Nathan's Famous, Inc. Annual Report 2021

FY2021 Annual Report · Nathan's Famous, Inc.

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A N N U A L R E P O R T

C O R P O R A T E P R O F I L E

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.

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 79,000 locations, including supermarkets, mass merchandisers and club stores throughout the United States.

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.

2 0 2 1 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)

2021

2020

2019

2018

2017

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)

$75,839
$25,515
$11,075

$103,325
$ 27,172
$ 13,435

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

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

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

$ 2.69
$ 2.69

$
$

3.19
3.19

$
$

5.13
5.09

$
$

0.63
0.62

$ 1.79
$ 1.78

4,116
4,116

4,216
4,216

4,187
4,220

4,181
4,221

4,172
4,206

$27,109
$27,225

$ 29,848
$ 29,964

$ 41,414
$ 30,399

$ 19,055
$ 29,115

$27,766
$28,348

(1) Our fiscal year ends on the last Sunday in March, which results in a 52- or 53-week year. The fiscal years ended March 28, 2021 and March 29, 2020 were each on the basis of a

52-week reporting period. The fiscal year ended March 31, 2019 was on the basis of a 53-week reporting period. The fiscal years ended March 25, 2018 and March 26, 2017 were
each on the basis of a 52-week reporting period.

(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) EBITDA and Adjusted EBITDA are non-GAAP financial measures. The Company has provided EBITDA and Adjusted EBITDA that the Company believes will impact the comparabil-
ity 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 defini-
tions 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 con-
junction with, data presented in accordance with US GAAP. Please see a reconciliation of EBITDA and Adjusted EBITDA to net income in the Annual Report on Form 10-K for the
fiscal year ended March 28, 2021, included herein.

(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 in fiscal 2019; (ii) loss on debt extinguishment in fiscal 2018; (iii) impair-

ment charge on long-lived assets in fiscal 2018; and (iv) share-based compensation.

Total Revenues
($ in millions)

Income From Operations(2)
($ in millions)

Adjusted EBITDA(5)
($ in millions)

120

100

120

$104.2

100

$96.3

$101.8

$103.3

$104.2

$101.8

$103.3

$75.8

120

$96.3

100

$96.3

$75.8

’17

’18

’19

’20

’21

’17

’18

’17

’19

’18

’20

’19

’21

’20

’21

’17

’18

’19

’20

’21

’17

’18

0
’18

’17
’19

’19

’18
’20

’20

’19
’21

’20

’21

’17

0
’18

’17

’18

’19

’20

’20
’21

’20

’21

’17

’18

’17
’19

’19

’18
’20

’20

’19
’21
’21

’20

’21

’17

’18

’19

’20

’21

’17

’18

’19

’20

’21

$26.3

$27.1

30
$104.2

$28.0

$27.2

$101.8

$103.3

$25.5

35
$27.1

$28.0

$27.2

$26.3

$25.5

$26.3

$28.3

$28.0

$30.4

$27.1

$29.1

$27.2

$30.0

$25.5

$27.2

$28.3

$29.1

$30.4

$30.0

$27.2

$28.3

$29.1

$30.4

$30.0

$27.2

S H A R E H O L D E R ’ S L E T T E R

Fiscal 2021 was another successful year for Nathan’s Famous, despite
the enormous challenges presented by the global COVID-19 pandemic.

Our business model is aimed at increasing the number
of distribution points for our signature products in three
distinct business channels. As of March 28, 2021: (1) our
consumer-packaged goods were sold through more
than 65,000 locations in supermarket/grocery channels
in the United States; (2) our bulk foodservice-packaged
goods were sold through 14,000 locations in foodservice
channels in North America; and (3) the Company had 4
company-owned restaurants in the United States and 213
franchised restaurants and 130 “ghost” kitchens through-
out the world. The diversity of these business lines
drove the Company’s performance in fiscal 2021, as our
increases in grocery channels offset a significant amount
of the unavoidable and expected declines caused by the
pandemic in our foodservice and restaurant businesses.

OPERATIONAL AND FINANCIAL RESULTS
On an overall basis, results for fiscal 2021 compared to
fiscal 2020 were as follows: (1) controllable operating
income was $25.88 Million, a decrease of only 1.3%;
(2) EBITDA1, a non-GAAP financial measure, was $27.1
Million, a decrease of 9.2%; (3) pre-tax income was $15.3
Million, a decrease of 14.9%; (4) net income was $11.08
Million, a decrease of 17.5%; and (5) diluted earnings per
share were $2.69, a decrease of 15.7%.

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
merchandisers, is the largest part of our business today,
both from the perspective of profit contribution and
points of distribution. Overall, license royalties during
fiscal 2021 increased 21.3% to $31.37 Million.

Our most significant licensing agreement is with
Smithfield Foods, 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 2021, royalties earned under this
agreement increased by 24.5% to $27.8 Million.

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, mustards,
pickles, franks ’n blankets, mini bagel dogs and mozza-
rella sticks.

Clearly, this part of our business benefited during the
pandemic as people were forced and/or chose to eat
more at home.

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. 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.

Fiscal 2021 was a challenging year for the Branded
Products Program, as a significant component of this
part of our business is focused on venues where people

1 Please see definition of EBITDA and the reconciliation of EBITDA to net income in the Annual Report on Form 10-K for the fiscal year ended March 28, 2021, included herein.

NATHAN’S FAMOUS, INC.

congregate, such as malls, sports stadiums, amusement
parks and airports. Due to the various shut-down orders
across the country during the pandemic, the unit volume of
products sold during the year fell 40.9%, and, as a conse-
quence, operating profit fell 38.9% to $6.38 Million.

Restaurant Operations
As of the end of fiscal 2021, our Restaurant Operations con-
sisted of 4 Company-owned locations, 213 franchised units
and 130 licensed “ghost kitchen” locations. Revenues from
Restaurant Operations in fiscal 2021 declined 46.9% to
$9.31 Million.

In fiscal 2020, we undertook activities to re-position our
restaurant system, developing new, higher quality menu
items and modern prototypes and were preparing to roll
the results out just as COVID-19 hit. Given the significant
impact we knew the pandemic would have on our restau-
rant operations and development activities, we chose to
wait on the roll-out of our new prototypes and instead focus
on developing a “ghost kitchen” program to offer our exist-
ing “Nathan’s Famous” menu and our brand new “Wings
of New York” menu virtually through delivery services and
apps such as DoorDash and UberEats. We opened our first
“ghost kitchen” in October of 2020, and by the end of fiscal
2021 in March we had 130 in operation.

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 5.2 million
shares of our common stock. At an average price of just
over $16.13 per share, we reduced our outstanding share
count by more than 50%, creating, we believe, significant
value for all of our shareholders.

In fiscal 2015, our capital return strategy shifted to divi-
dends. 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. In fiscal
2020, we raised that quarterly dividend to $0.35 per share,
or $1.40 for the fiscal year.

In all, between stock buybacks and cash dividends, a total
of approximately $238 Million has been returned to share-
holders over the last 20 years — almost 12 times more than
the company’s market capitalization of less than $30 Million
at the beginning of those 20 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.

Eric Gatoff
Chief Executive Officer

NATHAN’S FAMOUS, INC.

F O R M 1 0 - K

49263_Nathans_2021AR__10k.indd 1

7/7/21 12:52 PM

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

FORM 10-K
(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 28, 2021
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:

11753
(Zip Code)

516-338-8500

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

Trading Symbol(s)
NATH

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 ☒

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 ☒

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 ☒ 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 ☒ 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

☒
☒
☐

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal

control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. ☒

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

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 25, 2020 - was approximately $147,783,000, 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 4, 2021, there were outstanding 4,114,934 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 2021 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 28, 2021.

TABLE OF CONTENTS

Page

PART I

Item 1.
Business. ....................................................................................................................................................... 4
Item 1A. Risk Factors. ................................................................................................................................................. 21
Item 1B. Unresolved Staff Comments......................................................................................................................... 35
Properties. ..................................................................................................................................................... 36
Item 2.
Legal Proceedings. ....................................................................................................................................... 36
Item 3.
Mine Safety Disclosures. .............................................................................................................................. 36
Item 4.

PART II

Item 5.

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

Securities. .................................................................................................................................................. 37
Selected Financial Data. ............................................................................................................................... 38
Item 6.
Management’s Discussion and Analysis of Financial Condition and Results of Operations. ...................... 39
Item 7.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. ..................................................................... 52
Financial Statements and Supplementary Data. ........................................................................................... 53
Item 8.
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. ..................... 53
Item 9A. Controls and Procedures. .............................................................................................................................. 53
Item 9B. Other Information. ........................................................................................................................................ 53

PART III

Item 10. Directors, Executive Officers and Corporate Governance. .......................................................................... 55
Executive Compensation. ............................................................................................................................. 55
Item 11.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. .... 55
Item 12.
Certain Relationships and Related Transactions, and Director Independence. ............................................ 55
Item 13.
Principal Accountant Fees and Services. ...................................................................................................... 56
Item 14.

PART IV

Item 15.
Item 16.

Exhibits and Financial Statement Schedules. ............................................................................................... 57
Form 10-K Summary. ................................................................................................................................... 58

Signatures

Index to Financial Statements ....................................................................................................................................... F-1

Forward-Looking Statements

PART I

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 2021
period mean the fiscal year ended March 28, 2021 and references to the fiscal 2020 period mean the fiscal year ended March
29, 2020. 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 79,000 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:

● 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 28, 2021, packaged Nathan’s World Famous Beef Hot Dogs continued to be sold in
supermarkets, mass merchandisers and club stores including Walmart, Kroger, Ahold, Publix, Albertsons,
Safeway, ShopRite, 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.

● 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.

● 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.

● 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 seven 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. During the fiscal 2021 period, we expanded our brand presence by opening Nathan’s Famous
virtual kitchens, or “ghost kitchens.” We have partnered with existing branded restaurants and utilizing their existing
equipment allow them to sell Nathan’s Famous branded products through third party delivery platforms such as UberEats,
DoorDash and GrubHub. We have also developed a virtual chicken wing concept called the Wings of New York, with a
menu made up of chicken wings, chicken tenderloins and waffles.

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 potential to increase our sales by converting existing sales of non-branded
products to Nathan’s Famous 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:

●

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

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;

expanding the number of virtual kitchens domestically and internationally helping to grow our Nathan’s Famous
brand and Wings of New York concept; and

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

As of March 28, 2021:

● our Nathan’s Famous Company-owned and franchised units in operations consisted of 213 franchised units and
four Company-owned units (including one seasonal unit) located in 19 states and eight foreign countries;

● our Nathan’s Famous Branded Product Program distributed our Nathan’s World Famous Beef Hot Dogs
throughout all 50 states, the District of Columbia, Puerto Rico, Canada, the U.S. Virgin Islands, Guam and
Mexico;

● Nathan’s Famous packaged hot dogs and other products were offered for sale in supermarkets, mass

merchandisers 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, open new virtual kitchens, domestically and internationally, and expand
the Nathan’s Famous retail licensing programs. We may also selectively consider opening new Company-owned restaurants.

COVID-19 Pandemic

In March 2020, the World Health Organization (“WHO”) declared a global pandemic related to the outbreak of a
novel strain of coronavirus, designated “COVID-19.” Initially, federal, state, and local governments reacted to the COVID-
19 pandemic by encouraging or requiring social distancing, instituting shelter-in-place orders, and requiring, in varying
degrees, reduced operating hours, restaurant dine-in and/or indoor dining limitations, capacity limitations or other restrictions
that largely limited our Company-owned restaurants, franchised restaurants and BMP franchises to off-premise sales (take-
out and delivery) in the early stages of the pandemic. Additionally, it negatively impacted our Branded Product Program as
many of our customers operate in venues that are closed or venues that are operating at reduced capacity, such as professional
sports arenas, amusement parks, and shopping malls.

During the course of the fiscal 2021 period, certain of these restrictions were relaxed as incidents of infection from
the initial outbreak declined. The Company has instituted operational procedures to protect the health and foster the
confidence of employees and guests at the Company-owned and franchised units. The Company continues to monitor
developing and changing health authority recommendations and regulatory requirements.

The business environment remains fluid into fiscal 2022 (“the fiscal year ending March 27, 2022”) and is subject to
change as governmental authorities modify existing restrictions or implement new restrictions in response to changes in the
number of COVID-19 infections and the availability and acceptance of vaccines around the United States and internationally.

The impact of the COVID-19 pandemic on our results of operations and liquidity is discussed in Item 7 -

Management's Discussion and Analysis of Financial Condition and Results of Operations of this Form 10-K.

Corporate History

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

The COVID-19 pandemic has disrupted operations at our Company-owned restaurants, franchised restaurants and
BMP locations. Three out of four of our Company-owned restaurants remained open throughout the fiscal 2021 period and
continued to offer food primarily through take-out and delivery. Our seasonal location on the Coney Island Boardwalk
operated for an abbreviated time in the fiscal 2021 period. It was open from May 15, 2020 to September 13, 2020. This
seasonal location re-opened with reduced operating hours for the fiscal 2022 summer season on April 2, 2021.

A majority of our franchised locations closed temporarily during the fiscal 2021 period due to their locations being
in venues that were closed (such as movie theaters) or venues operating at reduced traffic levels (such as airports, highway
travel plazas and shopping malls). Currently, approximately 77% of the Company’s franchise system is open.

Such closures and disruptions have impacted revenues and income from operations as compared to the fiscal 2020

period.

We remain principally focused on the well-being and safety of our guests, restaurant employees, franchisees, and all

other Corporate employees.

The health and well-being of our employees and guests has always been and continue to be our top priority. Since
the situation around the COVID-19 pandemic is constantly changing we may implement additional safety measures in line
with health authority recommendations and regulatory requirements.

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 our 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 restaurants 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: the Nathan’s Famous NY Cheesesteak by
Pat LaFreida, our fresh angus hamburger program and our hand-dipped chicken program. We have historically used the
Arthur Treacher’s brand, products and trademarks as a branded seafood menu-line extension for inclusion in certain Nathan’s
Famous restaurants.

We also partner with major third-party delivery service providers, such as DoorDash, UberEats and GrubHub,
providing multiple options for our guests to continue to enjoy Nathan’s Famous products at home during the COVID-19
pandemic. Nathan’s also opened our first virtual kitchens (existing kitchens with no Nathan’s Famous branded store-front
presence, used to fill online orders) during the fiscal 2021 period to further expand our delivery options and to reach even
more of our customers. At March 28, 2021, there were 130 virtual kitchens operating in 10 states and four foreign countries.

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, kiosks and modular units generally carry only the core menu.
Our food trucks may carry the full Nathan’s Famous menu.

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 28, 2021, our Nathan’s franchise system, including our Branded Menu Program, consisted of 213 units

operating in 19 states and eight foreign countries.

Our franchise system includes among its franchisees such well-known companies as HMS Host, Gourmet Dining
Services, Inc., CulinArt, Inc., 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 2021 period, no single franchisee accounted for over 10% of our consolidated revenue. At March
28, 2021, HMS Host operated 12 franchised outlets, including three units at airports, eight units within highway travel plazas
and one unit within a mall. Additionally, 23 mobile carts were registered to operate in New York, NY, and 15 Bruster’s Real
Ice Cream shops were selling Nathan’s products under our Branded Menu Program.

Growth Strategies

Even amidst the various challenges of fiscal 2021, the Company embarked on a number of new initiatives to promote

the Nathan’s Famous brand and to position itself for future growth.

Virtual Kitchens – The Company has partnered with Franklin Junction, which connects host restaurants with digital

brands, and has also collaborated with REEF, and Ghost Kitchen Brands to expand across the United States and Canada.

Wings of New York – The Company launched the Wings of New York, a virtual concept offering New York style
chicken wings, hand-dipped chicken tenders, as well as Harlem-style chicken and waffles through third party delivery
services. The concept offers over a dozen different wing sauces ranging from Classic Buffalo and Creamy Mild Buffalo to
Carolina Reaper and Ghost Pepper, as well as a signature Buffalo sauce created by culinary consultant and James Beard
Award Winner Mark Miller. The Nathan’s Famous crinkle-cut French fries can be served alongside the wings or loaded with
an assortment of toppings including the NY Cheesesteak fries by Pat LaFrieda, while the waffles, which can be served a la
carte, are topped with real maple syrup and butter. The menu also features two waffle dessert options – a waffle sundae and
a waffle shake.

Expansion of Partnership with Pat LaFrieda – In 2019, the Company launched the NY Cheesesteak by Pat LaFrieda.
Due to the popularity of that hero sandwich, during the fiscal 2021 period the Company developed and introduced two new
menu items, the NY Cheesesteak topped Hot Dog and NY Cheesesteak Fries.

Goldbelly DIY Kits – During the fiscal 2021 period, the Company partnered with Goldbelly to provide Nathan’s
Famous favorite meals to consumers throughout the United States. The Company offers a number of meal kits through
Goldbelly, including its Nathan’s World Famous Beef hot dog and crinkle-cut French fries. Other meal options include the
NY Cheesesteak by Pat LaFrieda, and the Pastrami and Swiss Hero, both of which are shipped with Nathan’s Famous crinkle-
cut French fries.

Digital Business – During fiscal 2021, the Company upgraded its capabilities by expanding our partnerships with
third-party delivery services. Digital sales, which include delivery and customer pick-up, at three of our four Company-owned
restaurants (excluding our seasonal location on the Coney Island Boardwalk) accounted for 11% of sales at these locations
in fiscal 2021. Our ability to offer off-premises sales during the COVID-19 pandemic was important, as more guests preferred
to eat their meals at home and in-restaurant dining was prohibited or restricted early in fiscal 2021.

Continued Focus on Technology

The Company continues to take strides to improve its technology resources to aid its Company-owned store
operations. In fiscal 2021, the Company-owned restaurants migrated to the PAR Brink Point-of-Sale application. To further
increase operational efficiency, the Company partnered with Restaurant Magic to install a back office software solution that
focuses on inventory and food management, labor and scheduling, as well as reporting and analytics.

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 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 2021 period, franchisees opened seven new Nathan’s Famous
franchised units in the United States (including two Branded Menu Program units), and closed ten Nathan’s Famous
franchised units, including one international unit.

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.

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
back to Nathan’s.

As of March 28, 2021, Arthur Treacher’s, as a co-brand, was included within 27 Nathan’s Famous restaurants.

Additionally, we operate seven Arthur Treacher’s BMP locations.

Company-owned Nathan’s Restaurant Operations

As of March 28, 2021, we operated four Company-owned Nathan’s restaurants, including one seasonal location, in
New York. Three of our four Company-owned restaurants have been open with limited operations resulting from restrictions
due to the COVID-19 pandemic. Our seasonal location on the Coney Island Boardwalk re-opened with reduced operating
hours for the fiscal 2022 summer season on April 2, 2021.

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.

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 28, 2021, Nathan’s Famous franchisees operated 26 units in eight foreign countries.

During fiscal 2021, the Company entered into a licensing, manufacturing and distribution agreement with Mezzan
Holding KSC, one of the largest manufacturers, and distributors of food and beverages in the Gulf region. We believe this
partnership may position the Company with advantages and opportunities in and around the Gulf region.

Additionally, during fiscal 2021, the Company licensed Damhus, a German manufacturer of quality meat-products,

to manufacture and distribute Nathan’s World Famous Beef Hot Dogs across Europe.

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 28, 2021 and March 29,

2020: See Item 1A-“Risk Factors.”

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

1,102,000 $
383,000 $

2021

2020

4,872,000
1,962,000

March 28,

March 29,

(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 28, 2021

and their geographical distribution:

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

International Locations
Dominican Republic ......................................................
Jamaica ...........................................................................
Kazakhstan .....................................................................
Malaysia .........................................................................
Panama ...........................................................................
Philippines .....................................................................
Spain ..............................................................................
United Kingdom .............................................................
International Subtotal .....................................................
Grand Total ....................................................................

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

Company
-
-
-
-
-
-
-
-
-
4

Franchise (1)
1
5
24
5
1
3
2
5
1
9
25
81
4
2
9
2
3
1
4
187

Franchise (1)
6
2
4
4
4
3
1
2
26
213

Total (1)
1
5
24
5
1
3
2
5
1
9
25
85
4
2
9
2
3
1
4
191

Total (1)
6
2
4
4
4
3
1
2
26
217

(1)

Amounts include 94 units operated pursuant to our Nathan’s and Arthur Treacher’s Branded Menu Programs. Units
operating pursuant to our Branded Product Program are excluded. Virtual kitchens are also excluded.

Branded Product Program

The COVID-19 pandemic has disrupted operations within our Branded Product Program. Operations at many of our
Branded Product Program accounts have been negatively impacted as many of our customers operate in venues that are
currently closed (such as movie theatres) or venues operating at reduced traffic levels, such as professional sports arenas,
amusement parks and shopping malls.

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 28, 2021, 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. Pursuant to the Branded Product Program, Nathan’s World
Famous Beef Hot Dogs are being offered in national restaurant chains such as Auntie Anne’s, Hot Dog On A Stick, and
Johnny Rockets; national movie theater chains such as Regal Entertainment, National Amusements and Cinemex in Mexico;
amusement parks such as Six Flags and Universal Studios; casino hotels such as Foxwoods Casino in Connecticut; and
convenience store chains such as Race Trac, and Holiday Station stores. The Branded Products Program also distributes
product in professional sports arenas with Nathan’s World Famous Beef Hot Dogs being served in stadiums and arenas that
host the New York Yankees, New York Mets, Brooklyn Nets, Dallas Cowboys, Miami Marlins, Colorado Rockies and Green
Bay Packers.

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.

With the anticipated roll-out, availability and acceptance of vaccines to combat the COVID-19 pandemic, Nathan’s
expects to continue to seek out and evaluate a variety of alternative environments designed to maximize and grow our Branded
Product Program.

Expansion Program

We expect that our retail licensing program may 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 continue penetrating the grocery, mass merchandising and club channels by expanding points of distribution in
targeted, underpenetrated regions and through the development of new products. We believe John Morrell & Co. expects to
continue 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 of our Nathan’s Famous Hot Dog Eating Contests.

We expect to resume the growth of our Branded Product Program once the COVID-19 pandemic subsides, 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 will 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 as the COVID-19 pandemic subsides and
developing master franchising programs in foreign countries. We may selectively consider opening new Company-owned
Nathan’s restaurants on an opportunistic basis. In addition, we may consider new opportunities in both traditional and captive
market settings.

We expect to continue to expand the number of virtual kitchens domestically and internationally through our
partnerships with Franklin Junction, REEF and Ghost Kitchen Brands to bring the Nathan’s Famous brand and Wings of New
York concept to consumers across the United States and internationally.

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 continue to support our co-branded Arthur Treacher’s franchisees.

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
$27,778,000 in fiscal 2021 and $22,307,000 in fiscal 2020 representing 36.6% and 21.6% 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 $916,000 and $1,373,000 during the fiscal 2021 and 2020
period, respectively. The majority of these royalties were earned from one company. As of March 28, 2021, packaged
Nathan’s World Famous Beef Hot Dogs continued to be sold in supermarkets, mass merchandisers and club stores including
Walmart, Kroger, Ahold, Publix, Albertsons, Safeway, ShopRite, 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 91.5% of our fiscal 2021 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, Inc., a wholly-owned subsidiary of John Morrell & Co. During fiscal 2021 and 2020, we earned
$1,022,000 and $1,102,000, respectively, from this license. Through this agreement, we control the manufacture of all
Nathan’s hot dogs.

During fiscal 2021, 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 37 states,
primarily on the East Coast and in the Southwest and West Coast during fiscal 2021. During fiscal 2021 and 2020, we earned
royalties of $1,137,000 and $719,000, respectively, under this agreement. For the contract year ended in July 2020 we earned
royalties of $455,000 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 Midwest. 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 2020, we transferred the license 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 to an existing licensee. Royalties earned
under this agreement were approximately $211,000 during fiscal 2021 and $10,000 during fiscal 2020.

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 $303,000 during fiscal 2021 and $341,000 during fiscal 2020. Our license
agreement with Gold Pure Food Products Co., Inc. terminated in December 2020.

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, Inc. 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.

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 for two successive one year renewal periods
upon mutual consent. We believe this arrangement allows for more flexibility in expanding into new markets throughout the
United States, as well as proves to be 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 / Performance Food Group,
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 will continue to 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. Due to the COVID-19 pandemic, all regional hot dog eating contests were canceled in 2020. However,
while the regionals were canceled, our annual July 4th Hot Dog Eating Contest Championship was held at our flagship
restaurant. The appropriate safety precautions were taken and the event was closed to the public. ESPN aired our July 4th Hot
Dog Eating Championship Contest as it has done 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 Dogs and
crinkle-cut French fries. In many venues, Nathan’s World Famous Beef Hot Dogs and crinkle-cut French fries are 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:

● Professional Baseball: Yankee Stadium – New York Yankees; Citi Field – New York Mets; Marlins Park

– Miami Marlins; Coors Field – Colorado Rockies; and

● Professional Basketball: The Barclays Center – Brooklyn Nets; and

● Professional Football: AT&T Stadium – Dallas Cowboys; Lambeau Field – Green Bay Packers.

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 2021. 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.

In fiscal 2021, Nathan’s marketing efforts were largely focused on media spending online with focused efforts to
generate awareness and sales through third-party delivery platforms. Since the COVID-19 pandemic temporarily closed many
restaurants in our franchise system, the promotion of delivery through third-party platforms like UberEats, DoorDash and
GrubHub, helped support our Company-owned restaurants and our franchise system.

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 brand awareness amongst the engaged younger generation. Our social media efforts
also include driving foot traffic and sales through geo-targeting restaurant campaigns, as well as driving guests directly to
various online menus.

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 2021, Nathan’s marketing efforts for the Branded Product Program concentrated primarily on
participation in national industry trade shows, and regional, local distributor trade events, which were held virtually due to
the COVID-19 pandemic. We have also advertised our products in distributor and trade periodicals. 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 fiscal 2022, 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 continue to
upgrade our social media platforms by enhancing our corporate website and Facebook page and expanding the use of Twitter.

Human Capital

As of March 28, 2021, the Company employed 146 people, 33 of whom were corporate management and
administrative employees, 21 of whom were restaurant managers and 92 of whom were hourly full-time and part-time
foodservice employees.

As of March 28, 2021, more than 55% of our employees were female and approximately 73% of our employee

population were comprised of racial and ethnic minorities.

We generally employ approximately 200-300 seasonal employees during the summer months. Food service
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, 2023. Employees at a third
location are represented by the same union pursuant to a different agreement that expires on November 30, 2022.

We believe that our efforts to manage our workforce have been effective as evidenced by the fact that the Company

has not suffered any strike or work stoppage for more than 47 years.

Culture and diversity

Creating and fostering inclusive work environments and teams allows us to create an engaging and welcoming
culture for our employees, which we believe positively affects the quality of products and experience we deliver to our
customers.

The Company works to ensure our recruiting and hiring initiatives are reaching a broad audience, so that our
workforce represents the communities in which we serve. We seek to provide opportunities for growth and development at
all levels of our organization.

Our workforce represents nearly all demographics, with diversity in age, race, ethnicity and gender. Specifically, we

employ more women than men and more employees identify as racial and ethnic minorities, than white.

Compensation and Benefits

The Company is committed to providing market-competitive and equitable pay and benefits to attract and retain
great talent. In addition to competitive hourly rates and base salaries, all management employees at our Company-operated
restaurants are eligible for performance-based cash incentive bonuses based on the attainment of certain financial metrics,
along with all corporate management and administrative employees, at the discretion of our Board of Directors.

The Company attempts to provide a range of benefits to its employees and their families, including medical and
prescription drug, dental and vision, long-term disability coverage, as well as a 401(k) savings and flexible spending accounts.
The Company has historically matched contributions to its 401(k) savings plan at a rate of $0.25 per dollar contributed by the
employee up to a maximum of 3% of the employee’s annual salary.

Talent Development

We offer various management-training courses for management personnel of our Company-owned and franchised
Nathan’s Famous restaurants. A restaurant manager from each restaurant must successfully complete our mandated
management-training program.

Safety of our employees and customers during COVID-19

We are committed to providing safe work environments and providing our employees with the resources they need
to promote their well-being. We are also committed to providing a safe and healthy environment for our restaurant patrons.
In light of the COVID-19 pandemic, fiscal 2021 presented a unique set of challenges. We took several actions during fiscal
2021 to support the safety and well-being of our employees, such as providing personal protective equipment (“PPE”),
installing plexiglass at our Corporate offices and at Company-owned restaurants, requiring the use of face masks by all of
our employees, promoting social distancing measures as stipulated by local government regulations, adding social distancing
stickers, sanitizing stations, pre-shift temperature checks and providing for emergency paid sick leave.

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 United States 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 United States 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. An inability to obtain
or retain health department or other licenses could adversely affect our operations.

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 Small Business Administration’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.

In 2020 and 2021, various governmental bodies in the United States have addressed the spread of COVID-19 by
imposing limitations on business operations or recommending that residents adopt stringent “social distancing” measures.
Those formal and informal restraints, as well as consumer behavior and other factors (such as supply chain issues) may have
a material impact on our ability to operate our business at least while those restrictions are in effect, which may possibly have
a longer-term impact on our business and the demand for our products and restaurant services.

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, the Dodd-Frank Act of 2010, 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.

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, SINCE 1916
NATHAN’S FAMOUS, INC. 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
NATHAN’S FAMOUS 100TH ANNIVERSARY and design in color, SINCE 1916 NATHAN’S FAMOUS and hot dog
design in color, SINCE 1916 NATHAN’S FAMOUS and hot dog, fries and drink 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 package design registrations
and other related marks, FRANKSTERS, FROM A HOT DOG TO AN INTERNATIONAL HABIT, and MORE THAN
JUST THE BEST HOT DOG! and 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 in Canada, 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 routine business pattern 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. Routine 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 certain ways 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.

Risks Related to Business and Operations

Pandemics or disease outbreaks, such as the current novel coronavirus (COVID-19 virus) pandemic may disrupt

our business, which could materially affect our operations and results of operations.

The COVID-19 pandemic has impacted and may continue to impact sales and traffic at our Company-owned
restaurants and at our franchisees’ restaurants, may make it more difficult to staff restaurants and, in more severe cases, may
damage our reputation, cause an inability to obtain supplies, increase commodity costs or continue to cause partial or total
closures of impacted restaurants.

During the fiscal 2021 period, individuals in many areas where we operate our restaurants were required to practice

social distancing, restricted from gathering in groups and / or mandated to “stay at home.”

Additionally, sales and profits from our Branded Product Program have been impacted as many of our customers
operate in venues that are closed and may be slow to reopen, such as professional sports venues, amusement parks, shopping
malls and movie theaters.

In response to the COVID-19 outbreak and government restrictions, for a portion of our fiscal 2021 period, we were
required to close the dining rooms in our Company-owned restaurants and offer only takeout and delivery, and/or implement
modified work hours. The mobility restrictions, fear of contracting the coronavirus and the sharp increase in unemployment
caused by the closure of businesses in response to the COVID-19 outbreak, have adversely affected and will continue to
adversely affect our guest traffic, which in turn may materially adversely affect our liquidity, financial condition or results of
operations.

Even as and when the mobility restrictions are loosened or lifted, and vaccines are distributed, guests may still be
reluctant to return to in-restaurant dining, professional sports venues, amusement parks, shopping malls and movie theaters
and the impact of lost wages due to COVID-19 related unemployment may lower consumer spending for the foreseeable
future.

The extent to which the COVID-19 pandemic and other epidemics, disease outbreaks or public health emergencies
may adversely impact our business, liquidity, financial condition, and results of operations, will depend on numerous evolving
factors that we may not be able to accurately predict or assess, including the duration and scope of the pandemic, epidemic,
disease outbreak, or public health emergency; the availability, distribution and acceptance of vaccines; the negative impact
on the economy; the public perception of gathering in public places like professional sports venues, amusement parks,
shopping malls, and movie theaters; the short and longer-term impacts on the demand for restaurant services and levels of
consumer confidence; the ability of us and our franchisees to successfully navigate the impact of the COVID-19 pandemic;
government action, including restrictions on restaurant operations; increased unemployment; and reductions in consumer
discretionary spending. Even if a virus or other disease does not spread significantly, the perceived risk of infection or health
risk may damage our reputation and materially adversely affect our business, results of operations and financial condition.
The COVID-19 pandemic has heightened many of the other risks described in this Item 1A, “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.

We earned license royalties from John Morrell & Co. of approximately $28,694,000 in fiscal 2021 and
approximately $23,680,000 in fiscal 2020 representing 37.8% and 22.9% of total revenues, respectively. As a result of our
agreement with John Morrell & Co., we expect that most of our license revenues will be earned from John Morrell & Co. for
the foreseeable future. In addition, the reduction in our adjusted EBITDA (a non-GAAP financial measure (see Reconciliation
of GAAP and Non-GAAP measures on page 38 of this report)) from $29,964,000 in fiscal 2020 to $27,225,000 in fiscal 2021
and income from operations from $27,172,000 in fiscal 2020 to $25,515,000 in fiscal 2021 was partially mitigated due to the
increase in license royalties earned from John Morrell & Co. While our agreement with John Morrell & Co. expires in 2032,
John Morrell’s BPP foodservice 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 & Co. or its customers experience financial difficulties, (ii)
there is a disruption or termination of the John Morrell & Co. Agreement or (iii) there is a significant decrease in our revenue
from John Morrell & Co., 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.

A small number of our BPP customers account for a significant portion of our BPP revenues. Sales to our five largest
BPP customers were 70.4% and 72.4% of our BPP revenues in fiscal 2021 and fiscal 2020, respectively. In the event that
these BPP customers experience financial difficulties or, upon the expiration of their existing agreements, if applicable, 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.

We are unable to predict the future cost of our hot dogs and expect to experience price volatility for our beef products
during fiscal 2022. 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 & Co. currently has two manufacturing facilities producing different Nathan’s products and a

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

John Morrell & Co. currently has two manufacturing facilities producing different Nathan’s products. A temporary
closure at either of these 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 either 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 & Co. 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.

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 affect our business, results of operations and financial
condition.

Our earnings and business growth strategy depend 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.

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 adversely 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; product tampering; and 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. The dissemination of
information online, regardless of its accuracy, could harm our business, results of operations and financial condition.

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

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 and licensees fail to do so, our trademark and
service mark rights could be diluted.

Our earnings and business growth strategy depend 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: our ability to attract
new franchisees; 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.

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.

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.

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
the Notes. Any attempt by us to engage in these transactions may expose us to various inherent risks, including:

● 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;

●
●
● difficulties in successfully integrating, operating, maintaining and managing newly-acquired operations

or employees;

● difficulties maintaining uniform standards, controls, procedures and policies;
● unanticipated changes in business and economic conditions affecting an acquired business;
●
●

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:

the impact of COVID-19;
changes in customer demand;
sales promotions by Nathan’s and its competitors;

●
●
●
● variations in the timing and volume of Nathan’s sales and franchisees’ sales;
●

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;

●
● variations in the price, availability and shipping costs of supplies;
seasonal effects on demand for Nathan’s products;
●
● unexpected slowdowns in new store development efforts;
●
●
● weather and acts of God; and
●

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
adversely impacts 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 28, 2021, we and our franchisees (including units operated pursuant to our BMP) operated Nathan’s
restaurants in 19 states and eight foreign countries. As of March 28, 2021, 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 business, results of operations and financial condition.

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, as well as at third party online ordering and delivery businesses, 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.

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 (including, without limitation, as a result of the COVID-19 pandemic), 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, as we may not be able to find suitable individuals to replace such personnel on a timely basis or without incurring
increased costs, or at all.

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.

Risks Related to Regulatory Matters

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. 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. 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.

The COVID-19 pandemic has caused additional changes as companies struggle to find and hire workers as states
begin to ease restrictions. As demand for new hires increases, the competition for these employees could require the payment
of higher wages that could result in higher labor costs.

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 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.

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, results of operations, and financial condition. 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, results of operations, and financial condition.

We are subject to many federal, state and local laws, as well as statutory and regulatory requirements. Failure to

comply with, or changes in these laws or requirements, could have an adverse impact on our business.

The National Labor Relations Board (NLRB) previously considered whether to hold certain franchisors responsible
as a “joint employer” of its franchisees’ staff under certain fact patterns. McDonald’s USA LLC and their franchisees were
the subject of administrative litigation with the NLRB. That matter was resolved through a settlement in 2019, and in 2020,
the NLRB issued a regulation that changed the standard for determining when a party such as Nathan's would be deemed a
“joint employer” under the National Labor Relations Act. The new NLRB standard would make it less likely that the NLRB
would initiate an action against a company such as us. However, the new NLRB standard may be revised or revoked. There
is also the possibility of administrative action from other agencies, state governments, and in private lawsuits that may allege
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. In 2021 and beyond, if the United
States Department of Labor and agencies such as OSHA and the NLRB take a more aggressive position on defining and
enforcing joint employer status, or it both houses of Congress pass the pending “PRO Act,” that might change the status quo
and expose Nathan’s to the possibility of being deemed a “joint employer” of our franchisees’ staff together with our
franchisees.

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), results of operations and financial
condition.

In September 2019, California adopted a law known as “AB-5,” which was ostensibly intended to address the
relationship between “gig” workers and companies such as “Uber” and “Lyft.” By ballot initiative in November 2020,
California voters adopted “Proposition 22” to exempt companies such as Uber and Lyft (and others) from California
Assembly Bill 5 (“AB-5”); however, the remaining language of AB-5 is broad enough to raise the possibility that it might be
applied to the relationship between a franchisor such as Nathan's and its California franchisees. If AB-5 were applied to the
franchisor-franchisee relationship that Nathan's enjoys with its franchisees, that might significantly impact the structure and
financial viability of any California franchised or licensed locations.

California also adopted a new law to address data privacy. The California Consumer Privacy Act (CCPA) took effect
at the beginning of 2020, and imposes stringent data security standards, which might apply more broadly than only within
the borders of that state (for example, if a California resident buys products or has them shipped into the state and pays with
a credit or debit card). Both New York and Virginia have since adopted similar requirements, which take effect in 2021. It is
still uncertain whether the CCPA and the laws adopted in New York and Virginia will have a material impact on our
operations or that of our franchisees.

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.

Risks Related to Organizational Structure

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:

● 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.

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

dividends or the amount of such dividend.

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.

Risks Related to the Notes

Our substantial indebtedness makes us more sensitive to adverse economic conditions, may limit our ability to
plan for or respond to significant changes in our business, and requires a significant amount of cash to service our debt
payment obligations that we may be unable to generate or obtain.

As of March 28, 2021, we had total outstanding indebtedness of $150.0 million which is due in 2025. Subject to

the terms of any future agreements, we and our subsidiaries may be able to incur additional indebtedness in the future,
which would increase the risks related to our high level of indebtedness. 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.

Specifically, our high level of indebtedness could have important potential consequences, including, but not

limited to:

●

increasing our vulnerability to, and reducing our flexibility to plan for and respond to, adverse economic and industry
conditions and changes in our business and the competitive environment, including ongoing adverse economic conditions
arising from the COVID-19 pandemic;

● make it more difficult for us to satisfy our other financial obligations, including our obligations relating to the Notes;
●

requiring the dedication of a substantial portion of our cash flow from operations to the payment of principal of, and
interest on, indebtedness, thereby reducing the availability of such cash flow to fund working capital, capital
expenditures, acquisitions, dividends, share repurchases or other corporate purposes;

● make it more difficult for us to satisfy our obligations to the holders of the Notes, resulting in possible 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;

●
● place us at a competitive disadvantage compared to our competitors that have less debt;
●

increasing our vulnerability to a downgrade of our credit rating, which could adversely affect our cost of funds, liquidity,
value and trading of the Notes and access to capital markets;
restricting us from making strategic acquisitions or causing us to make non-strategic divestitures;
limit our ability to borrow additional funds or increase our cost of borrowing;

●
●
● placing us at a disadvantage compared to other less leveraged competitors or competitors with comparable debt at more

●

favorable interest rates;
increasing our exposure to the risk of increased interest rates insofar as current and future borrowings are subject to
variable rates of interest;

● making it more difficult for us to repay, refinance or satisfy our obligations relating to the Notes;
●
●

limiting our ability to borrow additional funds in the future and increasing the cost of any such borrowing;
imposing restrictive covenants on our operations as the result of the terms of our indebtedness, which, if not complied
with, could result in an event of default, which in turn, if not cured or waived, could result in the acceleration of our
debts, including the Notes

There is no assurance that we will generate cash flow from operations or that future debt or equity financings will
be available to us to enable us to pay our indebtedness or to fund other liquidity needs. If conditions related to the COVID-
19 pandemic result in significant disruptions to capital and financial markets, our cost of borrowing, our ability to access
capital on favorable terms and our overall liquidity could be adversely impacted. If our business does not generate sufficient
cash flow from operations or if future borrowings are not available to us in amounts sufficient to pay our indebtedness or to
fund other liquidity needs, our financial condition and results of operations may be adversely affected. As a result, we may
need to refinance all or a portion of our indebtedness on or before maturity. There is no assurance that we will be able to
refinance any of our indebtedness on favorable terms, or at all. Any inability to generate sufficient cash flow or refinance our
indebtedness on favorable terms could have a material adverse effect on our business and financial condition.

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.

At March 28, 2021, 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

Current Lease
Expiration Date

December 2027
November 2028
April 2030
December 2023

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

(a)

Seasonal satellite location.

At March 28, 2021, 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 $1,391,000 in fiscal 2021.

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 monetary 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.”

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. On June 14,
2019, Nathan’s Board of Directors authorized the increase of its regular dividend from $0.25 to $0.35 per quarter. During the
fiscal 2020 and fiscal 2021 periods, the Company declared and paid four quarterly dividends of $0.35 per 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 11, 2021, the Board declared its first quarterly cash dividend of $0.35 per share for fiscal year 2022

which is payable on June 25, 2021 to stockholders of record as of the close of business on June 21, 2021.

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 25, 2021 dividend.

Shareholders

As of June 4, 2021, we had approximately 364 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

The Company did not repurchase any of its common stock during the quarter ended March 28, 2021.

Since the commencement of the Company’s stock buy-back program in September 2001 through March 28, 2021,
Nathan’s has purchased a total of 5,254,081 shares of common stock at a cost of approximately $84,770,000 under all of its
stock repurchase programs.

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 28, 2021, Nathan’s had repurchased
1,066,450 shares at a cost of $37,108,000 under the sixth stock repurchase plan. At March 28, 2021, there were 133,550
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.

Reconciliation of GAAP and Non-GAAP Measures

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, a non-GAAP financial measure, which
is defined as net income excluding (i) interest expense; (ii) provision for income taxes and (iii) depreciation and amortization
expense. The Company has also provided Adjusted EBITDA, a non-GAAP financial measure, which is defined as EBITDA,
excluding (i) gain on sale of property and equipment; (ii) loss on debt extinguishment; (iii) impairment charge long-lived
assets; and (iv) share-based compensation that the Company believes will impact the comparability of its results of operations.

The Company believes that EBITDA and Adjusted EBITDA, which are non-GAAP financial measures, 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.

Fiscal Year (1)

(In thousands)

2021

2020

2019

2018

2017

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

11,075 $
10,601
4,250
1,183

13,435 $
10,601
4,579
1,233

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

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

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

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

27,109

29,848

41,414

19,055

27,766

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

-
-
-
116

(11,177)
-
-
162

-
8,872
790
398

-
-
-
582

ADJUSTED EBITDA .................. $

27,225 $

29,964 $

30,399 $

29,115 $

28,348

(1)

Our fiscal year ends on the last Sunday in March, which results in a 52- or 53-week year. The fiscal years ended
March 28, 2021 and March 29, 2020 were each on the basis of a 52-week reporting period. The fiscal year ended
March 31, 2019 was on the basis of a 53-week reporting period. The fiscal years ended March 25, 2018 and March
26, 2017 were each on the basis of a 52-week reporting period.

Item 6. Selected Financial Data.

Not applicable as we are considered a smaller reporting company.

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

Introduction

Overview of the Impact of COVID-19

In March 2020, the World Health Organization (“WHO”) declared a global pandemic related to the outbreak of a

novel strain of coronavirus, designated “COVID-19.”

During the fiscal 2021 period, COVID-19 spread throughout the United States and the rest of the world and
government authorities have implemented measures to reduce the spread of COVID-19. These governmental restrictions and
public perceptions of the risks associated with COVID-19 have caused consumers to avoid or to limit non-essential travel,
gatherings in public places and other social interactions. The COVID-19 pandemic has had an adverse impact on the
Company’s business, financial condition, cash flows, and results of operations for the fiscal 2021 period.

As a result of COVID-19, our Company-owned restaurants and our franchisees have experienced reduced customer

traffic, as well as instances of reduced store-level operations, including reduced operating hours.

As of March 28, 2021, three of our four Company-owned restaurants were open. Our seasonal location on the Coney

Island Boardwalk opened with reduced operating hours for the fiscal 2022 summer season on April 2, 2021.

Franchisees located in shopping malls, airports, and highway travel plazas continue to be subject to temporary
closures or reduced operating hours. Approximately 77% of our franchise system is currently open in a full or limited capacity.
Such closures and disruptions have impacted sales at our Company-owned restaurants, as well as franchise fees and royalties,
as compared to the fiscal 2020 period. Plans to mitigate the loss of sales have included increasing consumer access to our
products through third-party delivery channels.

Additionally, the COVID-19 pandemic has disrupted operations within our Branded Product Program. Operations
at many of our Branded Product Program accounts have been hampered as many of our customers operate in venues that are
closed or venues operating at reduced traffic levels, such as professional sports arenas, amusement parks, shopping malls,
and movie theaters. Such closures and disruptions have impacted sales and operating income within our Branded Product
Program.

During the fiscal 2021 period, royalties from our license agreements were significantly higher than during the fiscal
2020 period, due to significantly higher sales of consumer-packaged goods through grocery channels as consumers elected
to “shelter at home” as a result of the COVID-19 pandemic.

In the second half of the fiscal 2021 period, certain of these governmental restrictions were relaxed as incidents of
infection from the initial outbreak declined. The Company has instituted operational procedures to protect the health and
foster the confidence of employees and guests at the restaurants. The Company continues to monitor developing and changing
health authority recommendations and regulatory requirements.

With the roll-out, availability and acceptance of vaccines to combat the COVID-19 pandemic, we have seen an
increase in the number of re-openings within our franchise system during the fourth quarter of our fiscal 2021 period and
continuing into the first quarter of our fiscal 2022 period, as well as an increase in partial re-openings at some of our Branded
Product Program accounts including professional sports arenas, amusement parks, movie theatres and shopping malls.

The business environment remains dynamic and uncertain and is subject to change as governmental authorities
modify existing restrictions or implement new restrictions in response to changes in the number of COVID-19 infections and
the availability and acceptance of vaccines around the United States and internationally. We expect that the pandemic will
continue to have a negative impact on our revenue and net income for the foreseeable future. Even as government restrictions
are lifted and vaccines are being distributed, the ongoing economic impacts and health concerns associated with the pandemic
may continue to affect consumer behavior, spending levels, and may result in reduced restaurant traffic and consumer
spending trends that may adversely impact our financial condition and results of operations.

Overview

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 sells packaged hot dogs and other meat products to retail customers through supermarkets or grocery-type retailers
for off-site consumption. Our Branded Product Program 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, operating
Company-owned restaurants, licensing agreements for the sale of Nathan’s products within supermarkets and club stores, the
sale of Nathan’s products directly to other foodservice operators and the manufacture of certain proprietary spices by third
parties and franchising the Nathan’s restaurant concept (including the Branded Menu Program).

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

years ended March 28, 2021, March 29, 2020, March 31, 2019, March 25, 2018, and March 26, 2017.

March 28,
2021

March 29,
2020

March 31,
2019

March 25,
2018

March 26,
2017

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

216
7
(10)

255
16
(55)

276
13
(34)

279
40
(43)

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

213

216

255

276

259
53
(33)

279

At March 28, 2021, our restaurant system consisted of 213 Nathan’s franchised units, including 94 Branded Menu
units located in 19 states, and eight foreign countries, and four Company-owned and operated units (including one seasonal
unit), located within the New York metropolitan area.

Over the past several years, our strategic emphasis has been to increase the number of distribution points for our
products across all of our business platforms, including our Licensing Program for distribution of Nathan’s Famous branded
consumer packaged goods, our Branded Products Program for distribution of Nathan’s Famous branded bulk products to the
foodservice industry, and our namesake restaurant system comprised of both Company-owned and franchised units. The
primary drivers of our recent growth have been our Licensing and Branded Product Programs, which are the largest
contributors to the Company’s revenues and profits.

We remain committed to these parts of our business and we continue to reinvigorate our restaurant system. The
operating plan we have adopted in this regard is focused on surrounding our core items, Nathan’s World Famous Beef Hot
Dogs and crinkle-cut French fried potatoes, with other much higher quality menu items developed to deliver best-in-class
customer experience and greater customer frequency. Menu development activities have been combined with concept
positioning efforts, operational improvements and more effective digital and social marketing campaigns. The goal is to
improve the performance of the existing restaurant system and to grow it through franchising efforts. Additionally, we have
introduced virtual kitchens whereby existing branded restaurants have the ability to market and to sell our products through
third-party delivery platforms. At March 28, 2021, we have expanded into 130 virtual kitchens, including 87 domestically
and 43 internationally. While we do not expect to significantly increase the number of Company-owned restaurants, we may
opportunistically and strategically invest in a small number of new units as showcase locations for prospective franchisees
and master developers as we seek to grow our franchise system. We continue to seek opportunities to drive sales in a variety
of ways as we adopt to the ever-changing consumer and environment.

As described in Risk Factors and other sections in this Annual Report on Form 10-K for the year ended March 28,
2021, our future results could be impacted by many developments including the impact of the COVID-19 pandemic on our
business, as well as our dependence on John Morrell & Co. as our principal supplier. 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 issued $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 (i) satisfy and discharge the Indenture
relating to the 2020 Notes; (ii) redeem the 2020 Notes (the "Redemption"), (iii) pay a portion of a special $5.00 per share
cash dividend to Nathan's stockholders of record (see Note J of the Notes to the Consolidated Financial Statements), and (iv)
used 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 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 28, 2021, the Company made its required semi-annual interest payments of
$4,968,750 on May 1, 2020 and November 1, 2020. On May 1, 2021, the Company paid its semi-annual interest payment of
$4,968,750.

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

Our future results may be impacted by our interest obligations under the 2025 Notes. As a result of the issuance of
the 2025 Notes, Nathan’s incurs interest expense of $9,937,500 per annum and annual amortization of debt issuance costs of
approximately $691,000. 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 28, 2021,

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:

●

senior in right of payment to all of the Company and the guarantors’ future subordinated indebtedness;

●

effectively senior to all unsecured senior indebtedness to the extent of the value of the collateral securing the 2025
Notes and the guarantees;

● pari passu with all of the Company and the guarantors’ other senior indebtedness;

●

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;

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

●

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 had 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.

Effective June 1, 2020, Nathan’s Board of Directors authorized the repurchase of up to $10 million of the 2025
Notes by the Company (at a price equal to or less than par) from time to time. There is no set time limit on the repurchases.

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.

Leases

We determine if a contract contains a lease at inception. Our material operating leases consist of our Company-
owned restaurants and Corporate office space. Renewal options are typically not included in the lease term as it is not
reasonably certain at commencement date that we would exercise the option to extend the lease. Our real estate leases
typically provide for fixed minimum rent payments and/or contingent rent payments based upon sales in excess of specified
thresholds. Fixed minimum rent payments are recognized on a straight-line basis over the lease term. Contingent rent
payments are recognized each period as the liability is incurred or the asset is earned.

Operating lease assets and liabilities are recognized at time of lease inception. Operating lease liabilities represent
the present value of lease payments not yet paid. Operating lease assets represent our right to use an underlying asset and are
based upon the operating lease liabilities adjusted for any payments made before the commencement date, initial direct costs
and lease incentives earned.

The lease liability equals the present value of the remaining lease payments over the lease term and is discounted
using the incremental borrowing rate, as the rate implicit in the Company’s leases is not readily determinable. This
incremental borrowing rate is the rate of interest that the Company would have to pay to borrow, on a collateralized basis
over a similar term, an amount equal to the lease payments in a similar economic environment. If the estimate of our
incremental borrowing rate was changed, our operating lease assets and liabilities could differ materially.

Revenue Recognition

We earn revenues through our Company-owned restaurants, franchised restaurants and virtual kitchens. Retail sales
from franchised restaurants and virtual kitchens are reported to us by our franchisees and virtual kitchen operators and are
not included in our revenues. Retail sales from Company-owned restaurants are recognized at the point-of-sale. Royalty
revenues resulting from the retail sales from franchised restaurants and virtual kitchens are generally based on a percentage
of sales and recognized on a monthly basis when it is earned and deemed collectible. Franchise fees, renewal fees, area
development fees, and transfer fees are recognized as revenue over the term of each respective agreement, or upon termination
of the franchise agreement. Revenues from Company-owned restaurants and revenues from franchisees and our virtual
kitchen operators can fluctuate from time-to-time as a result of restaurant count and sales level changes.

We may also generate revenues from advertising contributions which are made to the Company’s Advertising Fund
which are also generally based on a percentage of sales. Some vendors that supply products to the Company and our restaurant
system may also contribute to the Advertising Fund based upon purchases made by our franchisees and at Company-owned
restaurants.

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 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.

Impairment of Goodwill and Other Intangible Assets

Goodwill and intangible assets consist of (i) goodwill of $95,000 resulting from the acquisition of Nathan’s in 1987;
and (ii) trademarks, trade names and other intellectual property of $1,156,000 in connection with Arthur Treacher’s. We test
goodwill for impairment annually, or more frequently if events or changes in circumstances indicate that the asset may be
impaired. As of March 28, 2021 and March 29, 2020, the Company performed its annual impairment test of goodwill and has
determined that no impairment is deemed to exist.

During the fiscal year ended March 29, 2020, the Company determined its indefinite-lived intangible asset to have
a finite useful life based on the expected future use of this intangible asset. Based upon the review of the current Arthur
Treacher’s co-branding agreements, the Company determined that the remaining useful lives of these agreements is twelve
years and the intangible asset is subject to annual amortization. The Company has recorded amortization expense of $113,000
and $84,000 during the fiscal years ending March 28, 2021 and March 29, 2020, respectively. As of March 28, 2021 and
March 29, 2020, the Company performed its annual impairment test of this finite-lived intangible asset and has determined
that no impairment is deemed to exist.

Impairment of Long-Lived Assets

Long-lived assets include property, equipment and right of use assets for operating leases with finite useful lives.
Impairment losses are recorded on long-lived assets 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 28, 2021 and March 29, 2020.

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. For stock option awards, the grant date fair value of the awards is determined using
the Black-Scholes option pricing model and involves several assumptions in determining the value of stock-based
compensation including:

(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 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.

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 H of the Notes to Consolidated Financial Statements.

Adoption of New Accounting Standards

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 Company adopted this guidance on March 30, 2020. The adoption of
this guidance did not have a material impact on the Company’s consolidated financial statements.

New Accounting Standards Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of
Credit Losses on Financial Instruments,” 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 this 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. In November 2019, the FASB deferred
the effective date for smaller reporting companies for annual reporting periods beginning after December 15, 2022. This
standard is required to take effect in Nathan’s first quarter (June 2023) of our fiscal year ending March 31, 2024. The
Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial
statements and related disclosures.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for
Income Taxes,” which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes
certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent
application. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020. This standard is required to take
effect in Nathan’s first quarter (June 2021) of our fiscal year ending March 27, 2022. The Company is currently evaluating
the impact that the adoption of this guidance will have on its consolidated financial statements and related disclosures.

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.

Results of Operations

Fiscal year ended March 28, 2021 compared to fiscal year ended March 29, 2020

Revenues

Total sales were $41,326,000 for the fifty-two weeks ended March 28, 2021 as compared to $70,559,000 for the
fifty-two weeks ended March 29, 2020. Foodservice sales from the Branded Product Program were $33,617,000 for the fiscal
2021 period as compared to sales of $57,586,000 for the fiscal 2020 period. The sales from our Branded Product Program
have been negatively impacted by the COVID-19 pandemic as many of our customers operate in venues that are currently
closed, such as movie theaters, or venues operating at reduced capacity, such as professional sports arenas, amusement parks
and shopping malls. During the fiscal 2021 period, the volume of business decreased by approximately 41% as compared to
the fiscal 2020 period. Our average selling prices increased by approximately 0.4% as compared to the fiscal 2020 period.

Total Company-owned restaurant sales were $7,709,000 during the fiscal 2021 period compared to $12,973,000
during the fiscal 2020 period. The decrease was primarily due to a decline in customer traffic at our Coney Island locations
related to the impact of the COVID-19 pandemic during the fiscal 2021 period. Additionally, as stipulated under government
orders, the dining rooms at our Company-owned restaurants were operating at reduced capacity and maintaining social
distancing protocols under these same government orders.

License royalties were $31,368,000 in the fiscal 2021 period as compared to $25,859,000 in the fiscal 2020 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 $28,694,000 for the fiscal 2021 period as
compared to $23,680,000 for the fiscal 2020 period. As consumers sheltered at home as a result of the COVID-19 pandemic,
our licensing business exhibited strong consumer demand. The increase is due to a 12% increase in retail volume during the
fiscal 2021 period, as well as a 12% increase in average net selling price as compared to the fiscal 2020 period. The
foodservice business earned lower royalties of $457,000 as compared to the fiscal 2020 period due to a shift in the business.
Royalties earned from all other licensing agreements for the manufacture and sale of Nathan’s products increased by $495,000
during the fiscal 2021 period as compared to the fiscal 2020 period primarily due to additional royalties earned on sales of
French fries, cocktail franks and mozzarella sticks.

Franchise fees and royalties were $1,601,000 in the fiscal 2021 period as compared to $4,572,000 in the fiscal 2020
period. Total royalties were $1,317,000 in the fiscal 2021 period as compared to $3,327,000 in the fiscal 2020 period.
Royalties earned under the Branded Menu Program were $229,000 in the fiscal 2021 period as compared to $643,000 in the
fiscal 2020 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 $1,088,000 in the fiscal 2021 period as compared
to $2,684,000 in the fiscal 2020 period. Franchise restaurant sales declined to $22,269,000 in the fiscal 2021 period as
compared to $61,542,000 in the fiscal 2020 primarily due to temporary closings, as well as venues operating at significantly
reduced traffic as a result of the COVID-19 pandemic. Comparable domestic franchise sales (consisting of 59 Nathan’s
outlets, excluding sales under the Branded Menu Program) were $17,095,000 during the fiscal 2021 period as compared to
$40,516,000 during the fiscal 2020 period.

At March 28, 2021, 213 franchised outlets, including domestic, international and Branded Menu Program outlets
were operating compared to 216 franchised outlets, including domestic, international and Branded Menu Program outlets at
March 29, 2020. Total franchise fee income was $284,000 in the fiscal 2021 period as compared to $1,245,000 in the fiscal
2020 period. Domestic franchise fee income was $133,000 in the fiscal 2021 period as compared to $143,000 in the fiscal
2020 period. International franchise fee income was $103,000 in the fiscal 2021 period as compared to $151,000 in the fiscal
2020 period.

We recognized $48,000 and $951,000 of forfeited fees in the fiscal 2021 and fiscal 2020 period, respectively. The
forfeited fees in the fiscal 2020 period were primarily from the termination of our Master Franchise Agreements for Russia,
Kyrgyzstan, Australia, United Kingdom and Turkey. During the fiscal 2021 period, seven franchised outlets opened,
including two new Branded Menu Program outlets. Additionally, 130 new virtual kitchens opened. During the fiscal 2020
period, 16 franchised outlets opened, including five international units and three new Branded Menu Program outlets.

Advertising fund revenue, after eliminating Company contributions, was $1,544,000 in the fiscal 2021 period and

$2,335,000 during the fiscal 2020 period.

Costs and Expenses

Overall, our cost of sales decreased by $21,952,000 to $32,536,000 in the fiscal 2021 period as compared to
$54,488,000 in the fiscal 2020 period. Our gross profit (representing the difference between sales and cost of sales) was
$8,790,000 or 21.3% of sales during the 2021 period as compared to $16,071,000 or 22.8% of sales during the fiscal 2020
period. The reduction in margin was primarily due to higher prime restaurant costs associated with new menu offerings, and
higher labor costs associated with higher minimum hourly rates of pay at two of our Company-owned restaurants.

Cost of sales in the Branded Product Program decreased by approximately $19,910,000 during the fiscal 2021 period
as compared to the fiscal 2020 period, primarily due to the 0.8% decrease in the average cost per pound of our hot dogs, as
well as the 41% decrease in the volume of product sold due to the COVID-19 pandemic as discussed above. We did not make
any purchase commitments for beef during the fiscal 2021 and 2020 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.

Beginning in May 2020, the cost of hot dogs increased significantly due primarily to the effects of the COVID-19
pandemic on the meat processing industry. This trend continued during the summer months and then declined during the
second half of the fiscal 2021 period.

With respect to Company-owned restaurants, our cost of sales during the fiscal 2021 period was $5,295,000 or
68.7% of restaurant sales, as compared to $7,337,000 or 56.6% of restaurant sales in the fiscal 2020 period. We experienced
higher food costs driven by higher prime costs associated with new menu offerings, and higher labor costs associated with
higher minimum hourly rates of pay at two of our Company-owned restaurants. We expect that our future labor costs will
continue to be impacted by the additional increase in minimum wage requirements in New York State which will commence
on July 1, 2021, as well as other new labor regulations and our food costs may be impacted by increases in commodity costs.

Restaurant operating expenses were $3,268,000 in the fiscal 2021 period as compared to $3,476,000 in the fiscal
2020 period. We incurred lower occupancy expenses of $252,000, lower utility expenses of $18,000, lower marketing
expenses of $73,000 and lower repairs and maintenance expenses of $15,000 which were offset, in part, by higher insurance
costs of $33,000 and higher delivery charges of $147,000 associated with offsite consumption.

Depreciation and amortization was $1,183,000 in the fiscal 2021 period as compared to $1,233,000 in the fiscal

2020 period.

General and administrative expenses decreased $2,738,000 or 18.5% to $12,041,000 in the fiscal 2021 period as
compared to $14,779,000 in the fiscal 2020 period. The Company reduced expenses in response to the impact of the COVID-
19 pandemic. The decrease in general and administrative expenses was primarily attributable to reduced corporate payroll
expenses through temporary salary reductions and layoffs, a lower incentive compensation accrual, reduced tradeshow and
sponsorship expenses in light of the COVID-19 pandemic and reductions in other discretionary expenses including marketing
and travel. These reductions were partially offset by increases in legal and other professional fees and severance costs related
to transitioning certain Corporate personnel from a furloughed status to a permanent layoff.

Advertising fund expense, after eliminating Company contributions, was $1,296,000 in the fiscal 2021 period, as

compared to $2,177,000 in the fiscal 2020 period.

Other Items

Interest expense of $10,601,000 in both the fiscal 2021 and fiscal 2020 periods represented accrued interest of

$9,910,000 on the 2025 Notes at 6.625% per annum and amortization of debt issuance costs of $691,000.

Interest income was $364,000 for the fiscal 2021 period as compared to $1,357,000 in the fiscal 2020 period.

Other income, which relates primarily to a sublease of a franchised restaurant was $47,000 and $86,000 in the fiscal

2021 and fiscal 2020 periods, respectively.

Provision for Income Taxes

The income tax provision for the fiscal 2021 period and fiscal 2020 period reflect effective tax rates of 27.7% and
25.4%, respectively. Nathan’s effective tax rate for the fiscal year ended March 29, 2020 was reduced by 1.3%, as a result of
the tax benefits associated with stock compensation. For the fiscal year ended March 29, 2020, excess tax benefits of $228,000
were reflected in the Consolidated Statements of Earnings as a reduction to the provision for income taxes. Nathan’s effective
tax rate without this adjustment would have been 26.7% for the fiscal 2020 period. The Company’s tax rate for the fiscal
2021 period was favorably affected by 0.1% due to its return to provision adjustment of approximately $18,000 in connection
with the filing of its March 2020 tax returns.

The amount of unrecognized tax benefits at March 28, 2021 was $397,000 all of which would impact Nathan’s
effective tax rate, if recognized. As of March 28, 2021, Nathan’s had $256,000 of accrued interest and penalties in connection
with unrecognized tax benefits.

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

by up to $19,000 during the fiscal year ending March 27, 2022.

Off-Balance Sheet Arrangements

At March 28, 2021 and March 29, 2020, 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 28, 2021 aggregated $81,064,000, a $3,947,000 increase during the fiscal 2021
period as compared to cash and cash equivalents of $77,117,000 at March 29, 2020. Net working capital increased to
$80,072,000 from $75,165,000 at March 29, 2020. Through March 28, 2021, the Company declared and paid four regular
dividends of $0.35 per common share aggregating $5,761,000. During the fiscal 2021 period, the Company made its required
semi-annual interest payments of $4,968,750 on May 1, 2020 and November 1, 2020. On May 1, 2021, we made the first
semi-annual interest payment of fiscal 2022.

Cash provided by operations of $11,766,000 in the fiscal 2021 period is primarily attributable to net income of
$11,075,000 in addition to other non-cash operating items of $2,064,000, offset by changes in other operating assets and
liabilities of $1,373,000. Non-cash operating expenses consist principally of depreciation and amortization of $1,183,000,
amortization of debt issuance cost of $691,000, share-based compensation expense of $116,000, non-cash rental expense of
$120,000, and bad debts of $101,000. In the fiscal 2021 period, accounts and other receivables increased by $645,000 due
primarily to higher franchise and license royalties receivable of $925,000 offset by lower Branded Product Program
receivables of $309,000. Prepaid expenses and other current assets increased by $144,000 due principally to the prepayment
of income taxes and insurance of $280,000 and $125,000, respectively, which were offset, in part, by a reduction in prepaid
marketing expenses of $173,000. Accounts payable, accrued expenses and other current liabilities decreased by $287,000
due principally to a reduction in accrued payroll and other benefits of $282,000 due primarily to lower incentive compensation
accruals; a reduction in accrued rebates due under the Branded Product Program of $382,000; and a reduction in accrued
income taxes of $176,000 which were offset, in part, by an increase in accounts payable of $532,000 due to the timing of
seasonal product purchases.

Cash used in investing activities was $551,000 in the fiscal 2021 period primarily in connection with capital
expenditures incurred for our Branded Product Program and the installation of a new point-of-sale system at our Company-
owned restaurants.

Cash used in financing activities of $7,268,000 in the fiscal 2021 period relates to the payments of the Company’s
regular quarterly $0.35 per share cash dividend totaling $5,761,000. Additionally, during the fiscal 2021 period, Nathan’s
repurchased 26,676 shares of common stock for $1,501,000.

During the period from October 2001 through March 28, 2021, Nathan’s purchased 5,254,081 shares of its common
stock at a cost of approximately $84,770,000 pursuant to stock repurchase plans previously authorized by the Board of
Directors. Since March 26, 2007, we have repurchased 3,362,981 shares at a total cost of approximately $77,612,000,
reducing the number of shares then-outstanding by 55.9%.

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 its common stock on behalf of the Company. As of March 28, 2021, Nathan’s has repurchased
1,066,450 shares at a cost of approximately $37,108,000 under the sixth stock repurchase plan. At March 28, 2021, there
were 133,550 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.

On March 13, 2020, the Company’s Board of Directors approved a 10b5-1 stock plan (the “10b5-1 Plan”) which
expired on August 12, 2020. During the fiscal 2021 period, the Company repurchased in open market transactions 26,676
shares of the Company’s common stock at an average share price of $56.26 for a total cost of $1,501,000 under the 10b5-1
Plan.

As discussed above, we had cash and cash equivalents at March 28, 2021 aggregating $81,064,000. 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. On June 14, 2019, Nathan’s Board of Directors authorized the increase of its regular
quarterly dividend to $0.35 from $0.25. During the fiscal 2021 period, we have declared and paid four quarterly dividend
distributions totaling $5,761,000.

Effective June 11, 2021, the Board declared its first quarterly cash dividend of $0.35 per share for fiscal 2022 which

will be paid on June 25, 2021 to stockholders of record as of the close of business on June 21, 2021.

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 28, 2021, we were required to make interest payments of $9,937,500, all of which have
been made as of November 1, 2020. During the fiscal year ending March 27, 2022, we will be required to make interest
payments of $9,937,500. On May 1, 2021, we made the first semi-annual interest payment of fiscal 2022.

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

At March 28, 2021, 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 such lease.

Our contractual obligations primarily consist of the 2025 Notes and the related interest payments, operating leases,
and employment agreement with certain executive officers. These contractual obligations impact our short-term and long-
term liquidity and capital resource needs. There have been no material changes in our contractual obligations since March
29, 2020.

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.
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. As of March 28, 2021, Nathan’s has recorded a liability of $113,000 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.

Inflationary Impact

We do not believe that general inflation has materially impacted earnings. However, we have experienced significant
volatility in our costs for our hot dogs and certain food products, distribution costs and utilities. Between April 2018 and
March 2020, beef prices traded within a range of + or - 10%. Prices were at the lowest levels between October 2018 and
March 2019 as compared to higher levels between October 2019 and March 2020. Our average cost of hot dogs between
October 2019 and March 2020 was approximately 11.2% higher than between October 2018 and March 2019. Our average
cost of hot dogs between April 2020 and March 2021 was approximately 0.8% lower than between April 2019 and March
2020.

We are unable to predict the future cost of our hot dogs and expect to experience price volatility for our beef products
during fiscal 2022. To the extent that beef prices increase as compared to earlier periods, it could impact our results of
operations. In the past, we have 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. 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, 2019, the minimum wage was $15.00 in New York City and increased to $13.75
per hour for the remainder of New York State.

The minimum hourly rate of pay for the remainder of New York State increased to $14.50 on Dec. 31, 2020; and

will increase to $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.

We may attempt to offset the effects of wage inflation, at least in part, through periodic menu price increases.

However, no assurance can be given that we will be able to offset these wage increases in the future.

Effective November 27, 2017, the City of New York Fair Work Week Legislation package of bills took effect that
covers City of New York 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.

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 28, 2021,
Nathan’s cash and cash equivalents aggregated $81,064,000. Earnings on this cash would increase or decrease by
approximately $203,000 per annum for each 0.25% change in interest rates.

Borrowings

At March 28, 2021, 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

Beginning May 2020, the cost of hot dogs increased significantly due primarily to the effects of the COVID-19
pandemic on the meat processing industry. This trend continued during the summer months and then declined during the
second half of the fiscal 2021 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 2022. 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. 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 hardening 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% in the cost of
our food and paper products for the year ended March 28, 2021 would have increased or decreased our cost of sales by
approximately $2,877,000.

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 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:

● pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and

dispositions of our assets;

● 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

● 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
28, 2021. 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 28, 2021. The effectiveness of our internal control over financial reporting as of March 28,
2021, 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
28, 2021 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 25, 2021 to shareholders of record at the close of business on June 21, 2021.

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

To the Stockholders 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 28, 2021, 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 28, 2021, 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 sheets as of March 28, 2021 and March 29, 2020 and the related consolidated
statements of earnings, stockholders’ deficit, and cash flows and the related notes for each of the fifty-two week periods
ended March 28, 2021 and March 29, 2020 of the Company, and our report dated June 11, 2021 expressed an unqualified
opinion on those financial statements.

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
New York, NY
June 11, 2021

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 2021 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 of approximately $235,000 in the fiscal 2021 period and
$165,000 in the fiscal 2020 period, 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 in the fiscal 2020 period the aggregate amount of approximately $100,000
in respect to the issuance of its consent to the inclusion of the fiscal 2017 and fiscal 2018 audited financial statements of the
Company in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2019 and $50,000 for the
issuance of its consent to the inclusion of fiscal 2018 audited financial statements of a wholly-owned subsidiary of the
Company for the fiscal year ended March 29, 2020 in our Franchise Disclosure Document.

Audit-Related Fees

Marcum LLP did not render any audit-related services for fiscal 2021 and 2020, respectively and, accordingly, did

not bill for any such services.

Tax Fees

Marcum LLP did not render any tax compliance, tax advice or tax planning services for fiscal 2021 and 2020,

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

All Other Fees

Marcum LLP did not render any other services for fiscal 2021 and 2020, 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 of all audit and non-audit services.

Our Audit Committee approved all of the audit services provided by Marcum LLP during fiscal 2021 and 2020,

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 on

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

(2)

Financial Statement Schedule

None.

(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

10.1

10.2

10.3

10.4

10.5

10.6

10.7

10.8

10.9

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.)
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.)
Description of Common Stock (incorporated by reference to Exhibit 4.5 to Form 10-K for the year ended March 29,
2020.)
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.)
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.)
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).
***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).

10.16

10.11

10.14

10.12

10.15

10.19

10.17

10.20

10.13

10.10

10.18

***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 & Co. (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 & Co. (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 29, 2020 (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).
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.)
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.)
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.)
First Amendment to Lease, dated April 1, 2019 by and between Jericho Plaza, LLC and Nathan’s Famous Services,
Inc. (Incorporated by reference to Exhibit 10.22 to Form 10-K for the year ended March 31, 2019.)
***2019 Stock Incentive Plan. (Incorporated by reference to Annex A to Proxy Statement on Schedule 14A dated
July 26, 2019.)
***Agreement dated as of December 13, 2019 between Nathans’ Famous, Inc. and Ronald G. DeVos. (Incorporated
by reference to Exhibit 10.1 to Form 8-K dated December 13, 2019.)
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 11, 2021.
(1) Certification by Eric Gatoff, Chief Executive Officer, pursuant to Rule 13a - 14(a).
(1) Certification by Robert Steinberg, 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 Robert Steinberg, 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.
101.INS
Inline XBRL Instance Document.
Inline XBRL Taxonomy Extension Schema Document
101.SCH
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document.
Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.DEF
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE
104

Inline XBRL Taxonomy Extension Presentation Linkbase Document.
Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101)

21
23.1
31.1
31.2
32.1

10.21

10.22

10.23

10.24

16.1

32.2

(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 11th day of June, 2021.

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 11th day of June, 2021.

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

/s/ HOWARD LORBER
Howard Lorber
Executive Chairman

/s/ ROBERT STEINBERG
Robert Steinberg
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

/s/ ANDREW LEVINE
Andrew Levine
Director

Nathan’s Famous, Inc. and Subsidiaries

TABLE OF CONTENTS

Page

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

Consolidated Balance Sheets .................................................................................................................................... F-3

Consolidated Statements of Earnings ....................................................................................................................... F-4

Consolidated Statements of Stockholders’ Deficit ................................................................................................... F-5 – F-6

Consolidated Statements of Cash Flows .................................................................................................................. F-7

Notes to Consolidated Financial Statements ............................................................................................................ F-8

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Nathan’s Famous, Inc. and Subsidiaries (the “Company”)
as of March 28, 2021 and March 29, 2020, the related consolidated statements of earnings, stockholders’ deficit and cash
flows for each of the fifty-two week periods ended March 28, 2021 and March 29, 2020, and the related notes (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 28, 2021 and March 29, 2020, and the results of its operations and its cash
flows for each of the fifty-two week periods ended March 28, 2021 and March 29, 2020, 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 28, 2021, 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 11, 2021, 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 provides a reasonable basis for our opinion.

Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or
required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the
financial statements and (2) involved especially challenging, subjective, or complex judgments. We determined that there are
no critical audit matters.

/s/ Marcum LLP

Marcum LLP

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

New York, NY
June 11, 2021

F-2

Nathan’s Famous, Inc. and Subsidiaries

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

March 28, 2021 March 29, 2020

ASSETS

CURRENT ASSETS

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

Property and equipment, net of accumulated depreciation of $9,779 and $9,468, respectively .
Operating lease assets (Note K) .................................................................................................
Goodwill ....................................................................................................................................
Intangible asset, net ....................................................................................................................
Deferred income taxes ................................................................................................................
Other assets ................................................................................................................................

81,064 $
11,652
624
1,325
94,665

4,090
8,337
95
1,156
138
328

77,117
11,108
378
1,181
89,784

4,610
9,181
95
1,269
-
343

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

108,809 $

105,282

LIABILITIES AND STOCKHOLDERS’ DEFICIT

CURRENT LIABILITIES

Accounts payable ....................................................................................................................... $
Accrued expenses and other current liabilities (Note G) ............................................................
Current portion of operating lease liabilities (Note K) ...............................................................
Deferred franchise fees ..............................................................................................................
Total current liabilities....................................................................................

Long-term debt, net of unamortized debt issuance costs of $3,169 and $3,860, respectively

(Note J) ...................................................................................................................................
Operating lease liabilities (Note K) ............................................................................................
Other liabilities (Note G)............................................................................................................
Deferred franchise fees ..............................................................................................................
Deferred income taxes ................................................................................................................

4,041 $
8,478
1,837
237
14,593

146,831
7,553
774
1,536
-

3,509
9,297
1,583
230
14,619

146,140
8,532
696
1,687
9

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

171,287

171,683

COMMITMENTS AND CONTINGENCIES (Note M)

STOCKHOLDERS’ DEFICIT

Common stock, $.01 par value; 30,000,000 shares authorized; 9,369,015 and 9,368,792
shares issued; and 4,114,934 and 4,141,387 shares outstanding at March 28, 2021 and
March 29, 2020, respectively .................................................................................................
Additional paid-in capital ...........................................................................................................
Accumulated deficit ...................................................................................................................
Stockholders’ equity before treasury stock ................................................................................

94
62,240
(40,042 )
22,292

94
62,130
(45,356 )
16,868

Treasury stock, at cost, 5,254,081 and 5,227,405 shares at March 28, 2021 and March 29,

2020 .......................................................................................................................................
Total stockholders’ deficit ..............................................................................

(84,770 )
(62,478 )

(83,269 )
(66,401 )

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

108,809 $

105,282

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

F-3

Nathan’s Famous, Inc. and Subsidiaries

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

Fifty-Two
weeks ended weeks ended

Fifty-Two

March 28,
2021

March 29,
2020

REVENUES

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

COSTS AND EXPENSES

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

41,326 $
31,368
1,601
1,544
75,839

32,536
3,268
1,183
12,041
1,296
50,324

70,559
25,859
4,572
2,335
103,325

54,488
3,476
1,233
14,779
2,177
76,153

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

25,515

27,172

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

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

(10,601)
364
47

15,325
4,250
11,075 $

(10,601 )
1,357
86

18,014
4,579
13,435

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

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

4,116,000
4,116,000

4,216,000
4,216,000

Income per share:

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

2.69 $
2.69 $

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

1.40 $

3.19
3.19

1.40

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

F-4

Nathan’s Famous, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
Fifty-two weeks ended March 28, 2021 and the Fifty-two weeks ended March 29, 2020

(in thousands, except share and per share amounts)

Common Common

Paid-in Accumulated

Additional

Treasury Stock, at
Cost

Total
Stockholders’

Balance, March 31, 2019 ................. 9,336,338 $

Stock Capital Deficit
93 $ 60,945 $

Amount Deficit

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

(70,144)

Shares issued in connection with

share-based compensation plans ..

32,454

1,077

1,078

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

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

Dividends on common stock ...........

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

(8)

85,642 (4,966)

(4,966)

(5,912 )

116

(5,912)

116

Net income ......................................
-
Balance, March 29, 2020 ................. 9,368,792 $

-
94 $ 62,130 $

13,435
-
(45,356 ) 5,227,405 $ (83,269) $

13,435
(66,401)

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-two weeks ended March 28, 2021 and the Fifty-two weeks ended March 29, 2020

(in thousands, except share and per share amounts)

Balance, March 29, 2020 ............... 9,368,792 $

(45,356 ) 5,227,405 $ (83,269) $

(66,401)

Common Common
Shares

Additional

Paid-in Accumulated

Treasury Stock, at
Cost

Total
Stockholders’

Amount Deficit

Stock Capital Deficit
94 $ 62,130 $

Shares issued in connection with
share-based compensation
plans ...........................................

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

Repurchase of common stock .......

Dividends on common stock ........

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

223

(6)

26,676 (1,501)

(1,501)

(5,761 )

116

(5,761)

116

Net income .....................................
-
Balance, March 28, 2021 ............... 9,369,015 $

-
94 $ 62,240 $

11,075
-
(40,042 ) 5,254,081 $ (84,770) $

11,075
(62,478)

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

F-6

Nathan’s Famous, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

Fifty-Two
weeks ended weeks ended

Fifty-Two

March 28,
2021

March 29,
2020

Cash flows from operating activities:

Net income ................................................................................................................... $
Adjustments to reconcile net income to net cash provided by operating activities

11,075 $

13,435

Depreciation and amortization ..........................................................................
Non cash rental expense ....................................................................................
Amortization of debt issuance costs ..................................................................
Share-based compensation expense ..................................................................
Income tax benefit on stock option exercises ....................................................
Provision for doubtful accounts ........................................................................
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 ..................................................................................................

1,183
120
691
116
-
101
(147)

(645)
(246)
(144)
15
(287)
(144)
78

1,233
232
691
116
228
71
352

(1,006 )
157
(174 )
122
(2,028 )
(1,088 )
8

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

11,766

12,349

Cash flows from investing activities:

Purchase of property and equipment ............................................................................

(551)

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

(551)

Cash flows from financing activities:

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 compensation

plans .........................................................................................................................
Net cash used in financing activities ......................................................

(5,761)
(1,501)
-

(6)
(7,268)

(870 )

(5,912 )
(4,966 )
1,078

(8 )
(9,808 )

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

3,947

1,671

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

77,117

75,446

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

81,064 $

77,117

Cash paid during the year for:

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

9,938 $
4,768 $

9,938
3,874

Noncash financing activity:

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

1.40 $

1.40

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

F-7

Nathan’s Famous, Inc. and Subsidiaries

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

March 28, 2021 and March 29, 2020

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 28, 2021, the Company’s restaurant system included four Company-owned units in the New York City
metropolitan area and 213 franchised or licensed units, located in nineteen states and eight foreign countries.

Covid-19 Pandemic

In March 2020, the World Health Organization declared the novel strain of coronavirus (COVID-19), a global pandemic.
The COVID-19 pandemic has had an impact on the Company’s business, financial condition, cash flows and results of
operations for the fiscal year ended March 28, 2021 and continues into fiscal 2022. Governmental restrictions and public
perceptions of the risks associated with COVID-19 have caused consumers to avoid or limit nonessential travel,
gatherings in public places and other social interactions, which has adversely affected, and could continue to adversely
affect, our business. The COVID-19 pandemic, has and may continue to impact customer traffic at our Company-owned
restaurants and franchised restaurants, as well as sales to our Branded Product Program customers. We cannot predict
whether, when or the manner in which the conditions surrounding the pandemic will change and cannot currently estimate
the impact on our business in the short or long-term.

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.

F-8

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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
fiscal years ended March 28, 2021 and March 29, 2020 are on the basis of a 52-week reporting period.

3. 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.

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.

4. 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. The Company did not have any cash equivalents at March 28, 2021 or March 29, 2020.

At March 28, 2021 and March 29, 2020, substantially all of the Company’s cash balances are in excess of Federal
government insurance limits. The Company has not experienced any losses in such accounts.

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.

6. 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) .................................. 5 – 25
Machinery, equipment, furniture and fixtures (years) ...... 3 – 15
Leasehold improvements (years) ...................................... 5 – 20

F-9

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

7. 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 $1,156 in connection with Arthur Treacher’s.

As of March 28, 2021, the Company performed its annual impairment test of goodwill in accordance with the accounting
guidance adopted in the first quarter fiscal 2021 that simplifies the testing for goodwill impairment, as discussed in Note
B.22 – Adoption of New Accounting Standard. No impairment charges were recognized on goodwill for the fiscal years
ended March 28, 2021 and March 29, 2020.

During the fiscal year ended March 29, 2020, the Company determined its indefinite-lived intangible asset to have a
finite useful life based on the expected future use of this intangible asset. Based upon the review of the current Arthur
Treacher’s co-branding agreements, the Company determined that the remaining useful lives of these agreements is
twelve years and the intangible asset is subject to annual amortization. The Company has recorded amortization expense
of $113 and $84 for the fiscal years ending March 28, 2021 and March 29, 2020, respectively.

The Company reviews its definite-lived intangible asset for impairment whenever events or changes in circumstances
indicate that the carrying value may not be recoverable. The Company determined that the impact of COVID-19 on its
business was a sufficient indicator that the carrying value may not be recoverable. The Company tested for recoverability
of its definite-lived intangible asset based on the projected undiscounted cash flows to be derived from such co-branding
agreements. Based on the quantitative test performed, the Company determined that the definite-lived intangible asset
was recoverable and no impairment charge was recorded for the fiscal years ended March 28, 2021 and March 29, 2020.

Annual amortization of the intangible asset for the next five years and thereafter will approximate the following:

Estimate for
fiscal year

2022 ............................................................................. $
2023 .............................................................................
2024 .............................................................................
2025 .............................................................................
2026 .............................................................................
Thereafter ....................................................................
Total ............................................................................. $

113
113
113
113
113
591
1,156

8. Long-lived Assets

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

F-10

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Long-lived assets include property, equipment and right of use assets for operating leases with finite useful lives. Assets
are grouped at the individual restaurant level which represents the lowest level for which cash flows can be identified
largely independent of the cash flows of other assets and liabilities. The Company generally considers a history of
restaurant operating losses to be its primary indicator of potential impairment for individual restaurant locations. As a
result of the impact of the COVID-19 pandemic on its business, the Company determined that sufficient indicators existed
to trigger the performance of an impairment analysis as of March 28, 2021.

The Company tests for recoverability based on the projected undiscounted cash flows to be derived from such assets. If
the projected undiscounted future cash flows are less than the carrying value of the asset, the Company will record on a
restaurant-by-restaurant basis, 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 assets. 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. No long-lived assets were deemed to be
permanently impaired during the fiscal years ended March 28, 2021 and March 29, 2020.

9. Leases

Determination of Whether a Contract Contains a Lease

We determine if an arrangement is a lease at inception or modification of a contract, and classify each lease as either an
operating or finance lease at commencement. The Company only reassesses lease classifications subsequent to
commencement upon a change to the expected lease term or the contract being modified. Operating leases represent the
Company’s right to use an underlying asset as lessee for the lease term, and lease obligations represent the Company’s
obligation to make lease payments arising from the lease.

ROU Model and Determination of Lease Term

The Company uses the right-of-use (“ROU”) model to account for leases where the Company is the lessee, which requires
an entity to recognize a lease liability and ROU asset on the lease commencement date. A lease liability is measured
equal to the present value of the remaining lease payments over the lease term and is discounted using the incremental
borrowing rate, as the rate implicit in the Company’s leases is not readily determinable. The incremental borrowing rate
is the rate of interest that the Company would have to pay to borrow, on a collateralized basis over a similar term, an
amount equal to the lease payments in a similar economic environment. Lease payments include payments made before
the commencement date and any residual value guarantees, if applicable. The initial ROU asset consists of the initial
measurement of the lease liability, adjusted for any payments made before the commencement date, initial direct costs
and lease incentives earned. When determining the lease term, as both lessee and lessor, the Company includes option
periods when it is reasonably certain that those options will be exercised.

F-11

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Operating Leases

For operating leases, minimum lease payments or receipts, including minimum scheduled rent increases, are recognized
as rent expense where the Company is a lessee, or income where the Company is a lessor, as applicable, on a straight-
line basis (“Straight-Line Rent”) over the applicable lease terms. There is a period under certain lease agreements referred
to as a rent holiday (“Rent Holiday”) that generally begins on the possession date and ends on the rent commencement
date. During a Rent Holiday, no cash rent payments are typically due under the terms of the lease; however, rent expense
is recorded for that period on a straight-line basis. The excess of the Straight-Line Rent over the minimum rents paid is
included in the ROU asset where the Company is a lessee. The excess of the Straight-Line Rent over the minimum rents
received is recorded as a deferred lease asset and is included in “Other Assets” where the Company is a lessor. The
Company recorded $34 and $32 in Other Assets at March 28, 2021 and March 29, 2020, respectively. Certain leases
contain provisions, referred to as contingent rent (“Contingent Rent”), that require additional rental payments based upon
restaurant sales volume. Contingent Rent is recognized each period as the liability is incurred or the asset is earned.

Lease cost for operating leases is recognized on a straight-line basis and includes the amortization of the ROU asset and
interest expense relating to the operating lease liability. Variable lease cost for operating leases include Contingent Rent
and payments for executory costs such as real estate taxes, insurance and common area maintenance, which are excluded
from the measurement of the lease liability. Short-term lease cost for operating leases includes rental expense for leases
with a term of less than 12 months. Leases with an initial expected term of 12 months or less are not recorded in the
Consolidated Balance Sheets and the related lease expense is recognized on a straight-line basis over the lease term.
Lease costs are recorded in the Consolidated Statements of Earnings based on the nature of the underlying leases as
follows: (1) rental expense related to leases for Company-operated restaurants is recorded to “Restaurant Operating
Expenses,” (2) rental expense for leased properties that are subsequently subleased to franchisees is recorded to “Other
Income, net” and (3) rental expense related to leases for corporate offices and equipment is recorded to “General and
administrative expenses.”

Rental income for operating leases on properties subleased to franchisees is recorded net of associated lease costs to
“Other income, net.” At March 28, 2021, 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.

Significant Assumptions and Judgement

Management makes certain estimates and assumptions regarding each new lease and sublease agreement, renewal and
amendment, including, but not limited to, property values, market rents, property lives, discount rates and probable term,
all of which can impact (1) the classification and accounting for a lease or sublease as operating or finance, (2) the Rent
Holiday and escalations in payment that are taken into consideration when calculating Straight-Line Rent, (3) the term
over which leasehold improvements for each restaurant are amortized and (4) the values and lives of adjustments to the
initial ROU asset where the Company is the lessee, or favorable and unfavorable leases where the Company is the lessor.
The amount of depreciation and amortization, interest and rent expense and income would vary if different estimates and
assumptions were used.

F-12

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

In April 2020, the FASB issued guidance allowing entities to make a policy election whether to account for lease
concessions related to the COVID-19 pandemic as lease modifications. The election applies to any lessor – provided
lease concession related to the impact of the COVID-19 pandemic, provided the concession does not result in a
substantial increase in the rights of the lessor or in the obligations of the lessee. During the fiscal year ended March 28,
2021, the Company received non-substantial concessions from certain landlords in the form of rent reductions. The
Company elected to not account for these rent concessions as lease modifications. This election did not have a material
impact on our Consolidated Financial Statements as of March 28, 2021.

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:

●

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 28, 2021 and March 29, 2020, 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 28, 2021 and a fair value of $154,420 as of
March 28, 2021. 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.

F-13

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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 definite- lived assets and long-lived assets. The Company
utilized the income approach (Level 3 inputs) which utilized projected undiscounted cash flows 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 - 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.

13. 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.

14. 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.

F-14

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

15. 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.

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

● Approval of all site selections to be developed.
● Provision of architectural plans suitable for restaurants to be developed.
● Assistance in establishing building design specifications, reviewing construction compliance and equipping the

restaurant.

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

The services provided in exchange for these upfront restaurant franchise fees do not contain separate and distinct
performance obligations from the franchising right and these initial franchise fees, renewal fees and transfer fees are
deferred and recognized over the term of each respective agreement, or upon termination of the franchise agreement.

The services provided in exchange for these international development fees do not contain separate and distinct
performance obligations from the franchise right and these international development fees are deferred and recognized
over the term of each respective agreement. Certain other costs, such as legal expenses, are expensed as incurred.

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 collectability is deemed to be reasonably assured.

The following is a summary of franchise openings and closings for the Nathan’s franchise restaurant system for the fiscal
years ended March 28, 2021 and March 29, 2020:

March 28,

March 29,

2021

2020

Franchised restaurants operating at the beginning of the period .....

216

New franchised restaurants opened during the period ....................

Franchised restaurants closed during the period .............................

Franchised restaurants operating at the end of the period ...............

(10)

213

255

(55)

216

F-15

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Contract balances

The following table provides information about contract liabilities (Deferred franchise fees) from contracts with
customers:

March 28,
2021

March 29,
2020

Deferred franchise fees (a) ................................................................................. $

1,773 $

1,917

(a) Deferred franchise fees of $237 and $1,536 are included in Deferred franchise fees – current and long term as of

March 28, 2021, respectively and $230 and $1,687 as of March 29, 2020, respectively.

Significant changes in Deferred franchise fees for the fiscal years ended March 28, 2021 and March 29, 2020 are as
follows:

Deferred franchise fees at beginning of period .................................................. $
New deferrals due to cash received and other ....................................................
Revenue recognized during the period ...............................................................
Deferred franchise fees at end of period ............................................................ $

1,917 $
140
(284)
1,773 $

3,005
157
(1,245)
1,917

March 28,
2021

March 29,
2020

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:

Estimate for
fiscal year

2022 ..............................................
2023 ..............................................
2024 ..............................................
2025 ..............................................
2026 ..............................................
Thereafter .....................................
Total .............................................. $

237
213
198
183
159
783
1,773

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.

F-16

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

16. 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.

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 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.

17. Business Concentrations and Geographical Information

The Company’s accounts receivable consists 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 28,
2021, three Branded Product customers represented 19%, 13% and 7%, of accounts receivable. At March 29, 2020, three
Branded Product customers represented 24%, 11% and 10%, of accounts receivable. One Branded Products customer
accounted for 9% and 12% of total revenue for the fiscal years ended March 28, 2021 and March 29, 2020, respectively.
One retail licensee accounted for 39% and 24% of the total revenue for the fiscal years ended March 28, 2021 and March
29, 2020, respectively.

The Company’s primary supplier of hot dogs represented 92% of product purchases for each of the fiscal years ended
March 28, 2021 and March 29, 2020. The Company’s primary distributor of products to its Company-owned restaurants
represented 6% and 5% of product purchases for each of the fiscal years ended March 28, 2021 and March 29, 2020,
respectively.

The Company’s revenues for the fiscal years ended March 28, 2021 and March 29, 2020 were derived from the following
geographic areas:

March 28,
2021

March 29,
2020

Domestic (United States) .............................................. $
Non-domestic ................................................................
$

74,737 $
1,102
75,839 $

98,453
4,872
103,325

F-17

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

The Company’s sales for the fiscal years ended March 28, 2021 and March 29, 2020 were derived from the following:

March 28,
2021

March 29,
2020

Branded Products .......................................................... $
Company-owned restaurants .........................................
Total sales .............................................................. $

33,617 $
7,709
41,326 $

57,586
12,973
70,559

License royalties............................................................ $

31,368 $

25,859

Royalties........................................................................
Franchise fees ................................................................
Total franchise fees and royalties ...........................

1,317
284
1,601

Advertising fund revenue ..............................................

1,544

3,327
1,245
4,572

2,335

Total revenues ........................................................ $

75,839 $

103,325

18. 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 $72 and $145, for the fiscal years ended March 28, 2021
and March 29, 2020, respectively, and have been included within restaurant operating expenses in the accompanying
Consolidated Statements of Earnings.

19. Stock-Based Compensation

At March 28, 2021, 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
consolidated 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.

F-18

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

20. 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.

21. 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.

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 H for a further discussion of our income taxes.

F-19

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

22. Adoption of New Accounting Standard

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 Company adopted this guidance on March 30, 2020. The adoption of
this guidance did not have a material impact on the Company’s consolidated financial statements.

23. New Accounting Standards Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of
Credit Losses on Financial Instruments," 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 this 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. In November 2019, the FASB deferred the effective date for smaller reporting companies for annual reporting
periods beginning after December 15, 2022. This standard is required to take effect in Nathan’s first quarter (June 2023)
of our fiscal year ending March 31, 2024. The Company is currently evaluating the impact that the adoption of this
guidance will have on its consolidated financial statements and related disclosures.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income
Taxes,” which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes
certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve
consistent application. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020. This standard is
required to take effect in Nathan’s first quarter (June 2021) of our fiscal year ending March 27, 2022. The Company is
currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements and
related disclosures.

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.

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.

F-20

NOTE C - INCOME PER SHARE (continued)

The following chart provides a reconciliation of information used in calculating the per-share amounts for the fiscal
years ended March 28, 2021 and March 29, 2020, respectively:

Net Income

Net income per
share

2021 2020

2021

2020

2021 2020

Basic EPS

Basic calculation ........................... $ 11,075 $ 13,435 4,116,000 4,216,000 $ 2.69 $
Effect of dilutive employee stock

3.19

options .......................................

Diluted EPS

Diluted calculation ........................ $ 11,075 $ 13,435 4,116,000 4,216,000 $ 2.69 $

3.19

Options to purchase 10,000 shares of common stock for the fiscal years ended March 28, 2021 and March 29, 2020
were excluded from 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 28,

March 29,

2021

2020

Branded product sales ............................................................................. $
Franchise and license royalties ...............................................................
Other .......................................................................................................

6,480 $
5,224
293
11,997

6,789
4,299
257
11,345

Less: allowance for doubtful accounts ....................................................

345

237

Accounts and other receivables, net ....................................................... $

11,652 $

11,108

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.

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.

F-21

NOTE D - ACCOUNTS AND OTHER RECEIVABLES, NET (continued)

Changes in the Company’s allowance for doubtful accounts for the fiscal years ended March 28, 2021 and March 29,
2020 are as follows:

March 28,
2021

March 29,
2020

Beginning balance ................................................................................. $
Bad debt expense ...............................................................................
Write offs and other ...........................................................................

237 $
101
7

585
71
(419 )

Ending balance ...................................................................................... $

345 $

237

NOTE E - PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following:

March 28,

March 29,

2021

2020

Income taxes ............................................................................................. $
Real estate taxes .......................................................................................
Insurance ..................................................................................................
Marketing .................................................................................................
Other .........................................................................................................

280 $
87
388
196
374

-
75
263
369
474

Total prepaid expenses and other current assets ....................................... $

1,325 $

1,181

NOTE F - PROPERTY AND EQUIPMENT, NET

Property and equipment consist of the following:

March 28,

March 29,

2021

2020

Land ......................................................................................................... $
Building and improvements .....................................................................
Machinery, equipment, furniture and fixtures ..........................................
Leasehold improvements ..........................................................................
Construction-in-progress ..........................................................................
Total property and equipment ..................................................................
Less: accumulated depreciation and amortization ....................................

123 $
1,398
5,292
7,044
12
13,869
9,779

123
1,456
5,529
6,891
79
14,078
9,468

Property and equipment, net ..................................................................... $

4,090 $

4,610

Depreciation and amortization expense related to properties was $1,070 and $1,149 for the fiscal years ended March
28, 2021 and March 29, 2020, respectively.

F-22

NOTE G – ACCRUED EXPENSES, OTHER CURRENT LIABILITIES AND OTHER LIABILITIES

Accrued expenses and other current liabilities consist of the following:

March 28,

March 29,

2021

2020

Payroll and other benefits ......................................................................... $
Accrued rebates ........................................................................................
Rent and occupancy costs .........................................................................
Deferred revenue ......................................................................................
Construction costs ....................................................................................
Interest ......................................................................................................
Professional fees .......................................................................................
Corporate income taxes ............................................................................
Sales, use and other taxes .........................................................................
Other .........................................................................................................
Total accrued expenses and other current liabilities ................................. $

2,793 $
132
73
841
60
4,057
200
-
60
262
8,478 $

3,075
514
84
797
105
4,084
194
176
17
251
9,297

Other liabilities consist of the following:

Reserve for uncertain tax positions (Note H) ...........................................
Other .........................................................................................................
Total other liabilities ................................................................................ $

653
121
774 $

567
129
696

March 28,

March 29,

2021

2020

NOTE H – INCOME TAXES

The income tax provision consists of the following for the fiscal years ended March 28, 2021 and March 29,
2020:

March 28,
2021

March 29,
2020

Federal

Current .................................................................................................. $
Deferred ................................................................................................
Total Federal income tax ......................................................................

State and local

Current ..................................................................................................
Deferred ................................................................................................
Total State and local income tax ...........................................................
Total provision for income taxes .......................................................... $

3,146 $
(92 )
3,054

1,251
(55 )
1,196
4,250 $

2,904
322
3,226

1,323
30
1,353
4,579

F-23

NOTE H - INCOME TAXES (continued)

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“the CARES Act”) was enacted into law
which among other provisions increases the limitation on the allowed business interest expense deduction from 30
percent to 50 percent of adjusted taxable income for tax years beginning January 1, 2019 and 2020. Additionally, the
CARES Act allows businesses to immediately expense the full cost of Qualified Improvement Property, retroactive to
tax years beginning on or after January 1, 2018.

The income tax provisions for the fiscal years ended March 28, 2021 and March 29, 2020 reflect effective tax rates of
27.7% and 25.4%, respectively.

The total income tax provision for the fiscal years ended March 28, 2021 and March 29, 2020 differs from the amounts
computed by applying the United States Federal income tax rate of 21% to income before income taxes as a result of
the following:

March 28,
2021

March 29,
2020

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 benefit share based payments ............................................................
Total provision for income taxes .......................................................... $

3,218 $
936
68
(35 )
63
-
4,250 $

3,783
1,028
60
(95 )
31
(228 )
4,579

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 28,

March 29,

2021

2020

Deferred tax assets

Accrued expenses ................................................................................. $
Allowance for doubtful accounts ..........................................................
Deferred revenue ..................................................................................
Deferred stock compensation ................................................................
Operating lease liability ........................................................................
Other .....................................................................................................
Total deferred tax assets ......................................................... $

Deferred tax liabilities

Deductible prepaid expense ..................................................................
Operating lease right-of-use asset ..........................................................
Depreciation expense ............................................................................
Amortization .........................................................................................
Total deferred tax liabilities ....................................................
Net deferred tax asset (liability) ............................................. $

339 $
87
445
58
2,190
120
3,239 $

223
1,954
634
290
3,101
138 $

394
57
485
45
2,321
94
3,396

246
2,116
720
323
3,405
(9 )

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.

F-24

NOTE H - INCOME TAXES (continued)

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits, excluding interest and
penalties, for the fiscal years ended March 28, 2021 and March 29, 2020.

March 28,
2021

March 29,
2020

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 .................................................... $

311 $
(16 )
102
-
397 $

253
(10 )
52
16
311

The amount of unrecognized tax benefits at March 28, 2021 and March 29, 2020 were $397 and $311, respectively,
all of which would impact Nathan’s effective tax rate, if recognized. As of March 28, 2021 and March 29, 2020, the
Company had $256 and $259, respectively, accrued for the payment of interest and penalties. For the fiscal years ended
March 28, 2021 and March 29, 2020 Nathan’s recognized interest and penalties in the amounts of $(3) and $32,
respectively.

During the fiscal year ending March 27, 2022, 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 $19, which would favorably impact Nathan’s effective tax
rate, although no assurances can be given in this regard.

In November 2019, the State of New Jersey notified Nathan’s that our tax returns for the fiscal years ended March 27,
2016, March 26, 2017 and March 25, 2018 will be audited. In November 2020, the audit was completed and no
adjustments were noted.

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
2018
2018
2018
2017
2017

F-25

NOTE I – 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 hot dogs, 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.

Interest expense, interest income 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 I – SEGMENT INFORMATION (continued)

Operating segment information for the fiscal years ended March 28, 2021 and March 29, 2020 is as follows:

March 28,
2021

March 29,
2020

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 ................................................................ $

Interest expense .......................................................................................... $
Interest income ...........................................................................................
Other income, net .......................................................................................
Income before provision for income taxes ................................... $

Total assets
Branded Product Program........................................................................... $
Product licensing ........................................................................................
Restaurant operations .................................................................................
Corporate ....................................................................................................
Total assets ................................................................................... $

33,617 $
31,368
9,310
1,544
75,839 $

4,635 $
31,186
(2,856)
(7,450)
25,515 $

(10,601) $
364
47
15,325 $

7,037 $
4,775
11,662
85,335
108,809 $

57,586
25,859
17,545
2,335
103,325

7,688
25,677
1,637
(7,830 )
27,172

(10,601 )
1,357
86
18,014

7,352
3,906
12,915
81,109
105,282

Depreciation & amortization expense
Branded Product Program........................................................................... $
Restaurant operations .................................................................................
Corporate ....................................................................................................
Total depreciation & amortization expense .................................. $

247 $
613
323
1,183 $

312
641
280
1,233

(1) Represents advertising fund revenue

F-27

NOTE J – LONG-TERM DEBT

Long-term debt consists of the following:

March 28,

March 29,

2021

2020

6.625% Senior Secured Notes due 2025 ..................................................... $
Less: unamortized debt issuance costs ........................................................
Long-term debt, net ................................................................................. $

150,000 $
(3,169)
146,831 $

150,000
(3,860 )
146,140

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 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, 2020 and November 1, 2020. On
May 1, 2021, the Company paid its first semi-annual interest payment of fiscal 2022.

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 28, 2021, 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 J – LONG-TERM DEBT (continued)

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.

F-29

NOTE J – LONG-TERM DEBT (continued)

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

●
●

senior in right of payment to all of the Company and the guarantors’ future subordinated indebtedness;
effectively senior to all unsecured senior indebtedness to the extent of the value of the collateral securing the
2025 Notes and the guarantees;

● pari passu with all of the Company and the guarantors’ other senior indebtedness;
●

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;
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
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 had 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.

F-30

NOTE J – LONG-TERM DEBT (continued)

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.

Effective June 1, 2020, Nathan’s Board of Directors authorized the repurchase of up to $10 million of the 2025 Notes
by the Company (at par or better) from time to time. There is no set time limit on the repurchases.

NOTE K – LEASES

The Company is party as lessee to various leases for its Company-operated restaurants and lessee/sublessor to one
franchised location property, including land and buildings, as well as leases for its corporate office and certain office
equipment.

Company as lessee

The components of the net lease cost for the fiscal years ended March 28, 2021 and March 29, 2020 were as follows:

March 28,
2021

March 29,
2020

Statement of Earnings .................................................................................
Operating lease cost .................................................................................... $
Short term lease cost ...................................................................................
Variable lease cost ......................................................................................
Less: Sublease income, net .........................................................................

1,444 $
-
1,194
(47 )

1,238
17
1,517
(85 )

Total net lease cost (a) ................................................................................ $

2,591 $

2,687

(a) The fiscal years ended March 28, 2021 and March 29, 2020 include $1,981, net and $2,137, net,
respectively, recorded to “Restaurant Operating Expenses” for leases for Company-operated
restaurants; $657 and $635, respectively, recorded to “General and administrative expenses” for
leases for corporate offices and equipment; and $47 and $85, respectively, recorded to “Other
income, net” for leased properties that are leased to franchisees.

Cash paid for amounts included in the measurement of lease liabilities for the fiscal years ended March 28, 2021 and
March 29, 2020 were as follows:

Operating cash flows from operating leases ...............................................

$727

$375

March 28,
2021

March 29,
2020

F-31

NOTE K – LEASES (continued)

The weighted average remaining lease term and weighted-average discount rate for operating leases for the fiscal years
ended March 28, 2021 and March 29, 2020 were as follows:

March 28,
2021

March 29,
2020

Weighted average remaining lease term (years): ....................................

7.2

8.1

Weighted average discount rate: .............................................................

8.870%

8.869%

Future lease commitments to be paid and received by the Company as of March 28, 2021 were as follows:

Payments
Operating
Leases

Receipts
Subleases

Net Leases

Fiscal year:

2022 ................................................................ $
2023 ................................................................
2024 ................................................................
2025 ................................................................
2026 ................................................................
Thereafter ........................................................
Total lease commitments ........................................... $
Less: Amount representing interest ...........................
Present value of lease liabilities (a) ........................... $

1,837 $
1,849
1,774
1,678
1,712
3,761
12,611 $
3,221
9,390

247 $
168
169
169
169
183
1,105 $

1,590
1,681
1,605
1,509
1,543
3,578
11,506

(a) The present value of minimum operating lease payments of $1,837 and $7,553 are included
in “Current portion of operating lease liabilities” and “Long-term operating lease
liabilities,” respectively, on the Consolidated Balance Sheet.

Company as lessor

The components of lease income for the fiscal years ended March 28, 2021 and March 29, 2020 were as follows:

March 28, 2021 March 29, 2020

Operating lease income, net.................................................................

$47

$84

F-32

NOTE L – STOCKHOLDERS’ EQUITY, STOCK PLANS AND OTHER EMPLOYEE BENEFIT PLANS

1. Dividends

Effective June 14, 2019, the Board declared its first quarterly cash dividend of $0.35 per share for fiscal year 2020.
Through March 29, 2020, the Company declared and paid four regular quarterly dividends of $0.35 per common
share aggregating $5,912.

Effective June 12, 2020, the Board declared its first quarterly cash dividend of $0.35 per share for fiscal year 2021.
Through March 28, 2021, the Company declared and paid four regular quarterly dividends of $0.35 per common
share aggregating $5,761.

Effective June 11, 2021, the Board declared its first quarterly cash dividend of $0.35 per share for fiscal year 2022
which is payable on June 25, 2021 to stockholders of record as of the close of business on June 21, 2021.

Our ability to pay future dividends is limited by the terms of the Indenture with U.S. 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.

2. Stock Incentive Plans

On September 13, 2012, the Company amended the Nathan’s Famous, Inc. 2010 Stock Incentive Plan (the “2010
Plan”) increasing the number of shares available for issuance by 250,000 shares. Shares to be issued under the
2010 Plan were to 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 were subject to adjustment in the amount
that the Company’s Compensation Committee considered appropriate upon the occurrence of certain events,
including stock dividends, stock splits, mergers, consolidations, reorganizations, recapitalizations, or other capital
adjustments.

On September 18, 2019, the Company’s shareholders approved the Nathan’s Famous, Inc. 2019 Stock Incentive
Plan (the “2019 Plan”). The 2019 Plan became effective as of July 1, 2020 (the "Effective Date"). Following the
Effective Date, (i) no additional stock awards were granted under the 2010 Plan and (ii) all outstanding stock
awards previously granted under the 2010 Plan remained subject to the terms of the 2010 Plan. All awards granted
on or after the Effective Date of the 2019 Plan shall be subject to the terms of the 2019 Plan.

As of the Effective Date, we were able to issue up to: (a) 369,584 shares of common stock under the 2019 Plan
which includes: (i) shares that have been authorized but not issued pursuant to the 2010 Plan as of the Effective
Date up to a maximum of an additional 208,584 shares and (ii) any shares subject to any outstanding options or
restricted stock grants under any plan of the Company that were outstanding as of the Effective Date and that
subsequently expire unexercised, or are otherwise forfeited, up to a maximum of an additional 11,000 shares. As
of March 28, 2021, there were up to 208,584 shares available to be issued for future option grants or up to 184,808
shares of restricted stock to be granted under the 2019 Plan.

F-33

NOTE L – STOCKHOLDERS’ EQUITY, STOCK PLANS AND OTHER EMPLOYEE BENEFIT PLANS

(continued)

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.

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
for the fiscal years ended March 28, 2021 and March 29, 2020 is as follows:

March 28,
2021

March 29,
2020

Stock options .................................................................. $
Restricted stock ..............................................................
$

85 $
31
116 $

85
31
116

The tax benefit on stock-based compensation expense was $32 and $29 for the fiscal years ended March 28, 2021
and March 29, 2020, respectively. As of March 28, 2021, there was $54 of unamortized compensation expense
related to stock-based incentive awards. The Company expects to recognize this expense over approximately five
months, which represents the remaining requisite service periods for such award.

A summary of the status of the Company’s stock options at March 28, 2021 and March 29, 2020 and changes
during the fiscal years then ended is presented in the tables below:

2021

2020

Weighted-
Average
Exercise

Price

Options outstanding – beginning of year .................

10,000 $

89.90

42,234 $

46.807

Granted .................................................................

Expired .................................................................

Exercised ..............................................................

(32,234)

33.438

Options outstanding - end of year ............................

10,000 $

89.90

10,000 $

89.90

Options exercisable - end of year.............................

6,667 $

89.90

3,333 $

89.90

There were no stock option exercises for the fiscal year ended March 28, 2021. During the fiscal year ended March
29, 2020, options to purchase 32,234 shares were exercised which aggregated proceeds of $1,078 to the Company.
The aggregate intrinsic value of the stock options exercised during the fiscal year ended March 29, 2020 was
$1,134.

F-34

NOTE L – STOCKHOLDERS’ EQUITY, STOCK PLANS AND OTHER EMPLOYEE BENEFIT PLANS

(continued)

The following table summarizes information about outstanding stock options at March 28, 2021:

Weighted-
Average
Exercise Price

Weighted-
Average
Remaining
Contractual
Life

Aggregate
Intrinsic Value

Options outstanding at March 28, 2021 .......

10,000 $

89.90

2.46 $

Options exercisable at March 28, 2021 ........

6,667 $

89.90

2.46 $

Restricted stock:

Transactions with respect to restricted stock for the fiscal year ended March 28, 2021 are as follows:

Weighted-
Average

Grant-date
Fair value
Per share

Unvested restricted stock at March 29, 2020 .................

667 $

89.90

Granted .......................................................................

- $

Vested .........................................................................

334 $

89.90

Unvested restricted stock at March 28, 2021 .................

333 $

89.90

The aggregate fair value of restricted stock vested during the fiscal years ended March 28, 2021 and March 29, 2020
was $17 and $23, respectively.

3. Stock Repurchase Programs

On March 13, 2020, the Company's Board of Directors approved a 10b5-1 stock plan (the "10b5-1 Plan") which
expired on August 12, 2020. During the fiscal year ended March 28, 2021, the Company repurchased in open market
transactions 26,676 shares of the Company’s common stock at an average share price of $56.26 for a total cost of
$1,501 under the 10b5-1 Plan.

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 28, 2021, Nathan’s had
repurchased 1,066,450 shares at a cost of $37,108 under the sixth stock repurchase plan. At March 28, 2021, there
were 133,550 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-35

NOTE L – STOCKHOLDERS’ EQUITY, STOCK PLANS AND OTHER EMPLOYEE BENEFIT PLANS

(continued)

4. 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.

F-36

NOTE L – STOCKHOLDERS’ EQUITY, STOCK PLANS AND OTHER EMPLOYEE BENEFIT PLANS

(continued)

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, 2022, based on
the original terms, and no non-renewal notice has been given.

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. 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.

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.

5. 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 28, 2021 and
March 29, 2020 were $36 and $44, respectively, and are included in general and administrative expenses on the
Consolidated Statements of Earnings.

F-37

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 $384 as of December 31, 2020.
The Company has no plans or intentions to stop participating in the plan as of March 28, 2021 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 $5 and $6 for the fiscal years ended March 28,
2021 and March 29, 2020, respectively, and are included in general and administrative expenses on the Consolidated
Statements of Earnings.

6. 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 – GUARANTY AND OTHER COMMITMENTS AND CONTINGENCIES

1. 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 $113 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.

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.

NOTE N - RELATED PARTY TRANSACTIONS

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 $19 and $29 for the fiscal years ended March 28, 2021 and March 29, 2020, respectively.

F-38

2021 FORWARD LOOKING STATEMENTS DISCLAIMER

Except for historical information contained herein, the matters discussed are 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 1934, as amended that involve risks and uncertainties. Words such as “anticipate”, “believe”, “estimate”, “expect”,
“intend”, and similar expressions identify forward-looking statements, which are based on the current belief of the
Nathan’s Famous, Inc.’s (“we”, “us”, “our” or the “Company”) management, as well as assumptions made by and
information currently available to the Company’s management. Among the factors that could cause actual results to
differ materially include but are not limited to: the impact of the recent COVID-19 outbreak; the status of our licens-
ing and supply agreements, including the impact of our supply agreement for hot dogs with John Morrell & Co.; the
impact of our indebtedness, including the effect on our ability to fund working capital, operations and make new
investments; economic; weather (including the impact on the supply of cattle and the impact on sales at our restau-
rants particularly during the summer months), and change in the price of beef trimmings; our ability to pass on the
cost of any price increases in beef and beef trimmings; legislative and business conditions; the collectability of receiv-
ables; changes in consumer tastes; the ability to attract franchisees; the impact of the minimum wage legislation on
labor costs in New York State or other changes in labor laws, including regulations which could render a franchisor as
a “joint employee” or the impact of our new union contracts; our ability to attract competent restaurant and manage-
rial personnel; the enforceability of international franchising agreements; the future effects of any food borne illness,
such as bovine spongiform encephalopathy, BSE and e coli; and the risk factors reported from time to time in the
Company’s SEC reports. The Company does not undertake any obligation to update such forward-looking statements.

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7/9/21 11:16 AM

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
Owner—Retired,
United Capital Corp.

Charles Raich
Retired Founding Partner,
Raich, Ende, Malter & Co. LLP

Andrew M. Levine
Director of Real Estate,
Fingerboard Family Office

List of Officers
Howard M. Lorber
Executive Chairman of the Board

Eric Gatoff
Chief Executive Officer

Robert Steinberg
Vice President—Finance,
Chief Financial Officer, Treasurer
and Secretary

James Walker, CFE
Senior Vice President—Restaurants

Leigh Platte
Senior Vice President—Food Service

Independent Registered
Public Accounting Firm
Marcum LLP
730 3rd Avenue
New York, New York 10017

Corporate Counsel
Akerman LLP
1251 Avenue of the Americas
37th Floor
New York, New York 10020

Transfer Agent
American Stock Transfer &
Trust Company
6201 15th Avenue
Brooklyn, New York 11219

Form 10-K
The Company’s annual report
on Form 10-K as filed with the
Securities and Exchange
Commission, is available without
charge upon written request:
Secretary, Nathan’s Famous, Inc.

One Jericho Plaza
Second Floor—Wing A
Jericho, New York 11753

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 Thursday,
September 2, 2021, in the Offices of
Nathan’s Famous, Inc., One Jericho
Plaza, Second Floor — Wing A.
Jericho, New York 11753.

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One Jericho Plaza, Second Floor – Wing A, Jericho, New York 11753
www.nathansfamous.com