaurants on a case by case basis. We anticipate these efforts and tactics to support the
restaurant system will continue in fiscal 2020.

Nathan’s marketing efforts also include the use of free-standing inserts (“FSIs”) delivering a menu variety branded
message, as well as money-saving coupons. FSIs are dropped in newspapers surrounding clusters of Nathan’s restaurants in
the tri-state area and in Florida. Our FSIs cost effectively target nearly 6 million households per drop, immediately generating
traffic in our restaurants.

From a media point of view, Nathan’s marketing efforts include employing an “always on” social media strategy to
support the brand and franchise operations through our centralized brand presence. The social media objectives include
increasing our reach among our core customer base, while building awareness and community of the engaged younger
generation. Another objective of our social media efforts includes driving foot traffic and sale through geo-targeting
restaurant campaigns.

The objective of our Branded Product Program has historically been to seek to provide our foodservice operator
customers with value-added, high quality products supported with meaningful point of sale materials and other forms of
operational support.

During fiscal 2019, Nathan’s marketing efforts for the Branded Product Program concentrated primarily on
participation in national industry trade shows, and regional, local distributor trade events. We have also advertised our
products in distributor and trade periodicals and initiated distributor sales incentive contests. Most of the sales of new
restaurant franchises to franchisees are achieved through the direct effort of Company personnel. New arrangements with
Branded Product Program points of sale are achieved through the combined efforts of Company personnel and a network of
foodservice brokers and distributors who also are responsible for direct sales to national, regional and “street” accounts.

During the fiscal year ending March 29, 2020 (“fiscal 2020”), we may seek to further expand our internal marketing
resources along with our network of foodservice brokers and distributors. We may attempt to emphasize specific venues as
we expand our broker network, focus management and broker responsibilities on a regional basis and expand the use of sales
incentive programs. We are currently continuing the process of upgrading our social media platforms by enhancing our
corporate website and Facebook page and expanding the use of Twitter.

Government Regulation

We are subject to Federal Trade Commission (“FTC”) regulation and several states’ laws that regulate the offer and
sale of franchises. We are also subject to a number of state laws which regulate substantive aspects of the franchisor-
franchisee relationship.

The FTC’s “Trade Regulation Rule Concerning Disclosure Requirements and Prohibitions Concerning Franchising
and Business Opportunity Ventures” (the “FTC Rule”) requires us to disclose certain information to prospective franchisees.
Fifteen states, including New York, also require similar disclosure. While the FTC Rule does not require registration or filing
of the disclosure document, 14 states require franchisors to register the disclosure document (or obtain exemptions from that
requirement) before offering or selling a franchise. The laws of 17 other states require some form of registration (or a
determination that a company is exempt or otherwise not required to register) under “business opportunity” laws, which
sometimes apply to franchisors such as the Company. These laws have not precluded us from seeking franchisees in any
given area.

Laws that regulate one or another aspect of the franchisor-franchisee relationship presently exist in 24 states as well
as Puerto Rico and the U.S. Virgin Islands. These laws regulate the franchise relationship by, for example, requiring the
franchisor to deal with its franchisees in good faith, prohibiting interference with the right of free association among
franchisees, limiting the imposition of standards of performance on a franchisee, and regulating discrimination among
franchisees. Although these laws may also restrict a franchisor in the termination of a franchise agreement by, for example,
requiring “good cause” to exist as a basis for the termination, advance notice to the franchisee of the termination, an
opportunity to cure a default, and repurchase of inventory or other compensation, these provisions have not had a significant
effect on our operations. Our international franchise operations are subject to franchise-related and other laws in the
jurisdictions in which our franchisees operate. These laws in the U.S. and overseas have not precluded us from enforcing the
terms of our franchise agreements, and we do not believe that these laws are likely to significantly affect our operations.

We are not aware of any pending franchise legislation in the U.S. that we believe is likely to significantly affect our

operations.

Each Company-owned and franchised restaurant is subject to regulation as to operational matters by federal agencies

and to licensing and regulation by state and local health, sanitation, safety, fire and other departments.

We are subject to the Federal Fair Labor Standards Act and various other federal and state laws that govern minimum
wages, overtime, working conditions, mandatory benefits, health insurance, and other matters. Other regulatory
interpretations (such as the NLRB’s review of joint employment standards under the National Labor Relations Act, the Labor
Department’s review of the Fair Labor Standards Act, the SBA’s review of independence standards applicable to reviewing
franchisee loan applications, etc.) may have an impact on our overall business as well, although we do not believe that these
will significantly affect our operations. We are also subject to federal and state environmental regulations, which have not
had a material effect on our operations. More stringent and varied requirements of local governmental bodies with respect to
zoning, land use and environmental factors could delay or prevent development of new restaurants in particular locations. In
addition, the Federal Americans with Disabilities Act applies with respect to the design, construction and renovation of all
restaurants in the United States.

Each company that manufactures, supplies or sells our products is subject to regulation by federal agencies and to

licensing and regulation by state and local health, sanitation, safety and other departments.

We are also subject to the requirement that our restaurants post certain calorie content information for standard
menu items, pursuant to Section 4205 of the Patient Protection and Affordable Care Act of 2010. Some of our restaurants
are subject to similar requirements that are imposed by certain localities around the country.

Alcoholic beverage control regulations require each restaurant that sells such products to apply to a state authority
and, in certain locations, county and municipal authorities, for a license or permit to sell alcoholic beverages on the premises.
Typically, licenses must be renewed annually and may be revoked or suspended for cause at any time. Alcoholic beverage
control regulations relate to numerous aspects of the daily operations of the restaurants, including minimum age of customers
and employees, hours of operation, advertising, wholesale purchasing, inventory control and handling, storage and dispensing
of alcoholic beverages. Three of our Company-owned restaurants offer beer or wine coolers for sale. Each of these restaurants
has current alcoholic beverage licenses permitting the sale of these beverages. We have never had an alcoholic beverage
license revoked.

We may be subject in certain states to “dram-shop” statutes, which generally provide a person injured by an
intoxicated person the right to recover damages from an establishment which wrongfully served alcoholic beverages to such
person. We carry liquor liability coverage as part of our existing comprehensive general liability insurance and have never
been named as a defendant in a lawsuit involving “dram-shop” statutes.

The Sarbanes-Oxley Act of 2002 and rules promulgated thereunder by the Securities and Exchange Commission
(“SEC”) and the Nasdaq Stock Market have imposed substantial regulations and disclosure requirements in the areas of
corporate governance (including director independence, director selection and audit, corporate governance and compensation
committee responsibilities), equity compensation plans, auditor independence, pre-approval of auditor fees and services and
disclosure and internal control procedures. We are committed to industry best practices in these areas.

We believe that we operate in substantial compliance with applicable laws and regulations governing our operations,

including the FTC Rule and state franchise laws.

Employees

At March 31, 2019, we had 149 employees, 42 of whom were corporate management and administrative employees,
26 of whom were restaurant managers and 81 of whom were hourly full-time and part-time foodservice employees. We
generally employ approximately 300-400 seasonal employees during the summer months. Foodservice employees at two
Company-owned locations are currently represented by Local 1102 RWSDU UFCW AFL-CIO, CLC, Retail, Wholesale and
Department Store Union, under an agreement that expires on June 30, 2020. Employees at a third location are represented
by the same union pursuant to a different agreement that expires November 30, 2019. We consider our employee relations
to be good and have not suffered any strike or work stoppage for more than 45 years.

We provide a training program for managers and assistant managers of our Company-owned and new franchised
restaurants. Hourly food workers are trained on site by managers and crew trainers following Company practices and
procedures outlined in our operating manuals.

Trademarks

We hold trademark and/or service mark registrations for NATHAN’S, NATHAN’S FAMOUS, NATHAN’S
FAMOUS and design, NATHAN’S and Coney Island design, SINCE 1916 NATHAN’S FAMOUS and design, THE
ORIGINAL SINCE 1916 NATHAN’S FAMOUS and design, SINCE 1916 NATHAN’S FAMOUS THIS IS THE
ORIGINAL, THE ORIGINAL NATHAN’S FAMOUS, THE ORIGINAL NATHANS FAMOUS 100TH ANNIVERSARY
and design in color, and NATHAN’S FAMOUS EXPRESS within the United States, with some of these marks holding
corresponding foreign trademark and service mark registrations in 80 international jurisdictions, including Canada and China.
We also hold various related marks, FRANKSTERS, FROM A HOT DOG TO AN INTERNATIONAL HABIT, MORE
THAN JUST THE BEST HOT DOG! and design, and Mr. Frankie design, for restaurant services and some food items.

We hold trademark and/or service mark registrations for the marks ARTHUR TREACHER’S (stylized), ARTHUR
TREACHER’S FISH & CHIPS (stylized), KRUNCH PUP and ORIGINAL within the United States. We hold service mark
registrations for ARTHUR TREACHER’S in China and Japan. We also hold service mark registrations for ARTHUR
TREACHER’S FISH & CHIPS and design in Canada and Mexico and ARTHUR TREACHER’S FISH & CHIPS and design
in Colombia, Costa Rica, Kuwait, Malaysia, Singapore and the United Arab Emirates.

Our trademark and service mark registrations were granted and expire on various dates. We believe that these
trademarks and service marks provide significant value to us and are an important factor in the marketing of our products
and services. We believe that we do not infringe on the trademarks or other intellectual property rights of any third parties.
We also have licenses to use the Kenny Rogers trademarks and service marks in the then-existing Nathan’s restaurants
existing on April 23, 2008.

Seasonality

Our business is affected by seasonal fluctuations, including the effects of weather and economic conditions.
Historically, sales from our Company-owned locations, principally at Coney Island, and franchised restaurants from which
franchise royalties are earned and the Company’s earnings have been highest during our first two fiscal quarters, with the
fourth fiscal quarter typically representing the slowest period. This seasonality is primarily attributable to weather conditions
in the marketplace for our Company-owned and franchised Nathan’s restaurants, which is principally the Northeast.
Additionally, revenues from our Branded Product Program and retail licensing program generally follow similar seasonal
fluctuations, although not to the same degree. We believe that future revenues and profits will continue to be highest during
our first two fiscal quarters, with the fourth fiscal quarter representing the slowest period.

Competition

The fast food restaurant industry is highly competitive and can be significantly affected by many factors, including
changes in local, regional or national economic conditions, changes in consumer tastes, consumer concerns about the
nutritional quality of quick-service food, as well as the increases in and the locations of, competing restaurants.

Our restaurant system competes with numerous restaurants and drive-in units operating on both a national and local
basis, including major national chains with greater financial and other resources than ours. We also compete with local
restaurants and diners on the basis of menu diversity, food quality, price, size, site location and name recognition. There is
also active competition for management personnel, as well as for suitable commercial sites for owned or franchised
restaurants.

We believe that our emphasis on our signature products and the reputation of these products for taste and quality
set us apart from our major competitors. Many fast food companies have adopted “value pricing” and/or deep discount
strategies. Nathan’s markets our own form of “value pricing,” selling combinations of different menu items for a total price
lower than the usual sale price of the individual items and other forms of price sensitive promotions. Our value pricing
strategy may offer multi-sized alternatives to our value-priced combo meals.

We also compete with many restaurant franchisors and other business concepts for the sale of franchises to qualified

and financially capable franchisees.

Our Branded Product Program competes directly with a variety of other nationally-recognized hot dog companies
and other food companies; many of these entities have significantly greater resources than we do. Our products primarily
compete based upon price, quality and value to the foodservice operator and consumer. We believe that Nathan’s reputation
for superior quality, along with the ability to provide operational support to the foodservice operator, provides Nathan’s with
a competitive advantage.

Our retail licensing program for the sale of packaged foods within supermarkets competes primarily on the basis of
reputation, flavor, quality and price. In most cases, we compete against other nationally-recognized brands that may have
significantly greater resources than those at our disposal.

Available Information

We file reports with the SEC, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K and a proxy statement on Schedule 14A. The SEC also maintains a website at http://www.sec.gov that
contains reports, proxy and information statements and other information about issuers such as us that file electronically with
the SEC.

In addition, electronic copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K, proxy statement on Schedule 14A and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) under the Securities Exchange Act of 1934, as amended (“the Exchange Act”) are available free of
charge on our website, www.nathansfamous.com, as soon as reasonably practicable after we electronically file such material
with, or furnish it to, the SEC. The reference to our website address and the SEC website address do not constitute
incorporation by reference of the information contained on the website and should not be considered part of this document.

The Board of Directors has also adopted, and we have posted in the Investor Relations section of our website, written
Charters for each of the Board’s standing committees. We will provide without charge a copy of the Charter of any standing
committee of the Board upon a stockholder’s request to us at Nathan’s Famous, Inc., One Jericho Plaza, Second Floor - Wing
A, Jericho, NY 11753, Attention: Secretary.

For financial information regarding our results of operations, please see our consolidated financial statements

beginning on page F-1.

Item 1A. Risk Factors.

Our business is subject to various risks. Certain risks are specific to each way we do business, such as through
Company-owned restaurants, franchised restaurants, branded products and retail, while other risks, such as health-related or
economic risks, may affect all of the ways that we do business.

Investors should carefully consider all of the information set forth in this Form 10-K, including the following risk
factors, before deciding to invest in any of the Company’s securities. The following risk factors are not exhaustive. Additional
risks and uncertainties not presently known to the Company may also adversely impact its business. The Company’s business,
financial condition, results of operations or prospects could be materially adversely affected by any of these risks. In that
case, the trading price of the Company’s common stock could decline. This Form 10-K also contains forward-looking
statements that involve risks and uncertainties. The Company’s results could materially differ from those anticipated in these
forward-looking statements as a result of certain factors, including the risks it faces described below and elsewhere. See
“Forward-Looking Statements” above.

Our licensing revenue and overall profitability is substantially dependent on our agreement with John Morrell
& Co. and the loss or a significant reduction of this revenue would have a material adverse effect on our financial
condition and results of operations.

We earned license royalties from John Morrell of approximately $21,271,000 in fiscal 2019 and approximately
$20,833,000 in fiscal 2018 representing 20.9% and 20.0% of total revenues, respectively. As a result of our agreement with
John Morrell, we expect that most of our license revenues will be earned from John Morrell for the foreseeable future. In
addition, the increase in our adjusted EBITDA from $29.1 million in fiscal 2018 to $30.4 million in fiscal 2019 was primarily
the result of an increase in license royalties earned from John Morrell. While our agreement with John Morrell expires in
2032, John Morrell’s BPP business is weighted towards one high volume user who has not sold product pursuant to a formal
agreement. Accordingly, in the event that (i) John Morrell or its customers experience financial difficulties, (ii) there is a
disruption or termination of the John Morrell Agreement or (iii) there is a significant decrease in our revenue from John
Morrell, it would have a material adverse effect on our business, results of operations and financial condition.

A significant amount of our Branded Product Program (“BPP”) revenue is from a small number of BPP

accounts. The loss of any one or more of those BPP accounts could harm our profitability and operating results.

For the fiscal 2019 period, approximately 72% of our BPP business is from six accounts, including one account
representing approximately 25% of the BPP business, with which we have relatively short-term contracts. In the event that
these BPP customers experience financial difficulties or, upon the expiration of their existing agreements are not willing to
do business with us in the future on terms acceptable to management, there could be a material adverse effect on our business,
results of operations and financial condition.

Increases in the cost of food and paper products could harm our profitability and operating results.

The cost of the food and paper products we use depends on a variety of factors, many of which are beyond our
control. Food and paper products typically represent approximately 25% to 30% of our cost of restaurant sales. We purchase
large quantities of beef and our beef costs in the United States represent approximately 80% to 90% of our food costs. The
market for beef is particularly volatile and is subject to significant price fluctuations due to seasonal shifts, climate conditions,
industry demand and other factors beyond our control. For several years prior to June 2015, reduced supply and increased
demand in beef resulted in shortages, which required us to pay significantly higher prices for the beef we purchased.
Beginning March 2015, the beef markets stabilized through June 2015 before subsequently declining by approximately 30%.
As a result of the decline through March 2016, the market price of hot dogs during the fiscal year ended March 27, 2016 was
approximately 7.1% lower than the fiscal 2015 period. During the fiscal 2017 period, beef prices remained favorable, and as
such, our market price for hot dogs was 17.1% lower than during the fiscal 2016 period. Despite the favorable pricing of
fiscal 2017, prices began escalating in January 2017 and continued increasing through June 2017 before beginning to slightly
decline until July which is when the costs stabilized through March 2018 at approximately 10% higher than the same period
of the fiscal 2017 period. Since April 2018 our commodity cost for hot dogs had been stable before beginning to decline in
September 2018 into December 2018. Beef prices have begun moderately escalating between January and March 2019. As
such, our market price for hot dogs during our fiscal 2019 period was approximately 7.7% lower than the fiscal 2018 period.

We are unable to predict the future cost of our hot dogs and expect to experience price volatility for our beef products
during fiscal 2020. To the extent that beef prices increase as compared to earlier periods, it could impact our results of
operations. If the price of beef or other food products that we use in our operations significantly increases, or tariffs are
imposed, particularly in the BPP, and we choose not to pass, or cannot pass, these increases on to our customers, our operating
margins will decrease and such decrease in operating margins could have a material adverse effect on our business, results
of operations or financial condition.

Fluctuations in weather, supply and demand and economic conditions could adversely affect the cost, availability
and quality of some of our critical products, including beef. Our inability to obtain requisite quantities of high-quality
ingredients would adversely affect our ability to provide the menu items that are central to our business, and the highly
competitive nature of our industry may limit our ability to pass through increased costs to our customers. Continuing
increases in the cost of fuel would increase the distribution costs of our prime products thereby increasing the food and paper
cost to us and to our franchisees, thus negatively affecting profitability.

From time to time, we have sought to lock in the cost of a portion of our beef purchases by entering into various
commitments to purchase hot dogs during certain periods in an effort to ensure supply of product at a fixed cost of product.
However, we may be unable to enter into similar purchase commitments in the future. In addition, we do not have the ability
to effectively hedge all of our beef purchases using futures or forward contracts without incurring undue financial cost and
risk.

John Morrell currently has three manufacturing facilities producing different Nathan’s products and a long-

term significant interruption of a primary facility could potentially disrupt our operations.

John Morrell currently has three manufacturing facilities producing different Nathan’s products. A temporary
closure of any of the three plants could potentially cause a temporary disruption to our source of supply, potentially causing
some or all of certain shipments to customers to be delayed. A longer-term significant interruption at any of these production
facilities, whether as a result of a natural disaster or other causes, could significantly impair our ability to operate our business
on a day-to-day basis while John Morrell determines how to make up for any lost production capabilities, during which time
we may not be able to secure sufficient alternative sources of supply on acceptable terms, if at all. In addition, a long-term
disruption in supply to our customers could cause our customers to determine not to purchase some or all of their hot dogs
from us in the future, which in turn would adversely affect our business, results of operations and financial condition.
Furthermore, a supply disruption or other events might affect our brand in the eyes of consumers and the retail trade, which
damage might negatively impact our overall business in general, which could result in a material adverse effect on our
business, results of operations or financial condition.

The loss of one or more of our key suppliers could lead to supply disruptions, increased costs and lower operating

results.

We have historically relied on one supplier for the majority of our hot dogs and another supplier for a majority of
our supply of frozen French fries for our restaurant system. An interruption in the supply of product from either of these
suppliers without our obtaining an alternative source of supply on comparable terms could lead to supply disruptions,
increased costs and lower operating results.

We have an agreement with a secondary hot dog manufacturer that continues to also supply natural casing hot dogs
for our restaurant business. Additionally, a majority of the frozen crinkle-cut French fries sold through our franchised
restaurants have been obtained from one supplier. Since fiscal 2013, we have had a relationship with a secondary source of
supply of our frozen French fries for our restaurant system.

In the event that the hot dog or French fry suppliers are unable to fulfill our requirements for any reason, including
due to a significant interruption in its manufacturing operations, whether as a result of a natural disaster or for other reasons,
such interruption could significantly impair our ability to operate our business on a day-to-day basis.

In the event that we are unable to find one or more alternative suppliers of hot dogs or French fries on a timely basis,
there could be a disruption in the supply of product to Company-owned restaurants, franchised restaurants and BPP accounts,
which would damage our business, our franchisees and our BPP customers and, in turn, negatively impact our financial
results. In addition, any gap in supply to retail customers would result in lost royalty payments to us, which could have a
significant adverse financial impact on our results of operations. Furthermore, any gap in supply to retail customers may
damage our brand in the eyes of consumers and the retail trade, which damage might negatively impact our overall business
in general and impair our ability to continue our retail licensing program.

Additionally, there is no assurance that any supplemental sources of supply would be capable of meeting our
specifications and quality standards on a timely and consistent basis or that the financial terms of such supply arrangement
will be as favorable as our present terms with our hot dog or French fry supplier, as the case may be.

Any of the foregoing occurrences may cause disruptions in the supply of our hot dog or French fry products, as the
case may be, damage our franchisees and our BPP customers, adversely impact our financial results and/or damage our brand.

Our earnings and business growth strategy depends in large part on the success of our product licensees and
product manufacturers. Our reputation and the reputation of our brand may be harmed by actions taken by our product
licensees or product manufacturers that are otherwise outside of our control.

A significant portion of our earnings has come from royalties paid by our product licensees, such as John Morrell
& Co., Saratoga Food Specialties, Inc., a wholly-owned subsidiary of John Morrell & Co., and Lamb Weston, Inc. Although
our agreements with these licensees contain numerous controls and safeguards, and we monitor the operations of our product
licensees, our licensees are independent contractors, and their employees are not our employees. Accordingly, we cannot
necessarily control the performance of our licensees under their license agreements, including without limitation, the
licensee’s continued best efforts to manufacture our products for retail distribution and our foodservice businesses, timely
delivery of the licensed products, market the licensed products and assure the quality of the licensed products produced
and/or sold by a product licensee. Any shortcoming in the quality, quantity and/or timely delivery of a licensed product is
likely to be attributed by consumers to an entire brand’s reputation, potentially adversely affecting our business, results of
operations and financial condition. In addition, a licensee’s failure to effectively market the licensed products may result in
decreased sales, which would adversely affect our business, results of operations and financial condition. Also, to the extent
that the terms and conditions of any of these license agreements change or we change any of our product licensees, our
business, results of operations and financial condition could be materially affected.

The quick-service restaurant business is highly competitive, and that competition could lower revenues, margins

and market share.

The quick-service restaurant business of the foodservice industry is intensely competitive regarding price, service,
location, personnel and type and quality of food. We and our franchisees compete with international, national, regional and
local retailers primarily through the quality, variety and value perception of food products offered. Other key competitive
factors include the number and location of restaurants, quality and speed of service, attractiveness of facilities, effectiveness
of advertising and marketing programs, and new product development. We anticipate competition will continue to focus on
convenience and pricing. Many of our competitors have substantially larger marketing budgets, which may provide them
with a competitive advantage. Changes in pricing or other marketing strategies by these competitors can have an adverse
impact on our sales, earnings and growth. For example, many of those competitors have adopted “value pricing” strategies
intended to lure customers away from other companies, including our Company. Consequently, these strategies could have
the effect of drawing customers away from companies which do not engage in discount pricing and could also negatively
impact the operating margins of competitors which attempt to match their competitors’ price reductions. Extensive price
discounting in the quick-service restaurant business could have an adverse effect on our financial results.

In addition, we and our franchisees compete within the foodservice market and the quick-service restaurant business
not only for customers but also for management and hourly employees and qualified franchisees. If we are unable to maintain
our competitive position, we could experience downward pressure on prices, lower demand for products, reduced margins,
the inability to take advantage of new business opportunities and the loss of market share.

Recent changes to minimum wage rates have increased our labor costs.

We must comply with the Fair Labor Standards Act and various federal and state laws governing minimum
wages. Increases in the minimum wage and labor regulations have increased our labor costs. New York State passed
legislation increasing the minimum hourly wage for fast food workers of restaurant chains with 30 or more locations
nationwide which over a period of time will increase the minimum wage to $15.00 per hour. The first increase from this law
took effect beginning December 31, 2015 and was fully phased in by December 31, 2018 in New York City, where we
operate two Company-owned restaurants and by December 31, 2021 throughout the rest of New York State which impacts
the labor costs at our two remaining Company-owned restaurants and our franchised restaurants that operate in New York
State. The impact of the New York minimum wage increases on our business amounted to a 12.3% average salary increase
in 2016 and approximately an 11.0% average salary increase in 2017 for our employees that were affected. The increases
that took effect on December 31, 2017 increased the hourly wage by 11.4% for the employees that were affected in 2018.
We also expect that the increases that took effect on December 31, 2018 will increase the hourly wage by 11.1% in New
York City and 8.5% elsewhere for employees that are affected in 2019. In addition, the federal government and a number of
other states are evaluating various proposals to increase their respective minimum wage. As minimum wage rates increase,
we may need to increase not only the wages of our minimum wage employees but also the wages paid to employees at wage
rates that are above minimum wage. Additionally, as a result, we anticipate that our labor costs will continue to increase. If
we are unable to pass on these higher costs through price increases, our margins and profitability as well as the profitability
and margins of our franchisees will be adversely impacted which could have a material adverse effect on our business, results
of operations or financial condition. Our business could be further negatively impacted if the decrease in margins for our
franchisees results in the potential loss of new franchisees or the closing of a significant number of existing franchised
restaurants.

Increases in labor costs due to new regulations or labor shortages could slow our growth or harm our business.

In addition to minimum wage increases, in the past several years, state and local governments have enacted
legislation which increased labor costs. For instance, effective November 27, 2017, the City of New York enacted Fair Work
Week Legislation. A key component of this legislation is a requirement that fast food restaurants schedule their workers at
least two weeks in advance or pay employees between $10 to $75 per scheduling change, depending on the situation. Due to
Nathan’s dependency on weather conditions at our two Coney Island locations during the summer, we are unable to determine
the potential impact on our results of operations, which could be material. We have estimated that the daily penalty could
amount to as much as $10,000 per day during the height of the summer season for these two restaurants. Continued increases
in our labor costs as a result of this or other new legislation could have a material adverse effect on our business, financial
condition and results of operations.

Moreover, our success depends in part upon our ability and the ability of our franchisees to continue to attract,
motivate and retain regional, operational and restaurant general managers with the qualifications to succeed in our industry
and the motivation to apply our core service philosophy. If we or our franchisees are unable to continue to recruit and retain
sufficiently qualified managers or to motivate our employees to achieve sustained high service levels, our business and our
growth could be adversely affected. Competition for these employees could require the payment of higher wages that could
result in higher labor costs.

Changes in the U.S. healthcare system could increase our cost of doing business.

In March 2010, the federal government passed legislation to reform the U.S. health care system. As part of the plan,
employers are expected to provide their employees with minimum levels of healthcare coverage or incur certain financial
penalties. Our workforce includes numerous part-time workers, which may increase our health care costs and expose us to
certain excise taxes, in the event that healthcare is offered to less than 95% of our full-time employees, as defined by the
legislation. Additionally, some states and localities have passed state and local laws mandating the provision of certain levels
of health benefits by some employers. Continued increases in health care costs could adversely affect our operations and
those of the restaurant industry and we might have to further reconsider our pricing strategy as a means to offset reduced
operating margins. Increased health care costs could have a material adverse effect on our business, financial condition and
results of operations.

Changes in economic, market and other conditions could adversely affect us and our franchisees, and thereby

our operating results.

The quick-service restaurant business is affected by changes in international, national, regional, and local economic
conditions, consumer preferences and spending patterns, demographic trends, consumer perceptions of food safety and
health, diet and nutrition, weather, traffic patterns, the type, number and location of competing restaurants, and the effects of
war or terrorist activities and any governmental responses thereto. Factors such as inflation, higher costs for each of food,
labor, benefits and utilities, the availability and cost of suitable sites, fluctuating insurance rates, state and local regulations
and licensing requirements, legal claims, and the availability of an adequate number of qualified management and hourly
employees also affect restaurant operations and administrative expenses. Our ability and our franchisees’ ability to finance
new restaurant development, to make improvements and additions to existing restaurants, and the acquisition of restaurants
from, and sale of restaurants to, franchisees is affected by economic conditions, including interest rates and other government
policies impacting land and construction costs and the cost and availability of borrowed funds.

Current restaurant locations may become unattractive, and attractive new locations may not be available for a

reasonable price, if at all, which may reduce our revenue.

The success of any restaurant depends in substantial part on its location. There can be no assurance that current
locations will continue to be attractive as demographic patterns change. Neighborhood or economic conditions where
restaurants are located could decline in the future, thus resulting in potentially reduced sales in those locations. If we and our
franchisees cannot obtain desirable additional and alternative locations at reasonable prices, our results of operations would
be adversely affected.

Any perceived or real health risks related to the food industry could adversely affect our ability to sell our

products.

We are subject to risks affecting the food industry generally, including risks posed by the following:

food spoilage or food contamination;
consumer product liability claims;

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(cid:404) product tampering; and
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the potential cost and disruption of a product recall.

Our products are susceptible to contamination by disease-producing organisms, or pathogens, such as listeria
monocytogenes, salmonella, campylobacter, hepatitis A, trichinosis and generic E. coli. In addition, our beef products are
also subject to the risk of contamination from bovine spongiform encephalopathy. Because these pathogens are generally
found in the environment, there is a risk that these pathogens could be introduced to our products as a result of improper
handling at the manufacturing, processing, foodservice or consumer level. Our suppliers’ manufacturing facilities and
products, as well as our franchisee and Company-operated restaurant operations, are subject to extensive laws and regulations
relating to health, food preparation, sanitation and safety standards. Difficulties or failures by these companies in obtaining
any required licenses or approvals or otherwise complying with such laws and regulations could adversely affect our revenue
that is generated from these companies. Furthermore, we cannot assure you that compliance with governmental regulations
by our suppliers or in connection with restaurant operations will eliminate the risks related to food safety.

Events reported in the media, or incidents involving food-borne illnesses or food tampering, whether or not accurate,
can cause damage to our brand’s reputation and affect sales and profitability. Reports, whether true or not, of food-borne
illnesses (such as e-coli, avian flu, bovine spongiform encephalopathy, hepatitis A, trichinosis or salmonella) and injuries
caused by food tampering have in the past severely injured the reputations of participants in the quick-service restaurant
business and could in the future affect our business as well. Our brand’s reputation is an important asset to the business; as a
result, anything that damages our brand’s reputation could immediately and severely hurt system-wide sales and, accordingly,
revenue and profits. If customers become ill from food-borne illnesses or food tampering, we could also be forced to
temporarily close some, or all, restaurants. In addition, instances of food-borne illnesses or food tampering, even those
occurring solely at the restaurants of competitors, could, by resulting in negative publicity about the restaurant industry,
adversely affect system sales on a local, regional or system-wide basis. A decrease in customer traffic as a result of these
health concerns or negative publicity, or as a result of a temporary closure of any of our Company-owned restaurants or our
franchisees’ restaurants, could materially harm our business, results of operations and financial condition.

Additionally, we may be subject to liability if the consumption of any of our products causes injury, illness, or death.
A significant product liability judgment or a widespread product recall may negatively impact our sales and profitability for
a period of time depending on product availability, competitive reaction, and consumer attitudes. Even if a product liability
claim is unsuccessful or is not fully pursued, the negative publicity surrounding any assertion that our products caused illness
or injury could adversely affect our reputation with existing and potential customers and our corporate and brand image.
Injury to our brand’s reputation would likely reduce revenue and profits.

Negative publicity, including complaints on social media platforms and other internet-based communications,
could damage our reputation and harm our guest traffic, and in turn, negatively impact our business, financial condition,
results of operations and prospects.

There has been a marked increase in the use of social media platforms and similar devices, including blogs, social
media websites and other forms of internet-based communications that allow individuals to access 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 business and products 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 could
also be used for dissemination of trade secret information, compromising valuable Company assets. In sum, the dissemination
of information online, regardless of its accuracy, could harm our business, financial condition, results of operations and
prospects.

Changing health or dietary preferences may cause consumers to avoid products offered by us in favor of

alternative foods.

The foodservice industry is affected by consumer preferences and perceptions. Reports of the use of hormones,
antibiotics or pesticides in the production of certain food products may cause consumers to reduce or avoid consumption of
such food products. If prevailing health or dietary preferences, perceptions and governmental regulation cause consumers to
avoid the products we offer in favor of alternative or healthier foods, demand for our products may be reduced and our
business could be harmed.

We are subject to health, employment, environmental and other government regulations, and failure to comply
with existing or future government regulations could expose us to litigation, damage our corporate reputation or the
reputation of our brands and lower profits.

We and our franchisees are subject to various federal, state and local laws, rules or regulations affecting our
businesses. To the extent that the standards imposed by local, state and federal authorities are inconsistent, they can adversely
affect popular perceptions of our business and increase our exposure to litigation or governmental investigations or
proceedings. We may be unable to manage effectively the impact of new, potential or changing regulations that affect or
restrict elements of our business. The successful development and operation of restaurants depends to a significant extent on
the selection and acquisition of suitable sites, which are subject to zoning, land use (including the placement of drive-thru
windows), environmental (including litter), traffic and other regulations. There can be no assurance that we and our
franchisees will not experience material difficulties or failures in obtaining the necessary licenses or approvals for new
restaurants which could delay the opening of such restaurants in the future. Restaurant operations are also subject to licensing
and regulation by state and local departments relating to health, food preparation, sanitation and safety standards, federal and
state labor laws (including applicable minimum wage requirements, overtime, working and safety conditions and citizenship
requirements), federal and state laws prohibiting discrimination and other laws regulating the design and operation of
facilities, such as the Federal Americans with Disabilities Act of 1990. If we fail to comply with any of these laws, we may
be subject to governmental action or litigation, and accordingly our reputation could be harmed.

Injury to us or our brand’s reputation would, in turn, likely reduce revenue and profits. In addition, difficulties or
failures in obtaining any required licenses or approvals could delay or prevent the development or opening of a new restaurant
or renovations to existing restaurants, which would adversely affect our revenue.

In recent years, there has been an increased legislative, regulatory and consumer focus on nutrition and advertising
practices in the food industry, particularly among quick-service restaurants. As a result, we may become subject to regulatory
initiatives in the area of nutrition disclosure or advertising, such as requirements to provide information about the nutritional
content of our food products, which could increase expenses. The operation of our franchise system is also subject to franchise
laws and regulations enacted by a number of states and rules promulgated by the U.S. Federal Trade Commission. Any future
legislation regulating franchise relationships may negatively affect our operations, particularly our relationship with our
franchisees. Failure to comply with new or existing franchise laws and regulations in any jurisdiction or to obtain required
government approvals could result in a ban or temporary suspension on future franchise sales. Changes in applicable
accounting rules imposed by governmental regulators or private governing bodies could also affect our reported results of
operations, which could cause our stock price to fluctuate or decline.

We may not be able to adequately protect our intellectual property, which could decrease the value of our business

or the value of our brands and products.

The success of our business depends on the continued ability to use existing trademarks, service marks and other
components of each of our brands in order to increase brand awareness and further develop branded products. We may not
be able to adequately protect our trademarks, and the use of these trademarks may result in liability for trademark
infringement, trademark dilution or unfair competition. All of the steps we have taken to protect our intellectual property
may not be adequate.

We have registered or applied to register many of our trademarks and service marks both in the United States and
in foreign countries. Because of the differences in foreign trademark laws, our trademark rights may not receive the same
degree of protection in foreign countries as they would in the United States. We also cannot assure you that our trademark
and service mark applications will be approved. In addition, third parties may oppose our trademark and service mark
applications, or otherwise challenge our use of the trademarks or service marks. In the event that our trademarks or service
marks are successfully challenged, we could be forced to rebrand our products and services, which could result in loss of
brand recognition, and could require us to devote resources advertising and marketing new brands. Further, we cannot assure
you that competitors will not infringe our marks, or that we will have adequate resources to enforce our trademarks or service
marks.

We also license third party franchisees and other licensees to use our trademarks and service marks. We enter into
franchise agreements with our franchisees and license agreements with other licensees which govern the use of our
trademarks and service marks. Although we make efforts to police the use of our trademarks and service marks by our
franchisees and other licensees, we cannot assure you that these efforts will be sufficient to ensure that our franchisees and
other licensees abide by the terms of the trademark licenses. In the event that our franchisees fail to do so, our trademark and
service mark rights could be diluted.

Our earnings and business growth strategy depends in large part on the success of our restaurant franchisees
and on new restaurant openings. Our corporate reputation or brand reputation may be harmed by actions taken by
restaurant franchisees that are otherwise outside of our control.

A significant portion of our earnings comes from royalties, fees and other amounts paid by our restaurant
franchisees. The opening and success of franchised restaurants depends on various factors, including the demand for our
franchises and the selection of appropriate franchisee candidates, the availability of suitable restaurant sites, the negotiation
of acceptable lease or purchase terms for new locations, permitting and regulatory compliance, the ability to meet
construction schedules, the availability of financing and the financial and other capabilities of our franchisees and area
developers. We cannot assure you that area developers planning the opening of franchised restaurants will have the business
abilities or sufficient access to financial resources necessary to open the restaurants required by their agreements. We cannot
assure you that franchisees will successfully participate in our strategic initiatives or operate their restaurants in a manner
consistent with our concept and standards. Our franchisees are independent contractors, and their employees are not our
employees. We provide training and support to, and monitor the operations of, our franchisees, but the quality of their
restaurant operations may be diminished by any number of factors beyond our control. Consequently, the franchisees may
not successfully operate their restaurants in a manner consistent with our high standards and requirements, and franchisees
may not hire and train qualified managers and other restaurant personnel. Any operational shortcoming of a franchised

restaurant is likely to be attributed by consumers to an entire brand or our system, thus damaging our corporate or brand
reputation, potentially adversely affecting our business, results of operations and financial condition.

Growth in our restaurant revenue and earnings is significantly dependent on new restaurant openings. Numerous

factors beyond our control may affect restaurant openings. These factors include but are not limited to:

(cid:404) our ability to attract new franchisees;
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the availability of site locations for new restaurants;
the ability of potential restaurant owners to obtain financing, which may become more difficult due to
current market conditions and operating results;
the ability of restaurant owners to hire, train and retain qualified operating personnel;
construction and development costs of new restaurants, particularly in highly-competitive markets;
the ability of restaurant owners to secure required governmental approvals and permits in a timely manner,
or at all; and
adverse weather conditions.

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We cannot assure you that franchisees will renew their franchise agreements or that franchised restaurants will
remain open. Closings of franchised restaurants are expected in the ordinary course and may cause our royalty revenues and
financial performance to decline. Our principal competitors may have greater influence over their respective restaurant
systems than we do because of their significantly higher percentage of company restaurants and/or ownership of franchisee
real estate and, as a result, may have a greater ability to implement operational initiatives and business strategies, including
their marketing and advertising programs.

As our franchisees are independent operators, we have limited influence over their ability to invest in other
businesses or incur excessive indebtedness. Some of our franchisees have invested in other businesses, including other
restaurant concepts. Such franchisees may use the cash generated by their Nathan’s restaurants to expand their other
businesses or to subsidize losses incurred by such businesses. Additionally, as independent operators, franchisees do not
require our consent to incur indebtedness. Consequently, our franchisees have in the past, and may in the future, experience
financial distress as a result of over-leveraging. To the extent that our franchisees use the cash from their Nathan’s restaurants
to subsidize their other businesses or experience financial distress, due to over-leveraging, delayed or reduced payments of
royalties, advertising fund contributions and rents for properties we lease to them, or otherwise, it could have a material
adverse effect on our business, financial condition, results of operations and prospects. In addition, lenders to our franchisees
may be less likely to provide current or prospective franchisees necessary financing on favorable terms, or at all, due to
market conditions and operating results.

Changes in franchise regulation laws could impact our ability to obtain or retain licenses or approvals and

adversely affect our business, financial condition, results of operations and prospects.

We are also subject to federal statutes and regulations, including the rules promulgated by the U.S. Federal Trade
Commission, as well as certain state laws governing the offer and sale of franchises. Many state franchise laws impose
substantive requirements on franchise agreements, including limitations on non-competition provisions and on provisions
concerning the termination or non-renewal of a franchise. Some states require that certain materials be filed for a franchisor
to be registered and approved, before franchises can be offered or sold in that state. The failure to obtain or retain licenses or
approvals to sell franchises could have a material adverse effect on our business, financial condition, results of operations
and prospects.

We rely on the performance of major retailers, wholesalers, specialty distributors and mass merchants for the
success of our business, and should they perform poorly or give higher priority to other brands or products, our business
could be adversely affected.

We sell our products to retail outlets and wholesale distributors including, traditional supermarkets, mass
merchandisers, warehouse clubs, wholesalers, food service distributors and convenience stores. The replacement by or poor
performance of our major wholesalers, retailers or chains or our inability to collect accounts receivable from our customers
could materially and adversely affect our results of operations and financial condition. In addition, our customers offer
branded and private label products that compete directly with our products for retail shelf space and consumer purchases.
Accordingly, there is a risk that our customers may give higher priority to their own products or to the products of our
competitors. In the future, our customers may not continue to purchase our products or provide our products with adequate
levels of promotional support. A significant decline in the purchase of our products would have a material adverse effect on
our business, results of operations and financial condition.

The sophistication and buying power of our customers could have a negative impact on profits.

Our customers, such as supermarkets, warehouse clubs, and food distributors, have continued to consolidate,
resulting in fewer customers with which to do business. These consolidations and the growth of supercenters have produced
large, sophisticated customers with increased buying power and negotiating strength who are more capable of resisting price
increases and can demand lower pricing, increased promotional programs, or specialty tailored products. In addition, larger
retailers have the scale to develop supply chains that permit them to operate with reduced inventories or to develop and
market their own retailer brands. If the larger size of these customers results in additional negotiating strength and/or
increased private label or store brand competition, our profitability could decline.

Consolidation also increases the risk that adverse changes in our customers’ business operations or financial
performance will have a corresponding material adverse effect on us. For example, if our customers cannot access sufficient
funds or financing, then they may delay, decrease, or cancel purchases of our products, or delay or fail to pay us for previous
purchases.

Failure by third-party manufacturers or suppliers of raw materials to comply with food safety, environmental or

other regulations may disrupt our supply of certain products and adversely affect our business.

We rely on third-party manufacturers to produce our products and on other suppliers to supply raw materials. Such
manufacturers and other suppliers, whether in the United States or outside the United States, are subject to a number of
regulations, including food safety and environmental regulations. Failure by any of our manufacturers or other suppliers to
comply with regulations, or allegations of compliance failure, may disrupt their operations. Disruption of the operations of a
manufacturer or other suppliers could disrupt our supply of product or raw materials, which could have an adverse effect on
our business, consolidated financial condition, results of operations or liquidity. Additionally, actions we may take to mitigate
the impact of any such disruption or potential disruption, including increasing inventory in anticipation of a potential
production or supply interruption, may adversely affect our business, consolidated financial condition, results of operations
or liquidity.

Leasing of real estate exposes us to possible liabilities and losses.

We lease land and/or buildings for certain restaurants, which can include the sub-letting of leased land and/or
buildings to franchisees or companies other than our franchisees. Accordingly, we are subject to all of the risks associated
with owning, leasing and sub-leasing real estate. We generally cannot cancel these leases. If an existing or future store is not
profitable, and we decide to close it, we may nonetheless be committed to perform the obligations under the applicable lease
including, among other things, paying the base rent for the balance of the lease term. In addition, as each of the leases expires,
we may fail to negotiate renewals, either on commercially acceptable terms or at all, which could cause us to close stores in
desirable locations.

We may evaluate acquisitions, joint ventures and other strategic initiatives, any of which could distract

management or otherwise have a negative effect on revenue, costs and stock price.

Our future success may depend on opportunities to buy or obtain rights to other businesses that could complement,
enhance or expand our current business or products or that might otherwise offer growth opportunities. In particular, we may
evaluate potential mergers, acquisitions, joint venture investments, strategic initiatives, alliances, vertical integration
opportunities and divestitures. We have no commitments, agreements or understandings with respect to any of such
transactions. In addition, our ability to engage in these transactions may be impacted by the incurrence of debt as a result of
our sale of the Notes. Any attempt by us to engage in these transactions may expose us to various inherent risks, including:

(cid:404) not accurately assessing the value, future growth potential, strengths, weaknesses, contingent and other

liabilities and potential profitability of acquisition candidates;
the potential loss of key personnel of an acquired business;
the ability to achieve projected economic and operating synergies;

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(cid:404) difficulties in successfully integrating, operating, maintaining and managing newly-acquired operations or

employees;

(cid:404) difficulties maintaining uniform standards, controls, procedures and policies;
(cid:404) unanticipated changes in business and economic conditions affecting an acquired business;
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the possibility of impairment charges if an acquired business performs below expectations; and
the diversion of management’s attention from the existing business to integrate the operations and personnel
of the acquired or combined business or implement the strategic initiative.

Our annual and quarterly financial results may fluctuate depending on various factors, many of which are

beyond our control, and, if we fail to meet the expectations of investors, our share price may decline.

Our sales and operating results can vary from quarter to quarter and year to year depending on various factors, many
of which are beyond our control. Certain events and factors may directly and immediately decrease demand for our products.
These events and factors include:

changes in customer demand;
sales promotions by Nathan’s and its competitors;

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changes in the terms of our existing license/supply agreements and/or the replacement of existing licenses
or suppliers;
changes in average same-store sales and customer visits;

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(cid:404) variations in the price, availability and shipping costs of supplies;
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seasonal effects on demand for Nathan’s products;
(cid:404) unexpected slowdowns in new store development efforts;
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changes in competitive and economic conditions generally;
changes in the cost or availability of ingredients or labor;

changes in the number of franchises sold and in franchise agreement renewals.

Our operations are influenced by adverse weather conditions.

Weather, which is unpredictable, can impact our sales. Harsh weather conditions that keep customers from dining
out result in lost opportunities for our Company-owned and our franchisees’ restaurants. A heavy snowstorm or a tropical
storm or hurricane in the Northeast can shut down an entire metropolitan area, resulting in a reduction in sales in that area at
Company-owned and franchised restaurants. Our fourth quarter includes winter months and historically has a lower level of
sales at Company-owned and franchised restaurants. Additionally, our Company-owned restaurants at Coney Island are
heavily dependent on favorable weather conditions during the summer season. Rain during the weekends and/or
unseasonably cold temperatures will negatively impact the number of patrons going to the Coney Island beach locations.
Because a significant portion of our restaurant operating costs is fixed or semi-fixed in nature, the loss of sales during these
periods hurts our operating margins, and can result in restaurant operating losses. For these reasons, a quarter-to-quarter
comparison may not be a good indication of our performance or how it may perform in the future.

Due to the concentration of our restaurants in particular geographic regions, our business results could be
impacted by the adverse economic conditions prevailing in those regions regardless of the state of the national economy
as a whole.

As of March 31, 2019, we and our franchisees (including units operated pursuant to our BMP) operated Nathan’s
restaurants in 22 states and 14 foreign countries. As of March 31, 2019, the highest concentration of operating units was in
the Northeast, principally in New York and New Jersey. This geographic concentration in the Northeast can cause economic
conditions in particular areas of the country to have a disproportionate impact on our overall results of operations. It is
possible that adverse economic conditions in states or regions that contain a high concentration of Nathan’s restaurants could
have a material adverse impact on our results of operations in the future.

We rely extensively on computer systems, point of sales system and information technology to manage our
business. Any disruption in our computer systems, point of sales system or information technology may adversely affect
our ability to run our business.

We are significantly dependent upon our computer systems, point of sales system and information technology to
properly conduct our business. A failure or interruption of computer systems, point of sales systems or information
technology could result in the loss of data, business interruptions or delays in business operations. Further, despite our
considerable efforts and technological resources to secure our computer systems, point of sales systems and information
technology, security breaches, such as unauthorized access and computer viruses, may occur resulting in system disruptions,
shutdowns or unauthorized disclosure of confidential information. Any security breach of our computer systems, point of
sales systems or information technology may result in adverse publicity, loss of sales and profits, penalties or loss resulting
from misappropriation of information.

Cyberattacks and breaches could cause operational disruptions, fraud or theft of sensitive information.

Aspects of our operations are reliant upon internet-based activities, such as ordering supplies and back-office
functions such as accounting and transaction processing, making payments and accepting credit card payments in our
restaurants, processing payroll and other administrative functions, etc. For instance, if we fail to comply with applicable rules
or requirements for the payment methods we accept, or if payment-related data is compromised due to a breach or misuse of
data, we may be liable for costs incurred by payment card issuing banks and other third parties or subject to fines and higher
transaction fees, or our ability to accept or facilitate certain types of payments may be impaired. In addition, our customers
could lose confidence in certain payment types, which may result in a shift to other payment types or potential changes to
our payment systems that may result in higher costs.

We also use third-party vendors. While we select third-party vendors carefully, we do not control their actions. Any
problems caused by these third parties, including those resulting from breakdowns or other disruptions in communication
services provided by a vendor, failure of a vendor to handle current or higher volumes, cyberattacks and security breaches at
a vendor could adversely affect our ability to deliver products and services to conduct our business.

Although we have taken measures to protect our technology systems and infrastructure, including continuously
working to install new, and upgrade our existing information technology systems and provide employee training around
phishing, malware and other cyber risks, there can be no assurance that we will be successful and fully protected against
cyber risks and security breaches. A security breach could result in operational disruptions, theft or fraud, or exposure of
sensitive information to unauthorized parties. Such events could result in additional costs related to operational inefficiencies,
or damages, claims or fines.

We may be required to recognize additional asset impairment and other asset-related charges.

We have long-lived assets, goodwill and intangible assets and have incurred impairment charges in the past with
respect to those assets. In accordance with applicable accounting standards, we test for impairment annually, or more
frequently, if there are indicators of impairment, such as:

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significant adverse changes in the business climate;
current period operating or cash flow losses combined with a history of operating or cash flow losses or a
projection or forecast that demonstrates continuing losses associated with long-lived assets;
a current expectation that more-likely-than-not (e.g., a likelihood that is more than 50%) long-lived assets
will be sold or otherwise disposed of significantly before the end of their previously estimated useful life;
and
a significant drop in our stock price.

Based upon future economic and capital market conditions, as well as the performance of individual operating units,

future impairment charges could be incurred.

Catastrophic events may disrupt our business.

Unforeseen events, or the prospect of such events, including war, terrorism and other international conflicts, public
health issues such as epidemics or pandemics, labor unrest and natural disasters such as earthquakes, hurricanes or other
extreme adverse weather and climate conditions, whether occurring in the United States or abroad, could disrupt our
operations, disrupt the operations of franchisees, suppliers or customers, or result in political or economic instability. These
events could negatively impact consumer spending, thereby reducing demand for our products, or the ability to receive
products from suppliers. We do not have insurance policies that insure against certain of these risks. To the extent that we
do maintain insurance with respect to some of these risks, our receipt of the proceeds of such policies may be delayed or the
proceeds may be insufficient to offset our losses fully.

Our international operations are subject to various factors of uncertainty.

Our business outside of the United States is subject to a number of additional factors, including international
economic and political conditions, differing cultures and consumer preferences, currency regulations and fluctuations,
diverse government regulations and tax systems, uncertain or differing interpretations of rights (including intellectual
property rights) and obligations in connection with international franchise agreements and the collection of royalties from
international franchisees, the availability and cost of land and construction costs, and the availability of appropriate
franchisees. In developing markets, we may face risks associated with new and untested laws and judicial systems. Although

we believe we have developed the support structure required for international growth, there is no assurance that such growth
will occur or that international operations will be profitable.

Our business operations and future development could be significantly disrupted if we lose key members of our

management team.

The success of our business continues to depend to a significant degree upon the continued contributions of our
senior officers and key employees, both individually and as a group. Our future performance will be substantially dependent,
in particular, on our ability to retain and motivate our executive officers, for certain of whom we currently have employment
agreements in place. The loss of the services of any of our executive officers could have a material adverse effect on our
business, financial condition, results of operations and prospects, as well as our ability to satisfy our obligations under the
Notes. If we lose the services of any of these individuals in the foreseeable future; we currently have no effective replacement
for any of these individuals due to their experience, reputation in the industry and special role in our operations.

A recent ruling and complaint filed by the general counsel of the National Labor Relations Board could, if

upheld, make us liable for violations of overtime, wage or union-organization violations by our franchisees.

On July 29, 2014, the General Counsel of the National Labor Relations Board (NLRB) issued a statement
announcing that McDonald’s USA LLC might be charged with being jointly liable for labor and wage violations by its
franchisees. Subsequently on December 19, 2014, the General Counsel issued complaints alleging that McDonald’s USA
LLC was a “joint employer” with its franchisees at certain franchised locations, under certain fact patterns. McDonald’s USA
LLC and its franchisees are currently in administrative litigation with the NLRB. However, in March 2018, the NLRB
announced a proposed settlement of that complaint. If the parties do not ultimately settle and the NLRB’s general counsel
were to prevail in the administrative proceedings (as well as in related appeals in federal courts that will ensue), against
McDonald’s USA LLC, then depending upon the facts charged in that case, the “joint employment” principle may be
extended more broadly to franchisors other than McDonald’s, USA LLC (such as Nathan’s). If that took place, then we also
might be held partly liable in cases of alleged overtime, wage, or union-organizing violations by our franchisees. Similar to
the NLRB’s action, there have been private lawsuits in which parties have alleged that a franchisor and its franchisee “jointly
employ” the franchisee’s staff, that the franchisor is responsible for the franchisees’ staff (under theories of apparent agency,
ostensible agency, or actual agency), or otherwise. Among other things, a determination that Nathan's and its franchisees are
joint employers of one or more franchisees’ staff may make it easier to organize our franchisees’ staff into unions, provide
the staff and their union representatives with bargaining power to request that we have our franchisees raise wages, and make
it more expensive and less profitable to operate a Nathan’s franchised restaurant. A decrease in profitability or the closing of
a significant number of franchised restaurants could significantly impact our business (as well as our franchisees’ businesses),
and we may also be significantly impacted if the NLRB or a private party successfully brought an action against our company
alleging that we are a “joint employer” of our franchisees’ staffs.

We face risks of litigation and pressure tactics, such as strikes, boycotts and negative publicity from customers,
franchisees, suppliers, employees and others, which could divert our financial, and management resources and which
may negatively impact our financial condition and results of operations.

Class action lawsuits have been filed, and may continue to be filed, against various quick-service restaurants
alleging, among other things, that quick-service restaurants have failed to disclose the health risks associated with high-fat
foods and that quick-service restaurant marketing practices have targeted children and encouraged obesity. In addition, we
face the risk of lawsuits and negative publicity resulting from injuries, including injuries to infants and children, allegedly
caused by our products, toys and other promotional items available in our restaurants or by our playground equipment.

In addition, activist groups, including animal rights activists and groups acting on behalf of franchisees, the workers
who work for suppliers and others, have in the past, and may in the future, use pressure tactics to generate adverse publicity
by alleging, for example, inhumane treatment of animals by our suppliers, poor working conditions or unfair purchasing
policies. These groups may be able to coordinate their actions with other groups, threaten strikes or boycotts or enlist the
support of well-known persons or organizations in order to increase the pressure on us to achieve their stated aims. In the
future, these actions or the threat of these actions may force us to change our business practices or pricing policies, which
may have a material adverse effect on our business, results of operations and financial condition.

Further, we may be subject to employee, franchisee and other claims in the future based on, among other things,
mismanagement of the system, unfair or unequal treatment, discrimination, harassment, wrongful termination and wage, rest
break and meal break issues, including those relating to overtime compensation. We have been subject to these types of

claims in the past, and if one or more of these claims were to be successful or if there is a significant increase in the number
of these claims, our business, results of operations and financial condition could be harmed.

General regulation of the restaurant industry could adversely impact our business, financial condition, results

of operations and prospects.

The restaurant industry is subject to extensive federal, state and local governmental regulations, including those
relating to the preparation and sale of food and those relating to building and zoning requirements. In recent years, there has
been an increased legislative, regulatory and consumer focus on nutrition and advertising practices in the food industry,
particularly among restaurants. This focus has 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. 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 customers, or have enacted legislation restricting the use of certain types of ingredients in restaurants. Furthermore, the
2010 Patient Protection and Affordable Care Act (“PPACA”) establishes a uniform, federal requirement for certain
restaurants to post nutritional information on their menus. Specifically, the PPACA amended the Federal Food, Drug and
Cosmetic Act to require chain restaurants with 20 or more locations operating under the same name and offering substantially
the same menus to publish the total number of calories of standard menu items on menus and menu boards, along with a
statement that puts this calorie information in the context of a total daily calorie intake. The PPACA also requires covered
restaurants to provide to consumers, upon request, a written summary of detailed nutritional information for each standard
menu item, and to provide a statement on menus and menu boards about the availability of this information.

The PPACA further permits the United States Food and Drug Administration (the “FDA”) to require covered
restaurants to make additional nutrient disclosures, such as disclosure of trans fat content. The FDA nutritional labeling rules
require establishments to post calorie counts on all menu items, calorie boards and drive-thru displays throughout the United
States. Businesses affected by the new regulations had one year to comply. Compliance with current and future laws and
regulations regarding the ingredients and nutritional content of our menu items may be costly and time-consuming.

An unfavorable report on, or reaction to, our menu ingredients, the size of our portions or the nutritional content of
our menu items could negatively influence the demand for our offerings. Additionally, if consumer health regulations or
consumer eating habits change significantly, we may be required to modify or discontinue certain menu items, and we may
experience higher costs associated with the implementation of those changes. Additionally, some government authorities are
increasing regulations regarding trans fats and sodium, which may require us to limit or eliminate trans fats and sodium from
our menu offerings, switch to higher cost ingredients or may hinder our ability to operate in certain markets. Failure to
comply with these laws or regulations could have a material adverse effect on our business, financial condition, results of
operations and prospects.

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.

While we recently approved a quarterly dividend policy, there can be no assurance as to the declaration of future

dividends or the amount of such dividend.

We paid our shareholders a special $25.00 per share dividend in 2015 and a special $5.00 per share dividend in
January 2018. On May 31, 2018, Nathan’s Board of Directors authorized the commencement of a regular dividend of $1.00
per share per annum, payable at the rate of $0.25 per quarter. Through March 31, 2019, the Company declared and paid four
regular quarterly dividends of $0.25 per common share. Our declaration and payment of future cash dividends are subject
to the final determination by our Board of Directors that (i) the dividend will be made in compliance with laws applicable
to the declaration and payment of cash dividends, including Section 170 of the Delaware General Business Corporation
Law, (ii) the dividend complies with the terms of the Indenture, and (iii) the payment of dividends remains in our best
interests, which determination will be based on a number of factors, including the impact of changing laws and regulations,
economic conditions, our results of operations and/or financial condition, capital resources, the ability to satisfy financial
covenants and other factors considered relevant by the Board of Directors. There can be no assurance our Board of Directors
will approve the payment of cash dividends in the future or the amount of a cash dividend. Any discontinuance of the payment
of a dividend or changes to the amount of a dividend compared to prior dividends could cause our stock price to decline.

The Tax Cuts and Jobs Act of 2017 may increase the after-tax cost of our outstanding indebtedness.

The Tax Cuts and Jobs Act of 2017 (the “Tax Act”) limits our interest expense deduction on our Notes to 30% of
taxable income before interest, depreciation and amortization from 2018 to 2021 and then taxable income before interest
thereafter. The Tax Act permits us to carry forward disallowed interest expense indefinitely. Due to our high degree of
leverage, beginning in 2018, a portion of our interest expense in future years may not be deductible, which may increase the
after tax cost of any new debt financings as well as the refinancing of our existing debt. We continue to monitor the impact
of the nondeductible interest on our operations and capital structure.

Changes in tax laws and unfavorable resolution of tax contingencies could adversely affect our tax expense.

Our future effective tax rates could be adversely affected by changes in tax laws, both domestically and
internationally. From time to time, the United States Congress and foreign, state and local governments consider legislation
that could increase our effective tax rates. If changes to applicable tax laws are enacted, our results of operations could be
negatively impacted. Our tax returns and positions (including positions regarding jurisdictional authority of foreign
governments to impose tax) are subject to review and audit by federal, state, local and international taxing authorities. An
unfavorable outcome to a tax audit could result in higher tax expense, thereby negatively impacting our results of operations.

Our certificate of incorporation and by-laws and other corporate documents include anti-takeover provisions

which may deter or prevent a takeover attempt.

Some provisions of our certificate of incorporation, by-laws, other corporate documents, including the terms and
condition of our Notes, and provisions of Delaware law may discourage takeover attempts and hinder a merger, tender offer
or proxy contest targeting us, including transactions in which stockholders might receive a premium for their shares. This
may limit the ability of stockholders to approve a transaction that they may think is in their best interest. The corporate
documents include:

(cid:404) Employment Contracts. The employment agreements between us and each of Howard M. Lorber and Eric
Gatoff provide that in the event there is a change in control of Nathan’s, the employee has the option,
exercisable within one year for each of Messrs. Lorber and Gatoff, of his becoming aware of the change in
control, to terminate his employment agreement. Upon such termination, Mr. Gatoff has the right to receive
a lump sum payment equal to his salary and annual bonus for a one-year period, and Mr. Lorber has the
right to receive a lump sum payment equal to the greater of (i) his salary and annual bonuses for the
remainder of the employment term or (ii) 2.99 times his salary and annual bonus plus the difference between
the exercise price of any exercisable options having an exercise price of less than the then current market
price of our common stock and such current market price. Mr. Lorber will also receive a tax gross up
payment to cover any excise tax.

Risks Related to the Notes

We have a substantial amount of indebtedness.

We have significant indebtedness and debt service obligations. As of March 31, 2019, we had total outstanding
indebtedness of $150.0 million which is due in 2025. In addition, subject to the terms of any future agreements, we and our
subsidiaries may be able to incur additional indebtedness in the future. There is a risk that we will not be able to generate
sufficient funds to repay our debt. If we cannot service our fixed charges, it would have a material adverse effect on our
business and results of operations.

Our substantial indebtedness could adversely affect our financial health and prevent us from fulfilling our

obligations under the Notes and our other debt.

As of March 31, 2019, we had $150.0 million of outstanding indebtedness under the Notes. Our substantial

indebtedness could have important consequences to you. For example, it could:

increase our vulnerability to general adverse economic and industry conditions;

(cid:404)
(cid:404) make it more difficult for us to satisfy our other financial obligations, including our obligations relating to

the Notes;
restrict us from making strategic acquisitions or cause us to make non-strategic divestitures;

(cid:404)

require us to dedicate a substantial portion of our cash flow from operations to payments on our
indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital
expenditures and other general corporate purposes;

(cid:404) make it more difficult for us to satisfy our obligations to the holders of the Notes, resulting in possible

(cid:404)

defaults on and acceleration of such indebtedness;
limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we
operate;

(cid:404) place us at a competitive disadvantage compared to our competitors that have less debt; and
(cid:404)

limit our ability to borrow additional funds or increase our cost of borrowing.

In addition, the terms of the indenture governing the Notes contain restrictive covenants that limit our ability to
engage in activities that may be in our long-term best interests. Our failure to comply with those covenants could result in an
event of default which, if not cured or waived, could result in the acceleration of all of our debts, including the Notes. The
occurrence of any one of these events could have a material adverse effect on our business, financial condition, results of
operations, prospects or ability to satisfy our obligations under the Notes.

Despite our current indebtedness level, we may still be able to incur significant additional amounts of debt, which

could further exacerbate the risks associated with our substantial indebtedness.

We may be able to incur substantial additional indebtedness, including additional Notes and other secured
indebtedness, in the future. Although the indenture governing the Notes contains restrictions on the incurrence of additional
indebtedness, these restrictions are subject to a number of significant qualifications and exceptions, and under certain
circumstances, the amount of indebtedness that could be incurred in compliance with these restrictions could be substantial.
If new debt is added to our existing debt levels, the related risks that we face would intensify and we may not be able to meet
all our debt obligations, including the repayment of the Notes. In addition, the indenture governing the Notes does not prevent
us from incurring obligations that do not constitute indebtedness under the indenture.

To service our indebtedness, we will require a significant amount of cash. Our ability to generate cash depends
on many factors beyond our control. As such, we may not be able to generate sufficient cash to service the Notes or our
other indebtedness, and may be forced to take other actions to satisfy our obligations under our indebtedness, which may
not be successful.

Our ability to make payments on the Notes, to fund planned capital expenditures and to maintain sufficient working
capital will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic,
financial, competitive, legislative, regulatory and other factors that are beyond our control.

We cannot assure you that our business will generate sufficient cash flow from operations or future borrowings
from other sources in an amount sufficient to enable us to service our indebtedness, including the Notes, or to fund our other
liquidity needs. If our cash flows and capital resources are insufficient to allow us to make scheduled payments on our
indebtedness, we may need to reduce or delay capital expenditures, sell assets, seek additional capital or restructure or
refinance all or a portion of our indebtedness, including the Notes, on or before the maturity thereof, any of which could have
a material adverse effect on our operations. We cannot assure you that we will be able to refinance any of our indebtedness,
including the Notes, on commercially reasonable terms or at all, or that the terms of that indebtedness will allow any of the
above alternative measures or that these measures would satisfy our scheduled debt service obligations. If we are unable to
generate sufficient cash flow to repay or refinance our debt on favorable terms, it could significantly adversely affect our
financial condition, the value of our outstanding debt, including the Notes, and our ability to make any required cash
payments under our indebtedness, including the Notes. Our ability to restructure or refinance our debt will depend on the
condition of the capital markets and our financial condition at that time. Any refinancing of our debt could be at higher
interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations.
In addition, any future credit facility may be secured by a priority lien on substantially all of our assets. As such, our ability
to refinance the Notes or seek additional financing could be impaired as a result of such security interest.

We are subject to a number of restrictive covenants, which may restrict our business and financing activities.

The indenture governing the Notes imposes, and the terms of any future indebtedness may impose, operating and
other restrictions on us. Such restrictions will affect, and in many respects limit or prohibit, among other things, our ability
to:

incur or guarantee additional indebtedness or issue certain preferred stock;

redeem, repurchase or retire our equity interests, unsecured indebtedness or subordinated indebtedness;

(cid:404)
(cid:404) pay dividends on or make distributions in respect of our equity interests;
(cid:404)
(cid:404) make certain investments;
transfer or sell assets;
(cid:404)
create or incur certain liens;
(cid:404)
(cid:404)
create restrictions on the ability of our subsidiaries to pay dividends or make other payments to us;
(cid:404) merge or consolidate with other companies or sell, transfer or otherwise dispose of all or substantially all

of our and our restricted subsidiaries’ assets;
engage in certain transactions with our affiliates; and
(cid:404)
(cid:404) designate our subsidiaries as unrestricted subsidiaries.

The restrictions in the indenture governing the Notes may prevent us from taking actions that we believe would be
in the best interests of our business, and may make it difficult for us to successfully execute our business strategy or
effectively compete with companies that are not similarly restricted. We also may incur future debt obligations that might
subject us to additional restrictive covenants that could affect our financial and operational flexibility. Our ability to comply
with these covenants in future periods will largely depend on the pricing of our products and services, and our ability to
successfully implement our overall business strategy. We cannot assure you that we will be granted waivers or amendments
to these agreements if for any reason we are unable to comply with these agreements. The breach of any of these covenants
and restrictions could result in a default under the indenture governing the Notes, which could result in an acceleration of
our indebtedness.

Changes in respect of the debt ratings of our Notes may materially and adversely affect the availability, the

cost and the terms and conditions of our debt.

Our Notes have been publicly rated by Moody’s Investors Service, Inc., or Moody’s, and Standard & Poor’s Rating
Services, or S&P, independent rating agencies. In addition, future debt instruments may be publicly rated. These debt ratings
may affect our ability to raise debt. Any future downgrading of the Notes or our other debt by Moody’s or S&P may affect
the cost and terms and conditions of our financings and could adversely affect the value and trading of the Notes.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

Our principal executive offices consist of approximately 9,300 square feet of leased space in Jericho, NY. The lease
commenced on January 1, 2010, had a ten (10) year term, with a five (5) year renewal right. Effective April 1, 2019, we
executed the first amendment to the lease extending the lease for an additional ten (10) year term to expire on March 31,
2029. In August 2018, we completed the sale of our regional office building located in Fort Lauderdale, FL. We also
completed the sale of the Company-owned restaurant, including the real estate, in Bay Ridge, Brooklyn, NY in October 2018.
The Company continued operating the restaurant under a Surrender Agreement with the purchaser until January 2019.

At March 31, 2019, other Company-owned restaurants that were operating were located in leased space with terms

expiring as shown in the following table:

Nathan’s Restaurants
Coney Island .................................................. Brooklyn, NY
Coney Island Boardwalk (a) .......................... Brooklyn, NY
Long Beach Road ......................................... Oceanside, NY
Central Park Avenue ..................................... Yonkers, NY

Location

(a)

Seasonal satellite location.

Current Lease
Expiration Date

December 2027
November 2019
April 2030
December 2023

Approximate
Square Footage
10,000
3,800
4,100
3,500

At March 31, 2019, in addition to the leases listed above, we were the sub-lessor of one property to a franchisee
located within the metropolitan New York area.

Aggregate rental expense, net of sublease income, under all current leases amounted to $1,579,000 in fiscal 2019.

Item 3. Legal Proceedings.

We and our subsidiaries are from time to time involved in ordinary and routine litigation. Management presently
believes that the ultimate outcome of these proceedings, individually or in the aggregate, will not have a material adverse
effect on our financial position, cash flows or results of operations. Nevertheless, litigation is subject to inherent uncertainties
and unfavorable rulings could occur. An unfavorable ruling could include money damages and, in such event, could result
in a material adverse impact on our results of operations for the period in which the ruling occurs.

Item 4. Mine Safety Disclosures.

Not applicable.

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

PART II

Securities.

Common Stock Prices

Our common stock is quoted on the NASDAQ Global Market (“Nasdaq”) under the symbol “NATH.” At June 7,

2019, the closing price per share for our common stock, as reported by Nasdaq, was $64.14.

Dividend Policy

Historically, Nathan’s has not paid or declared any regular dividends on our common stock since our initial public
offering in 1993. However, we have paid two Special Dividends, a $5.00 per share Special Dividend in January 2018 and a
$25.00 per share Special Dividend in March 2015. On May 31, 2018, Nathan’s Board of Directors authorized the
commencement of a regular dividend of $1.00 per share per annum, payable at the rate of $0.25 per quarter. Through March
31, 2019, the Company declared and paid four quarterly dividends of $0.25 per common share.

Our ability to pay future dividends is limited by the terms of an indenture, dated November 1, 2017, between the
Company, certain of its wholly-owned subsidiaries, as guarantors and U.S. Bank National Association, as trustee and
collateral trustee (the “Indenture”). It has been the Board of Directors’ policy to return capital to our shareholders primarily
through the purchase of stock pursuant to our stock buyback programs. Effective June 14, 2019, the Board declared its first
quarterly cash dividend of $0.35 per share for fiscal year 2020 which is payable on June 28, 2019 to stockholders of record
as of the close of business on June 24, 2019.

In addition to the terms of the Indenture, the payment of any cash dividends in the future will be dependent upon
our earnings and financial requirements and there can be no assurance that we will declare and pay any dividends subsequent
to the June 28, 2019 dividend.

Shareholders

As of June 7, 2019, we had approximately 420 shareholders of record, excluding shareholders whose shares were

held by brokerage firms, depositories and other institutional firms in “street name” for their customers.

Issuer Purchases of Equity Securities

For the fiscal year ended March 31, 2019, the Company repurchased 14,390 shares of its common stock at a cost of

$1,000. The Company did not repurchase any of its common stock during the quarter ended March 31, 2019.

Since the commencement of the Company’s stock buyback program in September 2001 through March 31, 2019,
Nathan’s has purchased a total of 5,141,763 shares of common stock at a cost of approximately $78,303,000 under all of its
stock repurchase programs and two modified Dutch Auction tender offers.

In 2016, the Company’s Board of Directors authorized increases to the sixth stock repurchase plan for the purchase
of up to 1,200,000 shares of its common stock on behalf of the Company. As of March 31, 2019, Nathan’s had repurchased
954,132 shares at a cost of $30,641,000 under the sixth stock repurchase plan. At March 31, 2019, there were 245,868 shares
remaining to be repurchased pursuant to the sixth stock repurchase plan. The plan does not have a set expiration date.
Purchases under the Company’s stock repurchase program may be made from time to time, depending on market conditions,
in open market or privately-negotiated transactions, at prices deemed appropriate by management. There is no set time limit
on the repurchases.

Item 6. Selected Financial Data.

March 31,
2019

Fiscal years ended (1)
March 27,
March 26,
March 25,
2018
2016
2017
(In thousands, except per share amounts)

March 29,
2015

Statement of Earnings Data:
Revenues:

Sales ............................................................................. $
License royalties ...........................................................
Franchise fees and royalties ..........................................
Advertising fund revenue (2) ........................................
Total revenues ..........................................................

71,561 $
23,615
4,171
2,502
101,849

76,708 $
23,020
4,473
-
104,201

70,820 $
20,368
5,068
-
96,256

75,590 $
19,815
5,044
-
100,449

Costs and Expenses:

Cost of sales ..................................................................
Restaurant operating expenses ......................................
Depreciation and amortization ......................................
General and administrative expenses ............................
Advertising fund expense (2) ........................................
Total costs and expenses ..........................................

52,779
3,525
1,212
13,851
2,506
73,873

58,752
3,506
1,352
13,491
-
77,101

51,634
3,386
1,297
13,659
-
69,976

57,557
3,557
1,255
13,117
-
75,486

75,057
18,011
5,581
-
98,649

61,488
3,747
1,253
12,203
-
78,691

Income from operations ................................................

27,976

27,100

26,280

24,963

19,958

Interest expense ............................................................
Gain on sale of property and equipment .......................
Loss on debt extinguishment ........................................
Impairment charge long-lived assets .............................
Interest and other income, net .......................................
Impairment charge long-term investment .....................
Insurance gain ...............................................................
Income before provision for income taxes ........................
Provision for income taxes ................................................
Net income ................................................................... $

(10,792 )
11,177
-
-
1,049
-
-
29,410
7,917
21,493 $

(13,591 )
-
(8,872 )
(790 )
265
-
-
4,112
1,482
2,630 $

(14,665 )
-
-
-
189
-
-
11,804
4,319
7,485 $

(14,630 )
-
-
-
151
(100 )
-
10,384
4,288
6,096 $

(816 )
-
-
-
263
-
-
19,405
7,702
11,703

Income per share:

Basic ......................................................................... $
Diluted ...................................................................... $

5.13 $
5.09 $

0.63 $
0.62 $

1.79 $
1.78 $

1.38 $
1.37 $

2.61
2.55

Dividends paid per share ................................................... $
Dividends paid .................................................................. $

1.00 $
4,187 $

5.00 $
20,948 $

- $
- $

25.00
116,110

Weighted average shares used in computing net income

per share
Basic .............................................................................
Diluted ..........................................................................

Balance Sheet Data at End of Fiscal Year:

4,187
4,220

4,181
4,221

4,172
4,206

4,430
4,463

4,486
4,588

Working capital ............................................................ $
Total assets ................................................................... $
Long-term debt, net (3) ................................................. $
Stockholders’ (deficit) .................................................. $

72,237 $
94,306 $
145,449 $
(70,144 ) $

53,702 $
80,091 $
144,758 $
(84,568 ) $

56,763 $
78,125 $
131,475 $
(66,491 ) $

49,779 $
71,549 $
130,266 $
(72,336 ) $

61,328
84,389
129,140
(59,908 )

Supplemental Non-GAAP information (4):

EBITDA (5) .................................................................. $
Adjusted EBITDA (6) .................................................. $

41,414 $
30,399 $

19,055 $
29,115 $

27,766 $
28,348 $

26,269 $
27,155 $

21,474
22,497

Selected Restaurant Operating Data:
Company-owned restaurant sales ...................................... $

13,601 $

14,085 $

14,646 $

16,222 $

15,412

Number of Units Open at End of Fiscal Year:

Company-owned restaurants .........................................
Franchised ....................................................................

4
255

5
276

5
279

5
259

5
296

Notes to Selected Financial Data

(1)

(2)

(3)

(4)

(5)

(6)

Our fiscal year ends on the last Sunday in March, which results in a 52- or 53-week year. The fiscal year ended
March 31, 2019 was on the basis of a 53-week reporting period. The fiscal years ended March 25, 2018, March 26,
2017, March 27, 2016 and March 29, 2015 were each on the basis of a 52-week reporting period.

Upon adoption of Topic 606 in fiscal 2019, the Company was required to include revenues and expenses of its
Advertising Fund as a component of the Company’s Consolidated Statement of Earnings. Previously, these activities
were reported on the Company’s Consolidated Balance Sheet.

Represents $150.0 million outstanding debt net of unamortized debt issuance costs of $4,551 and $5,242 at March
31, 2019 and March 25, 2018, respectively; and $135.0 million outstanding debt net of unamortized debt issuance
costs of $3,525, $4,734 and $5,860 at March 26, 2017, March 27, 2016 and March 29, 2015, respectively.

The Company has provided EBITDA and Adjusted EBITDA, each a non-US GAAP financial measure that the
Company believes will impact the comparability of its results of operations. The Company believes that EBITDA
and Adjusted EBITDA are useful to investors to assist in assessing and understanding the Company's operating
performance and underlying trends in the Company's business because EBITDA and Adjusted EBITDA are (i)
among the measures used by management in evaluating performance and (ii) are frequently used by securities
analysts, investors and other interested parties as a common performance measure. EBITDA and Adjusted EBITDA
are not recognized terms under US GAAP and should not be viewed as alternatives to net income or other measures
of financial performance or liquidity in conformity with US GAAP. Additionally, our definitions of EBITDA and
Adjusted EBITDA may differ from other companies. Analysis of results and outlook on a non-US GAAP basis
should be used as a complement to, and in conjunction with, data presented in accordance with US GAAP.

EBITDA represents net income adjusted for the reversal of (i) interest expense; (ii) provision for income taxes and
(iii) depreciation and amortization expense.

Adjusted EBITDA represents EBITDA adjusted for the reversal of (i) gain on sale of property and equipment; (ii)
loss on debt extinguishment; (iii) impairment charge on long-lived assets; (iv) share-based compensation; (v)
impairment charge on long-term investment in fiscal 2016; (vi) amortization of bond premium on available-for-sale
investments.

Reconciliation of GAAP and Non-GAAP Measures

The following is provided to supplement certain Non-GAAP financial measures discussed in the Selected Financial Data
presented above.

In addition to disclosing results that are determined in accordance with Generally Accepted Accounting Principles
in the United States of America ("US GAAP"), the Company has provided EBITDA which excludes (i) interest expense; (ii)
provision for income taxes and (iii) depreciation and amortization expense. The Company has also provided Adjusted
EBITDA excluding (i) gain on sale of property and equipment; (ii) loss on debt extinguishment; (iii) impairment charge on
long-lived assets; (iv) share-based compensation; (v) impairment charge on long-term investment in fiscal 2016; (vi)
amortization of bond premium on available-for-sale investments that the Company believes will impact the comparability of
its results of operations.

The Company believes that EBITDA and Adjusted EBITDA are useful to investors to assist in assessing and
understanding the Company's operating performance and underlying trends in the Company's business because EBITDA and
Adjusted EBITDA are (i) among the measures used by management in evaluating performance and (ii) are frequently used
by securities analysts, investors and other interested parties as a common performance measure.

EBITDA and Adjusted EBITDA are not recognized terms under US GAAP and should not be viewed as alternatives
to net income or other measures of financial performance or liquidity in conformity with US GAAP. Additionally, our
definitions of EBITDA and Adjusted EBITDA may differ from other companies. Analysis of results and outlook on a non-
US GAAP basis should be used as a complement to, and in conjunction with, data presented in accordance with US GAAP.

(In thousands)

2019

2018

Fiscal Year (1)
2017

2016

2015

Net income ...........................................................
Interest expense ....................................................
Income taxes .........................................................
Depreciation & amortization ................................

21,493
10,792
7,917
1,212

2,630
13,591
1,482
1,352

7,485
14,665
4,319
1,297

6,096
14,630
4,288
1,255

11,703
816
7,702
1,253

EBITDA .................................................

41,414

19,055

27,766

26,269

21,474

Gain on sale of property and equipment ...............
Loss on debt extinguishment ................................
Impairment charge long-lived assets ....................
Share-based compensation ...................................
Impairment charge long-term investment .............
Amortization of bond premium ............................

(11,177 )
-
-
162
-
-

-
8,872
790
398
-
-

-
-
-
582
-
-

-
-
-
722
100
64

-
-
-
859
-
164

ADJUSTED EBITDA ............................

30,399

29,115

28,348

27,155

22,497

(1)

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

Introduction

We are engaged primarily in the marketing of the “Nathan’s Famous” brand and the sale of products bearing the
“Nathan’s Famous” trademarks through several different channels of distribution. Historically, our business has been the
operation and franchising of quick-service restaurants featuring Nathan’s World Famous Beef Hot Dogs, crinkle-cut French-
fried potatoes, and a variety of other menu offerings. Our Company-owned and franchised units operate under the name
“Nathan’s Famous,” the name first used at our original Coney Island restaurant opened in 1916. Nathan’s product licensing
program began in 1978 by selling packaged hot dogs and other meat products to retail customers through supermarkets or
grocery-type retailers for off-site consumption. During fiscal 1998, we introduced our Branded Product Program, which
currently enables foodservice retailers and others to sell some of Nathan’s proprietary products outside of the realm of a
traditional franchise relationship. In conjunction with this program, purchasers of Nathan’s products are granted a limited
use of the Nathan’s Famous trademark with respect to the sale of the purchased products, including Nathan’s World Famous
Beef Hot Dogs, certain other proprietary food items and paper goods. Our Branded Menu Program is a limited franchise
program, under which foodservice operators may sell a greater variety of Nathan’s Famous menu items than under the
Branded Product Program.

Our revenues are generated primarily from selling products under Nathan’s Branded Product Program, restaurant
operations consisting of Company-owned restaurants and franchising the Nathan’s restaurant concept (including under the
Branded Menu Program) and product licensing agreements for the sale of Nathan’s products within supermarkets and club
stores, the manufacture of certain proprietary spices and the sale of Nathan’s products directly to other foodservice operators.
For further information, please see Note J – Segment Information in the accompanying financial statements.

The following summary reflects the franchise openings and closings of the Nathan’s franchise system for the fiscal

years ended March 31, 2019, March 25, 2018, March 26, 2017, March 27, 2016 and March 29, 2015.

March 31,
2019

March 25,
2018

March 26,
2017

March 27,
2016

March 29,
2015

Franchised restaurants operating at the beginning

of the period ......................................................
Franchised restaurants opened during the period .
Franchised restaurants closed during the period ...
Franchised restaurants operating at the end of the

276
13
(34 )

279
40
(43 )

259
53
(33 )

296
56
(93 )

324
36
(64 )

period ................................................................

255

276

279

259

296

At March 31, 2019, our franchise system consisted of 255 Nathan’s franchised units located in 22 states, and 14
foreign countries. We also operate four Company-owned Nathan’s units, including one seasonal location, within the New
York metropolitan area.

As described in Risk Factors and other sections in this Annual Report on Form 10-K for the year ended March 31,
2019, our future results could be impacted by many developments. In March 2014, John Morrell & Co., a subsidiary of
Smithfield Foods, Inc. became Nathan’s exclusive licensee to manufacture and sell hot dogs, sausage and corned beef at
retail. Our future operating results are substantially dependent on our agreement with John Morrell & Co. There are also
certain risks associated with engaging John Morrell & Co. as exclusive licensee including whether (i) we can maintain or
improve the quality and consistency of our products that is expected by our customers, and (ii) John Morrell & Co. will have
a sufficient supply of products available for our customers on a timely basis, as well as the risks described under “Risk
Factors - - Our licensing revenue and overall profitability is substantially dependent on our agreement with John Morrell &
Co. and the loss or a significant reduction of this revenue would have a material adverse effect on our financial condition
and results of operations.”

Our future operating results could be impacted by supply constraints on beef prices and/or increases in beef prices.

On November 1, 2017, the Company completed the issuance of $150.0 million of 6.625% Senior Secured Notes
due 2025 (the "2025 Notes") in a private offering in accordance with Rule 144A under the Securities Act of 1933, as amended
(the “Securities Act”). The 2025 Notes were issued pursuant to an indenture, dated November 1, 2017, (the “Indenture”) by
and among the Company, certain of its wholly-owned subsidiaries, as guarantors, and U.S. Bank National Association, as
trustee and collateral trustee. The Company used the net proceeds of the 2025 Notes offering to satisfy and discharge the
indenture relating to the 2020 Notes (as hereinafter defined) and redeem the 2020 Notes (the "Redemption"), to fund a portion
of a special $5.00 per share cash dividend to Nathan's stockholders of record (see Note K of the Notes to the Consolidated
Financial Statements), and for general corporate purposes, including working capital. The Company also funded the majority
of the special dividend of $5.00 per share through its existing cash. The Redemption occurred on November 16, 2017.

The Company performed the required evaluation of the refinancing and determined that a portion of the Redemption
of the 2020 Notes was accounted for as a modification of the debt and a portion as an extinguishment of the debt. In
connection with the Redemption, the Company recorded a loss on early extinguishment of debt of $8,872,000 for the year
ended March 25, 2018 that primarily reflected a portion of the premium paid to redeem the 2020 Notes and the write-off of
certain debt issuance costs.

The 2025 Notes bear interest at 6.625% per annum, payable semi-annually on May 1st and November 1st of each
year. During the fiscal year ended March 31, 2019, the Company made its required semi-annual interest payments of
$4,968,750 on May 1, 2018 and November 1, 2018. On May 1, 2019, the Company paid its semi-annual interest payment.

The 2025 Notes have no scheduled principal amortization payments prior to its final maturity on November 1, 2025.

On March 10, 2015, the Company completed the issuance of $135.0 million of 10.000% Senior Secured Notes due
2020 (“the 2020 Notes”) in a Rule 144A transaction. The 2020 Notes were issued pursuant to an indenture, dated March 10,
2015, by and among the Company, certain of its wholly-owned subsidiaries, as guarantors, and U.S. Bank National
Association, a national banking association, as trustee and collateral trustee. Debt issuance costs of approximately $5,985,000
were incurred, which were being amortized into interest expense over the remaining 5-year term of the 2020 Notes, or until
redeemed.

Our future results could also be impacted by our interest obligations under the 2025 Notes. As a result of the issuance
of the 2025 Notes, Nathan’s expects to incur interest expense of $9,937,500 per annum and annual amortization of debt
issuance costs of approximately $690,000. The terms and conditions of the 2025 Notes are as follows (terms not defined
shall have the meanings set forth in the Indenture):

There are no ongoing financial maintenance covenants associated with the 2025 Notes. As of March 31, 2019,

Nathan’s was in compliance with all covenants associated with the 2025 Notes.

The Indenture contains certain covenants limiting the Company’s ability and the ability of its restricted subsidiaries
(as defined in the Indenture) to, subject to certain exceptions and qualifications: (i) incur additional indebtedness; (ii) pay
dividends or make other distributions on, redeem or repurchase, capital stock; (iii) make investments or other restricted
payments; (iv) create or incur certain liens; (v) incur restrictions on the payment of dividends or other distributions from its
restricted subsidiaries; (vi) enter into certain transactions with affiliates; (vii) sell assets; or (viii) effect a consolidation or
merger. Certain Restricted Payments which may be made or indebtedness incurred by Nathan’s or its Restricted Subsidiaries
may require compliance with the following financial ratios:

Fixed Charge Coverage Ratio: the ratio of the Consolidated Cash Flow to the Fixed Charges for the relevant period,
currently set at 2.0 to 1.0 in the Indenture. The Fixed Charge Coverage Ratio applies to determining whether
additional Restricted Payments may be made, certain additional debt may be incurred and acquisitions may be made.

Priority Secured Leverage Ratio: the ratio of (a) Consolidated Net Debt outstanding as of such date that is secured by a
Priority Lien to (b) Consolidated Cash Flow of Nathan’s for the Test Period then most recently ended, in each case
with such pro forma adjustments as are appropriate; currently set at 0.40 to 1.00 in the Indenture.

Secured Leverage Ratio: the ratio of (a) Consolidated Net Debt outstanding as of such date that is secured by a Lien on
any property of Nathan’s or any Guarantor to (b) Consolidated Cash Flow of Nathan’s for the Test Period then most
recently ended, in each case with such pro forma adjustments as are appropriate. The Secured Leverage Ratio under
the Indenture is 3.75 to 1.00 and applies if Nathan’s wants to incur additional debt on the same terms as the 2025
Notes.

The Indenture also contains customary events of default, including, among other things, failure to pay interest,
failure to comply with agreements related to the Indenture, failure to pay at maturity or acceleration of other indebtedness,
failure to pay certain judgments, and certain events of insolvency or bankruptcy. Generally, if any event of default occurs,
the Trustee or the holders of at least 25% in principal amount of the 2025 Notes may declare the 2025 Notes due and payable
by providing notice to the Company. In case of default arising from certain events of bankruptcy or insolvency, the 2025
Notes, will become immediately due and payable.

The 2025 Notes are general senior secured obligations, are fully and unconditionally guaranteed by substantially all
of the Company’s wholly-owned subsidiaries and rank pari passu in right of payment with all of the Company’s existing and
future indebtedness that is not subordinated, are senior in right of payment to any of the Company’s existing and future
subordinated indebtedness, are structurally subordinated to any existing and future indebtedness and other liabilities of the
Company’s subsidiaries that do not guarantee the 2025 Notes, and are effectively junior to all existing and future indebtedness
that is secured by assets other than the collateral securing the 2025 Notes.

Pursuant to the terms of a collateral trust agreement, the liens securing the 2025 Notes and the guarantees will be

contractually subordinated to the liens securing any future credit facility.

The 2025 Notes and the guarantees are the Company and the guarantors’ senior secured obligations and will rank:

(cid:404) senior in right of payment to all of the Company and the guarantors’ future subordinated indebtedness;

(cid:404) effectively senior to all unsecured senior indebtedness to the extent of the value of the collateral securing the 2025 Notes

and the guarantees;

(cid:404) pari passu with all of the Company and the guarantors’ other senior indebtedness;

(cid:404) effectively junior to any future credit facility to the extent of the value of the collateral securing any future credit facility

and the 2025 Notes and the guarantees and certain other assets;

(cid:404) effectively junior to any of the Company and the guarantors’ existing and future indebtedness that is secured by assets
other than the collateral securing the 2025 Notes and the guarantees to the extent of the value of any such assets; and

(cid:404) structurally subordinated to the indebtedness of any of the Company’s current and future subsidiaries that do not

guarantee the 2025 Notes.

The Company may redeem the 2025 Notes in whole or in part prior to November 1, 2020, at a redemption price of
100% of the principal amount of the 2025 Notes redeemed plus the Applicable Premium, plus accrued and unpaid interest.
An Applicable Premium is the greater of 1% of the principal amount of the 2025 Notes; or the excess of the present value at
such redemption date of (i) the redemption price of the 2025 Notes at November 1, 2020 plus (ii) all required interest
payments due on the 2025 Notes through November 1, 2020 (excluding accrued but unpaid interest to the redemption date),
computed using a discount rate equal to the Treasury Rate as of such redemption date plus 50 basis points; over the then
outstanding principal amount of the 2025 Notes.

Prior to November 1, 2020, if using the net cash proceeds of certain equity offerings, the Company has the option
to redeem up to 35% of the aggregate principal amount of the 2025 Notes at a redemption price equal to 106.625% of the
principal amount of the 2025 Notes redeemed, plus accrued and unpaid interest and any additional interest.

On or after November 1, 2020, the Company may redeem some or all of the 2025 Notes at a decreasing premium

over time, plus accrued and unpaid interest as follows:

YEAR
On or after November 1, 2020 and prior to November 1, 2021 ...........................................................
On or after November 1, 2021 and prior to November 1, 2022 ...........................................................
On or after November 1, 2022 ..............................................................................................................

PERCENTAGE
103.313%
101.656%
100.000%

In certain circumstances involving a change of control, the Company will be required to make an offer to repurchase
all or, at the holder’s option, any part, of each holder’s 2025 Notes pursuant to the offer described below (the “Change of
Control Offer”). In the Change of Control Offer, the Company will be required to offer payment in cash equal to 101% of
the aggregate principal amount of 2025 Notes repurchased plus accrued and unpaid interest, to the date of purchase.

If the Company sells certain collateralized assets and does not use the net proceeds as required, the Company will
be required to use such net proceeds to repurchase the 2025 Notes at 100% of the principal amount thereof, plus accrued and
unpaid interest and additional interest penalty, if any, to the date of repurchase.

The 2025 Notes may be traded between qualified institutional buyers pursuant to Rule 144A of the Securities Act.

We have recorded the 2025 Notes at cost.

During the fiscal year ended March 25, 2018, we paid interest of $6,750,000 on September 15, 2017 for the 2020

Notes and paid interest of $2,287,500 in connection with the satisfaction of the 2020 Notes.

Critical Accounting Policies and Estimates

Our consolidated financial statements and the notes to our consolidated financial statements contain information
that is pertinent to management’s discussion and analysis. The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities. We believe the
following critical accounting policies involve additional management judgment due to the sensitivity of the methods,
assumptions and estimates necessary in determining the related asset and liability amounts.

Revenue Recognition

From 2014 through 2017, the Financial Accounting Standards Board (“FASB”) issued new accounting standards to
provide principles within a single framework for revenue recognition of transactions involving contracts with customers
across all industries (“Topic 606”). We adopted Topic 606 at the beginning of the fiscal year ended March 31, 2019. (See
“Summary of Significant Accounting Policies”, Note B.11 of the Notes to the Consolidated Financial Statements for further
discussion on the impact on Nathan’s.) Following are discussions of how our revenues are earned, and our accounting policies
pertaining to revenue recognition prior to the adoption of Topic 606 (“Legacy GAAP”) and subsequent to the adoption of
Topic 606 and other required disclosures.

Revenue Recognition - Branded Product Program

The Company recognizes sales from the Branded Product Program and certain products sold from the Branded
Menu Program upon delivery to Nathan’s customers via third party common carrier. Rebates provided to customers are
classified as a reduction to sales.

The timing and amount of revenue recognized related to sales made by our Branded Product Program was not

impacted by the adoption of Topic 606.

Revenue Recognition - Company-owned Restaurants

Sales by Company-owned restaurants, which are typically paid in cash or credit card by the customer, are recognized

at the point of sale. Sales are presented net of sales tax.

The timing and amount of revenue recognized related to our Company-owned restaurant sales was not impacted by

the adoption of Topic 606.

Revenue Recognition – License Royalties

The Company earns revenue from royalties on the licensing of the use of its intellectual property in connection with
certain products produced and sold by outside vendors. The use of the Company’s intellectual property must be approved by
the Company prior to each specific application to ensure proper quality and a consistent image. Revenue from license
royalties is generally based on a percentage of sales, subject to certain annual minimum royalties, recognized on a monthly
basis when it is earned and deemed collectible.

The timing and amount of revenue recognized related to our license royalties was not impacted by the adoption of

Topic 606.

Revenue Recognition - Franchising Operations

In connection with its franchising operations, the Company receives initial franchise fees, international development

fees, royalties, and in certain cases, revenue from sub-leasing restaurant properties to franchisees.

Franchise and area development fees, which are typically received prior to completion of the revenue recognition

process, are recorded as deferred revenue.

Development fees are nonrefundable and the related agreements require the franchisee to open a specified number
of restaurants in the development area within a specified time period or the agreements may be canceled by the Company.
Revenue from development agreements is deferred and prior to the adoption of Topic 606 had been recognized, with an
appropriate provision for estimated uncollectible amounts, when all material services or conditions to the sale were
substantially performed by the franchisor. If substantial obligations under the development agreement were not dependent
on the number of individual franchise locations to be opened, substantial performance was determined using the same criteria
applicable to an individual franchise, which was generally the opening of the first location pursuant to the development
agreement. If substantial performance was dependent on the number of locations, then the development fee was deferred and
was recognized ratably over the term of the agreement, as restaurants in the development area commenced operations on a
pro rata basis to the minimum number of restaurants required to be opened, or at the time the development agreement was
effectively canceled.

The following services are typically provided by the Company prior to the opening of a franchised restaurant.

(cid:404) Approval of all site selections to be developed.
(cid:404) Provision of architectural plans suitable for restaurants to be developed.
(cid:404) Assistance in establishing building design specifications, reviewing construction compliance and

equipping the restaurant.

(cid:404) Provision of appropriate menus to coordinate with the restaurant design and locations to be developed.
(cid:404) Provision of management training for the new franchisee and selected staff.
(cid:404) Assistance with the initial operations of restaurants being developed.

Under the adoption of Topic 606, the Company determined that the services provided in exchange for these upfront
restaurant franchise fees do not contain separate and distinct performance obligations from the franchising right and
beginning March 26, 2018, these initial franchise fees, renewal fees and transfer fees shall be deferred and recognized over
the term of each respective agreement, or upon termination of the franchise agreement.

Under Legacy GAAP, franchise fees, which are non-refundable, were recognized as income when substantially all
services to be performed by Nathan’s and conditions relating to the sale of the franchise were performed or satisfied, which
generally occurred when the franchise restaurant commenced operations.

Under Legacy GAAP, international development fees were recognized, net of direct expenses, upon the opening of
the first restaurant within the territory. Under the adoption of Topic 606, the Company determined that the services provided
in exchange for these international development fees do not contain separate and distinct performance obligations from the
franchise right and as of March 26, 2018, international development fees, net of certain incremental direct expenses, shall be
recognized over the term of each respective agreement. Certain other costs, such as legal expenses, shall be expensed as
incurred.

Nathan’s recognizes franchise royalties on a monthly basis which are generally based upon a percentage of sales
made by Nathan’s franchisees, when they are earned and deemed collectible. Franchise fees and royalties that are not deemed
to be collectible are not recognized as revenue until paid by the franchisee, or until collectability is deemed to be reasonably
assured.

Nathan’s recognizes royalty revenue from its Branded Menu Program either upon its sale of hot dogs or royalty
income when it has been determined that other qualifying products have been sold by the manufacturer to Nathan’s Branded
Menu Program franchisees or based upon product purchased by these franchisees from their primary distributor.

Franchise fees and royalties that are not deemed to be collectible are recorded as bad debts until paid by the

franchisee or until collectibility is deemed to be reasonably assured.

Revenue Recognition – National Advertising Fund

The Company maintains a national advertising fund (the “Advertising Fund”) established to collect and administer
funds contributed for use in advertising and promotional programs for Company-owned and franchised restaurants. Under
Legacy GAAP, the revenues, expenses and cash flows of the Advertising Fund were reported on the Company’s Consolidated
Balance Sheets and not included in the Company’s Consolidated Statements of Earnings and Statements of Cash Flows
because the contributions to the Advertising Fund were designed for specific purposes and the Company acted as an agent,
in substance, with regard to these contributions as a result of industry-specific guidance.

Under the adoption of Topic 606, the revenue, expenses and cash flows of the Advertising Fund are fully

consolidated into the Company’s Consolidated Statements of Earnings and Statements of Cash Flows.

While this treatment impacts the gross amount of reported advertising fund revenue and related expenses, the impact
is expected to be an offsetting increase to both revenue and expense after elimination of Company contributions, with no
impact to income from operations or net income because the Company attempts to manage the Advertising Fund to breakeven
over the course of the fiscal year. However, any surplus or deficit in the Advertising Fund will impact income from operations
and net income.

Revenue Recognition – Other

Revenue from sub-leasing properties is recognized as income as the revenue is earned and becomes receivable and
deemed collectible. Sub-lease rental income is presented net of associated lease costs in the consolidated statements of
earnings.

In the normal course of business, we extend credit to franchisees and licensees for the payment of ongoing royalties
and to trade customers of our Branded Product Program. Accounts and other receivables, net, as shown on our consolidated
balance sheets are net of allowances for doubtful accounts. An allowance for doubtful accounts is determined through
analysis of the aging of accounts receivable at the date of the financial statements, assessment of collectability based upon
historical trends and an evaluation of the impact of current and projected economic conditions. The Company writes off
accounts receivable when they are deemed uncollectible.

Impairment of Goodwill and Other Intangible Assets

Goodwill and intangible assets are deemed to have indefinite lives, and accordingly, are not amortized, but are
evaluated annually (or more frequently if events or changes in circumstances indicate the carrying value may not be
recoverable) for impairment. The most significant assumptions, which are used in this test, are estimates of future cash flows.
We typically use the same assumptions for this test as we use in the development of our business plans. If these assumptions
differ significantly from actual results, impairment charges may be required in the future. We conducted our annual
impairment tests and no goodwill or other intangible assets were determined to be impaired during the fiscal years ended
March 31, 2019, and March 25, 2018 and March 26, 2017.

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. Each reporting period, management reviews the carrying value of its investments
based upon the financial information provided by the investment’s management and considers whether indicators of an other-
than-temporary impairment exists. If an impairment indicator exists, management evaluates the fair value of its investment
to determine if an, other-than-temporary impairment in value has occurred. We are required to recognize an impairment on
the investment if such impairment is considered to be other-than temporary.

Impairment losses are recorded on long-lived assets on a restaurant-by-restaurant basis whenever impairment factors
are determined to be present. The Company tests the recoverability of its long-lived assets with finite useful lives whenever
events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. The Company tests
for recoverability based on the projected undiscounted cash flows to be derived from such asset. If the projected undiscounted
future cash flows are less than the carrying value of the asset, the Company will record an impairment loss, if any, based on
the difference between the estimated fair value and the carrying value of the asset. The Company generally measures fair
value by considering discounted estimated future cash flows from such asset. Cash flow projections and fair value estimates
require significant estimates and assumptions by management. Should the estimates and assumptions prove to be incorrect,
the Company may be required to record impairments in future periods and such impairments could be material. The Company
considers a history of restaurant operating losses to be its primary indicator of potential impairment for individual restaurant
locations. No long-lived assets were deemed impaired during the fiscal years ended March 31, 2019 or March 26, 2017. At
March 25, 2018, we recorded an impairment charge of $790,000 to write down the value of the long-lived assets at one of
our restaurants.

Stock-Based Compensation

As discussed in Note L.2 of the Notes to Consolidated Financial Statements, we have one active share-based
compensation plan that provides stock options and restricted stock awards for certain employees and non-employee directors
to acquire shares of our common stock. We consider the following factors in determining the value of stock-based
compensation:

(a)
(b)

expected option term based upon expected termination behavior;
volatility based upon historical price changes of the Company’s common stock over a period equal to the
expected life of the option;
expected dividend yield; and
risk free interest rate on date of grant.

Income Taxes

The Company’s current provision for income taxes is based upon its estimated taxable income in each of the
jurisdictions in which it operates, after considering the impact on taxable income of temporary differences resulting from
different treatment of items for tax and financial reporting purposes. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and any operating loss or tax credit carryforwards. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences
are expected to be recovered or settled. The ultimate realization of deferred tax assets is dependent upon the generation of
future taxable income in those periods in which temporary differences become deductible. Should management determine
that it is more likely than not that some portion of the deferred tax assets will not be realized, a valuation allowance against
the deferred tax assets would be established in the period such determination was made.

Uncertain Tax Positions

Financial Accounting Standards establish guidance for the determination of whether tax benefits claimed or
expected to be claimed on a tax return should be recorded in the financial statements. The Company may recognize the tax
benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination
by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements
from such position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being
realized upon ultimate settlement. Financial Accounting Standards also provide guidance on derecognition, classification,
interest and penalties, accounting in interim periods and disclosure requirements. (See Note I of the Notes to Consolidated
Financial Statements.)

Adoption of New Accounting Standards

From 2014 through 2017, the Financial Accounting Standards Board (“FASB”) issued new accounting standards to
provide principles within a single framework for revenue recognition of transactions involving contracts with customers
across all industries (“Topic 606”). We adopted Topic 606 at the beginning of the fiscal year ended March 31, 2019. Please
refer to Footnotes B.12 through B.17 in the accompanying Consolidated Financial Statements for discussions of how our
revenues are earned, and our accounting policies pertaining to revenue recognition prior to the adoption of Topic 606
(“Legacy GAAP”) and subsequent to the adoption of Topic 606 and other required disclosures. Also included in Footnote
B.18 are disclosures of the amounts by which each consolidated balance sheet, consolidated statement of earnings, and
consolidated statement of cash flows line item was impacted in the current period reporting as compared to Legacy GAAP.

In January 2017, the FASB issued a new accounting standard that narrows the definition of a business. The concept
is fundamental in determining whether transactions should be accounted for as acquisitions (or disposals) of assets or
businesses. The ASU revised the definition of a business to consist of the following key concepts:

(cid:404) A business is an integrated set of activities and assets that is capable of being conducted and managed for the
purpose of providing a return in the form of dividends, lower costs, or other economic benefits directly to
investors or other owners, members, or participants.

(cid:404) To be capable of being conducted and managed for the purposes described above, an integrated set of activities

and assets requires two essential elements–inputs and a substantive process(es) applied to those inputs.

The amendment is effective prospectively for public business entities for annual reporting periods beginning after
December 15, 2017. This standard took effect in Nathan’s first quarter ending (June 2018) of our fiscal year ending March
31, 2019. This new accounting standard did not have a material effect on the Company’s results of operations, cash flows or
financial position.

New Accounting Standards Not Yet Adopted

In February 2016, the FASB issued new guidance ASU 2016-02, “Leases (Topic 842),” which outlines principles
for the recognition, measurement, presentation and disclosure of leases applicable to both lessors and lessees. In January
2018, the FASB issued ASU 2018-01, Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic
842, which affects the guidance in ASU 2016-02. The standard permits the election of an optional transition practical
expedient to not evaluate land easements that exist or expired before the adoption of Topic 842 and that were not previously
accounted for as leases under Topic 840. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic
842 (Leases), and ASU 2018-11, Leases (Topic 842), Targeted Improvements, which provide (i) narrow amendments to
clarify how to apply certain aspects of the new lease standard, (ii) entities with an additional transition method to adopt the
new standard, and (iii) lessors with a practical expedient for separating components of a contract. The new standard is
effective for annual reporting periods beginning after December 15, 2018, including interim reporting periods within those
annual reporting periods.

The new guidance takes effect at the beginning of Nathan’s first quarter (April 1, 2019) of our fiscal year ending
March 29, 2020. The new guidance requires lessees to recognize on the balance sheet the assets and liabilities for the rights
and obligations created by finance and operating leases with lease terms of more than 12 months. The guidance requires
either a modified retrospective transition approach with application in all comparative periods presented, or an alternative
transition method, which permits the Company to use its effective date as the date of initial application without restating
comparative period financial statements and recognizing any cumulative effect adjustment to the opening balance sheet of
accumulated deficit at April 1, 2019.

The new guidance also provides several practical expedients and policies that companies may elect under either
transition method. Nathan’s expects to elect the modified retrospective method and use the effective date as the initial
application. Nathan’s will also adopt the package of practical expedients including; not reassessing prior conclusions about
lease identification, lease classification and initial direct costs. We will elect the short-term lease recognition exemption for
qualifying leases of less than 12 months and not recognize a Right-of-Use Asset or lease liability, we will elect not to separate
lease and non-lease components for all leases and we will not elect the use-of-hindsight practical expedient. We have
completed the scoping analysis and data gathering process for our current lease portfolio. We are finalizing the review of
information for completeness of the lease portfolio, analyzing the financial statement impact of adopting the standards, and
evaluating the impact of adoption on our existing accounting policies and disclosures. Upon adoption, we expect to recognize
additional operating lease liabilities of approximately $8,500,000, and a Right of Use asset of approximately $7,800,000,
based on the present value of the remaining minimum rental payments under current leasing standards for existing operating

leases and derecognize $700,000 of deferred rents. We do not expect the adoption of this guidance to have a material impact
on our consolidated statements of earnings and statement of cash flows.

In January 2017, the FASB issued an update to the accounting guidance to simplify the testing for goodwill
impairment. The update removes the requirement to determine the implied fair value of goodwill to measure the amount of
impairment loss, if any, under the second step of the current goodwill impairment test. A company will perform its annual
or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. A goodwill
impairment charge will be recognized for the amount by which the reporting unit’s carrying amount exceeds its fair value,
not to exceed the carrying amount of the goodwill. The guidance is effective prospectively for public business entities for
annual reporting periods beginning after December 15, 2019. This standard is required to take effect in Nathan’s first quarter
(June 2020) of our fiscal year ending March 28, 2021. Nathan’s does not expect the adoption of this new guidance to have a
material impact on its results of operations or financial position.

The Company does not believe that any other recently issued, but not yet effective accounting standards, when

adopted, will have a material effect on the accompanying financial statements.

Results of Operations

Fiscal year ended March 31, 2019 compared to fiscal year ended March 25, 2018

Revenues

Total sales were $71,561,000 for the fifty-three weeks ended March 31, 2019 (“fiscal 2019 period”) as compared
to $76,708,000 for the fifty-two weeks ended March 25, 2018 (“fiscal 2018 period”). Foodservice sales from the Branded
Product Program were $57,960,000 for the fiscal 2019 period as compared to sales of $62,623,000 in the fiscal 2018 period.
Our average selling prices decreased by approximately 3.5% as a result of our pricing strategy, which is more closely
correlated to the cost of beef which decreased by approximately 7.7%, during the fiscal 2019 period as compared to the fiscal
2018 period. During the fiscal 2019 period, the volume of business decreased by approximately 3.8%. Foodservice sales
during the 53rd week of fiscal 2019 were $2,090,000. On a comparative 52 week basis, sales would have been approximately
$55,870,000 and volume would have decreased by approximately 6.9%.

During the fiscal 2018 period, we added a new distributor to our distribution network that increased our sales during
implementation of the new distributor. In addition to the additional business realized, beginning in the third quarter fiscal
2018, this distributor temporarily provided distribution to a number of significant contract accounts, further increasing their
fiscal 2018 purchases. During the first quarter of fiscal 2019, distribution reverted to our traditional methodology, which
caused the re-distributor to reduce their inventory purchased from us. Excluding the effects of the re-distributors’ purchases
in both years, we estimate that customer shipments increased by approximately 3.6% during the fiscal 2019 period, excluding
the impact of the 53rd week.

Total Company-owned restaurant sales were $13,601,000 during the fiscal 2019 period compared to $14,085,000
during the fiscal 2018 period due primarily to lower sales at our Coney Island locations principally during April 2018 and
the summer of 2018 when the weather was exceptionally unfavorable in the Northeastern United States. Sales from our
Company-owned restaurants during the 53rd week of fiscal 2019 were approximately $142,000. Additionally, sales were
lower than the fiscal 2018 period by $268,000 from the sold restaurant in Bay Ridge, Brooklyn, NY.

License royalties were $23,615,000 in the fiscal 2019 period as compared to $23,020,000 in the fiscal 2018 period.
Total royalties earned on sales of hot dogs from our license agreement with John Morrell & Co. at retail and foodservice,
substantially from sales of hot dogs to Sam’s Club and WalMart, increased to $21,271,000 for the fiscal 2019 period as
compared to $20,833,000 for the fiscal 2018 period. The increase is due to a 2.2% increase in volume during the fiscal 2019
period as compared to the fiscal 2018 period, which was partly offset by a decline in average selling price of 1.3%. Beginning
in fiscal 2019, we agreed to reduce the royalty rate earned on the foodservice business with John Morrell & Co., substantially
on sales of hot dogs to Sam’s Club, in an attempt to secure additional business with WalMart. Overall, we earned higher
royalties of $150,000 as compared to the fiscal 2018 period. We also earned $161,000 from John Morrell & Co. from new
products, other than hot dogs, during the fiscal 2019 period. Royalties earned from all other licensing agreements for the
manufacture and sale of Nathan’s products increased by $157,000 during the fiscal 2019 period as compared to the fiscal
2018 period. Licensee sales and royalties, which are reported by our licensees, were not affected by the additional week in
fiscal 2019.

Franchise fees and royalties were $4,171,000 in the fiscal 2019 period as compared to $4,473,000 in the fiscal 2018
period. Total royalties were $3,666,000 in the fiscal 2019 period as compared to $4,138,000 in the fiscal 2018 period.
Royalties earned under the Branded Menu program were $726,000 in the fiscal 2019 period as compared to $1,008,000 in
the fiscal 2018 period. Royalties earned under the Branded Menu Program are not based upon a percentage of restaurant
sales, but are based upon product purchases. Traditional franchise royalties were $2,940,000 in the fiscal 2019 period as
compared to $3,130,000 in the fiscal 2018 period. Franchise restaurant sales decreased to $65,607,000 in the fiscal 2019
period as compared to $69,838,000 in the fiscal 2018 period primarily due to the impact of units closed between fiscal years
which were partly offset by sales of approximately $1,230,000 from the 53rd week of fiscal 2019. Comparable domestic
franchise sales (consisting of 82 Nathan’s outlets, excluding sales under the Branded Menu Program) were $51,038,000
during the 53 weeks of fiscal 2019 period as compared to $50,253,000 during the 52 weeks fiscal 2018 period. Comparable
sales during the 52 weeks of fiscal 2019 were approximately $50,075,000, a 0.4% decline in comparable domestic sales on
a basis of 52 weeks.

At the beginning of the fiscal 2019 period we adopted Topic 606. Footnote B in the accompanying Consolidated
Financial Statements provides a full explanation of this new accounting standard. The most significant component of this
new standard affects the timing associated with Nathan’s recognition of franchise fees. Franchise fee income is now recorded
into income on a prorated basis over the term of the franchise agreement as compared to previously recognizing the full
franchise fee into income upon the opening of a new restaurant.

At March 31, 2019, 255 franchised outlets, including domestic, international and Branded Menu Program outlets
were operating as compared to 276 franchised outlets, including domestic, international and Branded Menu Program outlets
at March 25, 2018. Total franchise fee income was $505,000 in the fiscal 2019 period as compared to $335,000 in the fiscal
2018 period. Domestic franchise fee income was $155,000 in each of the fiscal 2019 and fiscal 2018 periods. International
franchise fee income increased to $158,000 in the fiscal 2019 period as compared to $133,000 in the fiscal 2018 period. We
also recognized $192,000 and $47,000 in forfeited fees in the fiscal 2019 and fiscal 2018 periods, respectively. During the
fiscal 2019 period, total franchise fees would have been $288,000, under the previous revenue recognition guidance. During
the fiscal 2019 period, 13 new franchised outlets opened including five international locations and four new Branded Menu
Program outlets opened. During the fiscal 2018 period, 40 new franchised outlets opened, including 16 international
locations, and 19 Branded Menu Program outlets.

Advertising fund revenue, after eliminating Company contributions, was $2,502,000 during the fiscal 2019 period.
Pursuant to the adoption of Topic 606, revenue and expenses of the Advertising Fund are required to be included as
components of the Company’s Statements of Earnings and Cash Flows. Nathan’s seeks to manage its Advertising Fund with
the expectation that inflows and outflows will be offsetting and has also recorded a separate Advertising fund expense. Prior
to the adoption of Topic 606, the activities of the Advertising Fund were reported within the Consolidated Balance Sheet.

Costs and Expenses

Overall, our cost of sales decreased by $5,973,000 to $52,779,000 in the fiscal 2019 period as compared to
$58,752,000 in the fiscal 2018 period. Our gross profit (representing the difference between sales and cost of sales) was
$18,782,000 or 26.2% of sales during the fiscal 2019 period as compared to $17,956,000 or 23.4% of sales during the fiscal
2018 period. The margin improvement was primarily due to the lower cost of beef in the Branded Product Program and in
the Company-operated restaurants partly offset by higher labor costs at the Company-owned restaurants due to the annual
increases in the New York minimum wages and other labor regulations.

Cost of sales in the Branded Product Program decreased by approximately $5,750,000 during the fiscal 2019 period
as compared to the fiscal 2018 period, primarily due to the 7.7% decrease in the average cost per pound of our hot dogs and
the 3.8% decrease in the volume of product sold discussed above. We did not enter into any purchase commitments of beef
during the fiscal 2019 and 2018 periods. If the cost of beef and beef trimmings increases and we are unable to pass on these
higher costs through price increases or otherwise reduce any increase in our costs through the use of purchase commitments,
our margins will be adversely impacted.

With respect to Company-owned restaurants, our cost of sales during the fiscal 2019 period was $7,807,000 or
57.4% of restaurant sales, as compared to $8,030,000 or 57.0% of restaurant sales in the fiscal 2018 period primarily due to
lower beef costs offset by the impact of higher labor costs principally associated with the effects of the New York State
minimum wage increase. Lower beef costs were also offset by higher seafood and other food costs during the fiscal 2019
period. We expect that our future labor costs will continue to be impacted by the multi-year new increase in minimum wage
requirements in New York State, as well as other new labor regulations and any increase in food costs from higher commodity
costs.

Restaurant operating expenses were $3,525,000 in the fiscal 2019 period as compared to $3,506,000 in the fiscal
2018 period. The increase in restaurant operating costs results primarily from higher home delivery costs, occupancy costs
and insurance, which were partly offset by lower costs realized of $70,000 after the sale of our restaurant in Bay Ridge,
Brooklyn, NY.

Depreciation and amortization was $1,212,000 in the fiscal 2019 period compared to $1,352,000 in the fiscal 2018
period as a result of lower capital spending and the sales of the Florida office and the Company-owned restaurant located in
Bay Ridge, Brooklyn, NY.

General and administrative expenses increased $360,000 or 2.7% to $13,851,000 in the fiscal 2019 period as
compared to $13,491,000 in the fiscal 2018 period. The increase in general and administrative expenses was primarily
attributable to higher marketing expenses, professional fees and compensation expense of $67,000. Salaries of approximately
$96,000 were incurred during the 53rd week. We incurred professional fees of approximately $38,000 to implement Topic
606 and we were also required to expense approximately $162,000 of legal fees as a result of the adoption of Topic 606,
which would have previously been offset against franchise fee revenue. We also incurred higher legal fees in connection
with the sale of two Company-owned properties.

Advertising fund expense, after elimination Company contributions, was $2,506,000 during the fiscal 2019 period.
Pursuant to the adoption of Topic 606, revenue and expenses of the Advertising Fund are required to be included as
components of the Company’s Statements of Earnings and Cash Flows. Nathan’s manages its Advertising Fund with the
expectation that inflows and outflows will be offsetting. Prior to the adoption of Topic 606, the activities of the Advertising
Fund were reported within the Consolidated Balance Sheet.

Other Items

Gain on sale of property and equipment of $11,177,000 in the fiscal 2019 period relates to (i) the gain on the sale
of the Company-owned restaurant located in Bay Ridge, Brooklyn, NY and (ii) the gain on the sale of the Florida regional
office.

The Company recorded a loss on early extinguishment of debt of $8,872,000 in connection with the fiscal 2018
refinancing of the 2020 Notes in the fiscal 2018 period that primarily reflects a portion of the premium paid to redeem the
2020 Notes at 10.000% per annum and the write-off of certain debt issuance costs. Please refer to Footnote K in the
accompanying Consolidated Financial Statements, for further discussion regarding the 2017 refinancing.

Interest expense of $10,792,000 in the fiscal 2019 period represented accrued interest of $10,101,000 on the 2025
Notes at 6.625% per annum and amortization of debt issuance costs of $691,000. Interest expense of $13,591,000 in the
fiscal 2018 period represents interest of $8,574,000 on the 2020 Notes, $3,948,000 accrued interest on the 2025 Notes and
total amortization of debt issuance costs of $1,069,000. On November 1, 2017, the Company issued the 2025 Notes and the
Redemption of the 2020 Notes occurred on November 16, 2017. The Company incurred additional interest expense of
approximately $562,500 from the time the 2025 Notes closed until the Redemption during the fiscal 2018 period.

Impairment charge – long-lived assets of $790,000 in the fiscal 2018 period represents write-down of one restaurant

based upon the Company’s evaluation of its ability to recover its investment from future cash flows.

Interest income was $840,000 in the fiscal 2019 period as compared to $166,000 in the fiscal 2018 period.

Other income in the fiscal 2019 period primarily relates to (i) a fee of $175,000 to extend the closing date of the
sale of our restaurant located in Bay Ridge, Brooklyn, NY by three months and (ii) sublease income from a franchised
restaurant which was $85,000 in each of the fiscal 2019 and fiscal 2018 periods.

Provision for Income Taxes

On December 22, 2017, the Tax Cuts and Jobs Act, (the “Tax Act”) was enacted which among other provisions,
reduced the top corporate tax rate from 35 percent to a flat 21 percent beginning January 1, 2018 and eliminated the corporate
Alternative Minimum Tax. The Tax Act limits the deduction of business interest, net of interest income, to 30 percent of the
adjusted taxable income of the taxpayer in any taxable year. Any amount disallowed under the limitation is treated as business
interest paid or accrued in the following year. Disallowed interest will have an indefinite carryforward. The Tax Act also
repeals the performance-based exception to the $1.0 million deduction limitation on executive compensation and modifies
the definition of “covered employees”. Additionally, the Tax Act intended to allow businesses to immediately expense the

full cost of Qualified Improvement Property. However, the law as written does not permit restaurant companies to take
advantage of the laws’ intention. Nathan’s determined that its blended federal tax rate was 31% for its fiscal year ending
March 25, 2018, as a result of the Tax Act.

The income tax provisions for the fifty-three week period ended March 31, 2019 and the fifty-two week period
March 25, 2018 reflect effective tax rates of 26.9% and 36.0%, respectively. The Company’s tax rate reflects the reduction
in our Federal income tax rate from 31% to 21% pursuant to the Tax Act. During the third quarter of our fiscal year ended
March 25, 2018, pursuant to Staff Accounting Bulletin #118, Nathan’s determined reasonable estimates to its deferred assets
and liabilities and pursuant to Topic 740, Income Taxes, the Company recognized the effect(s) of the Tax Act on current and
deferred income taxes in its financial statements. Nathan’s recorded the following discrete adjustment to its deferred tax
liability and unrecognized tax benefits which increased the income tax benefit by $245,000, or 6.0% percentage points during
the fiscal year ended March 25, 2018.

The amount of unrecognized tax benefits at March 31, 2019 was $253,000 all of which would impact Nathan’s
effective tax rate, if recognized. As of March 31, 2019, Nathan’s had $245,000 of accrued interest and penalties in connection
with unrecognized tax benefits.

In January 2018, Nathan’s received notification from the State of Virginia that it was seeking to review Nathan’s
tax returns for the period April 2014 through March 2017. The review has been completed; Nathan’s has accepted the findings
and settled the matter in the second quarter fiscal 2019. The effects of the review, which were not significant, have been
factored into the Company’s effective tax rate for fiscal 2019.

Nathan’s estimates that its unrecognized tax benefit excluding accrued interest and penalties could be further

reduced by up to $11,000 during the fiscal year ending March 29, 2020.

The final annual tax rate is subject to many variables, including the ultimate determination of revenue and income
tax by state, among other factors, and cannot be determined until the end of the fiscal year; therefore, the actual tax rate could
differ from our current estimates. In addition, the ultimate benefit of the Tax Act on Nathan’s is unclear as the lower annual
tax rate could be outweighed by deduction limitations and other provisions included in further guidance and regulations.

Results of Operations

Fiscal year ended March 25, 2018 compared to fiscal year ended March 26, 2017

Revenues

Total sales were $76,708,000 for the fifty-two weeks ended March 25, 2018 (“fiscal 2018 period”) as compared to
$70,820,000 for the fifty-two weeks ended March 26, 2017 (“fiscal 2017 period”). Foodservice sales from the Branded
Product Program were $62,623,000 for the fiscal 2018 period as compared to sales of $55,960,000 in the fiscal 2017 period.
During the fiscal 2018 period, the volume of business increased by approximately 9.4%. As result of our pricing strategy,
which is more closely correlated to the cost of beef which increased by approximately 7.2%, our average selling prices were
higher by approximately 1.8% during the fiscal 2018 period as compared to the fiscal 2017 period. Total Company-owned
restaurant sales were $14,085,000 during the fiscal 2018 period compared to $14,646,000 during the fiscal 2017 period due
primarily to lower sales at our Coney Island location. Sales at our Company-owned restaurants were unfavorably affected
during the fiscal 2018 period due primarily to unfavorable summer weather conditions. Direct retail sales also decreased
$214,000 during the fiscal 2018 period as compared to the fiscal 2017 period as we transitioned this business into our Branded
Product Program during the second quarter of fiscal 2017.

License royalties were $23,020,000 in the fiscal 2018 period as compared to $20,368,000 in the fiscal 2017 period.
Total royalties earned on sales of hot dogs from our license agreement with John Morrell & Co. at retail and foodservice,
substantially from sales of hot dogs to Sam’s Club, increased to $20,833,000 for the fiscal 2018 period as compared to
$18,424,000 for the fiscal 2017 period. The increase is due to a 9.3% increase in volume during the fiscal 2018 period as
compared to the fiscal 2017 period. Average selling prices, on which our royalties are calculated, increased by 4.5% due to
pricing increases during the fourth quarter. Royalties earned from all other licensing agreements for the manufacture and sale
of Nathan’s products increased by $243,000 during the fiscal 2018 period as compared to the fiscal 2017 period.

Franchise fees and royalties were $4,473,000 in the fiscal 2018 period as compared to $5,068,000 in the fiscal 2017
period. Total royalties were $4,138,000 in the fiscal 2018 period as compared to $4,290,000 in the fiscal 2017 period.
Royalties earned under the Branded Menu program were $1,008,000 in the fiscal 2018 period as compared to $955,000 in
the fiscal 2017 period. Royalties earned under the Branded Menu Program are not based upon a percentage of restaurant
sales, but are based upon product purchases. Traditional franchise royalties were $3,130,000 in the fiscal 2018 period as
compared to $3,335,000 in the fiscal 2017 period. Franchise restaurant sales decreased to $69,838,000 in the fiscal 2018
period as compared to $74,553,000 in the fiscal 2017 period primarily due to the impact of units closed in the previous year,
and a 1.5% decline in comparable domestic sales. Comparable domestic franchise sales (consisting of 86 Nathan’s outlets,
excluding sales under the Branded Menu Program) were $50,496,000 in the fiscal 2018 period as compared to $51,274,000
in the fiscal 2017 period.

At March 25, 2018, 276 franchised outlets, including domestic, international and Branded Menu Program outlets
were operating as compared to 279 franchised outlets, including domestic, international and Branded Menu Program outlets
at March 26, 2017. Total franchise fee income was $335,000 in the fiscal 2018 period as compared to $778,000 in the fiscal
2017 period. Domestic franchise fee income decreased to $155,000 in the fiscal 2018 period as compared to $268,000 in the
fiscal 2017 period due primarily to the difference in the types of locations opened, and associated fees earned, between the
two periods. International franchise fee income decreased to $133,000 in the fiscal 2018 period as compared to $470,000 in
the fiscal 2017 period due to the timing of new international development. We also recognized $47,000 and $40,000 in
forfeited fees in the fiscal 2018 and fiscal 2017 periods, respectively. During the fiscal 2018 period, 40 new franchised outlets
opened, including 16 international locations, and 19 Branded Menu Program outlets. During the fiscal 2017 period, 53 new
franchised outlets opened, including 20 international locations, and 26 Branded Menu Program outlets.

Costs and Expenses

Overall, our cost of sales increased by $7,118,000 to $58,752,000 in the fiscal 2018 period as compared to
$51,634,000 in the fiscal 2017 period. Our gross profit (representing the difference between sales and cost of sales) was
$17,956,000 or 23.4% of sales during the fiscal 2018 period as compared to $19,186,000 or 27.1% of sales during the fiscal
2017 period. The margin decline was primarily due to the higher cost of beef in the Branded Products Program and in the
Company-operated restaurants, in addition to the higher labor costs at the Company-owned restaurants.

Cost of sales in the Branded Product Program increased by approximately $7,306,000 during the fiscal 2018 period
as compared to the fiscal 2017 period, primarily due to the 9.4% increase in volume of product sold and the 7.2% increase
in the average cost per pound of our hot dogs. During the fiscal 2017 period, we completed our purchase of approximately
662,000 lbs. of hot dogs pursuant to the open purchase commitment, representing approximately 3.2% of volume, which
reduced our overall cost of hot dogs by approximately 36 BPS. We did not make any purchases during the fiscal 2018 period
pursuant to any purchase commitment. If the cost of beef and beef trimmings increases and we are unable to pass on these
higher costs through price increases or otherwise reduce any increase in our costs through the use of purchase commitments,
our margins will be adversely impacted.

With respect to Company-owned restaurants, our cost of sales during the fiscal 2018 period was $8,030,000 or 57%
of restaurant sales, as compared to $8,022,000 or 54.8% of restaurant sales in the fiscal 2017 period due primarily to lower
revenues and higher labor costs principally associated with the effects of the New York State minimum wage increase. We
expect that our future labor costs will continue to be impacted by the multi-year new increase in minimum wage requirements
in New York State, as well as other new labor regulations and any increase in food costs from higher commodity costs.

Restaurant operating expenses were $3,506,000 in the fiscal 2018 period as compared to $3,386,000 in the fiscal
2017 period. The increase in restaurant operating costs results primarily from higher occupancy, insurance and other costs.

Depreciation and amortization was $1,352,000 in the fiscal 2018 period compared to $1,297,000 in the fiscal 2017

period.

General and administrative expenses decreased $168,000 or 1.2% to $13,491,000 in the fiscal 2018 period as
compared to $13,659,000 in the fiscal 2017 period. The decrease in general and administrative expenses was primarily
attributable to reduced marketing and promotional activities in connection with the commemoration of our 100th anniversary
during the fiscal 2017 period, partly offset by higher marketing expenses for our Branded Product Program and professional
fees during the fiscal 2018 period.

Other Items

On November 1, 2017, the Company completed the issuance of $150,000,000 of the 2025 Notes. The 2025 Notes
were issued pursuant to the Indenture by and among the Company, certain of its wholly-owned subsidiaries, as guarantors,
and U.S. Bank National Association, as trustee and collateral trustee. The Company used the net proceeds of the 2025 Notes
offering to satisfy and discharge the Indenture relating to the 2020 Notes and the Redemption, paid a portion of a special
$5.00 per share cash dividend to Nathan's stockholders of record (see Note L), with the remaining net proceeds for general
corporate purposes, including working capital. The Redemption occurred on November 16, 2017. The Company performed
the required evaluation of the refinancing and determined that a portion of the Redemption of the 2020 Notes is accounted
for as a modification of the debt and a portion as an extinguishment of the debt. In connection with the Redemption, the
Company recorded a loss on early extinguishment of debt of $8,872,000 that primarily reflects a portion of the premium paid
to redeem the 2020 Notes and the write-off of certain debt issuance costs.

Interest expense of $13,591,000 in the fiscal 2018 period represents interest of $8,574,000 on the 2020 Notes,
$3,948,000 accrued interest on the 2025 Notes and total amortization of debt issuance costs of $1,069,000. On November 1,
2017, the Company issued the 2025 Notes and the Redemption occurred on November 16, 2017. The Company incurred
additional interest expense of approximately $562,500 from the time the 2025 Notes closed until the Redemption. As a result
of the issuance of the 2025 Notes and the Redemption, the Company expects to reduce its annual interest expense by
approximately $4,068,000 per annum.

Impairment charge – long-lived assets of $790,000 in the fiscal 2018 period represents write-down of one restaurant

based upon the Company’s evaluation of its ability to recover its investment from future cash flows.

Interest income was $166,000 in the fiscal 2018 period as compared to $104,000 in the fiscal 2017 period. Nathan’s

established its interest bearing money market account during fiscal 2017 period.

Other income, which primarily relates to a sublease of a franchised restaurant, was $99,000 in the fiscal 2018 period,

as compared to $85,000 in the fiscal 2017 period.

Provision for Income Taxes

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law, which reduced
corporate income tax rates to 21% effective January 1, 2018. Nathan’s has determined that its blended federal income tax
rate for fiscal 2018 will be 31%. Fiscal year taxpayers are required to determine their final tax rate by prorating the federal
tax rate prior to enactment and prorating the new rate for the balance of the fiscal year to determine the blended federal tax
rate for the fiscal year.

The income tax provision for the fifty-two week periods ended March 25, 2018 and March 26, 2017 reflect effective
tax rates of 36.0% and 36.6%, respectively. Nathan’s effective tax rate for the fifty-two week periods ended March 25, 2018
and March 26, 2017 were reduced by 4.2% percentage points and 5.6% percentage points, respectively, as a result of the tax
benefits associated with stock compensation. For the fifty-two weeks ended March 25, 2018, excess tax benefits of $173,000
were reflected in the Consolidated Statements of Earnings as a reduction to the provision for income taxes. The amount of
unrecognized tax benefits at March 25, 2018 was $263,000, all of which would impact Nathan’s effective tax rate, if
recognized. Nathan’s has determined reasonable estimates to its deferred assets and liabilities and pursuant to Topic 740,
Income Taxes, the Company has recognized the effect(s) of the Act on current and deferred income taxes in its financial
statements during the fiscal period ended March 25, 2018. Nathan’s has completed its analysis and review of the Act and
recorded the following discrete adjustment to its deferred tax liability and unrecognized tax benefits which reduced the
provision for income taxes by $245,000 or by 6.0% percentage points during the fiscal year-end March 25, 2018. As described
in Note I to the Consolidated Financial Statements, Nathan’s estimates that its annual tax rate for the fiscal year ending March
31, 2019 will be in the range of approximately 27.0% to 30.0%, excluding the impact of the discrete items recorded and
excess tax benefit associated with stock compensation. The final annual tax rate is subject to many variables, including the
ultimate determination of revenue and income tax by state, among other factors, and therefore cannot be determined until the
end of the fiscal year; therefore, the actual tax rate could differ from our current estimates. As of March 25, 2018, Nathan’s
had $214,000 of accrued interest and penalties in connection with unrecognized tax benefits. Nathan’s estimates that its
unrecognized tax benefit including accrued interest and penalties could be further reduced by up to $6,000.

Off-Balance Sheet Arrangements

At March 31, 2019 and March 25, 2018, Nathan’s did not have any open purchase commitment to purchase hot
dogs. Nathan’s may continue to enter into additional purchase commitments in the future as favorable market conditions
become available.

Liquidity and Capital Resources

Cash and cash equivalents at March 31, 2019 aggregated $75,446,000, increasing by $18,107,000 during the fiscal
2019 period as compared to cash of $57,339,000 at March 25, 2018. Net working capital increased to $72,237,000 from
$53,702,000 at March 25, 2018. During the fiscal year ended March 31, 2019, the Company sold two properties, generating
proceeds of $12,775,000, and made its required semi-annual interest payments of $4,968,750 on May 1, 2018 and November
1, 2018. Through March 31, 2019, the Company declared and paid four regular dividends of $0.25 per common share
aggregating $4,187,000. During the fiscal year ended March 25, 2018, the Company redeemed the $135.0 million 2020 Notes
by issuing the $150.0 million 2025 Notes. Please see Footnote K in the accompanying Consolidated Financial Statements
for further description of the 2025 Notes.

Cash provided by operations of $11,156,000 in the fiscal 2019 period is primarily attributable to net income of
$21,493,000 in addition to other non-cash operating items of $2,561,000, offset by gains from the sale of our Company-
owned restaurant located in Bay Ridge, Brooklyn, NY and our Florida office of $11,177,000 and changes in operating assets
and liabilities of $1,721,000. Non-cash operating expenses consist principally of $1,212,000 of depreciation and
amortization, $691,000 amortization of debt issuance costs, $310,000 of excess income tax benefits from stock-based
compensation arrangements as a result of the accounting for certain aspects of its share-based payments to employees, share-
based compensation expense of $162,000 and bad debts of $100,000. In the fiscal 2019 period, accounts and other receivables
decreased by $229,000 compared to the fiscal 2018 period due primarily to lower receivables from Branded Product Program
sales of $172,000. In the fiscal 2019 period, prepaid expenses and other current assets decreased by $1,866,000 due
principally to the reduction of prepaid income taxes of $1,624,000 which were deposited in fiscal 2018 prior to the debt
refinancing. The decrease in accounts payable, accrued expenses and other current liabilities of $3,367,000 is primarily due
to the reduction in accounts payable of $1,343,000 due principally to seasonal fluctuations, application of deposits payable
of $1,201,000 toward proceeds from the sale of our Company-owned restaurant located in Bay Ridge, Brooklyn, NY and
accrued rebates of $771,000.

Cash provided by investing activities was $12,328,000 in the fiscal 2019 period primarily represents net proceeds
received from the sale of our Company-owned restaurant located in Bay Ridge, Brooklyn, NY of $11,445,000, as well as the
sale of our regional Florida office of $1,330,000, partially offset by capital expenditures incurred for our Branded Product
Program and select restaurant improvements of $447,000.

Cash used in financing activities of $5,377,000 in the fiscal 2019 period relates primarily to the payments of the
Company’s regular $0.25 per share cash dividend of $4,187,000 and dividends of $150,000 relating to the previously declared
special cash dividends in connection with the vesting of 5,000 shares of the Company’s restricted stock. During the fiscal
2019 period, Nathan’s repurchased 14,390 shares of common stock for $1,000,000. The Company also paid $174,000 for
withholding taxes on the net share vesting of employee restricted stock. The Company also received $134,000 of proceeds
from the exercise of stock options.

During the period from October 2001 through March 31, 2019, Nathan’s purchased 5,141,763 shares of its common
stock at a cost of approximately $78,303,000 pursuant to stock repurchase plans previously authorized by the Board of
Directors. Since March 26, 2007, we have repurchased 3,250,663 shares at a total cost of approximately $71,145,000,
reducing the number of shares then-outstanding by 54.0%.

In 2016, the Company’s Board of Directors authorized increases to the sixth stock repurchase plan for the repurchase
of up to 1,200,000 shares of the Company’s common stock on behalf of the Company. As of March 31, 2019, Nathan’s has
repurchased 954,132 shares at a cost of $30,641,000 under the sixth stock repurchase plan. At March 31, 2019, there were
245,868 shares remaining to be repurchased pursuant to the sixth stock repurchase plan. The plan does not have a set
expiration date. Purchases under the Company’s stock repurchase program may be made from time to time, depending on
market conditions, in open market or privately-negotiated transactions, at prices deemed appropriate by management. There
is no set time limit on the repurchases.

As discussed above, we had cash and cash equivalents at March 31, 2019 aggregating $75,446,000. Our Board
routinely monitors and assesses its cash position and our current and potential capital requirements. In November 2017, we
refinanced our 2020 Notes through the issuance of the 2025 Notes and, our Board of Directors announced the payment of a
$5.00 per share special dividend to the shareholders of record as of the close of business on December 22, 2017. On May 31,
2018, Nathans’ Board of Directors authorized the commencement of a regular dividend of $1.00 per share per annum, payable
at the rate of $0.25 per share per quarter. Effective February 1, 2019, the Board declared its fourth quarterly cash dividend
of $0.25 per share which was paid on March 22, 2019 to stockholders of record as of the close of business on March 11,
2019. During the fiscal 2019 period, we have declared and paid four quarterly dividend distributions totaling $4,187,000.

Our ability to pay future dividends is limited by the terms of the Indenture for the 2025 Notes. In addition, the
payment of any cash dividends in the future, are subject to final determination of the Board and will be dependent upon our
earnings and financial requirements. We may also return capital to our stockholders through stock repurchases, subject to
any restrictions in the Indenture, although there is no assurance that the Company will make any repurchases under its existing
stock-repurchase plan.

We expect that in the future we will make investments in certain existing restaurants, support the growth of the
Branded Product and Branded Menu Programs, service the outstanding debt, fund our dividend program and may continue
our stock repurchase programs, funding those investments from our operating cash flow. We may also incur capital and other
expenditures or engage in investing activities in connection with opportunistic situations that may arise on a case-by-case
basis. In the fiscal year ending March 31, 2019, we were required to make interest payments of $9,937,500, all of which have
been made as of November 1, 2018. During the fiscal year ending March 29, 2020, we will be required to make interest
payments of $9,937,500. On May 1, 2019, we made the first semi-annual interest payment of fiscal 2020.

Management believes that available cash and cash equivalents, and cash generated from operations should provide
sufficient capital to finance our operations, satisfy our debt service requirements and provide for our quarterly dividends and
any stock repurchases for at least the next 12 months.

At March 31, 2019, we sublet one property to a franchisee that we lease from a third party. We remain contingently
liable for all costs associated with this property including: rent, property taxes and insurance. We may incur future cash
payments with respect to such property, consisting primarily of future lease payments, including costs and expenses
associated with terminating any of such leases.

The following schedule represents Nathan’s cash contractual obligations and commitments by maturity as of March

31, 2019 (in thousands):

Payments Due by Period

Cash Contractual Obligations
Long term debt (a) ............................................... $ 150,000 $
6,225
Employment Agreements ....................................
13,556
Operating Leases .................................................
169,781
Gross Cash Contractual Obligations ...................
Sublease Income ..................................................
1,624
Net Cash Contractual Obligations ....................... $ 168,157 $

Total

Less than
1 Year

2-3 Years 4-5 Years
- $
2,375
2,891
5,266
492
4,774 $

More than
5 Years
- $ 150,000
600
6,120
156,720
521
4,547 $ 156,199

1,750
3,141
4,891
344

- $
1,500
1,404
2,904
267
2,637 $

a) Represents the principal due on the 2025 Notes, but does not include interest expense.

At March 31, 2019, the Company had unrecognized tax benefits of $253,000. The Company believes that it is
reasonably possible that the unrecognized tax benefits may decrease by $12,000 within the next year. A reasonable estimate
of the timing of the remaining liabilities is not practicable.

Effective June 14, 2019 the Company declared its upcoming quarterly dividend of $0.35 per common share to

stockholders of record as of the close of business June 24, 2019, which is payable June 28, 2019.

percentage rent, real estate tax increases, attorney’s fees and other costs as these amounts are not reasonably determinable at
this time. Nathan’s has received a personal guaranty from the franchisee for all obligations under the Brooklyn Guaranty.
For the remainder of the term, the Brooklyn Guaranty is limited to 12 months of rent plus reasonable costs of collection and
attorney’s fees.

Inflationary Impact

We do not believe that general inflation has materially impacted earnings since 2006. However, we have
experienced significant volatility in our costs for our hot dogs and certain food products, distribution costs and utilities. From
2011 through 2014, we experienced unprecedented increases in the cost of beef. Beginning March 2015, the beef markets
stabilized through June 2015 before subsequently declining by approximately 30%. As a result of the decline through March
2016, the market price of hot dogs during the fiscal year ended March 27, 2016 was approximately 7.1% lower than the fiscal
year ended March 29, 2015. During the fiscal 2017 period, beef prices remained favorable, and as such, our market price for
hot dogs was 17.1% lower than during the fiscal 2016 period. Despite the favorable pricing of fiscal 2017, prices began
escalating in January 2017 and continued increasing through June 2017 before beginning to slightly decline until July which
is when the costs stabilized through March 2018 at approximately 10% higher than the same period of the fiscal 2017 period.
Since April 2018 our commodity cost for hot dogs had been stable before beginning to decline in September 2018 into
December 2018. Beef prices have begun moderately escalating between January and March 2019. As such, our market price
for hot dogs during our fiscal 2019 period was approximately 7.7% lower than the fiscal 2018 period.

We are unable to predict the future cost of our hot dogs and expect to experience price volatility for our beef products
during fiscal 2020. To the extent that beef prices increase as compared to earlier periods, it could impact our results of
operations. In the past, we entered into purchase commitments for a portion of our hot dogs to reduce the impact of increasing
market prices. Our most recent purchase commitment was completed in 2016 for approximately 2,600,000 pounds of hot
dogs at approximately $2.01 per pound. We may attempt to enter into similar purchase arrangements for hot dogs and other
products in the future. Additionally, we expect to continue experiencing volatility in oil and gas prices on our distribution
costs for our food products and utility costs in the Company-owned restaurants and volatile insurance costs resulting from
the uncertainty of the insurance markets.

New York State passed legislation increasing the minimum hourly wage for fast food workers of restaurant chains
with 30 or more locations nationwide. The increase is being phased in differently between New York City and the rest of
New York State. Effective December 31, 2018, the minimum wage increased to $15.00 in New York City.

The minimum hourly rate of pay for the remainder of New York State increased to $12.75 on Dec. 31, 2018; and

will increase to $13.75 on Dec. 31, 2019; $14.50 on Dec. 31, 2020; and $15.00 on July 1, 2021.

All of Nathan’s Company-operated restaurants are within New York State, two of which operate within New York

City that have been significantly affected by this legislation.

The Company is further studying the impact on the Company’s operations and is developing strategies and tactics,
including pricing and potential operating efficiencies, to minimize the effects of these increases and future increases. We
have recently increased certain selling prices to pass on recent cost of sales increases. However, if we are unable to fully
offset these and future increases through pricing and operating efficiencies, our margins and profits will be negatively
affected.

Effective April 1, 2014, the City of New York, passed legislation requiring employers to offer paid sick leave to all
employees, including part-time employees, who work more than 80 hours for the employer. Nathan’s currently operates two
restaurants that have been affected by this new legislation.

Effective November 27, 2017, the City of New York Fair Work Week Legislation package of bills took effect that
the city estimates will cover some 65,000 fast food workers by giving them more predictable work schedules. A key
component of the package is a requirement that fast food restaurants schedule their workers at least two weeks in advance or
pay employees between $10 to $75 per scheduling change, depending on the situation. Due to Nathan’s dependency on
weather conditions at our two Coney Island beach locations during the summer season, we are unable to determine the
potential impact on our results of operations, which could be material. We believe that we have been able to implement tools
to minimize the financial impact of this legislation. Nevertheless, we incurred approximately $11,000 of additional costs due
to this legislation during the fiscal 2019 period.

Continued increases in labor, food and other operating expenses, including health care, could adversely affect our
operations and those of the restaurant industry and we might have to further reconsider our pricing strategy as a means to
offset reduced operating margins.

We believe the increases in the minimum wage and other changes in employment laws could have a significant
financial impact on our financial results and the results of our franchisees that operate in New York State. Our business could
be negatively impacted if the decrease in margins for our franchisees results in the potential loss of new franchisees or the
closing of a significant number of franchised restaurants.

The Company’s business, financial condition, operating results and cash flows can be impacted by a number of
factors, including but not limited to those set forth above in “Management’s Discussion and Analysis of Financial Condition
and Results of Operations,” any one of which could cause our actual results to vary materially from recent results or from
our anticipated future results. For a discussion identifying additional risk factors and important factors that could cause actual
results to differ materially from those anticipated, please see the discussions in “Forward-Looking Statements”, “Risk
Factors”, and “Notes to Consolidated Financial Statements” in this Form 10-K.

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

Cash and Cash Equivalents

We have historically invested our cash and cash equivalents in money market funds or short-term, fixed rate, highly
rated and highly liquid instruments which are generally reinvested when they mature. Although these existing investments
are not considered at risk with respect to changes in interest rates or markets for these instruments, our rate of return on short-
term investments could be affected at the time of reinvestment as a result of intervening events. As of March 31, 2019,
Nathan’s cash and cash equivalents aggregated $75,446,000. Earnings on this cash would increase or decrease by
approximately $189,000 per annum for each 0.25% change in interest rates.

Borrowings

At March 31, 2019, we had $150.0 million of 2025 Notes outstanding which are due in November 2025. Interest
expense on these borrowings would increase or decrease by approximately $375,000 per annum for each 0.25% change in
interest rates. We currently do not anticipate entering into interest rate swaps or other financial instruments to hedge our
borrowings.

Commodity Costs

We do not believe that general inflation has materially impacted earnings since 2006. However, we have
experienced significant volatility in our costs for our hot dogs and certain food products, distribution costs and utilities. From
2011 through 2014, we experienced unprecedented increases in the cost of beef. Beginning March 2015, the beef markets
stabilized through June 2015 before subsequently declining by approximately 30%. As a result of the decline through March
2016, the market price of hot dogs during the fiscal year ended March 27, 2016 was approximately 7.1% lower than the fiscal
2015 period. During the fiscal 2017 period, beef prices remained favorable, and as such, our market price for hot dogs was
17.1% lower than during the fiscal 2016 period. Despite the favorable pricing of fiscal 2017, prices began escalating in
January 2017 and continued increasing through June 2017 before beginning to slightly decline until July which is when the
costs stabilized through March 2018 at approximately 10% higher than the same period of the fiscal 2017 period. Since April
2018 our commodity cost for hot dogs had been stable before beginning to decline in September 2018 into December 2018.
Beef prices have begun moderately escalating between January and March 2019. As such, our market price for hot dogs
during our fiscal 2019 period was approximately 7.7% lower than the fiscal 2018 period.

We are unable to predict the future cost of our hot dogs and expect to experience price volatility for our beef products
during fiscal 2020. To the extent that beef prices increase as compared to earlier periods, it could impact our results of
operations. In the past, we entered into purchase commitments for a portion of our hot dogs to reduce the impact of increasing
market prices. Our most recent purchase commitment was completed in 2016 for approximately 2,600,000 pounds of hot
dogs at approximately $2.01 per pound. We may attempt to enter into similar purchase arrangements for hot dogs and other
products in the future. Additionally, we expect to continue experiencing volatility in oil and gas prices on our distribution
costs for our food products and utility costs in the Company-owned restaurants and volatile insurance costs resulting from
the uncertainty of the insurance markets.

With the exception of purchase commitments, we have not attempted to hedge against fluctuations in the prices of
the commodities we purchase using future, forward, option or other instruments. As a result, we expect that the majority of
our future commodity purchases will be subject to market changes in the prices of such commodities. We have attempted to
enter sales agreements with our customers that are correlated to our cost of beef, thus reducing our market volatility, or have
passed through permanent increases in our commodity prices to our customers that are not on formula pricing, thereby
reducing the impact of long-term increases on our financial results. A short-term increase or decrease of 10.0% in the cost of
our food and paper products for the year ended March 31, 2019 would have increased or decreased our cost of sales by
approximately $4,706,000.

Foreign Currencies

Foreign franchisees generally conduct business with us and make payments in United States dollars, reducing the
risks inherent with changes in the values of foreign currencies. As a result, we have not purchased future contracts, options
or other instruments to hedge against changes in values of foreign currencies and we do not believe fluctuations in the value
of foreign currencies would have a material impact on our financial results.

Item 8. Financial Statements and Supplementary Data.

The consolidated financial statements and supplementary data are submitted as a separate section of this report

beginning on Page F-1.

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

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an
evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined by Exchange
Act Rule 13a-15(e) and Exchange Act Rule 15d-15(e). Based on that evaluation, the Chief Executive Officer, and Chief
Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and
procedures were effective to ensure that the information required to be disclosed by us in the reports that we file or submit
under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s
rules and forms and that such information is accumulated and communicated to our management, including our principal
executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining an adequate system of internal control over
financial reporting, as defined by Exchange Act Rule 13a-15(f) and Exchange Act Rule 15d-15(f). Our internal control over
financial reporting includes those policies and procedures that:

(cid:404) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and

dispositions of our assets;

(cid:404) provide reasonable assurance that transactions are recorded as necessary to permit preparation of our financial
statements in accordance with generally accepted accounting principles in the United States, and that our
receipts and expenditures are being made only in accordance with authorizations of our management and
directors; and

(cid:404) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or

disposition of our assets that could have a material effect on the financial statements.

Management has assessed the effectiveness of our system of internal control over financial reporting as of March
31, 2019. In making this assessment, management used the framework in Internal Control — Integrated Framework issued
in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on our assessment
and the criteria set forth by COSO in 2013, management believes that Nathan’s maintained effective internal control over
financial reporting as of March 31, 2019. The effectiveness of our internal control over financial reporting as of March 31,
2019, has been audited by Marcum LLP, an independent registered public accounting firm which has also audited our
consolidated financial statements, as stated in its attestation report which is included herein.

Changes in Internal Controls

There were no changes in our internal controls over financial reporting that occurred during the quarter ended March
31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.

Limitations on the Effectiveness of Controls

We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that
the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control
issues and instances of fraud, if any, within a company have been detected. Our disclosure controls and procedures are
designed to provide reasonable assurance of achieving their objectives and our Chief Executive Officer and Chief Financial
Officer have concluded that such controls and procedures are effective at the reasonable assurance level.

Item 9B. Other Information.

As disclosed in this Annual Report on Form 10-K, the Company’s Board of Directors has declared a $0.35 per share

dividend payable on June 28, 2019 to shareholders of record at the close of business on June 24, 2019.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL
OVER FINANCIAL REPORTING

To the Shareholders and Board of Directors of
Nathan’s Famous, Inc.

Opinion on Internal Control over Financial Reporting

We have audited Nathan’s Famous, Inc. and Subsidiaries (the “Company”) internal control over financial reporting as of
March 31, 2019, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of March 31, 2019, based on criteria established in Internal Control –
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the consolidated balance sheet as of March 31, 2019 and the related consolidated statements of earnings,
shareholders’ deficit, and cash flows and the related notes and schedule for the fifty-three weeks ended ended March 31,
2019 of the Company, and our report dated June 14, 2019 expressed an unqualified opinion on those financial statements
and financial statement schedule.

Basis for Opinion

The Company's 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 “Management
Annual Report on Internal Control over Financial Reporting”. Our responsibility is to express an opinion on the Company's
internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and
are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. 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 of internal control over financial reporting 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.

Definition and Limitations of Internal Control over Financial Reporting

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 the 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 degree of compliance with the policies or procedures may deteriorate.

/s/ Marcum llp

Marcum llp
Melville, NY
June 14, 2019

Item 10. Directors, Executive Officers and Corporate Governance.

PART III

The information required in response to this Item is incorporated herein by reference from the discussions under the
captions Proposal 1 – Election of Directors, Corporate Governance Management and Security Ownership in our proxy
statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A, not later than 120 days after
the end of the fiscal year covered by this Report.

Our Board of Directors has adopted a Financial Officer Code of Ethics applicable to the Company’s Chief Executive
Officer, Chief Financial Officer and all other members of the Company’s Finance Department. This Code of Ethics is posted
on the Company’s website within a broader Code of Business Conduct and Ethics at www.nathansfamous.com in the Investor
Relations section. We intend to satisfy the disclosure requirement under Item 10 of Form 8-K regarding an amendment to,
or a waiver from, the provision of our Code of Ethics that applies to our principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar functions and that relates to any element of such
provision of our Code of Ethics by posting such information on our website within four business days of the date of such
amendment or waiver. In the case of a waiver, the nature of the waiver, the name of the person to whom the waiver was
granted and the date of the waiver will also be disclosed.

Item 11. Executive Compensation.

The information required in response to this Item is incorporated herein by reference from the discussion under the
caption Executive Compensation, including the Summary Compensation and other tables, Non-Qualified Deferred
Compensation, Risk Consideration in our Compensation Programs and 2019 Director Compensation in our proxy statement
to be filed with the Securities and Exchange Commission pursuant to Regulation 14A, not later than 120 days after the end
of the fiscal year covered by this Report.

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

The information required in response to this Item is incorporated herein by reference from the discussion under the
caption Equity Plan Information and Security Ownership in our proxy statement to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A, not later than 120 days after the end of the fiscal year covered by this Report.

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

The information required in response to this Item is incorporated herein by reference from the discussion under the
caption Corporate Governance – Director Independence and Corporate Governance – Certain Relationships and Related
Persons transactions in our proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation
14A, not later than 120 days after the end of the fiscal year covered by this Report.

Item 14. Principal Accountant Fees and Services.

Audit Fees

We were billed by Marcum LLP the aggregate amount approximately $165,000 in respect of fiscal 2019 for fees
for professional services rendered for the audit of our annual financial statements and the effectiveness of our internal control
over financial reporting, as well as the review of our financial statements included in our Form 10-Q. We were billed by
Grant Thornton LLP the aggregate amount of approximately $465,000 in respect of fiscal 2018 for fees for professional
services rendered for the audit of our annual financial statements and the effectiveness of our internal control over financial
reporting as well as the review of our financial statements included in our Forms 10-Q. The fiscal 2018 amount includes
billings by Grant Thornton LLP of approximately $120,000 for fees for the professional services rendered for the review of
interim financial information in connection with the issuance of their comfort letter in conjunction with the private placement
of the Company’s Senior Secured Notes. We were billed by Grant Thornton LLP the aggregate of approximately $100,000
in respect to the issuance of their consent to the inclusion of the fiscal 2018 audited financial statements in this Annual Report
on Form 10-K for the year ended March 31, 2019.

Audit-Related Fees

Marcum LLP and Grant Thornton LLP did not render any audit-related services for fiscal 2019 and 2018,

respectively and, accordingly, did not bill for any such services.

Tax Fees

Marcum LLP and Grant Thornton LLP did not render any tax compliance, tax advice or tax planning services for

fiscal 2019 and 2018, respectively and, accordingly, did not bill for any such services.

All Other Fees

Marcum LLP and Grant Thornton LLP did not render any other services for fiscal 2019 and 2018, respectively and,

accordingly, did not bill for any such services.

Pre-Approval Policies

Our Audit Committee has not adopted any pre-approval policies. Instead, the Audit Committee will specifically

pre-approve the provision by Marcum LLP and Grant Thornton LLP of all audit and non-audit services.

Our Audit Committee approved all of the audit services provided by Marcum LLP and Grant Thornton LLP during

2019 and 2018, respectively.

Item 15. Exhibits and Financial Statement Schedules.

(a) (1) Consolidated Financial Statements

PART IV

The consolidated financial statements listed in the accompanying index to the consolidated financial statements and

schedule on Page F-1 are filed as part of this Report.

(2) Financial Statement Schedule

The consolidated financial statement schedule listed in the accompanying index to the consolidated financial

statements and schedule on Page F-1 is filed as part of this Report.

(3) Exhibits

Certain of the following exhibits were previously filed as exhibits to other reports or registration statements filed
by the Registrant under the Securities Act of 1933 or under the Securities Exchange Act of 1934 and are therefrom
incorporated by reference.

Exhibit
No.
3.1

3.2

3.3
4.1

4.2

4.3

4.4

10.1

10.2

10.3

10.4

10.5

Exhibit
Certificate of Incorporation. (Incorporated by reference to Exhibit 3.1 to Registration Statement on Form S-1
No. 33- 56976.)
Amendment to the Certificate of Incorporation, filed December 15, 1992. (Incorporated by reference to Exhibit
3.2 to Registration Statement on Form S-1 No. 33-56976.)
By-Laws, as amended. (Incorporated by reference to Exhibit 3.1 to Form 8-K dated November 1, 2006.)
Specimen Stock Certificate. (Incorporated by reference to Exhibit 4.1 to Registration Statement on Form S-1
No. 33-56976.)
Rights Agreement, dated as of June 5, 2013, between Nathan’s Famous, Inc. and American Stock Transfer and
Trust Company, LLC, as Rights Agent, which includes form of Rights Certificate as Exhibit A and the Summary
of Rights to Purchase as Exhibit B. (Incorporated by reference to Exhibit 4.2 to the Company’s Current Report
filed on Form 8-K dated June 11, 2013.)
Amendment No. 1 to Rights Agreement, dated as of June 14, 2018, between Nathan’s Famous, Inc. and
American Stock Transfer & Trust Company, LLC. (Incorporated by reference to Exhibit 4.1 to the Company’s
Current Report on Form 8-K dated June 15, 2018.)
Indenture, dated as of November 1, 2017, by and among Nathan’s Famous, Inc., certain of its wholly owned
subsidiaries, as guarantors, and U.S. Bank National Association, a National Banking Association, as trustee and
collateral trustee (including the form of Note (Incorporated by reference to Exhibit 4.1 to the Company’s Current
Report filed on Form 8-K dated November 1, 2017.)
Leases for premises at Coney Island, New York, as follows: (Incorporated by reference to Exhibit 10.3 to
Registration Statement on Form S-1 No. 33-56976.)
a) Lease, dated November 22, 1967, between Nathan’s Realty Associates and the Company.
b) Lease, dated November 22, 1967, between Ida’s Realty Associates and the Company.
Form of Standard Franchise Agreement. (Incorporated by reference to Exhibit 10.12 to Registration Statement
on Form S-1 No. 33-56976.)
***Employment Agreement with Howard M. Lorber, dated as of December 15, 2006. (Incorporated by reference
to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated December 15, 2006.)
***Employment Agreement with Eric Gatoff, dated as of December 15, 2006. (Incorporated by reference to
Exhibit 10.2 to the Company’s Current Report on Form 8-K dated December 15, 2006.)
***Amendment to Employment Agreement with Eric Gatoff dated August 3, 2010. (Incorporated by reference
to Exhibit 10.1 to Form 10-Q for the quarter ended June 27, 2010.)

10.6 Agreement of Lease between One-Two Jericho Plaza Owner LLC and Nathan’s Famous Services, Inc. dated
September 11, 2009, (Incorporated by reference to Exhibit 10.2 to Form 10-Q for the quarter ended September
27, 2009.)

10.7 Guaranty by Nathan’s Famous, Inc. of Agreement of Lease with One-Two Jericho Plaza Owner LLC dated
September 11, 2009, (Incorporated by reference to Exhibit 10.3 to Form 10-Q for the quarter ended September
27, 2009).

10.8

10.9

10.10

10.11

10.12

10.13

10.14

10.15

10.16

10.17

10.18

***2010 Stock Incentive Plan (Incorporated by reference to Exhibit A to Proxy Statement on Schedule 14A
dated July 23, 2010).
***Amendment to 2010 Stock Incentive Plan (Incorporated by reference to Exhibit A to Proxy Statement on
Schedule 14A dated July 23, 2012).
***Amendment to Employment Agreement with Howard M. Lorber, dated November 1, 2012. (Incorporated
by reference to Exhibit 10.1 to Form 10-Q for the quarter ended September 23, 2012).
***Amendment Number 2, dated December 7, 2017 to Employment Agreement with Howard M. Lorber
(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated December 6,
2017).
**Letter agreement dated December 5, 2012 between Nathan’s Famous Systems, Inc. and John Morrell & Co.
(Incorporated by reference to Exhibit 10.1 to Form 10-Q for the quarter ended December 23, 2012).
First Amendment to Licensing and Supply Agreement, dated September 22, 2016 between Nathan’s Famous
Systems, Inc. and John Morrell & Company (Incorporated by reference to Exhibit 10.1 to Form 10-Q for the
quarter ended September 24, 2017).
Second Amendment to Licensing and Supply Agreement, dated June 29, 2017 between Nathan’s Famous
Systems, Inc. and John Morrell & Company (Incorporated by reference to Exhibit 10.2 to Form 10-Q for the
quarter ended September 24, 2017).
***Restricted Stock Agreement with Eric Gatoff, dated June 4, 2013. (Incorporated by reference to Exhibit
10.27 to Form 10-K for the year ended March 31, 2013.)
Parity Lien Security Agreement dated as of November 1, 2017, by and among Nathan’s Famous, Inc. and Other
Assignors Identified therein and U.S. Bank National Association as Collateral Trustee. (Incorporated by
reference to Exhibit 10.3 to Form 10-Q for the quarter ended December 24, 2017.)
***2019 Management Incentive Plan for the Fiscal Year ending March 31, 2019 (Incorporated by reference to
Exhibit 10.1 to Form 10-Q for the quarter ended June 24, 2018).
***Nathan’s Famous, Inc. Code Section 162(m) Bonus Plan (Incorporated by reference to Appendix B to the
Proxy Statement on Schedule 14A filed on July 28, 2016).

10.19 Agreement of Sale between Nathan’s Famous Operating Corp. and 660 86 LLC dated September 8, 2017

(Incorporated by reference to Exhibit 10.20 to Form 10-K for the year ended March 25, 2018).

10.20 Amendment to Agreement of Sale between Nathan’s Famous Operating Corp. and 660 86 LLC dated March 6,

2018 (Incorporated by reference to Exhibit 10.21 to Form 10-K for the year ended March 25, 2018).

16.1

10.22

10.21 Amendment to Agreement of Sale between Nathan’s Famous Operating Corp. and 660 86 LLC dated July 15,
2018. (Incorporated by reference to Exhibit 10.2 to Form 10-Q for the quarter ended June 24, 2018.)
(1) First Amendment to Lease, dated April 1, 2019 by and between Jericho Plaza, LLC and Nathan’s Famous
Services, Inc.
Letter of Grant Thornton LLP, dated July 6, 2018. (Incorporated by reference to Exhibit 16.1 to the Company’s
Current Report on Form 8-K dated July 6, 2018.)
(1) List of Subsidiaries of the Registrant.
(1) Consent of Marcum LLP dated June 14, 2019.
(1) Consent of Grant Thornton LLP dated June 14, 2019.
(1) Certification by Eric Gatoff, Chief Executive Officer, pursuant to Rule 13a - 14(a).
(1) Certification by Ronald G. DeVos, Chief Financial Officer, pursuant to Rule 13a - 14(a).
(1) Certification by Eric Gatoff, Chief Executive Officer of Nathan’s Famous, Inc., pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(1) Certification by Ronald G. DeVos, Chief Financial Officer of Nathan’s Famous, Inc., pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

21
23.1
23.2
31.1
31.2
32.1

32.2

101.INS XBRL Instance Document.
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB XBRL Taxonomy Extension Label Linkbase Document.
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document.

(1) Filed herewith.

** Filed with confidential portions omitted pursuant to request for confidential treatment. The omitted portions have been separately filed with the SEC.

*** Indicates a management plan or arrangement.

Item 16.

Form 10-K Summary.

None.

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 on the 14th day of June, 2019.

SIGNATURES

Nathan’s Famous, Inc.

/s/ ERIC GATOFF
Eric Gatoff
Chief Executive Officer
(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the

following persons on behalf of the Registrant and in the capacities indicated on the 14th day of June, 2019.

/s/ ERIC GATOFF
Eric Gatoff
Chief Executive Officer
(Principal Executive Officer)

/s/ HOWARD LORBER
Howard Lorber
Executive Chairman

/s/ RONALD G. DEVOS
Ronald G. DeVos
Vice President - Finance and Chief Financial Officer
(Principal Financial and Accounting Officer)

/s/ WAYNE NORBITZ
Wayne Norbitz
Director

/s/ ROBERT J. EIDE
Robert J. Eide
Director

/s/ BARRY LEISTNER
Barry Leistner
Director

/s/ BRIAN GENSON
Brian Genson
Director

/s/ ATTILIO F. PETROCELLI
Attilio F. Petrocelli
Director

/s/ CHARLES RAICH
Charles Raich
Director

Nathan’s Famous, Inc. and Subsidiaries

TABLE OF CONTENTS

Page

Report of Independent Registered Public Accounting Firm .................................................................................... F-2

Consolidated Balance Sheets ................................................................................................................................... F-4

Consolidated Statements of Earnings ....................................................................................................................... F-5

Consolidated Statements of Stockholders’ (Deficit) ................................................................................................ F-6 – F-8

Consolidated Statements of Cash Flows .................................................................................................................. F-9

Notes to Consolidated Financial Statements ............................................................................................................ F-10

Schedule II - Valuation and Qualifying Accounts ................................................................................................... F-40

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of
Nathan’s Famous, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Nathan’s Famous, Inc. and Subsidiaries (the “Company”)
as of March 31, 2019, the related consolidated statements of earnings, stockholders’ deficit and cash flows for the fifty-three
weeks ended March 31, 2019, and the related notes and schedule (collectively referred to as the “financial statements”). In
our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March
31, 2019, and the results of its operations and its cash flows for the fifty-three weeks ended March 31, 2019, 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)
("PCAOB"), the Company's internal control over financial reporting as of March 31, 2019, based on the criteria established
in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in 2013 and our report dated June 14, 2019, expressed an unqualified opinion on the effectiveness of
the Company’s internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion
on the Company's financial statements based on our audit. We are a public accounting firm registered with the PCAOB and
are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether
due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audit provide a reasonable basis for our opinion.

/s/ Marcum llp
Marcum llp

We have served as the Company’s auditor since 2018.

Melville, NY
June 14, 2019

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
Nathan’s Famous, Inc.

Opinion on the financial statements
We have audited the accompanying consolidated balance sheet of Nathan’s Famous, Inc. (a Delaware corporation) and
subsidiaries (the “Company”) as of March 25, 2018, the related consolidated statements of earnings, comprehensive income,
stockholders’ (deficit), and cash flows for each of the fifty-two weeks ended March 25, 2018, and March 26, 2017, and the
related notes and schedule (collectively referred to as the “financial statements”). In our opinion, the financial statements
present fairly, in all material respects, the financial position of the Company as of March 25, 2018, and the results of its
operations and its cash flows for each of the fifty-two weeks ended March 25, 2018, and March 26, 2017 in conformity with
accounting principles generally accepted in the United States of America.

Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and
are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether
due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor from 2002 to 2018.

New York, New York
June 8, 2018

F-3

Nathan’s Famous, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)

March 31,
2019

March 25,
2018

ASSETS

CURRENT ASSETS

Cash and cash equivalents .......................................................................................... $
Accounts and other receivables, net (Note D) ............................................................
Inventories ..................................................................................................................
Prepaid expenses and other current assets (Note E)....................................................
Assets held for sale (Note F) .......................................................................................
Total current assets ............................................................................

Property and equipment, net of accumulated depreciation of $8,611 and $8,264,

respectively .............................................................................................................
Goodwill .....................................................................................................................
Intangible asset ...........................................................................................................
Deferred income taxes ................................................................................................
Other assets .................................................................................................................

75,446 $
10,173
535
1,007
-
87,161

4,889
95
1,353
343
465

57,339
10,502
384
2,873
610
71,708

6,642
95
1,353
-
293

Total assets ........................................................................................ $

94,306 $

80,091

LIABILITIES AND STOCKHOLDERS’ (DEFICIT)

CURRENT LIABILITIES

Accounts payable ........................................................................................................ $
Accrued expenses and other current liabilities (Note H) ............................................
Deferred franchise fees ...............................................................................................
Total current liabilities .......................................................................

5,222 $
9,384
318
14,924

6,565
11,248
193
18,006

Long-term debt, net of unamortized debt issuance costs of $4,551 and $5,242,

respectively (Note K) ..................................................................................................
Other liabilities (Note H) ............................................................................................
Deferred franchise fees ...............................................................................................
Deferred income taxes ................................................................................................

145,449
1,390
2,687
-

144,758
1,355
238
302

Total liabilities.......................................................................................

164,450

164,659

COMMITMENTS AND CONTINGENCIES (Note M)

STOCKHOLDERS’ (DEFICIT)

Common stock, $.01 par value; 30,000,000 shares authorized; 9,336,338 and
9,311,922 shares issued; and 4,194,575 and 4,184,549 shares outstanding at
March 31, 2019 and March 25, 2018, respectively .................................................
Additional paid-in capital ...........................................................................................
(Accumulated deficit) .................................................................................................
Stockholders’ equity (deficit) before treasury stock ...................................................

93
60,945
(52,879 )
8,159

93
60,823
(68,181 )
(7,265 )

Treasury stock, at cost, 5,141,763 and 5,127,373 shares at March 31, 2019 and March

25, 2018 ......................................................................................................................
Total stockholders’ (deficit) ..................................................................

(78,303 )
(70,144 )

(77,303 )
(84,568 )

Total liabilities and stockholders’ (deficit) ............................................ $

94,306 $

80,091

The accompanying notes are an integral part of these consolidated financial statements.

F-4

Nathan’s Famous, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except share and per share amounts)

Fifty-Three
weeks ended weeks ended

Fifty-Two

Fifty-Two
weeks ended

March 31,
2019

March 25,
2018

March 26,
2017

REVENUES

Sales ............................................................................................... $
License royalties ............................................................................
Franchise fees and royalties ...........................................................
Advertising fund revenue (Note B) ................................................
Total revenues ..............................................................

71,561 $
23,615
4,171
2,502
101,849

76,708 $
23,020
4,473
-
104,201

COSTS AND EXPENSES

Cost of sales ...................................................................................
Restaurant operating expenses .......................................................
Depreciation and amortization .......................................................
General and administrative expenses .............................................
Advertising fund expense (Note B) ...............................................
Total costs and expenses ..............................................

52,779
3,525
1,212
13,851
2,506
73,873

58,752
3,506
1,352
13,491
-
77,101

70,820
20,368
5,068
-
96,256

51,634
3,386
1,297
13,659
-
69,976

Income from operations ...............................................

27,976

27,100

26,280

Gain on sale of property and equipment ........................................
Interest expense .............................................................................
Loss on debt extinguishment (Note K) ..........................................
Impairment charge – long-lived assets (Note B)............................
Interest income...............................................................................
Other income, net ...........................................................................

Income before provision for income taxes ........................................
Provision for income taxes ................................................................
Net income ................................................................... $

11,177
(10,792 )
-
-
840
209

29,410
7,917
21,493 $

-
(13,591 )
(8,872 )
(790 )
166
99

4,112
1,482
2,630 $

-
(14,665 )
-
-
104
85

11,804
4,319
7,485

PER SHARE INFORMATION
Weighted average shares used in computing income per share:

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

4,187,000
4,220,000

4,181,000
4,221,000

4,172,000
4,206,000

Income per share:

Basic ........................................................................................... $
Diluted ........................................................................................ $

5.13 $
5.09 $

0.63 $
0.62 $

Dividends declared per share ......................................................... $

1.00 $

5.00 $

1.79
1.78

The accompanying notes are an integral part of these consolidated financial statements.

F-5

Nathan’s Famous, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT)
Fifty-three weeks ended March 31, 2019, Fifty-two weeks ended March 25, 2018 and the Fifty-two weeks ended
March 26, 2017

(in thousands, except share and per share amounts)

Common Common
Shares

Stock

Additional
Paid-in
Capital

(Accumulated
Deficit)

Treasury Stock,
at Cost

Amount

Total
Stockholders’
(Deficit)

Balance, March 27,

2016 .......................... 9,274,066 $

93 $ 60,950 $

(57,348 ) 5,096,757 $ (76,031 ) $

(72,336 )

Shares issued in

connection with
share-based
compensation plans ...

Withholding tax on net
share settlement of
share-based
compensation plans ...

Repurchase of common

stock ..........................

Share-based

compensation ............

Net income ...................
Balance, March 26,

29,804

(994 )

30,616

(1,272 )

582

7,485

582

7,485

2017 .......................... 9,303,870 $

93 $ 60,582 $

(49,863 ) 5,127,373 $ (77,303 ) $

(66,491 )

The accompanying notes are an integral part of these consolidated financial statements.

F-6

Nathan’s Famous, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT)
Fifty-three weeks ended March 31, 2019, Fifty-two weeks ended March 25, 2018 and the Fifty-two weeks ended
March 26, 2017

(in thousands, except share and per share amounts)

Common Common
Shares

Stock

Additional
Paid-in
Capital

(Accumulated
Deficit)

Treasury Stock,
at Cost

Amount

Total
Stockholders’
(Deficit)

Balance, March 26,

2017 .......................... 9,303,870 $

93 $ 60,582 $

(49,863 ) 5,127,373 $ (77,303 ) $

(66,491 )

Shares issued in

connection with
share-based
compensation plans ...

Withholding tax on net
share settlement of
share-based
compensation plans ...

Dividends on common

8,052

(157 )

stock ..........................

(20,948 )

Share-based

compensation ............

Net income ...................
Balance, March 25,

398

2,630

398

2,630

2018 .......................... 9,311,922 $

93 $ 60,823 $

(68,181 ) 5,127,373 $ (77,303 ) $

(84,568 )

The accompanying notes are an integral part of these consolidated financial statements.

F-7

Nathan’s Famous, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT)
Fifty-three weeks ended March 31, 2019, Fifty-two weeks ended March 25, 2018 and the Fifty-two weeks ended
March 26, 2017

(in thousands, except share and per share amounts)

Common Common
Shares

Stock

Additional
Paid-in
Capital

(Accumulated
Deficit)

Treasury Stock,
at Cost

Amount

Total
Stockholders’
(Deficit)

Balance, March 25,

2018 .......................... 9,311,922 $

93 $ 60,823 $

(68,181 ) 5,127,373 $ (77,303 ) $

(84,568 )

Cumulative effect of
the adoption of
ASC606 ....................

Shares issued in

connection with
share-based
compensation plans .

Withholding tax on net
share settlement of
share-based
compensation plans .

Repurchase of

(2,004 )

24,416

134

(174 )

common stock ..........

14,390

(1,000 )

Dividends on common

stock ........................

Share-based

compensation ...........

Net income ..................
Balance, March 31,

(4,187 )

162

21,493

162

21,493

2019 .......................... 9,336,338 $

93 $ 60,945 $

(52,879 ) 5,141,763 $ (78,303 ) $

(70,144 )

The accompanying notes are an integral part of these consolidated financial statements.

F-8

Nathan’s Famous, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except share and per share amounts)

Fifty-Three
weeks ended
March 31, 2019 March 25, 2018

weeks ended

Fifty-Two

weeks ended
March 26, 2017

Cash flows from operating activities:

Net income ..................................................................................................... $

21,493 $

2,630 $

7,485

Adjustments to reconcile net income to net cash provided by operating

activities

Loss on debt extinguishment ..............................................................
Depreciation and amortization ...........................................................
Gain on sale of property and equipment .............................................
Amortization of debt issuance costs ...................................................
Share-based compensation expense ...................................................
Income tax benefit on stock option exercises .....................................
Provision for doubtful accounts .........................................................
Impairment charge – long lived assets ...............................................
Deferred income taxes ........................................................................

Changes in operating assets and liabilities:

Accounts and other receivables, net ...................................................
Inventories .........................................................................................
Prepaid expenses and other current assets ..........................................
Other assets ........................................................................................
Accounts payable, accrued expenses and other current liabilities ......
Deferred franchise fees ......................................................................
Other liabilities ...................................................................................

-
1,212
(11,177 )
691
162
310
100
-
86

229
(151 )
1,866
(172 )
(3,367 )
(161 )
35

8,872
1,352
-
1,069
398
173
34
790
(512 )

(1,588 )
195
(1,780 )
5
7,091
95
38

-
1,297
-
1,209
582
659
53
-
101

(280 )
108
250
(189 )
(673 )
(39 )
(151 )

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

11,156

18,862

10,412

Cash flows from investing activities:

Proceeds from disposal of property and equipment ........................................
Purchase of property and equipment ...............................................................

12,775
(447 )

13
(563 )

-
(1,128 )

Net cash provided by (used in) investing activities ................

12,328

(550 )

(1,128 )

Cash flows from financing activities:

Proceeds from issuance of long-term debt ......................................................
Cash payments for extinguishment of debt .....................................................
Premium paid on extinguishment of debt .......................................................
Debt issuance costs .........................................................................................
Dividends paid to stockholders .......................................................................
Repurchase of treasury stock ..........................................................................
Proceeds from the exercise of stock options ...................................................
Payments of withholding tax on net share settlement of share-based

-
-
-
-
(4,337 )
(1,000 )
134

150,000
(135,000 )
(6,750 )
(4,908 )
(21,073 )
-
-

compensation plans ....................................................................................

(174 )

(157 )

-
-
-
-
(375 )
(1,272 )
44

(994 )

Net cash (used in) financing activities ...................................

(5,377 )

(17,888 )

(2,597 )

Net increase in cash and cash equivalents ...........................................................

18,107

424

6,687

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

57,339

56,915

50,228

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

75,446 $

57,339 $

56,915

Cash paid during the year for:

Interest ............................................................................................................ $
Income taxes ................................................................................................... $

9,938 $
6,284 $

9,038 $
3,584 $

13,500
4,049

Noncash financing activity:

Dividends declared per share .......................................................................... $

1.00 $

5.00 $

The accompanying notes are an integral part of these consolidated financial statements.

F-9

Nathan’s Famous, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)

March 31, 2019, March 25, 2018 and March 26, 2017

NOTE A - DESCRIPTION AND ORGANIZATION OF BUSINESS

Nathan’s Famous, Inc. and subsidiaries (collectively the “Company” or “Nathan’s”) has historically operated or
franchised a chain of retail fast food restaurants featuring the “Nathan’s World Famous Beef Hot Dog”, crinkle-cut
French-fried potatoes and a variety of other menu offerings. Nathan’s has also established a Branded Product
Program, which enables foodservice retailers to sell select Nathan’s proprietary products outside of the realm of a
traditional franchise relationship. Nathan’s also licenses the manufacture and sale of “Nathan’s Famous” packaged
hot dogs, crinkle-cut French fries and a number of other products to a variety of third parties for sale to supermarkets,
club stores and grocery stores. The Company is also the owner of the Arthur Treacher’s brand. Arthur Treacher’s
main product is its "Original Fish & Chips" product consisting of fish fillets coated with a special batter prepared
under a proprietary formula, deep-fried golden brown, and served with English-style chips and corn meal "hush
puppies." The Company considers itself to be a brand marketer of its products to the foodservice and retail industries,
pursuant to its various business structures. Nathan’s has also pursued co-branding and co-hosting initiatives.

At March 31, 2019, the Company’s restaurant system included four Company-owned units in the New York City
metropolitan area and 255 franchised or licensed units, located in 22 states and 14 foreign countries.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following significant accounting policies have been applied in the preparation of the consolidated financial
statements:

1. Principles of Consolidation

The consolidated financial statements include the accounts of the Company and all of its wholly-owned subsidiaries.
All significant inter-company balances and transactions have been eliminated in consolidation.

2. Fiscal Year

The Company’s fiscal year ends on the last Sunday in March, which results in a 52 or 53-week reporting period.
The results of operations and cash flows for the fiscal year ended March 31, 2019 is on the basis of a 53-week
reporting period. The fiscal years ended March 25, 2018 and March 26, 2017 are on the basis of a 52-week reporting
period.

3. Reclassifications

We have reclassified $238 of Deferred franchise fees from Other liabilities in the Consolidated Balance Sheet at
March 25, 2018 to conform with the presentation of Deferred franchise fees under Topic 606 which we adopted at
the beginning of the fiscal year ending March 31, 2019. This reclassification had no effect on previously reported
total assets, total liabilities or stockholders’ (deficit).

4. Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates.

F-10

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Significant estimates made by management in preparing the consolidated financial statements include revenue
recognition, the allowance for doubtful accounts, valuation of stock-based compensation, accounting for income
taxes, and the valuation of goodwill, intangible assets and other long-lived assets.

5. Cash and Cash Equivalents

The Company considers all highly liquid instruments purchased with an original maturity of three months or less to
be cash equivalents.

Cash equivalents at March 31, 2019 were $20,000. The Company did not have any cash equivalents at March 25,
2018. Substantially all of the Company’s cash and cash equivalents are in excess of government insurance.

6. Inventories

Inventories, which are stated at the lower of cost or net realizable value, consist primarily of food items and supplies.
Cost is determined using the first-in, first-out method.

7. Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and amortization. Major improvements are
capitalized and minor replacements, maintenance and repairs are charged to expense as incurred. Depreciation and
amortization are calculated on the straight-line basis over the estimated useful lives of the assets. Leasehold
improvements are amortized over the shorter of the estimated useful life or the lease term of the related asset. The
estimated useful lives are as follows:

Building and improvements (years) ..............................................................................................
Machinery, equipment, furniture and fixtures (years) ..................................................................
Leasehold improvements (years) ..................................................................................................

5 – 25
3 – 15
5 – 20

8. Goodwill and Intangible Assets

Goodwill and intangible assets consist of (i) goodwill of $95 resulting from the acquisition of Nathan’s in 1987;
and (ii) trademarks, trade names and other intellectual property of $1,353 in connection with Arthur Treacher’s.

The Company’s goodwill and intangible assets are deemed to have indefinite lives and, accordingly, are not
amortized, but are evaluated for impairment at least annually, but more often whenever changes in facts and
circumstances occur which may indicate that the carrying value may not be recoverable. As of March 31, 2019 and
March 25, 2018, the Company performed its required annual impairment test of goodwill and intangible assets and
has determined no impairment is deemed to exist.

9. Long-lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying value may not be recoverable.

Each reporting period, management reviews the carrying value of its investments based upon the financial
information provided by the investment’s management and considers whether indicators of an other-than-temporary
impairment exists. If an impairment indicator exists, management evaluates the fair value of its investment to
determine if an, other-than-temporary impairment in value has occurred. We are required to recognize an
impairment on the investment if such impairment is considered to be other-than-temporary.

F-11

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Impairment losses are recorded on long-lived assets on a restaurant-by-restaurant basis whenever impairment factors
are determined to be present. The Company tests the recoverability of its long-lived assets with finite useful lives
whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.
The Company tests for recoverability based on the projected undiscounted cash flows to be derived from such asset.
If the projected undiscounted future cash flows are less than the carrying value of the asset, the Company will record
an impairment loss, if any, based on the difference between the estimated fair value and the carrying value of the
asset. The Company generally measures fair value by considering discounted estimated future cash flows from such
asset. Cash flow projections and fair value estimates require significant estimates and assumptions by management.
Should the estimates and assumptions prove to be incorrect, the Company may be required to record impairments
in future periods and such impairments could be material. The Company considers a history of restaurant operating
losses to be its primary indicator of potential impairment for individual restaurant locations. At March 25, 2018, we
performed our annual impairment evaluation and recorded an impairment charge of $790 to write down the value
of the long-lived assets at one of our restaurants. No long-lived assets were deemed impaired during the fiscal years
ended March 31, 2019 and March 26, 2017.

10. Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date (an exit price).

The fair value hierarchy, as outlined in the applicable accounting guidance, is based on inputs to valuation
techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect
assumptions market participants would use in pricing an asset or liability based on market data obtained from
independent sources while unobservable inputs reflect a reporting entity’s pricing based upon their own market
assumptions.

The fair value hierarchy consists of the following three levels:

(cid:404)

Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for an identical asset or
liability in an active market

Level 2 - inputs to the valuation methodology include quoted prices for a similar asset or liability in an
active market or model-derived valuations in which all significant inputs are observable for substantially
the full term of the asset or liability

Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value
measurement of the asset or liability

The use of observable market inputs (quoted market prices) when measuring fair value and, specifically, the use of
Level 1 quoted prices to measure fair value are required whenever possible. The determination of where an asset or
liability falls in the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures
quarterly and based on various factors, it is possible that an asset or liability may be classified differently from year
to year.

At March 31, 2019 and March 25, 2018, we did not have any assets or liabilities that were recorded at fair value.

The Company’s long-term debt had a face value of $150,000 as of March 31, 2019 and a fair value of $145,688 as
of March 31, 2019. The Company estimates the fair value of its long-term debt based upon review of observable
pricing in secondary markets as of the last trading day of the fiscal period. Accordingly, the Company classifies its
long-term debt as Level 2.

The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximate fair
value due to the short-term maturity of the instruments.

The majority of the Company’s non-financial assets and liabilities are not required to be carried at fair value on a
recurring basis. However, the Company is required on a non-recurring basis to use fair value measurements when
analyzing asset impairment as it relates to goodwill and other indefinite-lived intangible assets and long-lived assets.

F-12

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

The Company utilized the income approach (Level 3 inputs) which utilized cash flow forecasts for future income
and were discounted to present value in performing its annual impairment testing of intangible assets.

11. Start-up Costs

Pre-opening and similar restaurant costs are expensed as incurred.

12. Revenue Recognition

From 2014 through 2017, the Financial Accounting Standards Board (“FASB”) issued new accounting standards to
provide principles within a single framework for revenue recognition of transactions involving contracts with
customers across all industries (“Topic 606”). We adopted Topic 606 at the beginning of the fiscal year ended March
31, 2019. Below in items numbers 12, 13, 14, 15 and 16 are discussions of how our revenues are earned, and our
accounting policies pertaining to revenue recognition prior to the adoption of Topic 606 (“Legacy GAAP”) and
subsequent to the adoption of Topic 606 and other required disclosures. Also included in Item 17 are disclosures of
the amounts by which each consolidated balance sheet, consolidated statement of earnings, and consolidated
statement of cash flows line item was impacted in the current period reporting as compared to Legacy GAAP.

13. Revenue Recognition - Branded Product Program

The timing and amount of revenue recognized related to sales made by our Branded Product Program was not
impacted by the adoption of Topic 606.

14. Revenue Recognition - Company-owned Restaurants

Sales by Company-owned restaurants, which are typically paid in cash or credit card by the customer, are recognized
at the point of sale. Sales are presented net of sales tax.

The timing and amount of revenue recognized related to our Company-owned restaurant sales was not impacted
by the adoption of Topic 606.

15. Revenue Recognition – License Royalties

The Company earns revenue from royalties on the licensing of the use of its intellectual property in connection with
certain products produced and sold by outside vendors. The use of the Company’s intellectual property must be
approved by the Company prior to each specific application to ensure proper quality and a consistent image.
Revenue from license royalties is generally based on a percentage of sales, subject to certain annual minimum
royalties, recognized on a monthly basis when it is earned and deemed collectible.

The timing and amount of revenue recognized related to our license royalties was not impacted by the adoption of
Topic 606.

16. Revenue Recognition - Franchising Operations

In connection with its franchising operations, the Company receives initial franchise fees, international development
fees, royalties, and in certain cases, revenue from sub-leasing restaurant properties to franchisees.

Under Legacy GAAP, franchise fees, which are non-refundable, were recognized as income when substantially all
services to be performed by Nathan’s and conditions relating to the sale of the franchise were performed or satisfied,
which generally occurred when the franchise restaurant commenced operations.

F-13

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

The following services are typically provided by the Company prior to the opening of a franchised restaurant.

equipping the restaurant.

Under the adoption of Topic 606, the Company determined that the services provided in exchange for these upfront
restaurant franchise fees do not contain separate and distinct performance obligations from the franchising right and
beginning March 26, 2018, these initial franchise fees, renewal fees and transfer fees shall be deferred and
recognized over the term of each respective agreement, or upon termination of the franchise agreement.

Under Legacy GAAP, international development fees were recognized, net of direct expenses, upon the opening of
the first restaurant within the territory. Under the adoption of Topic 606, the Company determined that the services
provided in exchange for these international development fees do not contain separate and distinct performance
obligations from the franchise right and as of March 26, 2018, international development fees, net of certain
incremental direct expenses, shall be recognized over the term of each respective agreement. Certain other costs,
such as legal expenses, shall be expensed as incurred.

The following is a summary of franchise openings and closings for the Nathan’s franchise restaurant system for the
fiscal years ended March 31, 2019, March 25, 2018 and March 26, 2017:

March 31, March 25, March 26,
2018

2017

2019

Franchised restaurants operating at the beginning of the period ...

276

279

259

New franchised restaurants opened during the period ...................

Franchised restaurants closed during the period ............................

(34 )

(43 )

(33 )

Franchised restaurants operating at the end of the period .............

255

276

279

The Company recognizes franchise royalties on a monthly basis, which are generally based upon a percentage of
sales made by the Company’s franchisees, when they are earned and deemed collectible. The Company recognizes
royalty revenue from its Branded Menu Program directly from the sale of Nathan’s products by its primary
distributor or directly from the manufacturers.

Franchise fees and royalties that are subsequently deemed to be not collectible are recorded as bad debts until paid
by the franchisee or until collectibility is deemed to be reasonably assured.

17. Revenue Recognition – National Advertising Fund

The Company maintains a national advertising fund (the “Advertising Fund”) established to collect and administer
funds contributed for use in advertising and promotional programs for Company-owned and franchised restaurants.
Under Legacy GAAP, the revenues, expenses and cash flows of the Advertising Fund were reported on the
Company’s Consolidated Balance Sheets and not included in the Company’s Consolidated Statements of Earnings
and Statements of Cash Flows because the contributions to the Advertising Fund were designed for specific purposes
and the Company acted as an agent, in substance, with regard to these contributions as a result of industry-specific
guidance.

Under the adoption of Topic 606, the revenue, expenses and cash flows of the Advertising Fund are fully
consolidated into the Company’s Consolidated Statements of Earnings and Statements of Cash Flows.

F-14

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

While this treatment impacts the gross amount of reported advertising fund revenue and related expenses, the impact
is expected to approximately offset the increase to both revenue and expense, with minimal impact to income from
operations or net income because the Company attempts to manage the Advertising Fund to breakeven over the
course of the fiscal year. However, any surplus or deficit in the Advertising Fund will impact income from
operations and net income.

18. Revenue Recognition – Impact of Adopting New Revenue Recognition Standards

Under the adoption of Topic 606, the Company used the modified retrospective method, whereby the cumulative
effect of initially adopting the guidance was recognized as an adjustment to the opening balance of accumulated
deficit at March 26, 2018 in the amount of $2,004, net of tax. Pursuant to the modified retrospective method, the
results of operations from the comparative periods have not been adjusted and continue to be reported under Legacy
GAAP.

Impacts on Consolidated Financial Statements

The following tables summarize the impact of adopting Topic 606 on the Company’s condensed consolidated
financial statements:

Adjustments

Reported

Franchise
Fees

Balance
Sheet
Reclassi-
fications

Balances
Without
Adoption

Condensed Consolidated Balance Sheet
March 31, 2019

Deferred income taxes ...............................................
Total assets ................................................................
Accrued expenses and other current liabilities ..........
Deferred franchise fees ..............................................
Total current liabilities ..............................................
Deferred income taxes ...............................................
Deferred franchise fees ..............................................
Total liabilities ...........................................................
(Accumulated deficit) ................................................
Stockholders’ equity before treasury stock ................
Total stockholders’ (deficit) ......................................
Total liabilities and stockholders’ (deficit) ................

343
94,306
9,384
318
14,924
-
2,687
164,450
(52,879 )
8,159
(70,144 )
94,306

(731 )
(731 )
(190 )
(378 )
(568 )
-
(2,140 )
(2,708 )
1,977
1,977
1,977
(731 )

388
388
-
369
369
388
(369 )
388
-
-
-
388

-
93,963
9,194
309
14,725
388
178
162,130
(50,902 )
10,136
(68,167 )
93,963

Adjustments

Reported

Franchise
Fees

Advertising
Fund

Balances
Without
Adoption

Condensed Consolidated Statement of Earnings
Year ended March 31, 2019

Franchise fees and royalties .......................................
Advertising fund revenue ..........................................
Total revenues ...........................................................
General and administrative expenses.........................
Advertising fund expense ..........................................
Total costs and expenses ...........................................
Income from operations .............................................
Income before provision for income taxes ................
Provision for income taxes ........................................
Net income ................................................................

4,171
2,502
101,849
13,851
2,506
73,873
27,976
29,410
7,917
21,493

(217 )
-
(217 )
(162 )
-
(162 )
(55 )
(55 )
(24 )
(27 )

-
(2,502 )
(2,502 )
-
(2,506 )
(2,506 )
4
4
-
-

3,954
-
99,130
13,689
-
71,205
27,925
29,359
7,893
21,466

F-15

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Adjustments

Reported

Franchise
Fees

Advertising
Fund

Balances
Without
Adoption

Condensed Consolidated Statement of Cash Flows
Year ended March 31, 2019
Cash flows from operating activities:

Net income ................................................................
Changes in operating assets and liabilities:
Accounts payable, accrued expenses and other

Current liabilities ...................................................
Deferred franchise fees ..............................................
Net cash provided by operating activities ..................
Net cash provided by investing activities ..................
Net cash (used in) financing activities .......................
Net increase in cash and cash equivalents .................

Contract balances

21,493

(27 )

21,466

(3,367 )
(161 )
11,156
12,328
(5,377 )
18,107

(190 )
217
-
-
-
-

-
-
-
-
-
-

(3,557 )
56
11,156
12,328
(5,377 )
18,107

The following table provides information about receivables and contract liabilities (Deferred franchise fees) from
contracts with customers (in thousands):

Deferred franchise fees (a) ......................................................................................................... $

March 31, 2019
3,005

(a) Deferred franchise fees of $318 and $2,687 are included in Deferred franchise fees – current and long term,

respectively.

Significant changes in Deferred franchise fees are as follows:

Deferred franchise fees at beginning of period (a) ..................................................................... $
Additions to deferred revenue ....................................................................................................
Revenue recognized during the period .......................................................................................
Deferred franchise fees at end of period .................................................................................... $

Fifty-three
Weeks
Ended
March 31, 2019
3,139
371
(505 )
3,005

(a)

Includes the cumulative effect of adopting Topic 606 of $2,735, excluding deferred income taxes.

Anticipated Future Recognition of Deferred Franchise Fees

The following table reflects the estimated franchise fees to be recognized in the future related to performance
obligations that are unsatisfied at the end of the period:

2020 ................................................................................................................................
2021 ................................................................................................................................
2022 ................................................................................................................................
2023 ................................................................................................................................
2024 ................................................................................................................................
Thereafter ........................................................................................................................
Total ................................................................................................................................ $

Estimate for fiscal year
318
309
299
262
248
1,569
3,005

F-16

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

We have applied the optional exemption, as provided for under Topic 606, which allows us not to disclose the
transaction price allocated to unsatisfied performance obligations when the transaction price is a sales-based royalty.

19. Business Concentrations and Geographical Information

At March 31, 2019 and March 25, 2018 the Company maintained cash balances which are in excess of Federal
government insurance limits. The Company does not believe that it is exposed to any significant risk on these
balances.

The Company’s accounts receivable consist principally of receivables from franchisees for royalties and advertising
contributions, from sales under the Branded Product Program, and from royalties from retail licensees. At March
31, 2019, four Branded Product customers represented 19%, 18%, 17% and 13%, of accounts receivable. At March
25, 2018, three Branded Product customers represented 41%, 20% and 8%, of accounts receivable. One Branded
Products customer accounted for 14%, 19% and 12% of total revenue for the years ended March 31, 2019, March
25, 2018 and March 26, 2017, respectively. One retail licensee accounted for 22%, 21% and 20% of the total revenue
for the years ended March 31, 2019, March 25, 2018 and March 26, 2017, respectively.

The Company’s primary supplier of hot dogs represented 92%, 92% and 91% of product purchases for the fiscal
years ended March 31, 2019, March 25, 2018 and March 26, 2017, respectively. The Company’s distributor of
products to its Company-owned restaurants represented 5%, 4% and 5% of product purchases for each of the fiscal
years ended March 31, 2019, March 25, 2018 and March 26, 2017, respectively.

The Company’s revenues for the fiscal years ended March 31, 2019, March 25, 2018 and March 26, 2017 were
derived from the following geographic areas:

March 31,
2019

March 25,
2018

March 26,
2017

Domestic (United States) ................................... $
Non-domestic .....................................................

97,871 $
3,978
101,849 $

97,661 $
6,540
104,201 $

90,070
6,186
96,256

The Company’s sales for the fiscal years ended March 31, 2019, March 25, 2018 and March 26, 2017 were derived
from the following:

March 31,
2019

March 25,
2018

March 26,
2017

Branded Products ............................................... $
Company-owned restaurants ..............................
Other ..................................................................

Total sales ................................................... $

57,960 $
13,601
-

71,561 $

62,623 $
14,085
-

76,708 $

55,960
14,646
214
70,820

License royalties ................................................ $

23,615 $

23,020 $

20,368

Royalties ............................................................
Franchise fees .....................................................
Total franchise fees and royalties ................

3,666
505
4,171

4,138
335
4,473

Advertising fund revenue (A) ............................

2,502

4,290
778
5,068

Total revenues ............................................. $

101,849

104,201

96,256

(A) Prior to adoption of Topic 606, inflows into the National Advertising Fund were not considered revenue.

F-17

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

20. Advertising

The Company administers an advertising fund on behalf of its restaurant system to coordinate the marketing efforts
of the Company. Under this arrangement, the Company collects and disburses fees paid by manufacturers,
franchisees and Company-owned stores for national and regional advertising, promotional and public relations
programs. Contributions to the advertising fund are based on specified percentages of net sales, generally ranging
up to 2%. Company-owned store advertising expense, which is expensed as incurred, was $107, $117 and $182, for
the fiscal years ended March 31, 2019, March 25, 2018 and March 26, 2017, respectively, and have been included
within restaurant operating expenses in the accompanying Consolidated Statements of Earnings.

21. Stock-Based Compensation

At March 31, 2019, the Company had one stock-based compensation plan in effect which is more fully described
in Note L.2.

The cost of all share-based payments, including grants of restricted stock and stock options, is recognized in the
financial statements based on their fair values measured at the grant date, or the date of any later modification, over
the requisite service period. The Company recognizes compensation cost for unvested stock awards on a straight-
line basis over the requisite vesting period.

22. Classification of Operating Expenses

Cost of sales consists of the following:

o The cost of food and other products sold by Company-operated restaurants, through the Branded Product

Program and through other distribution channels.

o The cost of labor and associated costs of in-store restaurant management and crew.
o The cost of paper products used in Company-operated restaurants.
o Other direct costs such as fulfillment, commissions, freight and samples.

Restaurant operating expenses consist of the following:

o Occupancy costs of Company-operated restaurants.
o Utility costs of Company-operated restaurants.
o Repair and maintenance expenses of Company-operated restaurant facilities.
o Marketing and advertising expenses done locally and contributions to advertising funds for Company-

operated restaurants.
Insurance costs directly related to Company-operated restaurants.

23. Income Taxes

The Company’s current provision for income taxes is based upon its estimated taxable income in each of the
jurisdictions in which it operates, after considering the impact on taxable income of temporary differences resulting
from different treatment of items for tax and financial reporting purposes and income tax benefits from share-based
payments. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets and liabilities and their respective
tax bases and any operating loss or tax credit carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected
to be recovered or settled. The ultimate realization of deferred tax assets is dependent upon the generation of future
taxable income in those periods in which temporary differences become deductible. Should management determine
that it is more likely than not that some portion of the deferred tax assets will not be realized, a valuation allowance
against the deferred tax assets would be established in the period such determination was made.

F-18

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Uncertain Tax Positions
The Company has recorded liabilities for underpayment of income taxes and related interest and penalties for
uncertain tax positions based on the determination of whether tax benefits claimed or expected to be claimed on a
tax return should be recorded in the financial statements. The Company may recognize the tax benefit from an
uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the
taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial
statements from such position should be measured based on the largest benefit that has a greater than fifty percent
likelihood of being realized upon ultimate settlement. Nathan’s recognizes accrued interest and penalties associated
with unrecognized tax benefits as part of the income tax provision.

See Note I for a further discussion of our income taxes.

24. Adoption of Other New Accounting Standards

In January 2017, the FASB issued a new accounting standard that narrows the definition of a business. The concept
is fundamental in determining whether transactions should be accounted for as acquisitions (or disposals) of assets
or businesses. The ASU revised the definition of a business to consist of the following key concepts:

(cid:404) A business is an integrated set of activities and assets that is capable of being conducted and managed for
the purpose of providing a return in the form of dividends, lower costs, or other economic benefits directly
to investors or other owners, members, or participants.

(cid:404) To be capable of being conducted and managed for the purposes described above, an integrated set of
activities and assets requires two essential elements–inputs and a substantive process(es) applied to those
inputs.

The guidance was effective for the Company beginning in the quarter ending June 24, 2018 and did not have a
material impact on its results of operations or financial position.

25. New Accounting Standards Not Yet Adopted

In February 2016, the FASB issued new guidance ASU 2016-02, “Leases (Topic 842),” which outlines principles
for the recognition, measurement, presentation and disclosure of leases applicable to both lessors and lessees. In
January 2018, the FASB issued ASU 2018-01, Leases (Topic 842): Land Easement Practical Expedient for
Transition to Topic 842, which affects the guidance in ASU 2016-02. The standard permits the election of an
optional transition practical expedient to not evaluate land easements that exist or expired before the adoption of
Topic 842 and that were not previously accounted for as leases under Topic 840. In July 2018, the FASB issued
ASU 2018-10, Codification Improvements to Topic 842 (Leases), and ASU 2018-11, Leases (Topic 842), Targeted
Improvements, which provide (i) narrow amendments to clarify how to apply certain aspects of the new lease
standard, (ii) entities with an additional transition method to adopt the new standard, and (iii) lessors with a practical
expedient for separating components of a contract. The new standard is effective for annual reporting periods
beginning after December 15, 2018, including interim reporting periods within those annual reporting periods.

The new guidance will take effect at the beginning of Nathan’s first quarter (April 1, 2019) of our fiscal year ending
March 29, 2020. The new guidance requires lessees to recognize on the balance sheet the assets and liabilities for
the rights and obligations created by finance and operating leases with lease terms of more than 12 months. The
guidance requires either a modified retrospective transition approach with application in all comparative periods
presented, or an alternative transition method, which permits the Company to use its effective date as the date of
initial application without restating comparative period financial statements and recognizing any cumulative effect
adjustment to the opening balance sheet of accumulated deficit at April 1, 2019.

F-19

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

The new guidance also provides several practical expedients and policies that companies may elect under either
transition method. Nathan’s expects to elect the modified retrospective method and use the effective date as the
initial application. Nathan’s will also adopt the package of practical expedients including; not reassessing prior
conclusions about lease identification, lease classification and initial direct costs. We will elect the short-term lease
recognition exemption for qualifying leases of less than 12 months and not recognize a Right-of-Use Asset or lease
liability, we will elect not to separate lease and non-lease components for all leases and we will not elect the use-
of-hindsight practical expedient. We have completed the scoping analysis and data gathering process for our current
lease portfolio. We are finalizing the review of information for completeness of the lease portfolio, analyzing the
financial statement impact of adopting the standards, and evaluating the impact of adoption on our existing
accounting policies and disclosures. Upon adoption, we expect to recognize additional operating lease liabilities of
approximately $8,500, and a Right of Use asset of approximately $7,800 based on the present value of the remaining
minimum rental payments under current leasing standards for existing operating leases and derecognize $700 of
deferred rents. We do not expect the adoption of this guidance to have a material impact on our consolidated
statements of earnings and statement of cash flows.

In June 2016, the FASB issued new guidance on the measurement of credit losses, which significantly changes the
impairment model for most financial instruments. Current guidance requires the recognition of credit losses based
on an incurred loss impairment methodology that reflects losses once the losses are probable. Under the new
standard, the Company will be required to use a current expected credit loss model (“CECL”) that will immediately
recognize an estimate of credit losses that are expected to occur over the life of the financial instruments that are in
the scope of this update, including trade receivables. The CECL model uses a broader range of reasonable and
supportable information in the development of credit loss estimates. This guidance is effective for public business
entities for annual reporting periods beginning after December 15, 2019. This standard is required to take effect in
Nathan’s first quarter (June 2020) of our fiscal year ending March 28, 2021. The Company is currently evaluating
the impact that the adoption of this guidance will have on its consolidated financial statements and related
disclosures.

In January 2017, the FASB issued an update to the accounting guidance to simplify the testing for goodwill
impairment. The update removes the requirement to determine the implied fair value of goodwill to measure the
amount of impairment loss, if any, under the second step of the current goodwill impairment test. A company will
perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its
carrying amount. A goodwill impairment charge will be recognized for the amount by which the reporting unit’s
carrying amount exceeds its fair value, not to exceed the carrying amount of the goodwill. The guidance is effective
prospectively for public business entities for annual reporting periods beginning after December 15, 2019. This
standard is required to take effect in Nathan’s first quarter (June 2020) of our fiscal year ending March 28, 2021.
Nathan’s does not expect the adoption of this new guidance to have a material impact on its results of operations or
financial position.

The Company does not believe that any other recently issued, but not yet effective accounting standards, when
adopted, will have a material effect on the accompanying consolidated financial statements.

F-20

NOTE C - INCOME PER SHARE

Basic income per common share is calculated by dividing income by the weighted-average number of common
shares outstanding and excludes any dilutive effect of stock options. Diluted income per common share gives effect
to all potentially dilutive common shares that were outstanding during the period. Dilutive common shares used in
the computation of diluted income per common share result from the assumed exercise of stock options and
warrants, as determined using the treasury stock method.

The following chart provides a reconciliation of information used in calculating the per-share amounts for the fiscal
years ended March 31, 2019, March 25, 2018 and March 26, 2017, respectively:

Net Income
2019 2018 2017

2019

Shares
2018

Net income per share
2019 2018 2017

2017

Basic EPS
Basic
calculation .. $ 21,493 $ 2,630 $ 7,485 4,187,000 4,181,000 4,172,000 $ 5.13 $ 0.63 $ 1.79
Effect of
dilutive
employee
stock
options .......

34,000 (.04 ) (.01 ) (.01 )

33,000

40,000

Diluted EPS
Diluted
calculation .. $ 21,493 $ 2,630 $ 7,485 4,220,000 4,221,000 4,206,000 $ 5.09 $ 0.62 $ 1.78

Options to purchase 10,000 shares of common stock for the year ended March 31, 2019 were not included in the
computation of diluted earnings per share because the exercise price exceeded the average market price.

NOTE D - ACCOUNTS AND OTHER RECEIVABLES, NET

Accounts and other receivables, net, consist of the following:

March 31,

March 25,

2019

2018

Branded product sales ............................................................................. $
Franchise and license royalties ...............................................................
Other .......................................................................................................

7,432 $
2,661
665
10,758

7,604
2,767
599
10,970

Less: allowance for doubtful accounts ....................................................

585

468

Accounts and other receivables, net ........................................................ $

10,173 $

10,502

Accounts receivable are due within 30 days and are stated at amounts due from franchisees, retail licensees and
Branded Product Program customers, net of an allowance for doubtful accounts. Accounts that are outstanding
longer than the contractual payment terms are generally considered past due. The Company does not recognize
franchise and license royalties that are not deemed to be realizable.

F-21

NOTE D - ACCOUNTS AND OTHER RECEIVABLES, NET (continued)

The Company individually reviews each past due account and determines its allowance for doubtful accounts by
considering a number of factors, including the length of time accounts receivable are past due, the Company’s
previous loss history, the customer’s current and expected future ability to pay its obligation to the Company, the
condition of the general economy and the industry as a whole. Based on management’s assessment, the Company
provides for estimated uncollectible amounts through a charge to earnings. After the Company has used reasonable
collection efforts, it writes off accounts receivable through a charge to the allowance for doubtful accounts.

Changes in the Company’s allowance for doubtful accounts for the fiscal years ended March 31, 2019, March 25,
2018 and March 26, 2017 are as follows:

March 31,
2019

March 25,
2018

March 26,
2017

Beginning balance ............................................................... $
Reclassification to conform with Topic 606 ....................
Bad debt expense .............................................................
Accounts written off ........................................................

468 $
77
100
(60 )

457 $
-

34
(23 )

Ending balance .................................................................... $

585 $

468 $

471

53
(67 )

457

NOTE E – PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following:

March 31,

March 25,

2019

2018

Income taxes ................................................................................................. $
Insurance .......................................................................................................
Other .............................................................................................................

106 $
244
657

1,624
266
983

Total prepaid expenses and other current assets ........................................... $

1,007 $

2,873

NOTE F– SALES OF REAL ESTATE

Prior to the end of fiscal 2018, we entered into an agreement to sell a Company-owned restaurant located in Bay
Ridge, Brooklyn, NY for $12,250. Property and equipment of $610 related to this sale had been classified as Assets
held for sale in our Consolidated Balance Sheet at March 25, 2018.

On October 23, 2018, the Company completed the sale for proceeds of $11,445, net of direct expenses, and recorded
a gain of $10,854, which represented the excess of the proceeds, before legal fees of $33, over the carrying value
on that date.

On August 9, 2018, the Company completed the sale of its regional office building located in Fort Lauderdale,
Florida for proceeds of $1,330, net of direct expenses, and recorded a gain of $323, which represented the excess
of the proceeds, before legal fees of $17, over the carrying value on that date.

F-22

NOTE G - PROPERTY AND EQUIPMENT, NET

Property and equipment consists of the following:

March 31,

March 25,

2019

2018

Land .............................................................................................................. $
Building and improvements ..........................................................................
Machinery, equipment, furniture and fixtures ...............................................
Leasehold improvements ..............................................................................
Construction-in-progress ...............................................................................
Total property and equipment .......................................................................
Less: accumulated depreciation and amortization .........................................

123 $
1,452
5,422
6,481
22
13,500
8,611

835
2,035
5,450
6,578
8
14,906
8,264

Property and equipment, net ......................................................................... $

4,889 $

6,642

NOTE H – ACCRUED EXPENSES, OTHER CURRENT LIABILITIES AND OTHER LIABILITIES

Accrued expenses and other current liabilities consist of the following:

March 31,

March 25,

2019

2018

Payroll and other benefits ............................................................................. $
Accrued rebates .............................................................................................
Rent and occupancy costs .............................................................................
Deferred revenue ...........................................................................................
Construction costs .........................................................................................
Interest ..........................................................................................................
Professional fees ...........................................................................................
Sales, use and other taxes ..............................................................................
Dividend payable ..........................................................................................
Deposit payable .............................................................................................
Other .............................................................................................................
Total accrued expenses and other current liabilities ..................................... $

3,150 $
770
113
807
58
4,111
146
27
-
-
202
9,384 $

2,733
1,541
200
780
68
3,948
157
80
150
1,201
390
11,248

Other liabilities consist of the following:

Reserve for uncertain tax positions (Note I) .................................................
Deferred rental liability .................................................................................
Other .............................................................................................................
Total other liabilities ..................................................................................... $

496
670
224
1,390 $

467
677
211
1,355

March 31,

March 25,

2019

2018

F-23

NOTE I - INCOME TAXES

The income tax provision consists of the following for the fiscal years ended March 31, 2019, March 25, 2018 and
March 26, 2017:

March 31,
2019

March 25,
2018

March 26,
2017

Federal

Current .............................................................................. $
Deferred ............................................................................
Total Federal income tax ..................................................

State and local

Current ..............................................................................
Deferred ............................................................................
Total State and local income tax .......................................
Total provision for income taxes ...................................... $

5,385 $
43
5,428

2,447
42
2,489
7,917 $

1,077 $
(474 )
603

917
(38 )
879
1,482 $

3,024
79
3,103

1,195
21
1,216
4,319

On December 22, 2017, the Enactment Date, President Trump signed the Tax Cuts and Jobs Act (“Tax Act”) into
law which among other provisions, permanently reduces the top corporate tax rate from 35 percent to a flat 21
percent beginning January 1, 2018 and eliminates the corporate Alternative Minimum Tax. The Tax Act limits the
deduction of business interest, net of interest income, to 30 percent of the adjusted taxable income of the taxpayer
in any taxable year. Any amount disallowed under the limitation is treated as business interest paid or accrued in
the following year. Disallowed interest will have an indefinite carryforward. The Tax Act also repeals the
performance-based exception to the $1.0 million deduction limitation on executive compensation and modifies the
definition of “covered employees”. Additionally, the Tax Act intended to allow businesses to immediately expense
the full cost of Qualified Improvement Property. However, the law as written does not permit restaurant companies
to take advantage of the laws’ intention regarding the immediate expensing of Qualified Improvement Property.

The income tax provisions for the years ended March 31, 2019 and March 25, 2018 reflect effective tax rates of
26.9% and 36.0%, respectively. The Company's tax rate reflects the reduction of the Federal income tax rate to 21%
and blended 31% rate pursuant to the Tax Act, respectively.

During the fiscal year ended March 25, 2018, pursuant to Staff Accounting Bulletin No. 118 ("SAB No. 118"),
Nathan’s determined reasonable estimates to its deferred assets and liabilities and pursuant to ASC 740, Income
Taxes, the Company recognized the effect(s) of the Tax Act on current and deferred income taxes in its financial
statements. Nathan’s recorded a discrete adjustment to its deferred tax liability and unrecognized tax benefits which
reduced the provision for income taxes by $245 or 6.0 percentage points during the year ended March 25, 2018. In
accordance with the provisions of SAB No. 118, at March 25, 2018 we considered amounts related to the Tax Act
to be reasonably estimated. During the year fiscal year ended March 31, 2019, we refined and completed the
accounting for the Tax Act as we obtained, prepared, and analyzed additional information and as additional
legislative, regulatory, and accounting guidance and interpretations became available, resulting in an increase in the
provision for income taxes of $99 or 0.3 percentage points.

The total income tax provision for the fiscal years ended March 31, 2019, March 25, 2018 and March 26, 2017
differs from the amounts computed by applying the United States Federal income tax rate of 21%, blended 31% and
34%, respectively to income before income taxes as a result of the following:

Computed tax expense ........................................................ $
State and local income taxes, net of Federal income tax

benefit ..............................................................................
Change in uncertain tax positions, net ................................
Nondeductible meals and entertainment and other .............
Nondeductible compensation ..............................................
Tax reform act .....................................................................
Tax benefit share based payments .......................................
$

Total provision for income taxes

March 31,
2019

March 25,
2018

March 26,
2017

6,176 $

1,275 $

4,013

1,875
86
(66 )
57
99
(310 )
7,917 $

506
98
21
-
(245 )
(173 )
1,482 $

797
(11 )
61
118
-
(659 )
4,319

F-24

NOTE I - INCOME TAXES (continued)

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred
tax liabilities are presented below:

March 31,

March 25,

2019

2018

Deferred tax assets

Accrued expenses .......................................................................................... $
Allowance for doubtful accounts ...................................................................
Deferred revenue ...........................................................................................
Deferred stock compensation ........................................................................
Excess of straight line over actual rent ..........................................................
Investment .....................................................................................................
Other ..............................................................................................................
Total deferred tax assets .................................................................. $

Deferred tax liabilities

Deductible prepaid expense ...........................................................................
Depreciation expense .....................................................................................
Amortization ..................................................................................................
Total deferred tax liabilities ............................................................
Net deferred tax asset (liability) ...................................................... $

387 $
58
955
70
162
-
85
1,717 $

210
783
381
1,374
343 $

310
40
291
166
194
123
97
1,221

280
882
361
1,523
(302 )

A valuation allowance is provided when it is more likely than not that some portion, or all, of the deferred tax assets
will not be realized. We consider the level of historical taxable income, scheduled reversal of temporary differences,
tax planning strategies and projected future taxable income in determining whether a valuation allowance is
warranted. Based upon these considerations, management believes that it is more likely than not that the Company
will realize the benefit of its deferred tax asset.

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits, excluding interest and
penalties, for the fiscal years ended March 31, 2019, March 25, 2018 and March 26, 2017.

March 31,
2019

March 25,
2018

March 26,
2017

Unrecognized tax benefits, beginning of year ..................... $
Decreases of tax positions taken in prior years ...................
Increases based on tax positions taken in current year ........
Settlements of tax positions taken in prior years .................
Unrecognized tax benefits, end of year ............................... $

263 $
(8 )
46
(48 )
253 $

167 $
(2 )
98
-
263 $

208
(31 )
41
(51 )
167

The amount of unrecognized tax benefits at March 31, 2019, March 25, 2018 and March 26, 2017 were $253, $263
and $167, respectively, all of which would impact Nathan’s effective tax rate, if recognized. As of March 31, 2019
and March 25, 2018, the Company had $245 and $214, respectively, accrued for the payment of interest and
penalties. For the fiscal years ended March 31, 2019, March 25, 2018 and March 26, 2017 Nathan’s recognized
interest and penalties in the amounts of $31, $31 and $29, respectively. During the fiscal year ending March 29,
2020, Nathan’s will seek to settle additional uncertain tax positions with the tax authorities. As a result, it is
reasonably possible the amount of unrecognized tax benefits, excluding the related accrued interest and penalties,
could be reduced by up to $11, which would favorably impact Nathan’s effective tax rate, although no assurances
can be given in this regard.

In January 2018, Nathan’s received notification from the State of Virginia that it was seeking to review Nathan’s
tax returns for the period April 2014 through March 2017. The review has been completed; Nathan’s has accepted
the findings and settled the matter. The effects of the review, which were not significant, have been factored into
the Company’s effective tax rate for fiscal 2019.

F-25

NOTE I - INCOME TAXES (continued)

The ultimate benefit of the Tax Act on Nathan’s is unclear as the lower annual tax rate could be outweighed by
deduction limitations and other provisions included in further guidance and regulations.

The earliest tax years’ that are subject to examination by taxing authorities by major jurisdictions are as follows:

Jurisdiction
Federal ..............................................................................................................................................
New York State ................................................................................................................................
New York City ..................................................................................................................................
New Jersey ........................................................................................................................................
California ..........................................................................................................................................

Fiscal Year
2016
2016
2016
2015
2015

NOTE J – SEGMENT INFORMATION

Nathan’s considers itself to be a brand marketer of the Nathan’s Famous signature products to the foodservice
industry pursuant to its various business structures. Nathan’s sells its products directly to consumers through its
restaurant operations segment consisting of Company-operated and franchised restaurants, to distributors that resell
our products to the foodservice industry through the Branded Product Program (“BPP”) and by third party
manufacturers pursuant to license agreements that sell our products to club stores and grocery stores nationwide.
The Company’s Chief Executive Officer has been identified as the Chief Operating Decision Maker (“CODM”)
who evaluates performance and allocates resources for the Branded Product Program, Product Licensing and
Restaurant Operations segments based upon a number of factors, the primary profit measure being income from
operations. Certain administrative expenses are not allocated to the segments and are reported within the Corporate
segment.

Branded Product Program – This segment derives revenue principally from the sale of hot dog products either
directly to foodservice operators or to various foodservice distributors who resell the products to foodservice
operators.

Product licensing – This segment derives revenue, primarily in the form of royalties, from licensing a broad variety
of Nathan’s Famous branded products, including our hotdogs, sausage and corned beef products, frozen French fries
and additional products through retail grocery channels and club stores throughout the United States.

Restaurant operations – This segment derives revenue from the sale of our products at Company-owned restaurants
and earns fees and royalties from its franchised restaurants.

Revenues from operating segments are from transactions with unaffiliated third parties and do not include any
intersegment revenues.

Income from operations attributable to Corporate consists principally of administrative expenses not allocated to
the operating segments such as executive management, finance, information technology, legal, insurance, corporate
office costs, corporate incentive compensation and compliance costs and expenses of the advertising fund.

Gain on sale of property and equipment, loss on debt extinguishment, interest expense, interest income, impairment
charge and other income, net are managed centrally at the corporate level, and, accordingly, such items are not
presented by segment since they are excluded from the measure of profitability reviewed by the CODM.

Corporate assets consist primarily of cash and cash equivalents, and long-lived assets.

F-26

NOTE J – SEGMENT INFORMATION (continued)

Operating segment information is as follows:

Fifty-Three
weeks ended

Fifty-Two
weeks ended
March 31, 2019 March 25, 2018 March 26, 2017

Fifty-Two
weeks ended

Revenues
Branded Product Program ......................................... $
Product licensing .......................................................
Restaurant operations ................................................
Corporate (1) .............................................................
Total revenues ............................................. $

Income from operations
Branded Product Program ......................................... $
Product licensing .......................................................
Restaurant operations ................................................
Corporate...................................................................
Income from operations .............................. $

Gain on sale of property and equipment ................... $
Interest expense .........................................................
Loss on debt extinguishment (Note K) .....................
Impairment charge – long lived assets (Note B) .......
Interest income ..........................................................
Other income, net ......................................................
Income before provision for income taxes .. $

Total assets
Branded Product Program ......................................... $
Product licensing .......................................................
Restaurant operations ................................................
Corporate...................................................................
Total assets ................................................. $

Depreciation & amortization expense
Branded Product Program ......................................... $
Restaurant operations ................................................
Corporate...................................................................
Total depreciation & amortization

57,960 $
23,615
17,772
2,502
101,849 $

10,302 $
23,433
2,398
(8,157 )
27,976 $

11,177 $
(10,792 )
-
-
840
209
29,410 $

8,334 $
2,127
6,411
77,434
94,306 $

62,623 $
23,020
18,558
-
104,201 $

9,469 $
22,838
2,730
(7,937 )
27,100 $

- $
(13,591 )
(8,872 )
(790 )
166
99
4,112 $

8,174 $
2,269
7,537
62,111
80,091 $

312 $
657
243

298 $
786
268

56,174
20,368
19,714
-
96,256

10,257
20,186
4,101
(8,264 )
26,280

-
(14,665 )
-
-
104
85
11,804

7,113
2,003
8,740
60,269
78,125

316
762
219

expense .................................................... $

1,212 $

1,352 $

1,297

(1) Represents advertising fund revenue

F-27

NOTE K – LONG-TERM DEBT

Long-term debt consists of the following:

March 31,

March 25,

2019

2018

6.625% Senior Secured Notes due 2025 ................................................................ $
Less: unamortized debt issuance costs ...................................................................
Long-term debt, net ............................................................................................ $

150,000 $
(4,551 )
145,449 $

150,000
(5,242 )
144,758

On November 1, 2017, the Company issued $150,000 of 6.625% Senior Secured Notes due 2025 (the "2025 Notes") in a
private offering in accordance with Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The
2025 Notes were issued pursuant to an indenture dated as of November 1, 2017 by and among the Company, certain of its
wholly-owned subsidiaries and U.S. Bank National Association (the “Indenture”). The Company used the net proceeds of
the 2025 Notes offering to satisfy and discharge the Indenture relating to the $135,000 of 10.000% Senior Secured Notes due
2020 and redeem the 2020 Notes (the "Redemption"), paid a portion of a special $5.00 per share cash dividend to Nathan's
stockholders of record, with the remaining net proceeds for general corporate purposes, including working capital. The
Company also funded the majority of the special dividend of $5.00 per share through its existing cash. The Redemption
occurred on November 16, 2017.

The Company performed the required evaluation of the refinancing and determined that a portion of the Redemption of the
2020 Notes was accounted for as a modification of the debt and a portion as an extinguishment of the debt. In connection
with the Redemption, the Company recorded a loss on early extinguishment of debt of $8,872 for the year ended March 25,
2018 that primarily reflected a portion of the premium paid to redeem the 2020 Notes and the write-off of certain debt
issuance costs.

The 2025 Notes bear interest at 6.625% per annum, payable semi-annually on May 1st and November 1st of each year. The
Company made its required semi-annual interest payments of $4,969 on May 1, 2018 and November 1, 2018. On May 1,
2019, the Company paid its first semi-annual interest payment of fiscal 2020.

The 2025 Notes have no scheduled principal amortization payments prior to its final maturity on November 1, 2025.

The terms and conditions of the 2025 Notes are as follows (terms not defined shall have the meanings set forth in the
Indenture):

There are no ongoing financial maintenance covenants associated with the 2025 Notes. As of March 31, 2019, Nathan’s was
in compliance with all covenants associated with the 2025 Notes.

The Indenture contains certain covenants limiting the Company’s ability and the ability of its restricted subsidiaries (as
defined in the Indenture) to, subject to certain exceptions and qualifications: (i) incur additional indebtedness; (ii) pay
dividends or make other distributions on, redeem or repurchase, capital stock; (iii) make investments or other restricted
payments; (iv) create or incur certain liens; (v) incur restrictions on the payment of dividends or other distributions from its
restricted subsidiaries; (vi) enter into certain transactions with affiliates; (vii) sell assets; or (viii) effect a consolidation or
merger. Certain Restricted Payments which may be made or indebtedness incurred by Nathan’s or its Restricted Subsidiaries
may require compliance with the following financial ratios:

F-28

NOTE K – LONG-TERM DEBT (continued)

The Indenture also contains customary events of default, including, among other things, failure to pay interest, failure to
comply with agreements related to the Indenture, failure to pay at maturity or acceleration of other indebtedness, failure to
pay certain judgments, and certain events of insolvency or bankruptcy. Generally, if any event of default occurs, the Trustee
or the holders of at least 25% in principal amount of the 2025 Notes may declare the 2025 Notes due and payable by providing
notice to the Company. In case of default arising from certain events of bankruptcy or insolvency, the 2025 Notes, will
become immediately due and payable.

The 2025 Notes are general senior secured obligations, are fully and unconditionally guaranteed by substantially all of the
Company’s wholly-owned subsidiaries and rank pari passu in right of payment with all of the Company’s existing and future
indebtedness that is not subordinated, are senior in right of payment to any of the Company’s existing and future subordinated
indebtedness, are structurally subordinated to any existing and future indebtedness and other liabilities of the Company’s
subsidiaries that do not guarantee the 2025 Notes, and are effectively junior to all existing and future indebtedness that is
secured by assets other than the collateral securing the 2025 Notes.

Pursuant to the terms of a collateral trust agreement, the liens securing the 2025 Notes and the guarantees will be contractually
subordinated to the liens securing any future credit facility.

The 2025 Notes and the guarantees are the Company and the guarantors’ senior secured obligations and will rank:

(cid:404) senior in right of payment to all of the Company and the guarantors’ future subordinated indebtedness;

(cid:404) effectively senior to all unsecured senior indebtedness to the extent of the value of the collateral securing the 2025

Notes and the guarantees;

(cid:404) pari passu with all of the Company and the guarantors’ other senior indebtedness;

(cid:404) effectively junior to any future credit facility to the extent of the value of the collateral securing any future credit

facility and the 2025 Notes and the guarantees and certain other assets;

(cid:404) effectively junior to any of the Company and the guarantors’ existing and future indebtedness that is secured by
assets other than the collateral securing the 2025 Notes and the guarantees to the extent of the value of any such
assets; and

(cid:404) structurally subordinated to the indebtedness of any of the Company’s current and future subsidiaries that do not

guarantee the 2025 Notes.

The Company may redeem the 2025 Notes in whole or in part prior to November 1, 2020, at a redemption price of 100% of
the principal amount of the 2025 Notes redeemed plus the Applicable Premium, plus accrued and unpaid interest. An
Applicable Premium is the greater of 1% of the principal amount of the 2025 Notes; or the excess of the present value at
such redemption date of (i) the redemption price of the 2025 Notes at November 1, 2020 plus (ii) all required interest
payments due on the 2025 Notes through November 1, 2020 (excluding accrued but unpaid interest to the redemption date),
computed using a discount rate equal to the Treasury Rate as of such redemption date plus 50 basis points; over the then
outstanding principal amount of the 2025 Notes.

Prior to November 1, 2020, if using the net cash proceeds of certain equity offerings, the Company has the option to redeem
up to 35% of the aggregate principal amount of the 2025 Notes at a redemption price equal to 106.625% of the principal
amount of the 2025 Notes redeemed, plus accrued and unpaid interest and any additional interest.

F-29

NOTE K – LONG-TERM DEBT (continued)

On or after November 1, 2020, the Company may redeem some or all of the 2025 Notes at a decreasing premium over time,
plus accrued and unpaid interest as follows:

YEAR
On or after November 1, 2020 and prior to November 1, 2021 ...............................................................
On or after November 1, 2021 and prior to November 1, 2022 ...............................................................
On or after November 1, 2022 ..................................................................................................................

PERCENTAGE

103.313 %
101.656 %
100.000 %

In certain circumstances involving a change of control, the Company will be required to make an offer to repurchase all or,
at the holder’s option, any part, of each holder’s 2025 Notes pursuant to the offer described below (the “Change of Control
Offer”). In the Change of Control Offer, the Company will be required to offer payment in cash equal to 101% of the
aggregate principal amount of 2025 Notes repurchased plus accrued and unpaid interest, to the date of purchase.

If the Company sells certain collateralized assets and does not use the net proceeds as required, the Company will be required
to use such net proceeds to repurchase the 2025 Notes at 100% of the principal amount thereof, plus accrued and unpaid
interest and additional interest penalty, if any, to the date of repurchase.

The 2025 Notes may be traded between qualified institutional buyers pursuant to Rule 144A of the Securities Act. We have
recorded the 2025 Notes at cost.

NOTE L – STOCKHOLDERS’ EQUITY, STOCK PLANS AND OTHER EMPLOYEE BENEFIT PLANS

1. Dividends

On May 31, 2018, Nathans’ Board of Directors authorized the commencement of a regular dividend of $1.00 per
share per annum, payable at the rate of $0.25 per quarter. Through March 31, 2019, the Company declared and paid
four regular quarterly dividends of $0.25 per common share aggregating $4,187. The Company also paid the
remaining dividends payable of $150 from the previously declared special dividends.

Effective June 14, 2019, the Board declared its first quarterly cash dividend of $0.35 per share for fiscal year 2020
which is payable on June 28, 2019 to stockholders of record as of the close of business on June 24, 2019.

On November 1, 2017, the Company’s Board of Directors declared a special cash dividend of $5.00 per share
payable to stockholders of record as of December 22, 2017 of which approximately $20,923 was paid on January
4, 2018 to the stockholders. The Company also accrued $25 for the expected dividends payable on unvested
restricted shares pursuant to the terms of the restricted stock agreement. As unvested restricted stock vests, the
declared dividend is paid. The Company paid this $25 during the year ended March 31, 2019.

On March 10, 2015, the Company’s Board of Directors declared a special cash dividend of $25.00 per share payable
to stockholders of record as of March 20, 2015 of which approximately $115,100 was paid on March 27, 2015 to
the stockholders. The Company accrued $1,000 for the expected dividends payable on unvested restricted shares
pursuant to the terms of the restricted stock agreements. As unvested restricted stock vests, the declared dividend is
paid. As of March 31, 2019 we had paid the entire accrued dividend on the restricted stock.

Our ability to pay future dividends is limited by the terms of the Indenture with US Bank National Association, as
trustee and collateral trustee. In addition to the terms of the Indenture, the declaration and payment of any cash
dividends in the future are subject to final determination of the Board and will be dependent upon our earnings and
financial requirements.

F-30

NOTE L – STOCKHOLDERS’ EQUITY, STOCK PLANS AND OTHER EMPLOYEE BENEFIT PLANS

(continued)

2. Stock Incentive Plans

On September 14, 2010, the Company’s shareholders approved the Nathan’s Famous, Inc. 2010 Stock Incentive
Plan (the “2010 Plan”), which provides for the issuance of nonqualified stock options, restricted stock, restricted
stock units, stock appreciation rights and other stock-based awards to directors, officers and key employees. The
Company was initially authorized to issue up to 150,000 shares of common stock under the 2010 Plan, together
with any shares which had not been previously issued under the Company’s previous stock option plans as of July
19, 2010 (171,000 shares), plus any shares subject to any outstanding options or restricted stock grants under the
Company’s previous stock option plans that were outstanding as of July 19, 2010 and that subsequently expire
unexercised, or are otherwise forfeited, up to a maximum of an additional 100,000 shares.

On September 13, 2012, the Company amended the 2010 Plan increasing the number of shares available for issuance
by 250,000 shares. Shares to be issued under the 2010 Plan may be made available from authorized but unissued
stock, common stock held by the Company in its treasury, or common stock purchased by the Company on the open
market or otherwise. The number of shares issuable and the grant, purchase or exercise price of outstanding awards
are subject to adjustment in the amount that the Company’s Compensation Committee considers appropriate upon
the occurrence of certain events, including stock dividends, stock splits, mergers, consolidations, reorganizations,
recapitalizations, or other capital adjustments. In the event that the Company issues restricted stock awards pursuant
to the 2010 Plan, each share of restricted stock would reduce the amount of available shares for issuance by either
3.2 shares for each share of restricted stock granted or 1 share for each share of restricted stock granted. As of March
31, 2019, there were up to 208,584 shares available to be issued for future option grants or up to 187,933 shares of
restricted stock that may be granted under the 2010 Plan.

In general, options granted under the Company’s stock incentive plans have terms of five or ten years and vest over
periods of between three and five years. The Company has historically issued new shares of common stock for
options that have been exercised and used the Black-Scholes option valuation model to determine the fair value of
options granted at the grant date.

During the fiscal year ended March 31, 2019, the Company granted options to purchase 10,000 shares at an exercise
price of $89.90 per share, all of which expire five years from the date of grant. All such stock options vest ratably
over a three-year period commencing September 12, 2019.

The weighted-average option fair values, as determined using the Black-Scholes option valuation model, and the
assumptions used to estimate these values for stock options granted during the year ended March 31, 2019 were as
follows:

Weighted-average option fair values ............................................................................................. $

25.6314

Expected life (years) .....................................................................................................................

4.5

Interest rate ....................................................................................................................................

2.87 %

Volatility .......................................................................................................................................

32.57 %

Dividend Yield ..............................................................................................................................

1.11 %

The expected dividend yield is based on historical and projected yields for regular dividends. The Company
estimates expected volatility based primarily on historical monthly price changes of the Company’s stock equal to
the expected life of the option. The risk free interest rate is based on the U.S. Treasury yield in effect at the time of
the grant. The expected option term is the number of years the Company estimates the options will be outstanding
prior to exercise based on expected employment termination behavior.

F-31

NOTE L – STOCKHOLDERS’ EQUITY, STOCK PLANS AND OTHER EMPLOYEE BENEFIT PLANS

(continued)

During the fiscal year ended March 31, 2019, the Company granted 1,000 shares of restricted stock at a fair value
of $89.90 per share representing the closing price on the date of grant, which will be fully vested three years from
the date of grant. The restrictions on the shares lapse ratably over a three-year period on the annual anniversary of
the date of grant. The compensation expense related to this restricted stock award is expected to be $90 and will be
recognized, commencing on the grant date, over the next three years.

The Company recognizes compensation cost for unvested stock-based incentive awards on a straight-line basis over
the requisite service period. Compensation cost charged to expense under all stock-based incentive awards is as
follows:

March 31,
2019

March 25,
2018

March 26,
2017

Stock options ........................................................................ $
Restricted stock ....................................................................
$

102 $
60
162 $

150 $
248
398 $

150
432
582

The tax benefit on stock-based compensation expense was $44, $144 and $213 for the years ended March 31, 2019,
March 25, 2018 and March 26, 2017, respectively. As of March 31, 2019, there was $285 of unamortized
compensation expense related to stock-based incentive awards. The Company expects to recognize this expense
over approximately twenty-nine months, which represents the remaining requisite service periods for such award.

In connection with the Company’s special cash dividend, paid on January 4, 2018, to stockholders of record as of
December 22, 2017, the Company performed an analysis, pursuant to the anti-dilution provisions of the 2010 Plan
(the “2010 Plan”), and issued replacement options to purchase 68,498 shares at an exercise price of $33.438 for the
unvested stock options outstanding as of the record date of December 22, 2017, cancelling 64,384 shares at an
exercise price of $35.58 per share. Nathan’s performed its evaluation based on the closing price of its common stock
on December 20, 2017, the day before the stock went ex-dividend, of $83.20 per share, or $78.20 per share excluding
the dividend of $5.00 per share. No other terms or conditions of the outstanding options were modified. The anti-
dilution provisions of the original award were structured to equalize the award’s fair value before and after the
modification.

In connection with the Company’s special cash dividend, paid on March 27, 2015, to stockholders of record as of
March 20, 2015, the Company performed an analysis, pursuant to the anti-dilution provisions of the 2010 Plan, and
issued replacement options to purchase 75,745 shares at an exercise price of $35.58 for the unvested stock options
outstanding as of March 29, 2015, canceling 50,000 shares at an exercise price of $53.89. Nathan’s performed its
evaluation based on the closing price of its common stock on March 27, 2015 of $73.56 per share, or $48.56 per
share excluding the dividend of $25.00 per share. No other terms or conditions of the outstanding options were
modified. The anti-dilution provisions of the original award were structured to equalize the award’s fair value before
and after the modification.

F-32

NOTE L – STOCKHOLDERS’ EQUITY, STOCK PLANS AND OTHER EMPLOYEE BENEFIT PLANS

(continued)

A summary of the status of the Company’s stock options at March 31, 2019, March 25, 2018 and March 26, 2017
and changes during the fiscal years then ended is presented in the tables below:

2019
Weighted-
Average
Exercise
Price

2018
Weighted-
Average
Exercise

2017
Weighted-
Average
Exercise

Price

Options outstanding –

beginning of year ...................

68,498 $

33.438 75,745 $

35.58 124,030 $

26.29

Granted ..................................

10,000

89.90

Replacement options issued

(A) ......................................

Expired ..................................

Cancellation of outstanding

- 68,498 $

33.44

options (A) .........................

- (64,384 ) $

35.58

Exercised ...............................

(36,264 )

33.438 (11,361 )

35.58

(48,285 )

11.72

Options outstanding - end of

year ........................................

42,234 $

46.807 68,498 $

33.438

75,745 $

35.58

Options exercisable - end of

year ........................................

32,234 $

33.438 48,348 $

33.438

37,873 $

35.58

Exercise prices of outstanding options at March 31, 2019 ranged from $33.438 to $89.90.

(A) – Represents the effects on outstanding options after giving to the replacement options issued in connection

with the Company’s special dividend to the shareholders of record on December 22, 2017.

During the fiscal years ended March 31, 2019, March 25, 2018 and March 26, 2017, options to purchase 36,264,
11,361 and 48,285 shares were exercised which aggregated proceeds of $134, $-0- (due to net settlement) and $44,
respectively, to the Company. The aggregate intrinsic values of the stock options exercised during the fiscal years
ended March 31, 2019, March 25, 2018 and March 26, 2017 was $1,488, $379 and $1,555, respectively.

The following table summarizes information about outstanding stock options at March 31, 2019:

Weighted-
Average

Weighted-
Average
Exercise

Remaining Aggregate
Contractual
Life

Intrinsic
Value

Price

Options outstanding at March 31, 2019 ....................

42,234 $

46.807

1.32 $

1,127

Options exercisable at March 31, 2019 .....................

32,234 $

33.438

0.35 $

1,127

Exercise prices range from $33.438 to $89.90 ..........

F-33

NOTE L – STOCKHOLDERS’ EQUITY, STOCK PLANS AND OTHER EMPLOYEE BENEFIT PLANS

(continued)

Restricted stock:

Transactions with respect to restricted stock for the fiscal year ended March 31, 2019 are as follows:

Weighted-
Average
Grant-date
Fair value
Per share

Unvested restricted stock at March 25, 2018 .............................................

5,000 $

Granted ...................................................................................................

1,000 $

49.80

89.90

Vested .....................................................................................................

(5,000 ) $

(49.80 )

Unvested restricted stock at March 31, 2019 .............................................

1,000 $

89.90

The aggregate fair value of restricted stock vested during the fiscal years ended March 31, 2019, March 25, 2018
and March 26, 2017 was $434, $321 and $736, respectively.

3. Common Stock Purchase Rights

On June 5, 2013, Nathan’s adopted a new stockholder rights plan (the “2013 Rights Plan”) under which all
stockholders of record as of June 17, 2013 received rights to purchase shares of common stock.

The 2013 Rights were distributed as a dividend. Initially, the 2013 Rights will attach to, and trade with, the
Company’s common stock. Subject to the terms, conditions and limitations of the 2013 Rights Plan, the 2013 Rights
would become exercisable if (among other things) a person or group acquires 15% or more of the Company’s
common stock. Upon such an event and payment of the purchase price of $100.00 (the “2013 Right Purchase Price”),
each 2013 Right (except those held by the acquiring person or group) would have entitled the holder to acquire one
share of the Company’s common stock (or the economic equivalent thereof) or, if the then-current market price is
less than the then current 2013 Right Purchase Price, a number of shares of the Company’s common stock which at
the time of the transaction had a market value equal to the then current 2013 Right Purchase Price at a purchase
price per share equal to the then current market price of the Company’s Common Stock.

On June 14, 2018, the Company and American Stock Transfer and Trust Company, LLC, the Rights Agent, amended
the 2013 Rights Plan. The Amendment postponed the expiration date to September 30, 2018, at which time the 2013
Rights Plan expired.

4. Stock Repurchase Programs

During the period from October 2001 through March 31, 2019, Nathan’s purchased 5,141,763 shares of common
stock at a cost of approximately $78,303 pursuant to various stock repurchase plans previously authorized by the
Board of Directors.

During the year-ended March 31, 2019, Nathan’s repurchased 14,390 shares of its common stock at a cost of
approximately $1,000 pursuant to its sixth stock repurchase program.

In 2016, the Company’s Board of Directors authorized increases to the sixth stock repurchase plan for the purchase
of up to 1,200,000 shares of its common stock on behalf of the Company. As of March 31, 2019, Nathan’s had
repurchased 954,132 shares at a cost of $30,641 under the sixth stock repurchase plan. At March 31, 2019, there
were 245,868 shares remaining to be repurchased pursuant to the sixth stock repurchase plan. The plan does not
have a set expiration date. Purchases under the Company’s stock repurchase program may be made from time to
time, depending on market conditions, in open market or privately-negotiated transactions, at prices deemed
appropriate by management. There is no set time limit on the repurchases.

F-34

NOTE L – STOCKHOLDERS’ EQUITY, STOCK PLANS AND OTHER EMPLOYEE BENEFIT PLANS

(continued)

5. Employment Agreements

Effective January 1, 2007, Howard M. Lorber, previously Chairman of the Board and Chief Executive Officer,
assumed the newly-created position of Executive Chairman of the Board of Nathan’s and Eric Gatoff, previously
Vice President and Corporate Counsel, became Chief Executive Officer of Nathan’s.

In connection with the foregoing, the Company entered into an employment agreement with each of Messrs. Lorber
(as amended, the “Lorber Employment Agreement”) and Gatoff (as amended, the “Gatoff Employment
Agreement”). Under the terms of the Lorber Employment Agreement, Mr. Lorber would serve as Executive
Chairman of the Board from January 1, 2007 until December 31, 2012, unless his employment is terminated in
accordance with the terms of the Lorber Employment Agreement. On November 1, 2012, the Company amended
its employment agreement with Mr. Lorber, extending the term of the employment agreement to December 31, 2017
and increasing the base compensation of Mr. Lorber to $600 per annum. In addition, Mr. Lorber received a grant of
50,000 shares of restricted stock subject to vesting as provided in a Restricted Stock Agreement between Mr. Lorber
and the Company. Mr. Lorber will not receive a contractually-required bonus. On December 6, 2017, the Company
amended its employment agreement with Mr. Lorber, extending the term of the employment agreement from
December 31, 2017 to December 31, 2022 and increasing the base compensation of Mr. Lorber to $1,000 per annum.
The Lorber Employment Agreement provides for a three-year consulting period after the termination of employment
during which Mr. Lorber will receive a consulting fee of $200 per year in exchange for his agreement to provide no
less than 15 days of consulting services per year, provided, Mr. Lorber is not required to provide more than 50 days
of consulting services per year.

The Lorber Employment Agreement provides Mr. Lorber with the right to participate in employment benefits
offered to other Nathan’s executives. During and after the contract term, Mr. Lorber is subject to certain
confidentiality, non-solicitation and non-competition provisions in favor of the Company.

In the event that Mr. Lorber’s employment is terminated without cause, he is entitled to receive his salary and bonus
for the remainder of the contract term. The Lorber Employment Agreement further provides that in the event there
is a change in control, as defined in the agreement, Mr. Lorber has the option, exercisable within one year after such
event, to terminate the agreement. Upon such termination, he has the right to receive a lump sum cash payment
equal to the greater of (A) his salary and annual bonuses for the remainder of the employment term (including a
prorated bonus for any partial fiscal year), which bonus shall be equal to the average of the annual bonuses awarded
to him during the three fiscal years preceding the fiscal year of termination; or (B) 2.99 times his salary and annual
bonus for the fiscal year immediately preceding the fiscal year of termination, in each case together with a lump
sum cash payment equal to the difference between the exercise price of any exercisable options having an exercise
price of less than the then current market price of the Company’s common stock and such then current market price.
In addition, Nathan’s will provide Mr. Lorber with a tax gross-up payment to cover any excise tax due.

In the event of termination due to Mr. Lorber’s death or disability, he is entitled to receive an amount equal to his
salary and annual bonuses for a three-year period, which bonus shall be equal to the average of the annual bonuses
awarded to him during the three fiscal years preceding the fiscal year of termination.

Under the terms of the Gatoff Employment Agreement, Mr. Gatoff initially served as Chief Executive Officer from
January 1, 2007 until December 31, 2008, which period automatically extends for additional one-year periods unless
either party delivers notice of non-renewal no less than 180 days prior to the end of the term then in effect.
Consequently, the Gatoff Employment Agreement is expected to be extended through December 31, 2020, based
on the original terms, and no non-renewal notice has been given.

F-35

NOTE L – STOCKHOLDERS’ EQUITY, STOCK PLANS AND OTHER EMPLOYEE BENEFIT PLANS

(continued)

Pursuant to the agreement, Mr. Gatoff will receive a base salary, currently $500 effective June 1, 2016, and an
annual bonus based on his performance measured against the Company’s financial, strategic and operating
objectives as determined by the Compensation Committee pursuant to the terms of the 2018 Management Incentive
Plan approved by shareholders on September 12, 2018. The Gatoff Employment Agreement provides for an
automobile allowance and the right of Mr. Gatoff to participate in employment benefits offered to other Nathan’s
executives. The employment agreement automatically extends for successive one-year periods unless notice of non-
renewal is provided in accordance with the agreement. During and after the contract term, Mr. Gatoff is subject to
certain confidentiality, non-solicitation and non-competition provisions in favor of the Company. On June 4, 2013,
Mr. Gatoff received a grant of 25,000 shares of restricted stock at a fair value of $49.80 per share representing the
closing price on the date of grant, subject to vesting as provided in a Restricted Stock Agreement between Mr.
Gatoff and the Company. The compensation expense related to this restricted stock award was $1,245 and was
recognized, commencing on the grant date, over the next five years.

On June 10, 2015, the Company and Wayne Norbitz entered into a Transition Agreement (the “Transition
Agreement”) relating to the retirement of Mr. Norbitz as President and Chief Operating Officer of the Company.
Under the Transition Agreement, Mr. Norbitz continued to serve as President and Chief Operating Officer of the
Company through August 7, 2015 at which time he became a Consultant to the Company pursuant to the terms of
a one year Consulting Agreement between him and the Company (the “Consulting Agreement”). The Consulting
Agreement provides that Mr. Norbitz would receive a consulting fee of $16.3 per month. The Transition Agreement
further provided that Mr. Norbitz would receive a severance payment of $289 and under the terms of the Transition
Agreement, the Company purchased from Mr. Norbitz 56,933 shares of the Company’s common stock, $.01 par
value (the “Common Stock”) at a purchase price of $40.28 which was the closing price of the Common Stock as
reported on the Nasdaq Global Market on June 10, 2015.

Effective August 4, 2016, the Company and Wayne Norbitz executed an Amendment to the Consulting Agreement
(the “Amendment”), whereas the Term of the Agreement was originally extended to expire August 10, 2017, which
had been further extended to expire on December 31, 2017. Pursuant to the terms of the Amendment, Mr. Norbitz
provided consulting services one (1) day a week, as directed by the Board of Directors of the Company and/or Eric
Gatoff, Chief Executive Officer of the Company. The Amendment provided that Mr. Norbitz will receive a
consulting fee of $8.1 per month for services rendered.

Effective December 31, 2017, the Consulting Agreement between the Company and Wayne Norbitz expired and no
extension was initiated.

The Company and one employee of Nathan’s entered into a change of control agreement effective May 31, 2007
for annual compensation of $136 per year. The agreement additionally includes a provision under which the
employee has the right to terminate the agreement and receive payment equal to approximately three times his
annual compensation upon a change in control, as defined.

Each employment agreement terminates upon death or voluntary termination by the respective employee or may be
terminated by the Company on up to 30-days’ prior written notice by the Company in the event of disability or
“cause,” as defined in each agreement.

6. Defined Contribution and Union Pension Plans

The Company has a defined contribution retirement plan under Section 401(k) of the Internal Revenue Code
covering all nonunion employees over age 21, who have been employed by the Company for at least one year.
Employees may contribute to the plan, on a tax-deferred basis, up to 20% of their total annual salary. Historically,
the Company has matched contributions at a rate of $.25 per dollar contributed by the employee on up to a maximum
of 3% of the employee’s total annual salary. Employer contributions for the fiscal years ended March 31, 2019,
March 25, 2018 and March 26, 2017 were $42, $40 and $41, respectively.

F-36

NOTE L – STOCKHOLDERS’ EQUITY, STOCK PLANS AND OTHER EMPLOYEE BENEFIT PLANS

(continued)

The Company participates in a noncontributory, multi-employer, defined benefit pension plan (the “Union Plan”)
covering substantially all of the Company’s union-represented employees. The risks of participating in the Union
Plan are different from a single-employer plan in the following aspects: (a) assets contributed to the Union Plan by
one employer may be used to provide benefits to employees of other participating employers; (b) if a participating
employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining
participating employers; and (c) if the Company chooses to stop participating in the Union Plan, the Company may
be required to pay the Union Plan an amount based on the underfunded status of the Union Plan, referred to as a
withdrawal liability. The most recent estimate of our potential withdrawal liability is $378 as of December 31, 2018.
The Company has no plans or intentions to stop participating in the plan as of March 31, 2019 and does not believe
that there is a reasonable possibility that a withdrawal liability will be incurred. Any adjustment for withdrawal
liability will be recorded only when it is probable that a liability exists and can be reasonably estimated, in
accordance with U.S. GAAP. Contributions to the Union Plan were $7, $12 and $10 for the fiscal years ended March
31, 2019, March 25, 2018 and March 26, 2017, respectively.

7. Other Benefits

The Company provides, on a contributory basis, medical benefits to active employees. The Company does not
provide medical benefits to retirees.

NOTE M - COMMITMENTS AND CONTINGENCIES

1. Commitments

The Company’s operations are principally conducted in leased premises. The leases generally have initial terms
ranging from 5 to 20 years and usually provide for renewal options ranging from 5 to 20 years. Most of the leases
contain escalation clauses and common area maintenance charges (including taxes and insurance).

Revenue from sub-leasing properties is recognized in income as the revenue is earned and deemed collectible. Sub-
lease rental income is presented net of associated lease costs in the accompanying consolidated Statements of
Earnings.

As of March 31, 2019, the Company had non-cancelable operating lease commitments, net of certain sublease rental
income, as follows:

Lease
commitments

Sublease
income

Net lease
commitments

2020 ............................................................ $
2021 ............................................................
2022 ............................................................
2023 ............................................................
2024 ............................................................
Thereafter ....................................................

1,404 $
1,319
1,572
1,596
1,545
6,120

267 $
245
247
175
169
521

1,137
1,074
1,325
1,421
1,376
5,599

13,556 $

1,624 $

11,932

Aggregate rental expense, net of sublease income, under all current leases amounted to $1,579, $1,591 and $1,566
of which, $1,287, $1,304 and $1,278 were a component of restaurant operating expenses, for the fiscal years ended
March 31, 2019, March 25, 2018 and March 26, 2017, respectively. The remaining rents of $298, $287 and $288
were included in general and administrative expenses for the fiscal years ended March 31, 2019, March 25, 2018
and March 26, 2017, respectively. Sublease rental income was $267, $274 and $272 for the fiscal years ended March
31, 2019, March 25, 2018 and March 26, 2017, respectively.

F-37

NOTE M - COMMITMENTS AND CONTINGENCIES (continued)

Contingent rental payments on building leases are typically made based on the percentage of gross sales of the
individual restaurants that exceed predetermined levels. The percentage of gross sales to be paid and related gross
sales level vary by unit. Contingent rental expense, which is inclusive of common area maintenance charges, was
approximately $480, $478 and $457 for the fiscal years ended March 31, 2019, March 25, 2018 and March 26,
2017, respectively.

At March 31, 2019, the Company leases one site which it in turn subleases to a franchisee, which expires in April
2027 exclusive of renewal options. The Company remains liable for all lease costs when property is subleased to a
franchisee.

2. Legal Proceedings

The Company and its subsidiaries are from time to time involved in ordinary and routine litigation. Management
presently believes that the ultimate outcome of these proceedings, individually or in the aggregate, will not have a
material adverse effect on the Company’s financial position, cash flows or results of operations. Nevertheless,
litigation is subject to inherent uncertainties and unfavorable rulings could occur. An unfavorable ruling could
include money damages and, in such event, could result in a material adverse impact on the Company’s results of
operations for the period in which the ruling occurs.

3. Guaranty

On February 27, 2017, a wholly-owned subsidiary of the Company executed a Guaranty of Lease (the “Brooklyn
Guaranty”) in connection with its re-franchising of a restaurant located in Brooklyn, New York. The Company is
obligated to make payments under the Brooklyn Guaranty in the event of a default by the tenant/franchisee. The
Brooklyn Guaranty has an initial term of 10 years and one 5-year option and is limited to 24 months of rent for the
first three years of the term. Nathan’s has recorded a liability of $217 in connection with the Brooklyn Guaranty
which does not include potential percentage rent, real estate tax increases, attorney’s fees and other costs as these
amounts are not reasonably determinable at this time. Nathan’s has received a personal guaranty from the franchisee
for all obligations under the Brooklyn Guaranty. For the remainder of the term, the Brooklyn Guaranty is limited to
12 months of rent plus reasonable costs of collection and attorney’s fees.

NOTE N - RELATED PARTY TRANSACTIONS

A subsidiary of a firm to which the Company’s Executive Chairman of the Board is the President and Chief
Executive Officer, received ordinary and customary real estate brokerage commissions aggregating approximately
$72 in connection with the sale of the Florida regional office during the fiscal year ended March 31, 2019.

A firm to which the Company’s Executive Chairman of the Board is as an investor (and, prior to January 2012, a
consultant), and the firm’s affiliates, received ordinary and customary insurance commissions aggregating
approximately $37, $36 and $26 for the fiscal years ended March 31, 2019, March 25, 2018 and March 26, 2017,
respectively.

F-38

NOTE O - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

First

Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter (a)

Fiscal Year 2019

Total revenues .............................................................. $
Gross profit (b) .............................................................
Income from operations ...............................................
Net income ...................................................................

30,168 $
5,025
9,087
4,795

29,330 $
6,413
8,480
4,484

20,222 $
3,744
4,896
9,722

22,129
3,600
5,513
2,492

Per share information
Net income per share

Basic (c) .................................................................... $
Diluted (c) ................................................................ $

1.15 $
1.13 $

1.07 $
1.06 $

2.32 $
2.30 $

.60
.59

Shares used in computation of net income per share

Basic (c) .................................................................... 4,185,000 4,188,000 4,187,000 4,187,000
Diluted (c) ................................................................ 4,226,000 4,231,000 4,221,000 4,202,000

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

Fiscal Year 2018

Total revenues .............................................................. $
Gross profit (b) .............................................................
Income from operations ...............................................
Net income (loss) .........................................................

30,803 $
4,820
8,450
2,922

31,471 $
6,486
8,734
3,120

22,021 $
4,168
5,370
(3,779 )

19,906
2,482
4,546
367

Per share information
Net income (loss) per share

Basic (c) .................................................................... $
Diluted (c) ................................................................ $

.70 $
.69 $

.75 $
.74 $

(.90 ) $
(.90 ) $

.09
.09

Shares used in computation of net income (loss) per

share
Basic (c) .................................................................... 4,177,000 4,179,000 4,185,000 4,185,000
Diluted (c) ................................................................ 4,215,000 4,212,000 4,185,000 4,228,000

(a) The fourth quarter fiscal 2019 was comprised of 14 weeks, as compared to all other quarters which were

comprised of 13 weeks.

(b) Gross profit represents the difference between sales and cost of sales.
(c) The sum of the quarters may not equal the full year per share amounts included in the accompanying
consolidated statements of earnings due to the effect of the weighted average number of shares outstanding
during the fiscal years as compared to the quarters.

F-39

Nathan’s Famous, Inc. and Subsidiaries

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

March 31, 2019, March 25, 2018 and March 26, 2017

(in thousands)

COL. A

COL. B

COL. C

COL. D

COL. E

Balance at
beginning
of period

Additions
charged to
costs and
expenses

Additions
charged to
other
accounts

Deductions

Balance
at
end of
period

Description

Fifty-three weeks ended March 31, 2019

Allowance for doubtful accounts -

accounts receivable ................................. $

468 $

100 $

77 (b) $

(60 )(a) $

585

Fifty-two weeks ended March 25, 2018

Allowance for doubtful accounts - accounts

receivable .................................................. $

457 $

34 $

(23 )(a) $

468

Fifty-two weeks ended March 26, 2017

Allowance for doubtful accounts - accounts

receivable .................................................. $

471 $

53 $

(67 )(a) $

457

(a) Uncollectible amounts written off.

(b) Reclassification to conform with Topic 606.

F-40

C O R P O R A T E D I R E C T O R Y

Nathan’s Famous, Inc. & Subsidiaries

LIST OF DIRECTORS

Howard M. Lorber
Executive Chairman of the Board,
Nathan’s Famous, Inc.

Eric Gatoff
Chief Executive Officer,
Nathan’s Famous, Inc.

Wayne Norbitz
Former President, and
Chief Operating Officer,
Nathan’s Famous, Inc.

Robert J. Eide
Chairman & Chief Executive Officer,
AEGIS Capital Corp.

Barry Leistner
President & Chief Executive Officer,
Koenig Iron Works, Inc.

Brian S. Genson
President, F1Collectors.com

A.F. Petrocelli
Chairman of the Board, President
and Chief Executive Officer,
United Capital Corp.

Charles Raich
Retired Founding Partner,
Raich, Ende, Malter & Co. LLP

LIST OF OFFICERS
Howard M. Lorber
Executive Chairman of the Board

Eric Gatoff
Chief Executive Officer

Ronald G. DeVos
Vice President—Finance,
Chief Financial Officer
and Secretary

FORM 10-K
The Company’s annual report on
Form 10-K as filed with the Securities
and Exchange Commission, is avail-
able without charge upon written
request:
Secretary, Nathan’s Famous, Inc.

One Jericho Plaza
Second Floor—Wing A
Jericho, New York 11753

James Walker, CFE
Senior Vice President—Restaurants

Leigh Platte
Senior Vice President—Food Service

QUARTERLY SHAREHOLDER LETTER
Will be available on our website.
Copies will be provided upon
request.

Donald P. Schedler
Vice President—Development,
Architecture & Construction

INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Marcum LLP
10 Melville Park Road
Melville, New York 11747

CORPORATE COUNSEL
Ackerman LLP
666 Fifth Avenue
New York, New York 10103

TRANSFER AGENT
American Stock Transfer &
Trust Company
59 Maiden Lane
New York, New York 10038

CORPORATE HEADQUARTERS
One Jericho Plaza
Second Floor—Wing A
Jericho, New York 11753
516-338-8500 Telephone
516-338-7220 Facsimile

COMPANY WEBSITE
www.nathansfamous.com

ANNUAL SHAREHOLDERS’ MEETING
The Annual Meeting of Shareholders
of the Company will be held at 10:00
a.m., EST on Wednesday, September
18, 2019, in the Offices of Nathan’s
Famous, Inc., One Jericho Plaza,
Second Floor—Wing A., Jericho,
New York 11753.

Annual Report Design by Curran & Connors, Inc. / www.curran-connors.com

One Jericho Plaza, Second Floor – Wing A, Jericho, New York 11753
www.nathansfamous.com