NOTE 7 – LEASES

The present value of leases is calculated when the lease is entered into or assumed by us using an incremental borrowing rate at the time. Variable lease expenses are primarily property taxes and insurance. The remaining lease covering the former Village Bier Garten location was assigned to an unrelated party in January 2025.

Keegan’s lease is for approximately 2,800 square feet of restaurant space. At inception, Keegan’s 131-month lease provided for an initial rent of $5,000 per month with an annual escalation equal to the greater of 3% or the increase in the Consumer Price Index. The lease is being accounted for as an operating lease. At the inception of the lease, we recorded an operating lease obligation and a right-of-use asset of $624,000. The present value of future lease payments discounted at 3.75% of the remaining lease obligation of approximately $483,000 is reflected as a liability in the accompanying financial statements at June 29, 2025.  

The PIE lease is for approximately 3,500 square feet of restaurant and bakery production space. The terms of the 60-month lease provide for an initial rent of $10,000 per month with an annual escalation of 3% after 24 months. The PIE lease includes three five-year renewal option periods. The PIE lease is accounted for as an operating lease. At the inception of the lease, we recorded an operating lease obligation and a right-of-use asset of $1,055,000. The present value, discounted at 4.5% of the remaining lease obligation of approximately $809,000, is reflected as a liability in the accompanying financial statements at June 29, 2025.

In May 2024, with the acquisition of Schnitzel Haus assets, we assumed the remaining 44 months on the restaurant’s lease obligation for approximately $5,400 per month. The Schnitzel Haus lease is accounted for as an operating lease. At its inception, we recorded an operating lease obligation and a right-of-use asset of $182,878. The present value, discounted at 6.5% of the remaining lease obligation of $146,000, is reflected as a liability in the accompanying financial statements at June 29, 2025.

The following is a schedule of the approximate minimum future lease payments on the operating leases as of June 29, 2025:

The total operating lease expenses for the second 13-week period in 2025 and 2024 were approximately $73,000 and $85,000, respectively. In the 2025 and 2024 respective 26-week periods, operating lease expenses totaled approximately $147,000 and $155,000. Cash paid for leases during the 13 weeks ending June 29, 2025, totaled approximately $68,000, and in the 13 weeks ending June 30, 2024 it totaled approximately $79,000. Cash paid for leases was approximately $141,000 and $146,000 for the 2025 and 2024 26-week periods, respectively.  Variable expenses for lease properties were approximately $11,000 in the 13 weeks in 2025 and $9,000 in the 13 weeks of 2024. Variable lease expenses were approximately $20,000 and $26,000 in the 26-week periods in 2025 and 2024, respectively.

The Company pays monthly rent under month-to-month arrangements for corporate and administrative office spaces in  Minnetonka, Minnesota, of approximately $1,400.