FLANIGANS ENTERPRISES INC 10-K Cybersecurity GRC - 2024-12-27

Page last updated on December 27, 2024

FLANIGANS ENTERPRISES INC reported their cybersecurity risk management and governance process in a yearly 10-K filed on 2024-12-27 14:56:31 EST.

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10-K filed on 2024-12-27

FLANIGANS ENTERPRISES INC filed a 10-K at 2024-12-27 14:56:31 EST
Accession Number: 0001174947-24-001397

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Item 1C. Cybersecurity.

Item 1C information on cybersecurity risk management.) Government Regulation Our operations are subject to various federal, state and local laws affecting our business. In particular, our operations are subject to regulation by federal agencies and to licensing and regulation by state and local health, food preparation and safety, sanitation, alcoholic beverage control, safety and fire department agencies in the state or municipality where our units are located. Alcoholic beverage control regulations require each of our restaurants and package liquor stores to obtain a license to sell alcoholic beverages from a state authority and in certain locations, county and municipal authorities. In Florida, where all of our restaurants and package liquor stores are located, most of our liquor licenses are issued on a “quota license” basis. Quota licenses are issued on the basis of a population count established from time to time under the latest applicable census. Because the total number of liquor licenses available under a quota license system is limited and restrictions are placed upon their transfer, the licenses have purchase and resale value based upon supply and demand in the particular areas in which they are issued. The quota licenses held by us allow the sale of liquor for on and off premises consumption (the “4 COP Quota Liquor License”). The other liquor licenses held by us or limited partnerships of which we are the general partner, are restaurant liquor licenses, which do not have quota restrictions or purchase or resale value. A restaurant liquor license is issued to every applicant who meets all of the state and local licensing requirements, including, but not limited to zoning and minimum restaurant size, seating and menu. The restaurant liquor licenses held by us allow the sale of liquor for on premises consumption only. All licenses must be renewed annually and may be revoked or suspended for cause at any time. Suspension or revocation may result from violation by the licensee or its employees of any federal, state or local law regulation pertaining to alcoholic beverage control. Alcoholic beverage control regulations relate to numerous aspects of the daily operations of our units, including, minimum age of patrons and employees, hours of operations, advertising, wholesale purchasing, inventory control, handling, storage and dispensing of alcoholic beverages, internal control and accounting. As the sale of alcoholic beverages constitutes a large share of our revenue, the failure to receive or retain, or a delay in obtaining a liquor license in a particular location could adversely affect our operations in that location and could impair our ability to obtain licenses elsewhere. During our fiscal years 2024 and 2023, no significant pending matters have been initiated concerning any of our licenses which might be expected to result in a revocation of a liquor license or other significant actions against us. We are subject to “dram-shop” statutes due to our restaurant operations. These statutes generally provide a person injured by an intoxicated person the right to recover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated individual. We carry liquor liability coverage as part of our existing comprehensive general liability insurance, which we believe is consistent with coverage carried by other entities in the restaurant industry. Although we are covered by insurance, a judgment against us under a dram-shop statute in excess of our liability coverage could have a material adverse effect on us. We currently have no “dram shop” claims. 7 Our operations are also subject to federal and state laws governing such matters as wages, working conditions, citizenship requirements and overtime. Significant numbers of hourly personnel at our restaurants are paid at rates related to the federal or Florida minimum wage, whichever is higher, and accordingly, increases in the minimum wage will increase labor costs. We are also subject to the Americans with Disability Act of 1990 (ADA), which, among other things, may require certain renovations to our restaurants to meet federally mandated requirements. The cost of any such renovations is not expected to materially affect us. A significant number of our hourly restaurant staff members receive income from gratuities. Many of our locations participate voluntarily in a Tip Reporting Alternative Commitment (“TRAC”) agreement with the Internal Revenue Service (“IRS”). By complying with the educational and other requirements of the TRAC agreement, we reduce the likelihood of potential employer-only Federal Insurance Contributions Act (FICA tax assessments for unreported or underreported tips. We are not under investigation or audit, nor have we been assessed for potential employer-only FICA tax assessments for unreported or underreported tips. We are also subject to laws relating to information security, privacy, cashless payments and consumer credit protection and fraud. We are not aware of any statute, ordinance, rule or regulation under present consideration which would significantly limit or restrict our business as now conducted. However, in view of the number of local jurisdictions within the State of Florida in which we conduct business, and the highly regulated nature of the liquor business, there can be no assurance that additional limitations may not be imposed in the future, even though none are presently anticipated. Human Capital We depend on our staff members to successfully execute all aspects of our day-to-day operations. Our ability to attract highly motivated staff members and retain an engaged, experienced team is key to successful execution of our strategy. We are currently operating in a competitive labor environment. If we are unable to hire or retain qualified restaurant management and operating personnel in an increasingly competitive market, we may be unable to effectively operate and grow our business and revenues, which could materially adversely affect our financial performance. Development and Training We invest resources to ensure our staff receive training in order to maximize their potential. In addition, we strive to provide our staff with career advancement opportunities. Our training programs allow us to fill certain of our management positions with internal candidates. Benefits and Wellness We believe access to healthcare is a compelling benefit for many staff members and we offer healthcare benefits to our hourly staff members who work a minimum of 30 hours per week, on average. We attempt to provide a robust suite of benefits and wellness offerings. Employee Engagement Listening to our staff members is an essential part of building an engaged workforce, and we provide avenues for staff to share their ideas and concerns. As of our fiscal year end 2024, we employed 1,990 persons, of which 669 were full-time and 1,321 were part-time. Of these, 57 were employed at our corporate offices in administrative capacities and 12 were employed in maintenance. Of the remaining employees, 74 were employed in our package liquor stores and 1,847 in our restaurants. None of our employees are represented by collective bargaining organizations. We consider our labor relations to be favorable. 8 Giving Back Another key aspect of our culture is giving back to the communities where our staff live and work, and uniting our staff members around charitable causes personal to them. We periodically donate to philanthropic organizations through campaigns designed to engage our staff company-wide service programs, as follows: ● Breast Cancer Awareness - We donate $10,000 annually to local Breast Cancer Support organizations. ● Donated over $100,000 in total to HOPE mission. Money is used for disaster and hunger relief all over the world, youth outreach, and community building. ● Achievement Awards - We provide schools in Miami-Dade, Broward, and Palm Beach County with free meal coins and achievement awards throughout the year. We give out approximately 85,000 awards every year. ● Fishing Tournaments/Marine Conservation - We donate to fishing tournaments and beach cleanup projects. ● Supporting the local community - We donate funds to boy scouts, baseball teams, schools, etc. ● Sheridan House - We donated 500 backpacks to underprivileged children. We also collect and donate school supplies annually. ● Reclaimed Wood - All of our locations use reclaimed wood on interior walls. We also believe our sustainability programs and initiatives like restaurant-based recycling and replacing our off-premise packaging with materials that reduce the use of plastics and improve recyclability serve to foster pride in our staff. Executive Officers Name Positions and Offices Currently Held Age Office or Position Held Since James G. Flanigan Chairman of the Board of Directors, Chief Executive Officer and President 60 (1) August Bucci Chief Operating Officer and Executive Vice President 80 2002 Jeffrey D. Kastner Chief Financial Officer, General Counsel and Secretary 71 (2) Christopher O’Neil Vice President of Package Operations 59 2016 (1) Chairman of the Board of Directors, Chief Executive Officer since 2005; President since 2002. (2) Chief Financial Officer since 2004; Secretary since 1995; and General Counsel since 1982. Flanigan’s 401(k) Plan Effective July 1, 2004, we began sponsoring a 401(k) retirement plan covering substantially all employees who meet certain eligibility requirements. Employees may contribute elective deferrals to the plan up to amounts allowed under the Internal Revenue Code. We are not required to contribute to the plan but may make discretionary profit sharing and/or matching contributions. During our fiscal years ended September 28, 2024 and September 30, 2023, the Board of Directors approved discretionary matching contributions totaling $74,000 and $70,000, respectively. 9 General Liability Insurance For the policy year beginning December 30, 2023, we have general liability insurance which incorporates a $50,000 self-insured retention per occurrence for us and a $10,000 self-insured retention per occurrence for the limited partnerships. Our insurance carrier is responsible for $1,000,000 coverage per occurrence above our self-insured retentions, up to a maximum aggregate of $2,000,000 per year. We were also able to purchase excess liability insurance whereby our excess insurance carrier is responsible for $10,000,000 coverage above our primary general liability insurance coverage. We are uninsured against liability claims in excess of $11,000,000 per occurrence and in the aggregate. We secured general liability insurance and excess liability insurance to be effective as of December 30, 2024. (See
ITEM 1C CYBERSECURITY Cybersecurity Risk Management and Strategy We are committed to safeguarding our information and information systems from unauthorized access, use, disclosure, disruption, modification or destruction. Our program to protect our information assets and the management of risks to those assets supports the confidentiality, integrity, and availability of the information necessary to our long-term business success. Our cybersecurity risk management program includes: ● the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security controls, including, third-party network security reviews, scans, and audits, on at least an annual basis; ● regular cybersecurity awareness training for employees with access to our information systems, incident response personnel, and senior management; ● a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; ● a disaster recovery plan and controls designed to protect against business interruption, including by backing up our critical systems; ● use of end-to-end encryption and tokenization technology, a public key infrastructure, designed to ensure that only trusted devices can access our enterprise information technology network, and Intrusion Prevention System (IPS) that scans data in transit to help prevent the execution of harmful code; and ● a third-party risk management process for service providers, suppliers, and vendors who have access to our information systems. There can be no assurance that our cybersecurity risk management program and processes, including our policies, controls or procedures, will be fully implemented, complied with or are effective in protecting our systems and information. We are not currently aware of risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected or are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition. Cybersecurity Governance Our Board of Directors has oversight responsibility for the Company’s cybersecurity risk management, including technology and cybersecurity risks facing the Company. Management updates the Board, as necessary, regarding cybersecurity risk management matters, including reporting any material cybersecurity incidents. Our management team, including the CEO, CFO, COO, Director of Information Technology, and Director of Accounting, as appropriate, supervises efforts to prevent, detect, mitigate and remediate cybersecurity risks and incidents through various means, which may include briefings from internal security personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in the information technology environment. 21

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