SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
[ X ] Filed by the registrant
[ ] Filed by a party other than the registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
FLANIGAN'S ENTERPRISES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
<PAGE>
FLANIGAN'S ENTERPRISES, INC.
2841 Cypress Creek Road
Fort Lauderdale, Florida 33309
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 27, 1998
Fort Lauderdale, Florida
January 30, 1998
To the Stockholders of Flanigan's Enterprises, Inc.,
Please take notice that the Annual Meeting of Stockholders of
Flanigan's Enterprises, Inc. (the "Company") will be held on Friday, February
27, 1998, at 10:00 A.M., at its corporate headquarters, 2841 Cypress Creek Road,
Fort Lauderdale, Florida, 33309 to consider and act upon the following matters:
(1) To elect three directors of the Company to hold office until
the year 2001 Annual Meeting;
(2) To ratify the appointment of Arthur Andersen LLP, as
independent auditors for the Company for the 1998 fiscal year.
(3) To consider and take action on a shareholder's proposal for
the Company to prepare, file and distribute a Franchise
Offering Circular to all franchisees and re-execute its
Franchise Agreement.
(4) To transact such other business as may properly come before
the meeting.
Details relating to these matters are set forth in the attached proxy
statement. Stockholders of record at the close of business on January 26, 1998,
will be entitled to vote at the meeting.
The Company invites each stockholder to attend the meeting in person.
However, whether or not you expect to be present, your cooperation in promptly
signing and returning the enclosed proxy in the envelope provided will be
appreciated. Regardless of the number of shares you own, your vote is important.
If you are present and vote in person at the meeting, the proxy will not be
used.
The Board recommends and requests a vote "FOR" the three nominees to
the Board of Directors, and "FOR" approval of the independent auditors. The
Board recommends a vote "AGAINST" the shareholder's proposal.
FLANIGAN'S ENTERPRISES, INC.
/s/Mary C. Reymann
------------------
Mary C. Reymann, Secretary
<PAGE>
FLANIGAN'S ENTERPRISES, INC.
2841 Cypress Creek Road
Fort Lauderdale, Florida 33309
PROXY STATEMENT
January 30, 1998
ANNUAL MEETING OF STOCKHOLDERS
This proxy statement is furnished in connection with the solicitation
by the management of Flanigan's Enterprises, Inc. (the "Company") of proxies for
use at the Annual Meeting of Stockholders of the Company to be held on Friday,
February 27, 1998, at 10:00 A.M. at its corporate headquarters, 2841 Cypress
Creek Road, Fort Lauderdale, Florida, 33309 or at any adjournment of such
meeting.
Stockholders of record as of the close of business on January 26, 1998
are entitled to vote at the meeting. On that date there were outstanding 907,000
shares of Common Stock ($.10 par value) of the Company, with each entitled to
one vote.
The Company's Annual Report (including the Form 10-KSB filed with the
Securities and Exchange Commission) for the fiscal year ended September 27, 1997
is enclosed.
The accompanying proxy is revocable by the stockholder at any time
before it is exercised. Any stockholder attending the meeting may vote in person
whether or not a proxy was previously signed. Unless revoked, properly executed
proxies will be voted in accordance with specifications therein. Proxies with no
specifications will be voted in favor of proposals one and two and against
shareholder proposal number one. There are no rights of appraisal or similar
rights of dissenters with respect to any matter to be acted upon at the meeting.
Solicitation of proxies is to be made by use of the mails, and in
addition, may be made by directors, officers and regular employees of the
Company, either personally or by telephone. The cost of the solicitation will be
borne by the Company, including reimbursement of brokerage firms and other
custodian or nominees for reasonable expenses incurred in distributing these
proxy materials to their beneficiaries.
<PAGE>
PROPOSAL ONE:
ELECTION OF DIRECTORS
The By-Laws of the Company provide for a Board of Directors which shall
consist of three classes of directors of three directors each. Three directors
are to be elected to replace those of the class whose terms expire this year.
The three directors to be elected at the annual meeting shall serve for a
three-year term expiring in 2001 and until their respective successors are
elected and qualified.
Shares of stock represented by valid proxies received in time for the
meeting will be voted for the election of the nominees listed below. It is not
anticipated that any of the nominees will be unavailable for election as a
director, but in case any of the nominees should become unavailable, the proxies
will be voted for such substitute as shall be designated by the Board of
Directors. Joseph G. Flanigan has been a director since 1960. Jeffrey D. Kastner
and Charles Kuhn have been directors since 1985.
<TABLE>
<CAPTION>
DIRECTORS ELECT
Shares of
Common Stock
Principal Occupation for the Beneficially
Last Five Years and Certain Director Owned as of Percent
Name Other Directorships Age Since January 26, 1998 of Class
---- ------------------- --- ----- ---------------- --------
<S> <C> <C> <C> <C> <C>
Term Ending 2001
Joseph G. Flanigan Chairman of the Board 68 1960 293,778 (4) 26.7
President and Chief Executive
Officer of the Company
Jeffrey D. Kastner Principal, law firm of Jeffrey 44 1985 190,500 (5)(8) 17.3
D. Kastner, P.A. since 1985,
and General Counsel and
Assistant Secretary of
the Company
Charles F. Kuhn Former Vice President of 68 1985 - -
Package Operations, Package
Store Manager since 1992, of
Big Daddy's #14, Inc. a
Franchisee
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DIRECTORS CONTINUING IN OFFICE AFTER THE MEETING
Shares of
Common Stock
Principal Occupation for the Beneficially
Last Five Years and Certain Director Owned as of Percent
Name Other Directorships Age Since January 26, 1998 of Class
---- ------------------- --- ----- ---------------- --------
<S> <C> <C> <C> <C> <C>
Term Ending 1999
William Patton Vice President of Community 75 1990 7,666 (7) *
Relations since 1981, prior
thereto Vice President,
Lounge Operations
Germaine M. Bell Former Assistant Secretary 65 1984 - -
of the Company
Patrick J. Flanigan President of B.D. 43 Corp., 37 1991 31,275 (2) 2.8
(1) a Franchisee since 1985.
President of B.D. 15 Corp.,
General Partner of CIC
Investors #15, a Franchisee
since 1997
Term Ending 2000
Charles E. McManus Certified Manufacturing 83 1982 11,462 1.0
Engineer and Independent
Sales Representative for Food
Service Equipment Co.,
Baltimore, MD, President of
Preferred Food Purveyors,
Inc. Baltimore, MD.
Mary C. Reymann Financial Vice President and 73 1982 7,766 (7) *
Secretary of the Company
James G. Flanigan Vice President of Twenty- 33 1991 53,900 (3)(10) 4.9
(1) Seven Birds Corporation, a
Franchisee since 1985
Total shares beneficially owned
by all directors and executive
officers as a group (ten in
number). 516,119 (4)(6)(9) 47.0
</TABLE>
* Less than 1%
<PAGE>
(1) James G. and Patrick J. Flanigan are the sons of the Chairman
of the Board.
(2) Includes 31,100 shares owned by a trust which Mr. Patrick J.
Flanigan is one of three trustees and a beneficiary.
(3) Includes 31,100 shares owned by a trust of which Mr. James G.
Flanigan is one of three trustees and a beneficiary.
(4) Includes options to acquire 91,800 shares of common stock, see
Notes (3) & (4) to Cash Compensation Table. Includes 31,100
shares owned by a trust of which the spouse of the Chairman of
the Board is one of three trustees and 1,200 shares owned by
grandchildren of the Chairman of the Board.
(5) Includes 170,500 shares owned equally by five trusts of which
Mr. Kastner is one of three trustees. The five trusts include
the trusts of Mr. Patrick J. Flanigan (See Note (2) above) and
Mr. James G. Flanigan (See Note (3) above) and the 31,100
shares owned by each trust.
(6) Includes 93,300 shares owned equally by the three trusts of
which Mr. Kastner is one of the three trustees. The 31,100
shares of stock owned by each of the trusts of Mr. Patrick J.
Flanigan (See Note (2) above) and Mr. James G. Flanigan (See
Note (3) above) are included in the calculation of beneficial
stock ownership of those individuals only. The 31,100 shares
of stock owned by a trust of which the spouse of the Chairman
of the Board is one of three trustees is not included, as that
stock is already included in the calculation of beneficial
ownership of Mr. Kastner.
(7) Includes options to acquire 5,000 shares of common stock
pursuant to the Company's Key Employee Incentive Stock Option
Plan.
(8) Includes options to acquire 20,000 shares of Common Stock
pursuant to the Company's Key Employee Incentive Stock Option
Plan.
(9) Includes options to acquire 10,000 shares of Common Stock
granted to Edward A. Doxey, Treasurer of the Company, pursuant
to the Company's Key Employee Incentive Stock Option Plan.
(10) Includes options to acquire 14,000 shares of Common stock
pursuant to the Company's Key employee Incentive Stock Option
Plan.
The Board of Directors met four times during the past fiscal year and each
director attended those meetings of the Board and its committees. Each director
who is not a full time employee of the Company receives an annual director's fee
of $5,000 plus $250 for attendance at each Directors Meeting and Audit Committee
Meeting.
<PAGE>
BOARD OF DIRECTORS, COMMITTEES AND NOMINATIONS
The principal committee of the Board of Directors is the Audit
Committee. The functions of this committee include recommending the engaging and
discharging of the Company's independent auditors, reviewing with the
independent auditors the plan and results of the audit engagement, approving
professional services provided by the independent auditors prior to the
performance of such services, reviewing the range of audit and non-audit fees
and reviewing the adequacy of the Company's system of internal accounting
controls. The Audit Committee held one meeting during the past fiscal year. The
members of the Audit Committee for fiscal year 1997 were Charles McManus,
Jeffrey Kastner and Charles Kuhn.
While there is no nominating committee, the entire Board selects
nominees for election as directors and considers the performance of directors in
determining whether to nominate them for re-election. In performing these
functions, the Board considers any stockholder recommendations with respect to
the composition of the Board. Any recommendation by a stockholder of a proposed
candidate must be in writing, accompanied by a description of the proposed
nominee's qualification and other relevant biographical information together
with the consent of the proposed nominee to serve. The recommendation should be
directed to the Board of Directors, Attention: Secretary, Flanigan's
Enterprises, Inc., 2841 Cypress Creek Road, Fort Lauderdale, Florida, 33309.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES
SET FORTH HEREIN.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company
during the fiscal year ended September 27, 1997 to all of the Company's
executive officers whose aggregate direct re-numeration exceeded $60,000, and to
all executive officers as a group.
<TABLE>
<CAPTION>
COMPENSATION TABLE
Other
Name and Principal Position Annual Compensation Compensation (1)(2)
- --------------------------- ------------------- -------------------
<S> <C> <C>
Joseph G. Flanigan, (3)(4)(5) $228,000 $38,000
Chairman of the Board,
Chief Executive Officer
and President
Jeffrey D. Kastner, 96,000
Assistant Secretary
and General Counsel
Edward A. Doxey, 65,000
Treasurer
Others (two in number) 70,000 8,000
------- -------
All Executive Officers
as a group (five in number)(6) $459,000 $46,000
</TABLE>
<PAGE>
(1) This table does not include incidental personal benefits of a
limited nature. Although the amount of such benefits and the
extent to which they are related to job performance cannot be
ascertained specifically, the Company has concluded that the
aggregate amount does not exceed the lesser of $25,000 or 10%
of the cash compensation disclosed above for any one person or
all executive officers as a group.
(2) Represents value of Premium paid by the Company for life
insurance.
(3) On June 3, 1987, the Company entered into an Employment
Agreement with Joseph G. Flanigan effective January 1, through
December 31, 1988 and subject to one year extensions unless
either the Company or such executive shall have delivered a
notice that the term will not be extended. This Agreement was
approved by the Bankruptcy Court in the Company's
reorganization proceedings and was ratified by stockholders at
the Company's 1988 annual meeting (83% of the stockholders
voting ratified the Agreement). Mr. Flanigan receives a base
salary of $150,000. From 1988 until September 28, 1996 Mr.
Flanigan participated in a profit sharing program based on the
Company exceeding certain financial projections. For the
fiscal year ended September 28, 1996 no bonus was earned under
the Agreement. At the Company's 1997 annual meeting, the
stockholders approved a modification to the Agreement to
provide that during the period of Mr. Flanigan's employment,
the Company will pay Mr. Flanigan in addition to his base
salary an amount equal to fifteen percent of the annual income
of the Company before income taxes, in excess of $650,000,
excluding extraordinary items. For the fiscal year ended
September 27, 1997 a bonus of $78,000 was earned. The
Agreement further provides that in the event of termination,
the Chairman of the Board would be entitled to a maximum
payment of $450,000.
During fiscal year 1996, (prior to December 30, 1995), Mr.
Flanigan exercised the option to purchase 93,092 shares of the
Company's common stock, pursuant to the Employee Agreement, at
$0.875 per share. The option price in the Employment Agreement
had been reduced to $0.875 per share in December, 1989 and
approved at the Company's 1990 Annual Meeting.
The Employment Agreement further provides that in the event of
a "change in control" of the Company, the term of the
Agreement will continue for a period of three years
thereafter, provided that any damages due Mr. Flanigan as a
result of a change in control of the Company will be
subordinate to the claims of the secured creditors in the
Company's bankruptcy proceedings, whose damages would also be
due in full. In the event of termination, Mr. Flanigan would
be entitled to a maximum of $450,000.
(4) During the quarter ended March 28, 1992, the Board of
Directors approved issuance of additional options to Joseph G.
Flanigan to purchase up to 46,450 shares of the Company's
common stock. The exercise price of $2.25 equaled the fair
market value on the date of issuance. By written Resolution,
<PAGE>
dated January 12, 1994, the Board of Directors approved an
amendment to the stock option granted Joseph G. Flanigan
increasing the amount of the option price to $6.50 per share,
which reflected in excess of 110% of the per share price of
the Company's stock as of the close of business on January 12,
1994. The expiration date of the stock option was also
extended through February 27, 2002. This action was approved
by the stockholders at the Company's 1994 Annual Meeting.
(5) Also at the Company's 1997 Annual Meeting the stockholders
approved a modification to the Employment Agreement which
granted Mr. Flanigan the option to acquire 4.99% of the amount
of common stock of the Company outstanding as of the date of
exercise, but not less than 45,250 shares at the option price
of $4.95 per share. The expiration date of the stock option is
December 31, 2001.
(6) See "Related Party Transactions."
RELATED PARTY TRANSACTIONS
In fiscal year 1996, Walter L. McManus, Sr., former Vice Chairman,
(together with his children; Castlewood and Co., a family owned Maryland
partnership; and Castlewood Realty Company, Inc., a family owned Maryland
Corporation) received an aggregate of $251,000 from the Company in lease rentals
for three locations where they leased to the Company the land or building. The
Company owed agreed to lease rejection damages of $101,000 to companies
controlled by the former Vice Chairman of the Board, which are included in and
payable pursuant to the Company's Plan of Reorganization.
Certain of the officers and directors of the Company hold securities of
a limited partnership in King of Prussia, Pennsylvania which is managed by the
Company as General Partner for a management fee of 49% of the profits. The
partnership interests of all said officers and directors represented 18.22% of
the total invested capital of $960,000 in this limited partnership. This unit
was sold September 20, 1996. See page 9 of the Form 10-KSB for the period ended
September 27, 1997 for further discussion of the sale.
Members of Mr. Flanigan's family purchased four units sold to them on a
franchise basis in prior years. The terms of these sales were similar to one or
more of the Company's other franchise sales. As a result of these sales, the
Company had accounts receivable aggregating $3,000 from parties related to Mr.
Flanigan at year-end. All such accounts were in good standing.
During fiscal 1990, Mr. Flanigan acquired a 33.33% interest in one unit
sold to his family on a franchise basis in prior years. Mr. James G. Flanigan, a
member of the Board of Directors of the Company, is also a 33.33% owner of this
unit and is the manager of the day-to-day operation of the same. The Company
assigned the Lease Agreement for this unit to the franchisee, and vacated the
sublease agreement which had been a part of the franchise purchase. With this
transaction, the franchisee becomes responsible for all rent due under the Lease
Agreement. Under the new Franchise agreement the Company receives the royalty
fee only.
<PAGE>
During fiscal 1990, Mr. Flanigan also became a 50% owner of a
corporation which assumed management of the day-to-day operation of another unit
sold to his family on a franchise basis in prior years. Mr. Flanigan became
involved in the day-to-day operation of this unit during fiscal year 1995 on a
limited basis.
During fiscal year 1992, one unaffiliated franchisee expressed an
interest in selling his unit or returning it to the Company pursuant to the
terms of its franchise agreement and related documents. As a result of the
substantial investment necessary to upgrade and renovate this unit, an
affiliated group of investors formed a Subchapter S corporation and purchased
this unit from the franchisee. The shareholder interest of all officers and
directors represents 42% of the total invested capital. The shareholder interest
of the Chairman's family represents an additional 47.5% of the total invested
capital. The Company receives the increased royalties provided for in the new
franchise agreement executed during fiscal year 1996.
During fiscal year 1995, three of the four franchises purchased by
members of Mr. Flanigan's family in prior years, whose franchise agreements
expired during the past fiscal year, executed the Company's new franchise
agreement for the continued operation of their restaurants under the "Flanigan's
Seafood Bar and Grill" service mark or other service marks approved by the
Company.
During fiscal year 1996, the Company's franchise agreement with a
member of Mr. Flanigan's family expired and the Company declined to offer the
franchisee the option of executing its new franchise agreement. During the first
quarter of fiscal year 1997, the Company filed suit against the franchisee for
servicemark infringement, seeking injunctive relief and monetary damages.
Subsequent to the end of fiscal year 1997 a Stipulated Agreed Order of Dismissal
Upon Mediation was issued whereby the Company received $110,000 and the former
franchisee agreed to cease all use of the "Flanigan's" servicemark and other
trade dress features common to the Company owned and/or franchised restaurants.
During the third quarter of fiscal year 1997, a related party who is a
member of the Board of Directors of the Company and a member of Mr. Flanigan's
family formed a limited partnership to own a certain franchise in Fort
Lauderdale, Florida, through which it raised the necessary funds to renovate the
restaurant. The related party paid the Company $150,000 to approve his purchase
of this franchise and for the Company to relinquish its right to act as manager
of the franchise. As a result of this transaction the Company had a receivable
of $88,000 from the related party. The Company is a twenty-five percent limited
partner in the franchise. The shareholder interest of all officers and directors
represents 48.75% of the total of the invested capital. The shareholder interest
of the Chairman's family represents an additional 2.50% of the invested capital.
During the fourth quarter of fiscal year 1997, the Company formed a
limited partnership and raised funds through a private offering to purchase the
assets of a restaurant in Surfside, Florida and renovate the same for operation
under the "Flanigan's Seafood Bar and Grill" servicemark. The Company acts as
general partner of the limited partnership and is also a forty percent limited
partner. The shareholder interest of all officers and directors represents
23.20% of the total of the invested capital. The shareholder interest of the
Chairman's family and the family of one director represents an additional 8.80%
of the invested capital. The renovated restaurant is expected to be open on
March 17, 1998.
The Company paid or accrued $6,000 in fees to a service company owned
by the husband of Mary C. Reymann during the past fiscal year.
<PAGE>
See footnotes (3) and (5) to the Compensation table for a discussion of
an Employment Agreement between the Company and its Chairman of the Board.
Each of the above transactions was reviewed by the Board of Directors
at the time made and were, in the opinion of management and the Board, entered
into on terms which were no less favorable to the Company than could be obtained
in similar transactions with disinterested third parties.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of January 30, 1998, the names of
persons who own of record, or are known by the Company to own beneficially, more
than 5 percent of its Common Stock, and the beneficial ownership of all such
stock as of that date by all officers and directors as a group. See footnotes
(3), (4) and (5) to the Compensation Table for a discussion of stock options
granted to Mr. Flanigan.
<TABLE>
<CAPTION>
Number of
Name of Beneficial Owner Shares Percentage
- ------------------------ ------ ----------
<S> <C> <C>
Joseph G. Flanigan 293,778 26.7
Jeffrey D. Kastner 190,500 17.3
All Officers and Directors
as a Group (ten in number) 516,119 47.0
</TABLE>
PROPOSAL TWO:
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Upon the recommendation of the Audit Committee, the Board of Directors
has selected Arthur Andersen LLP, independent certified public accountants as
its auditors for fiscal year 1998. They have been the Company's accountants
since 1968.
During the fiscal year ended September 27, 1997, Arthur Andersen LLP,
rendered audit services to the Company, including audit of its annual financial
statements, review of reports on Form 10-KSB to the Securities and Exchange
Commission and various other accounting matters. The Audit Committee approves
audit services before they are rendered, approves the other professional
services after each is rendered, and considers the possible effect of such
services on the independence of such firm.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
PROPOSAL THREE:
Shareholder Proposal No. 1: Require that Flanigan's
Enterprises Inc. Prepare, File and Distribute
a Franchise Offering Circular to All Franchisees
Shareholder's Statement:
In 1985, Flanigan's approved a Franchise Plan under which the Company
sold its package liquor stores and lounges and entered into Franchise Agreements
<PAGE>
with purchasers. By year-end 1986, 10 units were franchised. As of August 15,
1997, approximately eight franchisees had executed Flanigan's new Franchise
Agreement to operate as Flanigan's franchises. This information is drawn from
Flanigan's annual report.
The Federal Trade Commission's rules and Florida law impose certain
requirements upon franchisors. Among these is the preparation and distribution
of a Uniform Franchise Offering Circular which advises prospective franchisees,
among other things, of risks associated with franchising. In 1985, Flanigan's
engaged special counsel to prepare and file a Franchise Offering Circular with
the Federal Trade Commission and distributed a copy of the Offering Circular to
all prospective franchisees. In 1995, Flanigan's prepared and circulated a
Franchise Agreement which was materially different from the 1985 agreement. In
1995, Flanigan's did not circulate a Franchise Offering Circular to all
franchisees. The effect of not circulating a Franchise Offering Circular may be
significant: Federal Law may provide a remedy of rescission to franchisees not
receiving a Franchise Offering Circular prior to executing the new Franchise
Agreement. In effect, certain franchisees may have the right to repudiate their
Franchise Agreement,
As a result of the foregoing, Flanigan's should prepare, file and
distribute a Franchise Offering Circular to all franchisees and re-execute its
Franchise Agreement.
My name is Paul B. Flanigan. I own 4,500 shares of Flanigan's stock
which I purchased on the open market. I am President of Quarterdeck Seafood Bar
& Neighborhood Grills, and JGF-PBF Management Company, the management company
for Flanigan's Guppies. I have been involved in a number of Flanigan family
ventures as an officer and investor. I am a member of the National Restaurant
Association and the Florida Restaurant Association. Prior to becoming involved
in the restaurant business, I was an attorney with the national law firms of
Morgan, Lewis & Bockius and Finley, Kumble, Wagner et al. and a certified pubic
accountant with the international accounting firm of Price Waterhouse & Co. I
hold degrees from Notre Dame and the University of Miami School of Law. I am
also the defendant in a lawsuit Flanigan's has filed in federal court against me
and my Quarterdeck restaurant group.
If you have questions, please call me, Paul B. Flanigan, at
954-525-8042.
I STRONGLY RECOMMEND A VOTE IN FAVOR OF SHAREHOLDER
PROPOSAL NO. 1.
Company's Statement:
To begin with, it is Important to note that the Company is not
currently offering new franchises, nor does it intend to do so. The franchises
in question are existing franchisees, owned in whole or in part by officers
and/or directors of the Company and/or their families, which executed new
franchise agreements in calendar years 1995 and 1996 to renew their old
franchise agreements. The only unrelated franchisees who executed the Company's
new franchise agreement in calendar year 1996, were provided with a Uniform
Franchise Offering Circular prior to executing the same and Shareholder Proposal
No. 1 is moot with regard to these two (2) unrelated franchisees.
Upon receipt of Shareholder Proposal No, 1, the Company retained
independent legal counsel, Keith J. Kanouse, Esquire, who specializes in
franchise law, to render a legal opinion on the issue raised in Shareholder
<PAGE>
Proposal No. 1. The legal opinion addressed the renewal of the franchises owned
in whole or in part by officers and/or directors of the Company and/or their
families and while recognizing that the FTC Franchise Rule requires a current
Franchise Offering Circular be given to existing franchisees if the new
franchise agreement is materially different than the existing franchise
agreement, concluded as follows:
All of these individuals had independent knowledge and access to all of the
material information concerning the franchisor that would otherwise have been
contained in a current Franchise Offering Circular at the time of renewal. In
addition, each franchisee actively participated in the negotiation of the new
franchise agreement and obtained changes in their favor... The purpose of the
FTC Franchise Rule is to give prospective or renewing franchisees essential and
reliable information about their proposed business investment. If renewing or
prospective franchisees already possess this information because of their
involvement with the franchisor, a new disclosure document becomes a meaningless
exercise. While technically required, it would be up to the renewing franchisee
to show a failure to give them material information upon which they would have
relied to make an investment decision. Absence such showing, I believe that the
technical violation is not serious,
Based upon his legal conclusion, independent legal counsel made the following
recommendation,
Since no franchisee is complaining, it would be my recommendation to do nothing
at this time and wait for the statute of limitations to expire. I see no
compelling reason to redisclose to these individuals.
Finally, in the event that any franchisee wished to rescind their franchise
agreement based upon the failure of the Company to provide a Uniform Franchise
Offering Circular, the legal opinion further explained that.
Rescission is a two-way street in that they would have to return all benefits,
including profits arising out of the operation of the restaurants, in return for
a refund of the initial franchise fee and royalties. Rescission makes sense in a
total scam, however, where as here, there is a viable operating business granted
to the franchisee, it makes little sense to rescind.
The Company would welcome the rescission of any current franchisee which is
owned in whole or in part by an officer and/or director of the Company and/or
their families, especially since the Company also has the right to purchase the
assets of the franchise pursuant to the old franchise agreement.
A copy of the legal opinion provided by independent legal counsel in
response to the issue raised in Shareholder Proposal No. 1 is available upon
request to the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" SHAREHOLDER PROPOSAL NO. 1.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
The rules and regulations of the Securities and Exchange commission
afford stockholders the right to submit proposals to the Company which the
Company must then include in its proxy materials and which will be voted on by
stockholders at the Annual Meeting next ensuing. Under these regulations any
stockholder desiring to submit a proposal to be voted on at the 1999 Annual
Meeting of the Company must deliver the proposal to the Company no later than
September 24, 1998.
<PAGE>
OTHER MATTERS
As of the date of this proxy statement, the management does not intend
to present, and has not been informed that any other person intends to present,
any matters for action at the meeting other than those specifically referred to
herein. If, however, any other matters are properly presented at the meeting it
is the intention of the persons named in the proxies to vote the shares of stock
represented thereby in accordance with their best judgment on such matters.
BY ORDER OF THE BOARD OF DIRECTORS
Mary C. Reymann
Secretary
January 30, 1998
<PAGE>
FLANIGAN'S ENTERPRISES INC.
Proxy Solicited on Behalf of the Board of Directors of
the Company for Annual Meeting February 27, 1998
The undersigned hereby constitutes and appoints Jeffrey D. Kastner and Mary
C. Reymann, jointly and severely as his true and lawful agents and proxies with
full power of substitution in each, to represent the undersigned at the Annual
Meeting of Stockholders of Flanigan's Enterprises, Inc. to be held at the
Company's executive offices, 2841 Cypress Creek Road, Ft Lauderdale, FL 33309 on
Friday, February 27, 1998 at 10:00 A.M. and at any adjournments thereof on all
matters coming before said meeting.
Please sign exactly as name appears below.
When shares are held by joint tenants, both should sign. Executors,
administrators, trustees, etc. should give full title as such, If the signer is
a corporation, please sign full corporate name by duly authorized officer.
_________________________________________
Date
_________________________________________
Signature
_________________________________________
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
(Continued on other side)
================================================================================
<PAGE>
(Please date and sign on reverse side)
This proxy, when properly executed will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this proxy will be
voted for Proposals one and two and against Shareholder Proposal No. 1.
I. ELECTION OF DIRECTORS.
Nominees Joseph G. Flanigan, Jeffrey D. Kastner, Charles Kuhn
[ ] VOTE FOR all nominees listed (except as marked to the contrary below).
[ ] VOTE WITHHELD from all nominees.
Instruction: To withhold authority to vote for any individual nominee, write
nominee's name below.
2. Proposal to Approve the Appointment of Arthur Andersen LLP, as the
Independent Auditors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
MANAGEMENT RECOMMENDS A VOTE "FOR" PROPOSALS ONE AND TWO.
3. Shareholder Proposal No. 1: Require that Flanigan's Enterprises Inc.
Prepare, File and Distribute a Franchise Offering Circular to All
Franchisees.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
MANAGEMENT RECOMMENDS A VOTE "AGAINST" SHAREHOLDER PROPOSAL NO. 1.
4. In their discretion, upon other matters as may properly come before
the meeting.
