10-Q

U.S. SECURITIES AND EXCHANGE COMMISSION

 Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended September 28, 2014

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from

Commission File No.  000-53577

DIVERSIFIED RESTAURANT HOLDINGS, INC.

(Exact name of registrant as specified in its charter) 

Nevada	03-0606420
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

27680 Franklin Road

Southfield, Michigan 48034

(Address of principal executive offices)

Registrant’s telephone number: (248) 223-9160

No change

(Former name, former address and former

fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes [X] No [  ]

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:  26,185,375 shares of $.0001 par value common stock outstanding as of November 5, 2014.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. 

Large accelerated filer	[   ]	Accelerated filer	[ X ]
Non-accelerated filer	[   ]	Smaller reporting company	[   ]

(Do not check if a smaller reporting company)        

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.  Yes [  ]       No [  ]

INDEX

PART I. FINANCIAL INFORMATION	1
Item 1. Financial Statements	1
Consolidated Balance Sheets	1
Consolidated Statements of Operations	2
Consolidated Statements of Comprehensive Income (loss)	3
Consolidated Statements of Stockholders' Equity	4
Consolidated Statements of Cash Flows	5
Notes to Interim Consolidated Financial Statements	6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3. Quantitative and Qualitative Disclosure About Market Risks	25
Item 4. Controls and Procedures	26
PART II. OTHER INFORMATION	27
Item 1. Legal Proceedings	27
Item 1A. Risk Factors	27
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3. Defaults Upon Senior Securities	27
Item 5. Other Information	27
Item 6. Exhibits	27

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

DIVERSIFIED RESTAURANT HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	September 28
	2014			December 29
ASSETS	(UNAUDITED)			2013
Current assets
Cash and cash equivalents	$	6,514,056		$	9,562,473
Investments		4,911,848			8,561,598
Accounts receivable		231,334			1,248,940
Inventory		1,182,420			1,017,626
Prepaid assets		429,581			555,144
Total current assets		13,269,239			20,945,781
Deferred income taxes		1,353,681			1,162,761
Property and equipment, net		74,500,195			58,576,734
Intangible assets, net		3,229,487			2,948,013
Goodwill		10,998,630			8,578,776
Other long-term assets		199,500			121,668
Total assets	$	103,550,732		$	92,333,733
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	5,210,270		$	4,416,092
Accrued compensation		1,565,911			2,060,082
Other accrued liabilities		1,035,623			809,104
Current portion of long-term debt		12,327,788			8,225,732
Current portion of deferred rent		377,812			306,371
Total current liabilities		20,517,404			15,817,381
Deferred rent, less current portion		2,992,190			3,420,574
Unfavorable operating leases		712,223			759,065
Other long-term liabilities		410,600			327,561
Long-term debt, less current portion		44,528,221			38,047,589
Total liabilities		69,160,638			58,372,170
Commitments and contingencies (Notes 10 and 11)
Stockholders' equity
Common stock - $0.0001 par value; 100,000,000 shares authorized; 26,147,999 and 26,049,578, respectively, issued and outstanding		2,582			2,580
Additional paid-in capital		35,554,165			35,275,255
Accumulated other comprehensive loss		(180,997	)		(245,364	)
Accumulated deficit		(985,656	)		(1,070,908	)
Total stockholders' equity		34,390,094			33,961,563
Total liabilities and stockholders' equity	$	103,550,732		$	92,333,733

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

1

DIVERSIFIED RESTAURANT HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	Three Months Ended						Nine Months Ended
	September 28			September 29			September 28			September 29
	2014			2013			2014			2013
Revenue	$	32,782,092		$	26,368,090		$	93,264,727		$	80,410,174
Operating expenses
Restaurant operating costs (exclusive of depreciation and amortization shown separately below):
Food, beverage, and packaging costs		9,456,106			7,759,146			26,784,277			24,336,433
Compensation costs		8,405,116			6,972,432			24,170,212			20,903,931
Occupancy costs		1,873,693			1,600,278			5,052,643			4,704,380
Other operating costs		7,220,083			5,436,252			19,627,639			16,100,223
General and administrative expenses		2,133,564			1,558,924			6,345,810			5,058,879
Pre-opening costs		609,664			639,498			2,063,800			2,036,022
Depreciation and amortization		2,865,794			2,070,841			7,612,125			5,539,874
Loss on disposal of property and equipment		33,013			22,970			353,333			83,711
Total operating expenses		32,597,033			26,060,341			92,009,839			78,763,453
Operating profit		185,059			307,749			1,254,888			1,646,721
Interest expense		(483,057	)		(320,798	)		(1,436,092	)		(1,375,646	)
Other income, net		67,789			68,415			86,426			92,958
Income (loss) before income taxes		(230,209	)		55,366			(94,778	)		364,033
Income tax provision (benefit)		(48,100	)		(14,444	)		(180,030	)		52,186
Net income (loss)	$	(182,109	)	$	69,810		$	85,252		$	311,847
Basic earnings (loss) per share	$	(0.01	)	$	0.00		$	0.00		$	0.01
Fully diluted earnings (loss) per share	$	(0.01	)	$	0.00		$	0.00		$	0.01
Weighted average number of common shares outstanding
Basic		26,107,627			26,054,118			26,074,797			23,231,403
Diluted		26,107,627			26,186,263			26,174,593			23,351,128

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

2

DIVERSIFIED RESTAURANT HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

	Three Months Ended						Nine Months Ended
	September 28			September 29			September 28		September 29
	2014			2013			2014		2013
Net income (loss)	$	(182,109	)	$	69,810		$	85,252	$	311,847
Other comprehensive income (loss)
Unrealized changes in fair value of interest rate swaps, net of tax of $43,284, $77,315, $26,039 and $18,011, respectively		84,022			(150,082	)		50,841		34,962
Unrealized changes in fair value of invesments, net of tax of $2,232, $16,876, $6,969 and $8,423, respectively		(4,333	)		32,750			13,526		(16,253	)
Total other comprehensive income (loss)		79,689			(117,332	)		64,367		18,709
Comprehensive income (loss)	$	(102,420	)	$	(47,522	)	$	149,619	$	330,556

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

3

DIVERSIFIED RESTAURANT HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

								Accumulated			Retained
						Additional		Other			Earnings			Total
	Common Stock					Paid-in		Comprehensive			(Accumulated			Stockholders'
	Shares			Amount		Capital		Income (Loss)			Deficit)			Equity
Balances - December 30, 2012		18,951,700		$	1,888	$	2,991,526	$	(284,294	)	$	(1,205,216	)	$	1,503,904
Issuance of restricted shares		145,575			-		-		-			-			-
Forfeitures of restricted shares		(48,399	)		-		-		-			-			-
Sale of common stock from follow-on offering, net of fees and expenses		6,900,000			690		31,906,989		-			-			31,907,679
Stock options exercised		104,638			2		74,997		-			-			74,999
Employee stock purhcase plan		2,061			-		12,145								12,145
Share-based compensation		-			-		205,668		-			-			205,668
Other comprehensive income		-			-		-		18,709			-			18,709
Net income		-			-		-		-			311,847			311,847
Balances - September 29, 2013 (unaudited)		26,055,575		$	2,580	$	35,191,325	$	(265,585	)	$	(893,369	)	$	34,034,951
Balances - December 29, 2013		26,049,578		$	2,580	$	35,275,255	$	(245,364	)	$	(1,070,908	)	$	33,961,563
Issuance of restricted shares		91,966			-				-			-			-
Forfeitures of restricted shares		(2,068	)		-		-		-			-			-
Share-based compensation		-			-		237,079		-			-			237,079
Employee stock purchase plan		8,523			2		41,831		-			-			41,833
Other comprehensive income		-			-		-		64,367			-			64,367
Net income		-			-		-		-			85,252			85,252
Balances - September 28, 2014 (unaudited)		26,147,999		$	2,582	$	35,554,165	$	(180,997	)	$	(985,656	)	$	34,390,094

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

4

DIVERSIFIED RESTAURANT HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Nine Months Ended
	September 28			September 29
	2014			2013
Cash flows from operating activities
Net income	$	85,252		$	311,847
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		7,641,090			5,539,874
Write off of loan fees		-			76,408
Realized loss on sales of investments		33,406			-
Loss on disposal of property and equipment		353,333			83,711
Share-based compensation		237,079			205,668
Deferred income taxes		(223,928	)		(13,248	)
Changes in operating assets and liabilities that provided (used) cash
Accounts receivable		1,017,606			(136,544	)
Inventory		(110,794	)		(300,064	)
Prepaid assets		125,563			(67,541	)
Intangible assets		(210,937	)		(546,831	)
Other long-term assets		(77,832	)		(299,267	)
Accounts payable		1,292,321			759,930
Accrued liabilities		(107,580	)		(458,825	)
Deferred rent		(356,943	)		614,182
Net cash provided by operating activities		9,697,636			5,769,300
Cash flows from investing activities
Purchases of investments		(7,469,555	)		(12,690,397	)
Proceeds from sale of investments		11,106,241			5,278,048
Purchases of property and equipment		(23,685,771	)		(17,297,791	)
Acquisition of business, net of cash acquired		(3,202,750	)		-
Net cash used in investing activities		(23,251,835	)		(24,710,140	)
Cash flows from financing activities
Proceeds from issuance of long-term debt		16,448,332			55,862,559
Repayments of long-term debt		(5,865,644	)		(58,460,520	)
Payment of loan fees		(118,739	)		-
Proceeds from employee stock purchase plan		41,833			-
Proceeds from sale of common stock, net of underwriter fees		-			31,994,823
Net cash provided by financing activities		10,505,782			29,396,862
Net increase (decrease) in cash and cash equivalents		(3,048,417	)		10,456,022
Cash and cash equivalents, beginning of period		9,562,473			2,700,328
Cash and cash equivalents, end of period	$	6,514,056		$	13,156,350

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

5

DIVERSIFIED RESTAURANT HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1.           BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Diversified Restaurant Holdings, Inc. (“DRH”) is a fast-growing restaurant company operating two complementary concepts:  Bagger Dave’s Burger Tavern ^® (“Bagger Dave’s”) and Buffalo Wild Wings ^® Grill & Bar (“BWW”).  As the creator, developer, and operator of Bagger Dave’s and as one of the largest franchisees of BWW, we provide a unique guest experience in a casual and inviting environment.  We were incorporated in 2006 and are headquartered in the Detroit metropolitan area.  As of September 28, 2014, we had 61 locations in Florida, Illinois, Indiana, and Michigan.

DRH and its wholly-owned subsidiaries (collectively, the “Company”), AMC Group, Inc. (“AMC”), AMC Wings, Inc. (“WINGS”), AMC Burgers, Inc. (“BURGERS”), and AMC Real Estate, Inc. (“REAL ESTATE”) own, operate, and manage Bagger Dave's and DRH-owned BWW restaurants located throughout Florida, Illinois, Indiana, and Michigan.

DRH originated the Bagger Dave’s concept with our first restaurant opening in January 2008 in Berkley, Michigan.  Currently, there are 22 Bagger Dave’s, 14 in Michigan and eight in Indiana. The Company expects to operate between 47 and 51 Bagger Dave’s locations by the end of 2017.

DRH is also one of the largest BWW franchisees and currently operates 40 DRH-owned BWW restaurants (18 in Michigan, 14 in Florida, four in Illinois, and four in Indiana), including the nation’s largest BWW, based on square footage, in downtown Detroit, Michigan. We remain on track to fulfill our area development agreement (“ADA”) with Buffalo Wild Wings International, Inc. (“BWLD”) and expect to operate 52 DRH-owned BWW restaurants by the end of 2017, exclusive of potential additional BWW restaurant acquisitions. 

The following organizational chart outlines the current corporate structure of DRH.  A brief textual description of the entities follows the organizational chart. DRH is incorporated in Nevada.  

AMC was formed on March 28, 2007 and serves as our operational and administrative center. AMC renders management, operational support, and advertising services to WINGS, BURGERS, REAL ESTATE and their subsidiaries. Services rendered by AMC include marketing, restaurant operations, restaurant management consultation, hiring and training of management and staff, and other management services reasonably required in the ordinary course of restaurant operations.

BURGERS was formed on March 12, 2007 and serves as a holding company for our Bagger Dave’s restaurants.  Bagger Dave’s Franchising Corporation, a subsidiary of BURGERS, was formed to act as the franchisor for the Bagger Dave’s concept and has rights to franchise in Illinois, Indiana, Kentucky, Michigan, Missouri, Ohio, and Wisconsin.  We do not intend to pursue franchise development at this time.  

WINGS was formed on March 12, 2007 and serves as a holding company for our DRH-owned BWW restaurants.  We are economically dependent on retaining our franchise rights with BWLD.  The franchise agreements have specific initial term expiration dates ranging from March 2020 through June 2034, depending on the date each was executed and the duration of its initial term.  The franchise agreements are renewable at the option of the franchisor and are generally renewable if the franchisee has complied with the franchise agreement.  When factoring in any applicable renewals, the franchise agreements have specific expiration dates ranging from March 2035 through June 2049.  We believe we are in compliance with the terms of these agreements.

6

REAL ESTATE was formed on March 18, 2013 and serves as the holding company for the real estate properties owned by DRH. REAL ESTATE’s portfolio currently includes eight properties, four of which are Bagger Dave’s restaurants and four of which are DRH-owned BWW restaurants. The restaurants at these locations are all owned and operated by DRH.

Basis of Presentation

The consolidated financial statements as of September 28, 2014 and December 29, 2013, and for the three-month and nine-month periods ended September 28, 2014 and September 29, 2013, have been prepared by the Company pursuant to accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission. The financial information as of September 28, 2014 and for the three-month and nine-month periods ended September 28, 2014 and September 29, 2013 is unaudited, but, in the opinion of management, reflects all adjustments and accruals necessary for a fair presentation of the financial position, results of operations, and cash flows for the interim periods.

The consolidated financial information as of December 29, 2013 is derived from our audited consolidated financial statements and notes thereto for the fiscal year ended December 29, 2013, which is included in Item 8 in the Fiscal 2013 Annual Report on Form 10-K, and should be read in conjunction with such consolidated financial statements.

The results of operations for the three-month and nine-month periods ended September 28, 2014 are not necessarily indicative of the results of operations that may be achieved for the entire year ending December 28, 2014.

Reclassifications

Certain reclassifications have been made to the consolidated financial statements to conform to the prior year's presentation.

Segment Reporting

The Company has two operating segments, Bagger Dave’s and BWW. The brands operate within the ultra-casual, full-service dining industry, providing similar products to similar customers. The brands also possess similar economic characteristics, resulting in similar long-term expected financial performance. Sales from external customers are derived principally from food and beverage sales. We do not rely on any major customers as a source of sales. We believe we meet the criteria for aggregating our operating segments into a single reporting segment.

Concentration Risks

Approximately 79.8% and 80.6% of the Company's revenues are generated from food and beverage sales of restaurants located in the Midwest region during the nine-month periods ended September 28, 2014 and September 29, 2013, respectively.

Investments

The Company’s investment securities are classified as available-for-sale. Investments classified as available-for-sale are available to be sold in the future in response to the Company’s liquidity needs, changes in market interest rates, tax strategies, and asset-liability management strategies, among other reasons. Available-for-sale securities are reported at fair value, with unrealized gains and losses, net of taxes, reported in the accumulated other comprehensive income (loss) component of stockholders’ equity, and accordingly, have no effect on net income. Realized gains or losses on sale of investments are determined on the basis of specific costs of the investments. Dividend income is recognized when declared and interest income is recognized when earned. Discount or premium on debt securities purchased at other than par value are amortized using the effective yield method. See Note 3 for details. 

Goodwill

Goodwill is not amortized and represents the excess of cost over the fair value of identified net assets of businesses acquired. Goodwill is subject to an annual impairment analysis or more frequently if indicators of impairment exist. At September 28, 2014 and December 29, 2013, we had goodwill of $ 11.0 million and $8.6 million, respectively that was assigned to our BWW operating segment. See Note 2 for additional information.

The impairment analysis, if necessary, consists of a two-step process. The first step is to compare the fair value of the reporting unit to its carrying value, including goodwill. We estimate fair value using market information (market approach) and discounted cash flow projections (income approach). The income approach uses the reporting unit’s projection of estimated operating results and cash flows that is discounted using a weighted-average cost of capital that reflects market conditions. The projection uses management’s best estimates of projected revenue, costs and cash expenditures, including an estimate of new restaurant openings and related capital expenditures. Other significant estimates also include terminal growth rates and working capital requirements. We supplement our estimate of fair value under the income approach by using a market approach which estimates fair value by applying multiples to the reporting unit’s projected operating performance. The multiples are derived from comparable publicly traded companies with similar characteristics to the reporting unit. If the fair value of the reporting unit is less than its carrying value, the second step of the impairment analysis must be performed in order to determine the amount of impairment loss, if any. The second step compares the implied fair value of goodwill with the carrying amount of that goodwill. If the carrying amount of the goodwill exceeds its implied fair value, an impairment charge is recognized in an amount equal to that excess. As of December 29, 2013, based on our quantitative analysis, goodwill was considered recoverable. At September 28, 2014, there were no impairment indicators warranting an analysis.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP 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 consolidated financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

7

Interest Rate Swap Agreements

The Company utilizes interest rate swap agreements with RBS Citizens, N.A. (“RBS”) to fix interest rates on a portion of the Company’s portfolio of variable rate debt, which reduces exposure to interest rate fluctuations.  The Company does not use any other types of derivative financial instruments to hedge such exposures, nor does it use derivatives for speculative purposes. The Company’s interest rate swap agreements qualify for hedge accounting. As such, the Company records the change in the fair value of its swap agreements as a component of accumulated other comprehensive income (loss), net of tax. The Company records the fair value of its interest swaps on the Consolidated Balance Sheet in other long-term assets or other long-term liabilities depending on the fair value of the swaps. See Note 7 and Note 14 for additional information on the interest rate swap agreements.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"), which supersedes nearly all existing revenue recognition guidance under GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP.  The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein.  We are currently evaluating the impact of our pending adoption of ASU 2014-09, although based on the nature of our business we do not expect the standard will have a significant impact on our consolidated financial statements.  

2.           SIGNIFICANT BUSINESS TRANSACTIONS

On April 23, 2013, the Company completed an underwritten, follow-on equity offering of 6.9 million shares of common stock at a price of $5.00 per share to the public. After deducting underwriting discounts, commissions, and other offering expenses the net proceeds to DRH were $31.9 million. The Company invested a portion of the proceeds from the follow-on offering in highly liquid short-term investments with maturities of less than one year. At September 28, 2014, the Company held available-for-sale securities with an estimated fair value of $4.9 million. See Note 3 for additional information.

On June 30, 2014, the Company completed the acquisition of substantially all of the assets of Screamin’ Hot Florida, LLC and Screamin’ Hot Trinity, LLC, each a Florida limited liability company. The assets consist of three BWW restaurants in Clearwater, Port Richey and Oldsmar, Florida (the “Restaurants”). The purchase price was $3.2 million in cash, subject to working capital adjustment, and one-half of the transfer fees imposed by BWLD under its franchise agreements for these Restaurants. After the acquisition, the Company will own the entire Tampa, FL BWW market, giving DRH control of the local Advertising Co-Op. This ownership provides DRH a unique opportunity to gain local market scale, in addition to providing greater geographic diversity to the Company’s restaurant portfolio.

The following table summarizes the estimated fair values of net assets acquired and liabilities assumed:

Working capital	$	57,600
Property and equipment		656,146
Franchise fees		72,750
Goodwill		2,419,854
Net Cash paid for acquisition	$	3,206,350

The excess of the purchase price over the aggregate fair value of assets acquired is allocated to goodwill. Goodwill will be deductible for tax purposes. The results of operations of these locations are included in our Consolidated Statements of Operations from the date of acquisition.

8

 3.           INVESTMENTS

Investments consist of available-for-sale securities that are carried at fair value. Available-for-sale securities are classified as current assets based upon our intent and ability to use any and all of the securities as necessary to satisfy the operational requirements of our business. Based on the call date of the investments, all securities have maturities of one year or less. Unrealized losses are charged against net earnings when a decline in fair value is determined to be other than temporary.

The amortized cost, gross unrealized holding gains, gross unrealized holding loss, and fair value of available-for-sale securities by type are as follows: 

	September 28, 2014
	Amortized Cost		Unrealized Gains		Unrealized Loss			Estimated Fair Value
Debt securities:
Obligations of states/municipals		2,613,309		-		(5,468	)		2,607,841
Corporate securities		2,322,250		-		(18,243	)		2,304,007
Total debt securities	$	4,935,559	$	-	$	(23,711	)	$	4,911,848

	December 29, 2013
	Amortized Cost		Unrealized Gains		Unrealized Loss			Estimated Fair Value
Debt securities:
U.S. government and agencies	$	3,497,951	$	236	$	(52	)	$	3,498,135
Corporate securities		5,107,853		-		(44,390	)		5,063,463
Total debt securities	$	8,605,804	$	236	$	(44,442	)	$	8,561,598

As of September 28, 2014 and December 29, 2013, $4.9 million and $7.0 million of investments were in a loss position with a cumulative unrealized loss of $23,711 and $44,442, respectively. The Company may incur future impairment charges if decline in market values continue and/or worsen and the impairments are no longer considered temporary. All investments with unrealized losses have been in such position for less than 12 months.

Gross unrealized gains and losses on available-for-sale securities, recorded in accumulated other comprehensive income (loss), as of September 28, 2014 and December 29, 2013, were as follows:

	September 28 2014			December 29 2013
Unrealized gains	$	-		$	236
Unrealized loss		(23,711	)		(44,442	)
Net unrealized loss		(23,711	)		(44,206	)
Deferred federal income tax benefit		8,061			15,030
Net unrealized loss on investments, net of deferred income tax	$	(15,650	)	$	(29,176	)

4.          PROPERTY AND EQUIPMENT

Property and equipment are comprised of the following assets:

	September 28 2014			December 29 2013
Land	$	5,823,050		$	3,610,453
Building		4,316,263			4,316,263
Equipment		26,459,185			22,212,594
Furniture and fixtures		6,950,744			5,822,813
Leasehold improvements		57,304,857			46,469,088
Restaurant construction in progress		4,551,171			2,434,332
Total		105,405,270			84,865,543
Less accumulated depreciation		(30,905,075	)		(26,288,809	)
Property and equipment, net	$	74,500,195		$	58,576,734

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5.        INTANGIBLE ASSETS

Intangible assets are comprised of the following:

	September 28 2014			December 29 2013
Amortized intangibles:
Franchise fees	$	659,863		$	568,363
Trademark		64,059			59,199
Non-compete agreement		76,560			76,560
Favorable lease		239,000			239,000
Loan fees		465,497			346,758
Total		1,504,979			1,289,880
Less accumulated amortization		(481,961	)		(361,009	)
Amortized intangibles, net		1,023,018			928,871
Unamortized intangibles:
Liquor licenses		2,206,469			2,019,142
Total intangibles, net	$	3,229,487		$	2,948,013

Amortization expense for the three-month periods ended September 28, 2014 and September 29, 2013, was $15,935 and $13,989, respectively. Amortization expense for the nine-month periods ended September 28, 2014 and September 29, 2013, was $45,144 and $41,437, respectively. Amortization of favorable leases and loan fees are reflected as part of occupancy and interest expense, respectively.

Based on the current intangible assets and their estimated useful lives, future intangible-related expense for the next five years is projected as follows:

Year	Amount
Remainder of 2014	$	42,847
2015		165,794
2016		147,614
2017		146,078
2018		71,516
2019 and thereafter		449,169
Total	$	1,023,018

The aggregate weighted-average amortization period for intangible assets is 8.2 years.  

6.           RELATED PARTY TRANSACTIONS

Fees for monthly accounting and financial statement services are paid to an entity owned by a member of the DRH Board of Directors and a stockholder of the Company. Fees paid during the three-month periods ended September 28, 2014 and September 29, 2013, were $131,050, and $101,440, respectively. Fees paid during the nine-month periods ended September 28, 2014 and September 29, 2013, were $378,988 and $295,642, respectively.

See Note 10 for related party operating lease transactions.

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 7.           LONG-TERM DEBT

Long-term debt consists of the following obligations:

	September 28 2014			December 29 2013
Note payable - $46.0 million term loan; payable to RBS with a senior lien on all the Company’s personal property and fixtures. Scheduled monthly principal payments are approximately $547,619 plus accrued interest through maturity in April 2018. Interest is charged based on one-month LIBOR plus an applicable margin, which ranges from 2.25% to 3.15%, depending on the lease adjusted leverage ratio defined in the terms of the agreement. The rate at September 28, 2014 was approximately 2.7%.	$	26,690,476			31,619,048
Note payable - $15.0 million development line of credit; payable to RBS with a senior lien on all the Company’s personal property and fixtures. Scheduled monthly principal payments are $178,571 plus accrued interest through maturity in April 2018. Interest is charged based on one-month LIBOR plus an applicable margin, which ranges from 2.25% to 3.15%, depending on the lease adjusted leverage ratio defined in the terms of the agreement. The rate at September 28, 2014 was approximately 2.7%.		14,107,143			12,759,420
Note payable - $20.0 million development line of credit II; payable to RBS with a senior lien on all the Company’s personal property and fixtures. Interest is charged based on one-month LIBOR plus an applicable margin, which ranges from 2.25% to 3.15%, depending on the lease adjusted leverage ratio defined in the terms of the agreement. The rate at September 28, 2014 was approximately 2.7%. Once fully drawn, payments will be due monthly; the note matures in April 2018.		14,207,752			-
Note payable to a bank secured by a senior mortgage on the Brandon Property. Scheduled monthly principal and interest payments are approximately $8,000 through maturity in June 2030, at which point a balloon payment of $413,550 is due. Interest is charged based on a fixed rate of 6.7%, per annum, through June 2017, at which point the rate will adjust to the U.S. Treasury Securities Rate plus 4.0% (and every seven years thereafter).		1,063,990			1,081,047
Note payable to a bank secured by a junior mortgage on the Brandon Property. The note matures in 2030 and requires monthly principal and interest installments of approximately $6,300 until maturity. Interest is charged at a rate of 3.6% per annum.		786,648			813,806
Total long-term debt		56,856,009			46,273,321
Less current portion		(12,327,788	)		(8,225,732	)
Long-term debt, net of current portion	$	44,528,221		$	38,047,589

On April 15, 2013, the Company entered into a $63.0 million senior secured credit facility with RBS (the “April 2013 Senior Secured Credit Facility”). The April 2013 Senior Secured Credit Facility consists of a $46.0 million term loan (the “April 2013 Term Loan”), a $15.0 million development line of credit (the “April 2013 DLOC”), and a $2.0 million revolving line of credit (the “April 2013 RLOC”). The April 2013 Term Loan is for a period of five years. Payments of principal are based upon an 84-month straight-line amortization schedule, with monthly principal payments of $547,619 plus accrued interest through maturity on April 15, 2018, at which time the entire unpaid principal and interest is due. The April 2013 DLOC converted to a term loan on March 11, 2014, with monthly principal payments of $178,571 plus accrued interest beginning May 2014 through maturity on April 15, 2018, at which time the entire unpaid principal and interest is due. The April 2013 RLOC is for a term of two years. As of September 28, 2014 no amounts were outstanding under the April 2013 RLOC. Amounts borrowed under the April 2013 Senior Secured Credit Facility bear interest at a rate of one-month LIBOR plus an applicable margin.

On March 20, 2014, the Company amended the April 2013 Senior Secured Credit Facility to include a $20.0 million development line of credit II (the “March 2014 DLOC II”). The March 2014 DLOC II is for a term of two years and is convertible upon maturity into a term note. The amendment also provided a 25 basis point reduction to the April 2013 Senior Secured Credit Facility’s applicable margin rate, which reduced the range from 2.5%/3.4% to 2.25%/3.15%, which commenced April 2014. 

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Based on the long-term debt terms that existed at September 28, 2014, the scheduled principal maturities for the next five years and thereafter are summarized as follows:

Year	Amount
Remainder of 2014	$	2,558,034
2015		13,148,218
2016		13,151,117
2017		13,154,578
2018		13,276,923
2019 and thereafter		1,567,139
Total	$	56,856,009

For the three-month periods ended September 28, 2014 and September 29, 2013, interest expense was $483,057 and $320,798, respectively. For both the nine-month periods ended September 28, 2014 and September 29, 2013, interest expense was $1.4 million.

The current debt agreement contains various customary financial covenants generally based on the performance of the specific borrowing entity and other related entities. The more significant covenants consist of a minimum debt service coverage ratio and a maximum lease adjusted leverage ratio, both of which we are in compliance with as of September 28, 2014.

At September 28, 2014, the Company has four interest rate swap agreements to fix a portion of the interest rates on its variable rate debt. The swap agreements all qualify for hedge accounting. The swap agreements have a combined notional amount of $40.2 million at September 28, 2014. Under the swap agreements, the Company receives interest at the one-month LIBOR and pays a fixed rate. The April 2012 swap has a rate of 1.4% (notional amount of $10.5 million) and expires April 2019, the October 2012 swap has a rate of 0.9% (notional amount of $4.3 million) and expires October 2017, the December 2013 swap has a rate of 1.4% (notional amount of $12.5 million) and expires April 2018, and the April 2015 forward swap has a rate of 1.54% (notional amount of $12.9 million) and expires April 2018. The fair value of these swap agreements was a liability of $250,528 and $327,561 at September 28, 2014 and December 29, 2013, respectively. Since these swap agreements qualify for hedge accounting, the changes in fair value are recorded in other comprehensive income (loss), net of tax. See Note 1 and Note 14 for additional information pertaining to interest rate swaps.

8.            STOCK-BASED COMPENSATION

The Company established a Stock Incentive Plan in 2011 (“Stock Incentive Plan”) to attract and retain directors, consultants, and team members and to align their interests with the interests of the Company’s shareholders through the opportunity for increased stock ownership.  The plan permits the grant and award of 750,000 shares of common stock by way of stock options and/or restricted stock.  Stock options must be awarded at exercise prices at least equal to or greater than 100.0% of the fair market value of the shares on the date of grant. The options will expire no later than 10 years from the date of grant, with vesting terms to be defined at grant date, ranging from a vesting schedule based on performance to a vesting schedule that extends over a period of time as selected by the Compensation Committee of the Board of Directors (the “Committee”) or another committee as determined by the Board of Directors. The Committee also determines the grant, issuance, retention, and vesting timing and conditions of awards of restricted stock. The Committee may place limitations, such as continued employment, passage of time, and/or performance measures, on restricted stock. Awards of restricted stock may not provide for vesting or settlement in full of restricted stock over a period of less than one year from the date the award is made.

During the nine months ended September 28, 2014 and September 29, 2013, restricted shares were granted to certain team members at a weight-average fair value of $4.82 and $5.85.  Restricted shares are granted with a per share purchase price at 100.0% of the fair market value on the date of grant. Based on the Stock Award Agreement, shares vest ratably over a three year period or upon the three year anniversary of the granted shares, the vesting terms are determined by the Committee.  Unrecognized stock-based compensation expense of $700,648 at September 28, 2014 will be recognized over the remaining weighted-average vesting period of 2.1 years. The total fair value of shares vested during the nine months ended September 28, 2014 and September 29, 2013 was $193,996 and $169,593, respectively.  Under the Stock Incentive Plan, there are 543,434 shares available for future awards at September 28, 2014.

The Company also reserved 250,000 shares of common stock for issuance under the Employee Stock Purchase Plan (“ESPP”). The ESPP is available to team members subject to employment eligibility requirements. Participants may purchase common stock at 85.0% of the lesser of the start or end price for the offering period. The plan has four offering periods, each start/end dates coincide with the fiscal quarter and are awarded on the last day of the offering period. During the nine months ended September 28, 2014 and September 29 2013, we issued 8,523 and 2,061 shares, respectively. Under the ESPP, there are 236,704 shares available for future awards at September 28, 2014.

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The following table presents the restricted shares transactions during the nine months ended September 28, 2014:

	Number of Restricted Stock Shares
Unvested, December 29, 2013		116,667
Granted		91,966
Vested		(41,031	)
Expired/Forfeited		(2,068	)
Unvested, September 28, 2014		165,534

The following table presents the restricted shares transactions during the nine months ended September 29, 2013:

	Number of Restricted Stock Shares
Unvested, December 30, 2012		54,900
Granted		145,375
Vested		(26,500	)
Expired/Forfeited		(48,400	)
Unvested, September 29, 2013		125,375

On July 30, 2007, DRH granted options for the purchase of 150,000 shares of common stock to the directors of the Company at an exercise price of $2.50 per share. These options vested ratably over a three-year period and were set to expire six years from issuance, July 30, 2013. All 150,000 options were fully vested as of July 30, 2013 and were exercised either through cash or cashless exercise at a price of $2.50 per share. The intrinsic value of options exercised in 2013 was $679,680.

On July 30, 2010, DRH granted options for the purchase of 210,000 shares of common stock to the directors of the Company.  These options are fully vested and expire six years from issuance, July 30, 2016.  Once vested, the options can be exercised at a price of $2.50 per share. At September 28, 2014, 210,000 shares of authorized common stock are reserved for issuance to provide for the exercise of these options. The intrinsic value of outstanding options is $476,700 and $852,600 as of September 28, 2014 and September 29, 2013, respectively.

Stock-based compensation of $84,072 and $70,563 was recognized, during the three-month periods ended September 28, 2014 and September 29, 2013, respectively, and $237,079, and $205,668 for the nine-month periods ended September 28, 2014 and September 29, 2013, respectively, as compensation cost in the Consolidated Statements of Operations and as additional paid-in capital on the Consolidated Statement of Stockholders' Equity to reflect the fair value of shares vested.

The Company has authorized 10,000,000 shares of preferred stock at a par value of $0.0001.  No preferred shares are issued or outstanding as of September 28, 2014.  Any preferences, rights, voting powers, restrictions, dividend limitations, qualifications, and terms and conditions of redemption shall be set forth and adopted by a Board of Directors' resolution prior to issuance of any series of preferred stock.

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 9.           INCOME TAXES

The (benefit) provision for income taxes consists of the following components for the three-month and nine-month periods ended September 28, 2014 and September 29, 2013, respectively:

	Three Months Ended						Nine Months Ended
	September 28 2014			September 29 2013			September 28 2014			September 29 2013
Federal:
Current	$	-		$	-		$	-		$	-
Deferred		(20,315	)		(14,246	)		(189,473	)		23,908
State:
Current		(24,389	)		33,568			43,898			65,434
Deferred		(3,396	)		(33,766	)		(34,455	)		(37,156	)
Income tax provision (benefit)	$	(48,100	)	$	(14,444	)	$	(180,030	)	$	52,186

The (benefit) provision for income taxes is different from that which would be obtained by applying the statutory federal income tax rate to income before income taxes before income taxes.  The items causing this difference are as follows:

	September 28 2014			September 29 2013
Income tax provision at federal statutory rate	$	(32,235	)	$	116,298
State income tax provision		6,331			18,663
Permanent differences		53,499			123,778
Tax credits		(207,625	)		(206,553	)
Income tax provision (benefit)	$	(180,030	)	$	52,186

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.  The Company expects the deferred tax assets to be fully realizable within the next several years. Significant components of the Company's deferred income tax assets and liabilities are summarized as follows:

	September 28 2014		December 29 2013
Deferred tax assets:
Net operating loss carry forwards	$	494,900	$	983,682
Deferred rent expense		593,237		131,249
Start-up costs		133,744		130,136
Tax credit carry forwards		2,591,009		2,427,861
Interest rate swaps		85,179		111,218
Investments		8,061		15,030
Stock-based compensation		275,606		129,514
Other		259,280		186,814
Total deferred tax assets		4,441,016		4,115,504
Deferred tax liabilities:
Tax depreciation in excess of book		2,804,681		2,708,544
Other		282,654		244,199
Total deferred tax liabilities		3,087,335		2,952,743
Net deferred income tax asset	$	1,353,681	$	1,162,761

If deemed necessary by management, the Company establishes valuation allowances in accordance with the provisions of Accounting Standards Codification (“ASC”) 740, Income Taxes ("ASC 740") issued by FASB. Management continually reviews the likelihood that deferred tax assets will be realized and the Company recognizes these benefits only as reassessment indicates that it is more likely than not that such tax benefits will be realized. 

The Company expects to use net operating loss and general business tax credit carryforwards before their 20-year expiration. As of September 28, 2014, the Company has available federal net operating loss carryforwards of approximately $2.1 million. Of that amount, approximately $600,000 relates to stock-based compensation tax deductions in excess of book compensation expense that will be credited to additional paid in capital in future periods when such deductions reduce taxes payable as determined based on a "with-and-without" approach.  Net operating losses relating to such benefits are not included in the table above. General business tax credits of $2.6 million will expire between 2028 and 2035. 

The Company applies the provisions of ASC 740 regarding the accounting for uncertainty in income taxes.  There are no amounts recorded on the Company's consolidated financial statements for uncertain positions.  The Company classifies all interest and penalties as income tax expense.  There are no accrued interest amounts or penalties related to uncertain tax positions as of September 28, 2014.

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The Company files income tax returns in the United States federal jurisdiction and various state jurisdictions.

10.           OPERATING LEASES (INCLUDING RELATED PARTY)

Lease terms range from five to 20 years, generally include renewal options, and frequently require us to pay a proportionate share of real estate taxes, insurance, common area maintenance, and other operating costs. Some restaurant leases provide for contingent rental payments based on sales thresholds.

Total rent expense was $1.4 million and $1.2 million for the three-month periods ended September 28, 2014 and September 29, 2013, respectively (of which $34,299 and $18,820, respectively, were paid to a related party).  Total rent expense was $3.8 million and $3.7 million for the nine-month periods ended September 28, 2014 and September 29, 2013, respectively (of which $103,961 and $56,394, respectively, were paid to a related party). On October 30, 2014, Detroit Burgers, Inc., one of our wholly-owned subsidiaries, acquired 100% of the membership interests of DMM Group, LLC from a trust controlled by the spouse of our President, CEO and Chairman, T. Michael Ansley for $250,000. DMM Group’s sole asset is the land and improvements used for our Detroit Bagger Dave’s restaurant.

Scheduled future minimum lease payments for each of the five years and thereafter for non-cancelable operating leases with initial or remaining lease terms in excess of one year at September 28, 2014 are summarized as follows:

Year	Amount
Remainder of 2014	$	1,528,696
2015		6,065,811
2016		5,841,663
2017		5,568,461
2018		5,282,794
2019 and thereafter		24,090,959
Total	$	48,378,384

Scheduled future minimum lease payments for each of the five years and thereafter for non-cancelable operating leases for restaurants under development with initial or remaining lease terms in excess of one year at September 28, 2014 are summarized as follows:

Year	Amount
Remainder of 2014	$	37,008
2015		496,736
2016		520,872
2017		522,552
2018		524,236
2019 and thereafter		4,107,260
Total	$	6,208,664

11.           COMMITMENTS AND CONTINGENCIES

The Company’s ADA requires DRH to open 32 restaurants by March 1, 2017.  Failure to develop restaurants in accordance with the schedule detailed in the agreement could lead to potential penalties of up to $50,000 for each undeveloped restaurant, payment of the initial franchise fees for each undeveloped restaurant, and loss of rights to development territory.  As of September 28, 2014, we have opened 22 of the 32 restaurants required by the ADA.  With the remaining 10 restaurants, along with two additional franchise agreements, we expect the Company will operate 52 BWW restaurants by 2017, exclusive of potential additional BWW restaurant acquisitions.  

The Company is required to pay BWLD royalties (5.0% of net sales) and advertising fund contributions (3.0% of net sales globally and 0.5% of net sales for certain cities) for the term of the individual franchise agreements.  The Company incurred royalty fees of $1.4 million and $1.2 million for the three-month periods ended September 28, 2014 and September 29, 2013 and $3.9 million and $3.5 million for nine-month periods ended September 28, 2014 and September 29, 2013, respectively.  Advertising fund contribution expenses were $813,579 and $690,096 for the three-month periods ended September 28, 2014 and September 29, 2013 and $2.3 million and $2.1 million for nine-month periods ended September 28, 2014 and September 29, 2013, respectively.

15

The Company is required by its various BWLD franchise agreements to modernize the restaurants during the term of the agreements.  The individual agreements generally require improvements between the fifth and tenth year to meet the most current design model that BWLD has approved.  The modernization costs for a restaurant can range from approximately $50,000 to approximately $700,000 depending on an individual restaurant's needs.

The Company is subject to ordinary and routine legal proceedings, as well as demands, claims and threatened litigation, which arise in the ordinary course of its business.  The ultimate outcome of any litigation is uncertain.  While unfavorable outcomes could have adverse effects on the Company's business, results of operations, and financial condition, management believes that the Company is adequately insured and does not believe an unfavorable outcome of any pending or threatened proceedings is probable or reasonably possible.  Therefore, no separate reserve or disclosure has been established for these types of legal proceedings. 

12.          EARNINGS PER COMMON SHARE

The following is a reconciliation of basic and fully diluted earnings per common share for the three-month and nine-month periods ended September 28, 2014 and September 29, 2013:

	Three months ended
	September 28 2014			September 29 2013
Income (loss) available to common stockholders	$	(182,109	)	$	69,810
Weighted-average shares outstanding		26,107,627			26,054,118
Effect of dilutive securities		-			132,145
Weighted-average shares outstanding - assuming dilution		26,107,627			26,186,263
Earnings (loss) per common share	$	(0.01	)	$	0.00
Earnings (loss) per common share - assuming dilution	$	(0.01	)	$	0.00

	Nine months ended
	September 28 2014		September 29 2013
Income available to common stockholders	$	85,252	$	311,847
Weighted-average shares outstanding		26,074,797		23,231,403
Effect of dilutive securities		99,796		119,725
Weighted-average shares outstanding - assuming dilution		26,174,593		23,351,128
Earnings per common share	$	0.00	$	0.01
Earnings per common share - assuming dilution	$	0.00	$	0.01

13.            SUPPLEMENTAL CASH FLOWS INFORMATION

Other Cash Flows Information

Cash paid for interest was $438,679 and $319,689 during the three-month periods ended September 28, 2014 and September 29, 2013, and was $1.3 million and $1.4 million for the nine-month periods ended September 28, 2014 and September 29, 2013, respectively.

Cash paid for income taxes was $22,000 during the three-month periods ended September 28, 2014 and September 29, 2013, respectively, and $22,000 and $65,500 for the nine-month periods ended September 28, 2014 and September 29, 2013, respectively.

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Supplemental Schedule of Non-Cash Operating, Investing, and Financing Activities

Noncash investing activities for property and equipment not yet paid during both the nine months ended September 28, 2014 and September 29, 2013, was $1.4 million.

14.           FAIR VALUE OF FINANCIAL INSTRUMENTS

The guidance for fair value measurements, FASB ASC 820, Fair Value Measurements and Disclosures, establishes the authoritative definition of fair value, sets out a framework for measuring fair value, and outlines the required disclosures regarding fair value measurements. Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. We use a three-tier fair value hierarchy based upon observable and non-observable inputs as follows:

●	Level 1	Quoted market prices in active markets for identical assets and liabilities;
●	Level 2	Inputs, other than level 1 inputs, either directly or indirectly observable; and
●	Level 3	Unobservable inputs developed using internal estimates and assumptions (there is little or no market data) which reflect those that market participants would use.

As of September 28, 2014 and December 29, 2013, respectively, our financial instruments consisted of cash and cash equivalents, accounts receivable, available-for-sale investments, accounts payable, and debt. The fair value of cash and cash equivalents, accounts receivable, and accounts payable approximate carrying value, due to their short-term nature.

The fair value of our interest rate swaps is determined based on valuation models, which utilize quoted interest rate curves to calculate the forward value and then discount the forward values to the present period. The Company measures the fair value using broker quotes which are generally based on market observable inputs including yield curves and the value associated with counterparty credit risk. Our interest rate swaps are classified as a Level 2 measurement as these securities are not actively traded in the market, but are observable based on transactions associated with bank loans with similar terms and maturities. See Note 1 and Note 7 for additional information pertaining to interest rates swaps.

The estimated fair values of the Company’s investment portfolio are based on prices provided by a third party pricing service and a third party investment manager. The prices provided by these services are based on quoted market prices, when available, non-binding broker quotes, or matrix pricing. The third party pricing service and the third party investment manager provide a single price or quote per security and the Company has not historically adjusted security prices. The Company obtains an understanding of the methods, models and inputs used by the third party pricing service and the third party investment manager, and has controls in place to validate that amounts provided represent fair values. Our investments are classified as a Level 2 measurement as these securities are not actively traded in the market, but are observable based on the quoted prices provided by our Portfolio managers.

As of September 28, 2014 and December 29, 2013, our total debt was approximately $56.9 million and $46.3 million, respectively, which approximated fair value. The Company estimates the fair value of its fixed-rate debt using discounted cash flow analysis based on the Company’s incremental borrowing rate (Level 2).

There were no transfers between levels of the fair value hierarchy during the three and nine months ended September 28, 2014 and the fiscal year ended December 29, 2013.

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The following table presents the fair values for those assets and liabilities measured on a recurring basis as of September 28, 2014:

FAIR VALUE MEASUREMENTS
Description	Level 1		Level 2			Level 3		Asset/(Liability) Total
Interest rate swaps	$	-	$	(250,528	)	$	-	$	(250,528	)
Debt securities
Obligations of states/municipals		-		2,607,841			-		2,607,841
Corporate securities		-		2,304,007			-		2,304,007
Total debt securities		-		4,911,848			-		4,911,848
Total debt securities and derivatives	$	-	$	4,661,320		$	-	$	4,661,320

The following table presents the fair values for those assets and liabilities measured on a recurring basis as of December 29, 2013:

FAIR VALUE MEASUREMENTS
Description	Level 1		Level 2			Level 3		Asset/(Liability) Total
Interest rate swaps	$	-	$	(327,561	)	$	-	$	(327,561	)
Debt securities
U.S. government and agencies		-		3,498,135			-		3,498,135
Corporate securities		-		5,063,463			-		5,063,463
Total debt securities		-		8,561,598			-		8,561,598
Total debt securities and swaps	$	-	$	8,234,037		$	-	$	8,234,037

15. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table summarizes each component of Accumulated Other Comprehensive Income (loss):

	September 28 2014			December 29 2013
Fair value of interest rate swaps (net of tax of $85,179 and $111,218)	$	(165,347	)	$	(216,188	)
Fair value of investments (net of tax of $8,061 and $15,030)		(15,650	)		(29,176	)
Total Accumulated other comprehensive loss ending balance	$	(180,997	)	$	(245,364	)

16.           SUBSEQUENT EVENTS

On October 31, 2014 and November 5, 2014, the Company closed on its previously announced sale and leaseback transaction with Spirit Master Funding IX (“Purchaser”), with regard to seven of the 12 properties that are subject to the agreement. The aggregate sales price for the properties closed to date was $13.1 million. The Company plans to use $5.0 million of the proceeds to pay down debt, including $1.9 million to retire mortgages on its Brandon Buffalo Wild Wings property and $3.1 million to pay down its DLOC. The Company intends to use the remaining proceeds from the transaction to fund growth capital. Closing on the remaining properties, all of which remain under construction, is anticipated to occur upon completion of the construction, subject to customary diligence by Purchaser and satisfaction of other conditions precedent to closing. For additional information, refer the 8-K filed on November 5, 2014.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated interim financial statements and related notes included in Item 1 of Part 1 of this Quarterly Report and the audited consolidated financial statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results from Operations contained in our Form 10-K, for the fiscal year ended December 29, 2013. Information included in this discussion and analysis includes commentary on company-owned restaurant, restaurant sales, and same store sales. Management believes such sales information is an important measure of our performance, and is useful in assessing consumer acceptance of the Bagger Dave’s Tavern® (“Bagger Dave’s”) and Buffalo Wild Wings® Grill & Bar (“BWW”) concept and the overall health of the concepts. However, same store sales information does not represent sales in accordance with accounting principles generally accepted in the United States of America (“GAAP”), should not be considered in isolation or as a substitute for other measures of performance prepared in accordance with GAAP and may not be comparable to financial information as defined or used by other companies.

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

Statements contained in this “Quarterly Report on Form 10-Q” may contain information that includes or is based upon certain “forward-looking statements” relating to our business. These forward-looking statements represent management’s current judgment and assumptions, and can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements are frequently accompanied by the use of such words as “anticipates,” “plans,” “believes,” “expects,” “projects,” “intends,” and similar expressions. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors, including, while it is not possible to predict or identify all such risks, uncertainties, and other factors, those relating to our ability to secure the additional financing adequate to execute our business plan; our ability to locate and start up new restaurants; acceptance of our restaurant concepts in new market places; and the cost of food and other raw materials.  Any one of these or other risks, uncertainties, other factors, or any inaccurate assumptions may cause actual results to be materially different from those described herein or elsewhere by us. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date they were made. Certain of these risks, uncertainties, and other factors may be described in greater detail in our filings from time to time with the Securities and Exchange Commission (“SEC”), which we strongly urge you to read and consider. Subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth above and elsewhere in our reports filed with the SEC. We expressly disclaim any intent or obligation to update any forward-looking statements.

OVERVIEW

Diversified Restaurant Holdings, Inc. (“DRH”) is a fast-growing restaurant company operating two complementary concepts:  Bagger Dave’s Burger Tavern ^® (“Bagger Dave’s”) and Buffalo Wild Wings ^® Grill & Bar (“BWW”).  As the creator, developer, and operator of Bagger Dave’s and as one of the largest franchisees of BWW, we provide a unique guest experience in a casual and inviting environment.  We were incorporated in 2006 and are headquartered in the Detroit metropolitan area.  As of September 28, 2014, we had 61 locations in Florida, Illinois, Indiana, and Michigan.

DRH and its wholly-owned subsidiaries (collectively, the “Company”), AMC Group, Inc. (“AMC”), AMC Wings, Inc. (“WINGS”), AMC Burgers, Inc. (“BURGERS”), and AMC Real Estate, Inc. (“REAL ESTATE”) own, operate, and manage Bagger Dave's and DRH-owned BWW restaurants located throughout Florida, Illinois, Indiana, and Michigan.

DRH originated the Bagger Dave’s concept with our first restaurant opening in January 2008 in Berkley, Michigan.  Currently, there are 22 Bagger Dave’s, 14 in Michigan and eight in Indiana. The Company expects to operate between 47 and 51 Bagger Dave’s locations by the end of 2017.

DRH is also one of the largest BWW franchisees and currently operates 40 DRH-owned BWW restaurants (18 in Michigan, 14 in Florida, four in Illinois, and four in Indiana), including the nation’s largest BWW, based on square footage, in downtown Detroit, Michigan. We remain on track to fulfill our area development agreement (“ADA”) with Buffalo Wild Wings International, Inc. (“BWLD”) and expect to operate 52 DRH-owned BWW restaurants by the end of 2017, exclusive of potential additional BWW restaurant acquisitions. 

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RESTAURANT OPENINGS

The following table outlines the restaurant unit information for each fiscal year from 2010 through 2014. From our inception in 2006, we managed, but did not own, nine BWW restaurants, which we acquired in February 2010.

	2014 (estimate)		2013		2012		2011		2010
Summary of restaurants open at the beginning of year
DRH-owned BWW		36		33		22		19		7
Bagger Dave’s		18		11		6		3		2
BWW Acquisitions / affiliate restaurants under common control		-		-		-		-		9
Total		54		44		28		22		18
Openings:
DRH-owned BWW		3		3		3		3		3
Bagger Dave’s		6		7		5		3		1
BWW Acquisitions		3		-		8		-		-
Closures		-		-		-		-		-
Total restaurants		66		54		44		28		22

RESULTS OF OPERATIONS

For the three-month period ended September 28, 2014 ("Third Quarter 2014") and nine-month period ended September 28, 2014 (“Year to Date 2014”), revenue was generated from the operations of 40 BWW restaurants and 21 Bagger Dave’s restaurants. Of these restaurants, the Company opened one BWW restaurant in July 2014 and acquired three BWW restaurants on June 30, 2014. Additionally, the Company has opened three Bagger Dave’s during Year to Date 2014; one in May 2014, June 2014, and September 2014. For the three-month period ended September 29, 2013 ("Third Quarter 2013") and the nine-month period ended September 29, 2013 (“Year to Date 2013”), revenue was generated from the operations of 35 BWW restaurants and 14 Bagger Dave’s restaurants (three Bagger Dave’s restaurants opened during Year to Date 2013; one in May 2013, July 2013, and September 2013). Quarterly and annual operating results may fluctuate significantly as a result of a variety of factors, including the timing and number of new restaurant openings and related expenses, increases or decreases in same store sales, changes in commodity prices, general economic conditions, and seasonal fluctuations. As a result, our quarterly results of operations are not necessarily indicative of the results that may be achieved for any future period. Same store sales is defined as a restaurant to be comparable in the first full quarter following the 18th month of operations. Changes in comparable restaurant sales reflect changes in sales for the comparable group of restaurants over a specified period of time. Our comparable restaurant base consisted of 46 and 35 restaurants at September 28, 2014 and September 29, 2013, respectively

Results of Operations for the Three Months Ended September 28, 2014 and September 29, 2013

	Three Months Ended
	September 28 2014			September 29 2013
Total revenue		100.0	%		100.0	%
Operating expenses
Restaurant operating costs:
Food, beverage, and packaging costs		28.8	%		29.4	%
Compensation costs		25.6	%		26.4	%
Occupancy costs		5.7	%		6.1	%
Other operating costs		22.0	%		20.6	%
General and administrative expenses		6.5	%		5.9	%
Pre-opening costs		1.9	%		2.4	%
Depreciation and amortization		8.7	%		7.9	%
Loss on disposal of property and equipment		0.1	%		0.1	%
Total operating expenses		99.3	%		98.8	%
Operating profit		0.7	%		1.2	%

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Revenue for Third Quarter 2014 was $32.8 million, an increase of $6.4 million, or 24.3%, over the $26.4 million of revenue generated during Third Quarter 2013. The increase was attributable to increased same store sales, acquisition of three BWW locations, and the opening of 10 DRH-owned restaurants (eight Bagger Dave’s and two BWW restaurants). $1.3 million was attributable to the 5.0% same store sales increase for 35 BWW and 11 Bagger Dave’s restaurants. $1.6 million was attributable to the acquisition of three BWW restaurants on June 30, 2014. The remaining $3.5 million is a result of restaurants opening within the last 18-months, including 10 Bagger Dave’s and five BWW restaurants. Breaking down our same store sales increase of 5.0% into components, 3.5% was attributable to price increase from winter and fall menu rollouts and 1.5% was attributable to increase traffic in our comparable locations.

Food, beverage, and packaging costs increased by $1.7 million, or 21.9%, to $9.5 million in Third Quarter 2014 from $7.8 million in Third Quarter 2013.  The increase was primarily due to an increased number of restaurants operating in 2014, including an acquisition of three BWW restaurants. Food, beverage, and packaging costs as a percentage of revenue decreased to 28.8% in Third Quarter 2014 from 29.4% in Third Quarter 2013 primarily due to lower chicken wing prices. Average cost per pound for bone-in chicken wings was $1.50 in Third Quarter 2014 compared to $1.71 in Third Quarter 2013.

Compensation costs increased by $1.4 million, or 20.5%, to $8.4 million in Third Quarter 2014 from $7.0 million in Third Quarter 2013.  The increase was primarily due to an increased number of restaurants operating in 2014, including an acquisition of three BWW restaurants.  Compensation costs as a percentage of sales decreased to 25.6% in Third Quarter 2014 from 26.4% in Third Quarter 2013.  

Occupancy costs increased by $0.3 million, or 17.1%, to $1.9 million in Third Quarter 2014 from $1.6 million in Third Quarter 2013.  This increase is primarily due to the increased number of restaurants operating in 2014, including an acquisition of three BWW restaurants. Occupancy as a percentage of sales decreased to 5.7% in Third Quarter 2014 from 6.1% in Third Quarter 2013 due to the increased real estate purchases occurring in late fiscal 2013 and throughout fiscal 2014.

Other operating costs increased by $1.8 million, or 32.8%, to $7.2 million in Third Quarter 2014 from $5.4 million in Third Quarter 2013.  The increase was primarily due to an increased number of restaurants operating in 2014. Other operating costs as a percentage of sales increased to 22.0% in Third Quarter 2014 from 20.6% in Third Quarter 2013 primarily due to additional repair and maintenance costs.

General and administrative expenses increased by $0.5 million, or 36.9%, to $2.1 million in Third Quarter 2014 from $1.6 million in Third Quarter 2013.  This increase was primarily due to the timing of our marketing expenses versus the prior year. General and administrative expenses as a percentage of sales increased to 6.5% in Third Quarter 2014 from 5.9% in Third Quarter 2013.

Pre-opening costs were relatively flat at $0.6 million in Third Quarter 2014 and Third Quarter 2013.   Pre-opening costs depend on the timing of restaurants under construction.  The Company opened two new restaurants in Third Quarter 2014 compared to two openings and one relocation in Third Quarter 2013. Pre-opening costs as a percentage of sales was 1.9% in Third Quarter 2014 and 2.4% in Third Quarter 2013.

Depreciation and amortization increased by $0.8 million, or 38.4%, to $2.9 million in Third Quarter 2014 from $2.1 in Third Quarter 2013.  This increase was primarily due to an increased number of restaurants operating in 2014.  Depreciation and amortization as a percentage of sales increased to 8.7% in Third Quarter 2014 from 7.9% in Third Quarter 2013 primarily due to the increased investment in ground-up development of our restaurant buildings. 

Loss on disposal of property and equipment increased by $10,043, or 43.7%, to $33,013 in Third Quarter 2014 from $22,970 in Third Quarter 2013. Loss on disposal of property and equipment as a percentage of sales remained at 0.1% in Third Quarter 2014.

Results of Operations for the Nine Months Ended September 28, 2014 and September 29, 2013

	Nine Months Ended
	September 28 2014			September 29 2013
Total revenue		100.0	%		100.0	%
Operating expenses
Restaurant operating costs:
Food, beverage, and packaging costs		28.7	%		30.3	%
Compensation costs		25.9	%		26.0	%
Occupancy costs		5.4	%		5.9	%
Other operating costs		21.0	%		20.0	%
General and administrative expenses		6.8	%		6.3	%
Pre-opening costs		2.2	%		2.5	%
Depreciation and amortization		8.2	%		6.9	%
Loss on disposal of property and equipment		0.4	%		0.1	%
Total operating expenses		98.6	%		98.0	%
Operating profit		1.4	%		2.0	%

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Revenue for Year to Date 2014 was $93.3 million, an increase of $12.9 million or 16.0% over the $80.4 million of revenue generated during Year to Date 2013. The increase was primarily attributable to three factors: (i) approximately $9.5 million was attributable to revenues generated from the opening of 10 DRH-owned restaurants (eight Bagger Dave’s restaurants and two BWW restaurant); (ii) $1.8 million increase was related to a 2.6% increase in same store sales for 35 BWW and 11 Bagger Dave’s restaurants; and (iii) the remaining $1.6 million was attributable to the acquisition of three BWW restaurants on June 30, 2014.

Food, beverage, and packaging costs increased by $2.5 million or 10.1% to $26.8 million in Year to Date 2014 from $24.3 million in Year to Date 2013.  The increase was primarily due to the increased number of restaurants operating in 2014.  Food, beverage, and packaging costs as a percentage of sales decreased to 28.7% in Year to Date 2014 from 30.3% in Year to Date 2013 due to lower chicken wing prices. Average cost per pound for bone-in chicken wings was $1.41 in Year to Date 2014 compared to $1.80 in Year to Date 2013.

Compensation costs increased by $3.3 million or 15.6% to $24.2 million in Year to Date 2014 from $20.9 million in Year to Date 2013. This increase was primarily due to the increased number of restaurants operating in 2014. Compensation as a percentage of sales decreased to 25.9% in Year to Date 2014 from 26.0% in Year to Date 2014 and in Year to Date 2013.

Occupancy costs increased by $0.4 million or 7.4% to $5.1 million in Year to Date 2014 from $4.7 million in Year to Date 2013.  This increase was primarily due to the increased number of restaurants operating in 2014. Occupancy cost as a percentage of sales decreased to 5.4% in Year to Date 2014 from 5.9% in Year to Date 2014 and in Year to Date 2013.

Other operating costs increased by $3.5 million or 21.9% to $19.6 million in Year to Date 2014 from $16.1 million in Year to Date 2013.  This increase was primarily the increased number of restaurants operating in 2014.  Other operating costs as a percentage of sales increased to 21.0% in Year to Date 2014 from 20.0% in Year to Date 2013.

General and administrative cost increased by $1.2 million or 25.4% to $6.3 million in Year to Date 2014 from $5.1 million in Year to Date 2013.  This increase was primarily due to the increased marketing campaign and other corporate costs associated with the substantial growth in operations. General and administrative cost as a percentage of sales increased to 6.8% in Year to Date 2014 from 6.3% in Year to Date 2013.

Pre-opening cost increased by $0.1 million or 1.4% to $2.1 million in Year to Date 2014 from $2.0 million in Year to Date 2013.  The decrease in pre-opening costs was due to the timing of restaurant openings in Year to Date 2014 versus Year to Date 2013.  The Company opened three new restaurants and relocated two restaurants in Year to Date 2014 compared to five openings and one relocation in Year to Date 2013. Pre-opening cost as a percentage of sales decreased to 2.2% in Year to Date 2014 from 2.5% in Year to Date 2013.

Depreciation and amortization cost increased by $2.1 million or 37.4% to $7.6 million in Year to Date 2014 from $5.5 million in Year to Date 2013.  This increase was primarily due to the increased number of restaurants operating in 2014.  Depreciation and amortization cost as a percentage of sales increased to 8.2% in Year to Date 2014 from 6.9% in Year to Date 2013 primarily due to the increased investment in real estate purchases. 

Loss on disposal of property and equipment increased by $0.3 million or 322.1% to $0.4 million in Year to Date 2014 from $0.1 million in Year to Date 2013.  This increase was primarily due to non-recurring property and equipment disposals in the current year driven by the relocation of two restaurants. Loss on disposal of property and equipment as a percentage of sales increased to 0.4% in Year to Date 2014 from 0.1% in Year to Date 2013

INTEREST AND TAXES

Interest expense was $483,057 and $320,798 during Third Quarter 2014 and Third Quarter 2013, respectively. The increase was due to the increased debt for 2014.  Interest expense was $1.4 million during both Year to Date 2014 and Year to Date 2013. 

For Third Quarter 2014, DRH had an income tax benefit of $48,100 compared to Third Quarter 2013 income tax benefit of $14,444.  The Third Quarter 2014 income tax benefit primarily relates to the increase in tip credits for the period. For Year to Date 2014, we booked an income tax benefit of $180,030 compared to Year to Date 2013 of an income tax provision of $52,186.  

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LIQUIDITY AND CAPITAL RESOURCES; EXPANSION PLANS

On April 15, 2013, the Company entered into a $63.0 million senior secured credit facility with RBS Citizens, N.A. (the “April 2013 Senior Secured Credit Facility”). The April 2013 Senior Secured Credit Facility consists of a $46.0 million term loan (the “April 2013 Term Loan”), a $15.0 million development line of credit (the “April 2013 DLOC”), and a $2.0 million revolving line of credit (the “April 2013 RLOC”). The April 2013 Term Loan is for a period of five years. Payments of principal are based upon an 84-month straight-line amortization schedule, with monthly principal payments of $547,619 plus accrued interest through maturity on April 15, 2018, at which time the entire unpaid principal and interest is due. The April 2013 DLOC converted to a term loan on March 11, 2014, with monthly principal payments of $178,571 plus accrued interest beginning May 2014 through maturity on April 15, 2018, at which time the entire unpaid principal and interest is due. The April 2013 RLOC is for a term of two years. As of September 28, 2014, no amounts were outstanding under the April 2013 RLOC. Amounts borrowed under the April 2013 Senior Secured Credit Facility bear interest at a rate of one-month LIBOR plus an applicable margin. On March 20, 2014, the Company amended the April 2013 Senior Secured Credit Facility to include a $20.0 million development line of credit II (the “March 2014 DLOC II”). The March 2014 DLOC II is for a term of two years and is convertible upon maturity into a term note. The amendment also provided a 25 basis point reduction to the April 2013 Senior Secured Credit Facility’s applicable margin rate, which reduced the range from 2.5%/3.4% to 2.25%/3.15%, which commences April 2014. 

On April 23, 2013, the Company completed an underwritten, follow-on equity offering of 6.9 million shares of common stock at a price of $5.00 per share to the public. After deducting underwriting discounts, commissions, and other offering expenses the net proceeds to DRH were $31.9 million. At September 28, 2014, the Company held available-for-sale securities with an estimated fair value of $4.9 million. The investments were funded by a portion of the proceeds from the follow-on offering. See Note 3 for additional information.

We believe the cash flow from operations, the remaining proceeds from the registered offering, proceeds from the sale-lease-back agreement and availability of credit will be sufficient to meet our operational funding, development, and obligations for at least the next 12 months.

Our capital requirements are primarily dependent upon the pace of our new restaurant growth plan.  The new restaurant growth plan is primarily dependent upon economic conditions, the real estate market, and resources to both develop and operate new restaurants.  In addition to new restaurants, our capital expenditure outlays are also dependent on costs for maintenance, facility upgrades, capacity enhancements, information technology, and other general corporate capital expenditures.

The amount of capital required to open a new restaurant is largely dependent on whether we build-out an existing leased space or build from the ground up.  Our preference is to find leased space for new restaurant locations but depending on the availability of real estate in specific markets, we will take advantage of alternative strategies which may include land purchases, land leases, and ground up construction of a building to house our restaurant operation.  Excluding land and building, we expect the build-out of a new Bagger Dave’s restaurant will, on average, require a total cash investment of $1.1 million to $1.4 million (excluding potential tenant incentives). Similarly, we expect the build-out of a new DRH-owned BWW restaurant will require an estimated cash investment of $1.9 million to $2.1 million (excluding potential tenant incentives).  We expect to spend approximately $200,000 to $250,000 per restaurant for pre-opening expenses.  Depending on individual lease negotiations, we may receive cash tenant incentives of up to $400,000.  The projected cash investment per restaurant is based on recent opening costs and future projections and may fluctuate based on construction costs specific to new restaurant locations.

We target a cash on cash return on our initial total capital investment, excluding real estate investment (which includes land and building), of less than four years.    The expected payback is subject to how quickly we reach our target sales volume and the cost of construction.  Real estate purchases and building costs are excluded from our expected return since the majority of our restaurants are leased and purchased real estate is not a part of our core operations.  We separate the analysis and decisions on real estate projects from new restaurant development, although we have no plans for independent real estate projects without an associated new restaurant opening.

Cash flow from operations for Year to Date 2014 was $9.7 million compared with $5.8 million for Year to Date 2013. Net cash provided by operating activities consisted primarily of net earnings adjusted for non-cash expenses.

Opening new restaurants, including real estate investments, is our primary use of capital and is estimated to be over 80.0% of our capital expenditures in 2014. For 2014, we estimate capital expenditures to be between $33.0 million and $36.0 million. Of this amount, $3.2 million was used for the acquisition of three new BWW restaurants in the north Tampa area. The acquisition was funded with a combination of bank funded DLOC and cash on hand. We plan to use the remaining capital as follows: one half for new restaurant openings, currently three Bagger Dave's and two DRH-owned BWW are under construction; one third for real estate (including the purchase of land and construction of buildings) associated with new restaurant openings; and the remaining for restaurant remodels, upgrades, relocations and other general corporate purposes.

Although investments in new restaurants are an integral part of our strategic and capital expenditures plan, we also believe that reinvesting in existing restaurants is an important factor and necessary to maintain the overall positive dining experience for our guests. Depending on the age of the existing restaurants, upgrades range from $50,000 (for minor interior refreshes) to $800,000 (for a full remodel of the restaurant). Restaurants are typically upgraded after approximately five to seven years of operation and fully remodeled after approximately 10 years of operation.

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Contractual Obligations

The following table presents a summary of our contractual obligations as of September 28, 2014:

			Less than
	Total		one year		1 - 3 years		3 - 5 years		After 5 years
Long-term debt1	$	56,856,009	$	12,327,788	$	26,085,494	$	16,932,023	$	1,510,704
Operating lease obligations		48,378,384		6,074,376		11,561,553		10,335,688		20,406,767
Commitments for restaurants under development 2		17,865,941		12,061,110		1,042,592		1,049,344		3,712,895
	$	123,100,334	$	30,463,274	$	38,689,639	$	28,317,055	$	25,630,366

1	Amount represents the expected principal cash payments relating to our long-term debt and do not include any fair value adjustments or discounts/premiums or interest rate payments due to the variable of the rates. See Note 7 for additional details.
2	Amount represents capital expenditures DRH is obligated to pay for restaurants under development in addition to noncancelable operating leases for these restaurants.

Mandatory Upgrades

In fiscal year 2014, we plan to complete two mandatory remodels of existing DRH-owned BWW restaurant, which will be funded with cash from operations.

Discretionary Upgrades and Relocations

In fiscal year 2014, the Company will invest additional capital to provide minor upgrades to a number of its existing locations, all of which will be funded by cash from operations. These improvements will primarily consist of new carpentry, audio/visual equipment upgrades, patio upgrades, and point-of-sale system upgrades. In fiscal year 2014, we relocated two DRH-owned BWW locations in lieu of remodels, the relocations occurred in second quarter 2014. The decision to relocate is typically driven by timing of our current lease agreements and the availability of real estate that we deem to be a better long-term investment. Relocations are funded by a combination of cash from operations and borrowing from our credit facility.

Inflation

Our profitability is dependent, among other things, on our ability to anticipate and react to changes in the costs of key operating resources, including food and other raw materials, labor, energy, and other supplies and services. Substantial increases in costs and expenses could impact our results of operations to the extent that such increases cannot be passed along to our restaurant guests.  The impact of inflation on food, labor, energy, and occupancy costs can significantly affect the profitability of our restaurant operations.

While we have been able to partially offset inflation and other changes in the costs of key operating resources by gradually increasing prices for our menu items, more efficient purchasing practices, productivity improvements, and greater economies of scale, there can be no assurance that we will be able to continue to do so in the future. From time to time, competitive conditions could limit our menu pricing flexibility. There can be no assurance that all future cost increases can be offset by increased menu prices or that increased menu prices will be fully absorbed by our restaurant guests without any resulting changes in their visit frequencies or purchasing patterns.  A majority of the leases for our restaurants provide for contingent rent obligations based on a percentage of revenue.  As a result, rent expense will absorb a proportionate share of any menu price increases in our restaurants.  However, there can be no assurance that we will continue to generate increases in comparable restaurant sales in amounts sufficient to offset inflationary or other cost pressures.

OFF-BALANCE SHEET ARRANGEMENTS

The Company assumed, from a related entity, an ADA in which the Company was to open 23 BWW restaurants within its designated "development territory”. On December 12, 2008, this agreement was amended, adding nine additional restaurants and extending the date of fulfillment to March 1, 2017. Failure to develop restaurants in accordance with the schedule detailed in the agreement could lead to potential penalties of up to $50,000 for each undeveloped restaurant, payment of the initial franchise fees for each undeveloped restaurant, and loss of rights to development territory. Failure to develop restaurants in accordance with the schedule detailed in the agreement could lead to potential penalties of $50,000 for each undeveloped restaurant and loss of rights to the development territory. As of September 28, 2014, 22 of the required 32 ADA restaurants had been opened for business. We remain on track to fulfill our obligation under the amended ADA, and we expect to operate a total of 52 BWW by the end of 2017, exclusive of potential acquisitions of additional BWW restaurants.

CRITICAL ACCOUNTING ESTIMATES

We prepare our consolidated financial statements in conformity with GAAP. The preparation of these financial statements requires us 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 income and expenses during the reporting period. Actual results could differ from those estimates. Our critical accounting policies have not changed materially from those previously reported in our Annual Report on Form 10-K for the fiscal year ended December 29, 2013.

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Item 3. Quantitative and Qualitative Disclosure About Market Risks

Debt Securities

We are exposed to market risk related to our debt securities. To manage our exposure, we have invested our excess cash in highly liquid short-term investments with maturities of less than one year. The investments are not held for trading or other speculative purposes. See Notes 1, 3, and 14 of our unaudited consolidated financial statements in Part I Item 1 of this report for additional information.

Interest Rate Risk

As a result of our normal borrowing activities, our operating results are exposed to fluctuations in interest rates. DRH has short-term and long-term debt with both fixed and variable interest rates. The short-term debt comprises the current portion of long-term debt maturing within twelve months from the balance sheet date. Long-term debt includes secured notes payable, two lines of credit and a revolving line of credit which is used to finance working capital requirements. To manage our exposure, we have entered into interest rate swap agreements. The derivative instruments are not held for trading or other speculative purposes.

As of September 28, 2014, DRH had $56.9 million of variable-rate debt with a weighted average interest rate of 2.7%, which approximates fair value. Interest based on the debt agreement is based on one-month LIBOR plus an applicable margin, which ranges from 2.25% to 3.15%, depending on the lease adjusted leverage ratio defined in the terms of the agreement. DRH currently estimates that a 100 basis point fluctuation in LIBOR would result in an approximate $0.6 million fluctuation in pretax income. See Notes 1, 7 and 14 of our unaudited consolidated financial statements in Part I Item 1 of this report for additional information.

Inflation

The primary inflationary factors affecting our operations are food, labor, and restaurant operating costs. Substantial increases in these costs could impact operating results to the extent that such increases cannot be passed along through higher menu prices. A large number of our restaurant personnel are paid at rates based on the applicable federal and state minimum wages, and increases in the minimum wage rates and tip-credit wage rates could directly affect our labor costs. Many of our leases require us to pay taxes, maintenance, repairs, insurance, and utilities, all of which are generally subject to inflationary increases.

Commodity Price Risk

Many of the food products purchased by us are affected by weather, production, availability, and other factors outside our control. We believe almost all of our food and supplies are available from several sources, which helps to control food product risks. Our purchasing department for Bagger Dave’s negotiates directly with our independent suppliers for our supply of food and paper products. As negotiated by BWLD, our DRH-owned BWW restaurants have a distribution contract with a BWLD selected vendor for our supply of food, paper, and non-food products. We have minimum purchase requirements with some of our vendors, but the terms of the contracts and our historical use of the products are such that we believe these minimum purchase requirements do not create a material market risk. One of the primary food products used by our BWW restaurants is chicken wings. We work to counteract the effect of the volatility of chicken wing prices, which can significantly change our cost of sales and cash flow, with the introduction of new menu items, effective marketing promotions, focused efforts on food costs and waste, and menu price increases. We also explore purchasing strategies to reduce the severity of cost increases and fluctuations. For the three-month periods ended September 28, 2014 and September 29, 2013 chicken wings accounted for approximately 15.9% and 15.8%, with an average price per pound of $1.50 and $1.71, respectively. For the nine-month periods ended September 28, 2014 and September 29, 2013 chicken wings accounted for approximately 29.1% and 34.5%, with an average price per pound of $1.41 and $1.80, respectively.

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Item 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures.

We are required to maintain disclosure controls and procedures designed to ensure that material information related to us, including our consolidated subsidiaries, is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms. Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

Conclusion regarding the effectiveness of disclosure controls and procedures

As of September 28, 2014, an evaluation was performed under the supervision of and with the participation of our management, including our principal executive and principal financial officers, of the effectiveness of the design and operation of our disclosure controls and procedures.  Based on that evaluation, our management, including our principal executive and principal financial officers, concluded that our disclosure controls and procedures were effective as of September 28, 2014.

(b) Changes in internal controls over financial reporting.

There were no changes in the Company’s internal control over financial reporting during the quarter ended September 28, 2014 that have materially affected, or are reasonably likely to materially affect the Company’s internal control over financial reporting.

Our process for evaluating controls and procedures is continuous and encompasses constant improvement of the design and effectiveness of established controls and procedures and the remediation of any deficiencies that may be identified during this process.

26

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Occasionally, we are a defendant in litigation arising in the ordinary course of our business, including claims arising from personal injuries, contract claims, dram shop claims, employment-related claims, and claims from guests or team members alleging injury, illness, or other food quality, health, or operational concerns. To date, none of these types of litigation, most of which are entirely or predominantly covered by insurance, has had a material effect on our financial condition or results of operations. We have insured and continue to insure against most of these types of claims. A judgment on any claim not covered by or in excess of our insurance coverage could materially adversely affect our financial condition or results of operations. As of the date of this Quarterly Report, we are not a party to any material pending legal proceedings and are not aware of any claims that could have a materially adverse effect on our financial position, results of operations or cash flows.

Item 1A. Risk Factors

There have been no material changes in our risk factors from those previously disclosed in our annual report on Form 10-K for the year ended December 29, 2013.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not Applicable.

Item 3. Defaults Upon Senior Securities

None.

Item 5. Other Information

None.

Item 6. Exhibits

(a) Exhibits:

3.1	Certificate of Incorporation (filed as an exhibit to the Company's Registration Statement on Form S-1, as filed with the Securities and Exchange Commission on August 10, 2007, and incorporated herein by this reference).
3.2	Amended and Restated Bylaws (filed as an exhibit to the Company's Form 8-K, as filed with the Securities and Exchange Commission on August 29, 2012, and incorporated herein by this reference).
3.3	First Amendment to the Amended and Restated Bylaws (filed as an exhibit to the Company's Form 8-K, as filed with the Securities and Exchange Commission on October 31, 2012, and incorporated herein by this reference).
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a).
31.2	Certification Chief Financial Officer pursuant to Rule 13a-14(a).
32.1	Certification Chief Executive Officer pursuant to 18 U.S.C. Section 1350.
32.2	Certification Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Document
101.DEF	XBRL Taxonomy Extension Definition Document
101.LAB	XBRL Taxonomy Extension Label Document
101.PRE	XBRL Taxonomy Extension Presentation Document

27

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, there unto duly authorized.

	DIVERSIFIED RESTAURANT HOLDINGS, INC.
Dated: November 7, 2014	By:	/s/ T. Michael Ansley
	T. Michael Ansley
	President and Chief Executive
	Officer (Principal Executive Officer)
	By:	/s/ David G. Burke
	David G. Burke
	Chief Financial Officer and Treasurer
	(Principal Financial and Accounting Officer)

28

EXHIBIT INDEX

Exhibit No.	Exhibit Description
3.1	Certificate of Incorporation (filed as an exhibit to the Company's Registration Statement on Form S-1, as filed with the Securities and Exchange Commission on August 10, 2007, and incorporated herein by this reference).
3.2	Amended and Restated Bylaws (filed as an exhibit to the Company's Form 8-K, as filed with the Securities and Exchange Commission on August 29, 2012, and incorporated herein by this reference).
3.3	First Amendment to the Amended and Restated Bylaws (filed as an exhibit to the Company's Form 8-K, as filed with the Securities and Exchange Commission on October 31, 2012, and incorporated herein by this reference).
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a).
31.2	Certification Chief Financial Officer pursuant to Rule 13a-14(a).
32.1	Certification Chief Executive Officer pursuant to 18 U.S.C. Section 1350.
32.2	Certification Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Document
101.DEF	XBRL Taxonomy Extension Definition Document
101.LAB	XBRL Taxonomy Extension Label Document
101.PRE	XBRL Taxonomy Extension Presentation Document

29

EX-31

Exhibit 31.1

RULE 13a-14(a) CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, T. Michael Ansley, certify that:

1.          I have reviewed this Quarterly Report on Form 10-Q for the fiscal quarter ended September 28, 2014 of Diversified Restaurant Holdings, Inc. (the "Company");

2.         Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.         Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.         The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financing reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.         The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonable likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated:  November 7, 2014	DIVERSIFIED RESTAURANT HOLDINGS, INC.
	By:	/s/ T. Michael Ansley
		T. Michael Ansley Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)

EX-31

 Exhibit 31.2

RULE 13a-14(a) CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, David G. Burke, certify that:

1.          I have reviewed this Quarterly Report on Form 10-Q for the fiscal quarter ended September 28, 2014 of Diversified Restaurant Holdings, Inc. (the "Company");

2.         Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.         Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.         The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financing reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.         The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonable likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated:  November 7, 2014	DIVERSIFIED RESTAURANT HOLDINGS, INC.
	By:	/s/ David G. Burke
		David G. Burke Treasurer and Chief Financial Officer (Principal Financial Officer)

EX-32

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Quarterly Report on Form 10-Q (“Quarterly Report”) of Diversified Restaurant Holdings, Inc. (the "Company") for the fiscal quarter ended September 28, 2014, I, T. Michael Ansley, Chairman of the Board of Directors and Chief Executive Officer of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief, that:

1. The Quarterly Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:  November 7, 2014	DIVERSIFIED RESTAURANT HOLDINGS, INC.
	By:	/s/ T. Michael Ansley
		T. Michael Ansley Chairman of the Board, President, and Chief Executive Officer (Principal Executive Officer)

EX-32

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Quarterly Report on Form 10-Q (“Quarterly Report”) of Diversified Restaurant Holdings, Inc. (the "Company") for the fiscal quarter ended September 28, 2014, I, David G. Burke, Treasurer and Chief Financial Officer of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief, that:

1. The Quarterly Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:  November 7, 2014	DIVERSIFIED RESTAURANT HOLDINGS, INC.
	By:	/s/ David G. Burke
		David G. Burke Treasurer and Chief Financial Officer (Principal Financial Officer)

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Note 2 - Significant Business Transactions (Details) - Estimated Fair Values of Net Assets Acqured and Liabilities Assumed (USD $)	Sep. 28, 2014	Dec. 29, 2013	Jun. 30, 2014 Screamin' Hot Florida, LLC and Screamin' Hot Trinity, LLC [Member]
Note 2 - Significant Business Transactions (Details) - Estimated Fair Values of Net Assets Acqured and Liabilities Assumed [Line Items]
Working capital			$ 57,600
Property and equipment			656,146
Franchise fees			72,750
Goodwill	10,998,630	8,578,776	2,419,854
Net Cash paid for acquisition			$ 3,206,350

XML

Note 9 - Income Taxes (Details) (USD $)	9 Months Ended
	Sep. 28, 2014
Note 9 - Income Taxes (Details) [Line Items]
Deferred Tax Assets, Tax Credit Carryforwards, General Business	$ 2,600,000
Unrecognized Tax Benefits	0
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued	0
Latest Tax Year [Member] | General Business Tax Credit Carryforward [Member]
Note 9 - Income Taxes (Details) [Line Items]
Tax Credit Carryforward, Expiration Year	2035
Earliest Tax Year [Member] | General Business Tax Credit Carryforward [Member]
Note 9 - Income Taxes (Details) [Line Items]
Tax Credit Carryforward, Expiration Year	2028
Domestic Tax Authority [Member]
Note 9 - Income Taxes (Details) [Line Items]
Operating Loss Carryforwards	2,100,000
Stock-Based Compensation Tax Deductions [Member]
Note 9 - Income Taxes (Details) [Line Items]
Operating Loss Carryforwards	$ 600,000

XML

Note 7 - Long-Term Debt (Details) (USD $)	3 Months Ended		9 Months Ended			1 Months Ended		6 Months Ended	1 Months Ended	6 Months Ended	3 Months Ended		15 Months Ended		3 Months Ended		1 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013	Dec. 29, 2013	Mar. 20, 2014 Reduction in the April 2013 Senior Secured Credit Facility [Member]	Mar. 20, 2014 April 2013 Senior Secured Credit Facility [Member] London Interbank Offered Rate (LIBOR) [Member] Minimum [Member]	Sep. 28, 2014 April 2013 Senior Secured Credit Facility [Member] London Interbank Offered Rate (LIBOR) [Member] Minimum [Member]	Mar. 20, 2014 April 2013 Senior Secured Credit Facility [Member] London Interbank Offered Rate (LIBOR) [Member] Maximum [Member]	Sep. 28, 2014 April 2013 Senior Secured Credit Facility [Member] London Interbank Offered Rate (LIBOR) [Member] Maximum [Member]	Apr. 15, 2013 April 2013 Senior Secured Credit Facility [Member]	Apr. 15, 2013 April 2013 Term Loan [Member]	Mar. 11, 2014 April 2013 DLOC [Member]	Apr. 15, 2013 April 2013 DLOC [Member]	Apr. 15, 2013 April 2013 RLOC [Member]	Sep. 28, 2014 April 2013 RLOC [Member]	Mar. 20, 2014 March 2014 DLOC II [Member]	Sep. 28, 2014 Interest Rate Swap [Member]	Sep. 28, 2014 Interest Rate Swap Agreement 1 [Member]	Sep. 28, 2014 Interest Rate Swap Agreement 2 [Member]	Sep. 28, 2014 Interest Rate Swap Agreement 3 [Member]	Sep. 28, 2014 Interest Rate Swap Agreement 4 [Member]
Note 7 - Long-Term Debt (Details) [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity											$ 63,000,000	$ 46,000,000		$ 15,000,000	$ 2,000,000		$ 20,000,000
Debt Instrument, Term												5 years			2 years		2 years
Debt Instrument, Periodic Payment											547,619		178,571
Long-term Line of Credit																0
Debt Instrument Basis Reduction On Variable Rate						0.25%
Debt Instrument, Basis Spread on Variable Rate							2.50%	2.25%	3.40%	3.15%
Interest Expense	483,057	320,798	1,436,092	1,375,646
Accretion Expense		320,798
Derivative Asset, Notional Amount																		40,200,000	10,500,000	4,300,000	12,500,000	12,900,000
Derivative, Fixed Interest Rate																			1.40%	0.90%	1.40%	1.54%
Interest Rate Derivative Liabilities, at Fair Value	$ 250,528		$ 250,528		$ 327,561

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Note 9 - Income Taxes (Details) - Income Tax (Benefit) Provision Components (USD $)	3 Months Ended		9 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013
Income Tax (Benefit) Provision Components [Abstract]
Current	$ 0	$ 0	$ 0	$ 0
Deferred	(20,315)	(14,246)	(189,473)	23,908
Current	(24,389)	33,568	43,898	65,434
Deferred	(3,396)	(33,766)	(34,455)	(37,156)
Income tax provision (benefit)	$ (48,100)	$ (14,444)	$ (180,030)	$ 52,186

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Note 5 - Intangible Assets (Details) - Future Intangible-Related Expense (USD $)	Sep. 28, 2014	Dec. 29, 2013
Future Intangible-Related Expense [Abstract]
Remainder of 2014	$ 42,847
2015	165,794
2016	147,614
2017	146,078
2018	71,516
2019 and thereafter	449,169
Total	$ 1,023,018	$ 928,871

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Note 10 - Operating Leases (Including Related Party) (Tables)

9 Months Ended

Sep. 28, 2014

Leases, Operating [Abstract]

Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block]

Year	Amount
Remainder of 2014	$	1,528,696
2015		6,065,811
2016		5,841,663
2017		5,568,461
2018		5,282,794
2019 and thereafter		24,090,959
Total	$	48,378,384

Year	Amount
Remainder of 2014	$	37,008
2015		496,736
2016		520,872
2017		522,552
2018		524,236
2019 and thereafter		4,107,260
Total	$	6,208,664

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Note 9 - Income Taxes (Details) - Deferred Income Tax Assets and Liabilities (USD $)	Sep. 28, 2014	Dec. 29, 2013
Deferred tax assets:
Net operating loss carry forwards	$ 494,900	$ 983,682
Deferred rent expense	593,237	131,249
Start-up costs	133,744	130,136
Tax credit carry forwards	2,591,009	2,427,861
Interest rate swaps	85,179	111,218
Investments	8,061	15,030
Stock-based compensation	275,606	129,514
Other	259,280	186,814
Total deferred tax assets	4,441,016	4,115,504
Deferred tax liabilities:
Tax depreciation in excess of book	2,804,681	2,708,544
Other	282,654	244,199
Total deferred tax liabilities	3,087,335	2,952,743
Net deferred income tax asset	$ 1,353,681	$ 1,162,761

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Accounting Policies, by Policy (Policies)

9 Months Ended

Sep. 28, 2014

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation

The consolidated financial statements as of September 28, 2014 and December 29, 2013, and for the three-month and nine-month periods ended September 28, 2014 and September 29, 2013, have been prepared by the Company pursuant to accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission. The financial information as of September 28, 2014 and for the three-month and nine-month periods ended September 28, 2014 and September 29, 2013 is unaudited, but, in the opinion of management, reflects all adjustments and accruals necessary for a fair presentation of the financial position, results of operations, and cash flows for the interim periods.

The consolidated financial information as of December 29, 2013 is derived from our audited consolidated financial statements and notes thereto for the fiscal year ended December 29, 2013, which is included in Item 8 in the Fiscal 2013 Annual Report on Form 10-K, and should be read in conjunction with such consolidated financial statements.

The results of operations for the three-month and nine-month periods ended September 28, 2014 are not necessarily indicative of the results of operations that may be achieved for the entire year ending December 28, 2014.

Reclassification, Policy [Policy Text Block]

Reclassifications

Certain reclassifications have been made to the consolidated financial statements to conform to the prior year's presentation.

Segment Reporting, Policy [Policy Text Block]

Segment Reporting

The Company has two operating segments, Bagger Dave’s and BWW. The brands operate within the ultra-casual, full-service dining industry, providing similar products to similar customers. The brands also possess similar economic characteristics, resulting in similar long-term expected financial performance. Sales from external customers are derived principally from food and beverage sales. We do not rely on any major customers as a source of sales. We believe we meet the criteria for aggregating our operating segments into a single reporting segment.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Concentration Risks

Approximately 79.8% and 80.6% of the Company's revenues are generated from food and beverage sales of restaurants located in the Midwest region during the nine-month periods ended September 28, 2014 and September 29, 2013, respectively.

Investment, Policy [Policy Text Block]

Investments

The Company’s investment securities are classified as available-for-sale. Investments classified as available-for-sale are available to be sold in the future in response to the Company’s liquidity needs, changes in market interest rates, tax strategies, and asset-liability management strategies, among other reasons. Available-for-sale securities are reported at fair value, with unrealized gains and losses, net of taxes, reported in the accumulated other comprehensive income (loss) component of stockholders’ equity, and accordingly, have no effect on net income. Realized gains or losses on sale of investments are determined on the basis of specific costs of the investments. Dividend income is recognized when declared and interest income is recognized when earned. Discount or premium on debt securities purchased at other than par value are amortized using the effective yield method. See Note 3 for details.

Goodwill and Intangible Assets, Goodwill, Policy [Policy Text Block]

Goodwill

Goodwill is not amortized and represents the excess of cost over the fair value of identified net assets of businesses acquired. Goodwill is subject to an annual impairment analysis or more frequently if indicators of impairment exist. At September 28, 2014 and December 29, 2013, we had goodwill of $ 11.0 million and $8.6 million, respectively that was assigned to our BWW operating segment. See Note 2 for additional information.

The impairment analysis, if necessary, consists of a two-step process. The first step is to compare the fair value of the reporting unit to its carrying value, including goodwill. We estimate fair value using market information (market approach) and discounted cash flow projections (income approach). The income approach uses the reporting unit’s projection of estimated operating results and cash flows that is discounted using a weighted-average cost of capital that reflects market conditions. The projection uses management’s best estimates of projected revenue, costs and cash expenditures, including an estimate of new restaurant openings and related capital expenditures. Other significant estimates also include terminal growth rates and working capital requirements. We supplement our estimate of fair value under the income approach by using a market approach which estimates fair value by applying multiples to the reporting unit’s projected operating performance. The multiples are derived from comparable publicly traded companies with similar characteristics to the reporting unit. If the fair value of the reporting unit is less than its carrying value, the second step of the impairment analysis must be performed in order to determine the amount of impairment loss, if any. The second step compares the implied fair value of goodwill with the carrying amount of that goodwill. If the carrying amount of the goodwill exceeds its implied fair value, an impairment charge is recognized in an amount equal to that excess. As of December 29, 2013, based on our quantitative analysis, goodwill was considered recoverable. At September 28, 2014, there were no impairment indicators warranting an analysis.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP 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 consolidated financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

Derivatives, Policy [Policy Text Block]

Interest Rate Swap Agreements

The Company utilizes interest rate swap agreements with RBS Citizens, N.A. (“RBS”) to fix interest rates on a portion of the Company’s portfolio of variable rate debt, which reduces exposure to interest rate fluctuations.  The Company does not use any other types of derivative financial instruments to hedge such exposures, nor does it use derivatives for speculative purposes. The Company’s interest rate swap agreements qualify for hedge accounting. As such, the Company records the change in the fair value of its swap agreements as a component of accumulated other comprehensive income (loss), net of tax. The Company records the fair value of its interest swaps on the Consolidated Balance Sheet in other long-term assets or other long-term liabilities depending on the fair value of the swaps. See Note 7 and Note 14 for additional information on the interest rate swap agreements.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"), which supersedes nearly all existing revenue recognition guidance under GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP.  The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein.  We are currently evaluating the impact of our pending adoption of ASU 2014-09, although based on the nature of our business we do not expect the standard will have a significant impact on our consolidated financial statements.

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Note 7 - Long-Term Debt (Details) - Long-Term Debt Obligations (Parentheticals) (USD $)	3 Months Ended	9 Months Ended
	Dec. 29, 2013	Sep. 28, 2014
April 2018 DLOC II [Member]
Debt Instrument [Line Items]
Intеrеst ratе at еnd of pеriod		2.70%
Maximum borrowing capacity (in Dollars)		$ 20,000,000
Interest rate range, low		2.25%
Interest rate range, high		3.15%
April 2018 Term Loan [Member]
Debt Instrument [Line Items]
Intеrеst ratе at еnd of pеriod		2.70%
Maximum borrowing capacity (in Dollars)	46,000,000	46,000,000
Schеdulеd monthly principal and intеrеst paymеnts (in Dollars)	547,619	547,619
Interest rate range, low	2.25%	2.25%
Interest rate range, high	3.15%	3.15%
April 2018 DLOC [Member]
Debt Instrument [Line Items]
Intеrеst ratе at еnd of pеriod		2.70%
Maximum borrowing capacity (in Dollars)	15,000,000	15,000,000
Schеdulеd monthly principal and intеrеst paymеnts (in Dollars)	178,571	178,571
Interest rate range, low	2.25%	2.25%
Interest rate range, high	3.15%	3.15%
Note Payable June 2030 [Member]
Debt Instrument [Line Items]
Schеdulеd monthly principal and intеrеst paymеnts (in Dollars)	8,000	8,000
Balloon paymеnt (in Dollars) (in Dollars)	413,550	413,550
Fixеd annual intеrеst ratе	6.70%	6.70%
Variablе intеrеst ratе basis	4.00%	4.00%
Note Payable 2030 Junior [Member]
Debt Instrument [Line Items]
Schеdulеd monthly principal and intеrеst paymеnts (in Dollars)	$ 6,300	$ 6,300
Fixеd annual intеrеst ratе	3.60%	3.60%

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Note 3 - Investments (Details) - Gross Unrealized Gains and Losses on Available for Sales Securities (USD $)	9 Months Ended	12 Months Ended
	Sep. 28, 2014	Dec. 29, 2013
Gross Unrealized Gains and Losses on Available for Sales Securities [Abstract]
Unrealized gains		$ 236
Unrealized loss	(23,711)	(44,442)
Net unrealized loss	(23,711)	(44,206)
Deferred federal income tax benefit	8,061	15,030
Net unrealized loss on investments, net of deferred income tax	$ (15,650)	$ (29,176)

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Note 1 - Business and Summary of Significant Accounting Policies (Details) (USD $)	9 Months Ended																9 Months Ended
	Sep. 28, 2014	Dec. 29, 2013	Dec. 31, 2017 Scenario, Forecast [Member] Bagger Dave's [Member] Minimum [Member]	Dec. 31, 2017 Scenario, Forecast [Member] Bagger Dave's [Member] Maximum [Member]	Dec. 31, 2017 Scenario, Forecast [Member] BWW [Member] Required Under Area Development Agreement [Member]	Sep. 28, 2014 Scenario, Forecast [Member]	Sep. 28, 2014 Bagger Dave's [Member] AMC Real Estate [Member]	Sep. 28, 2014 Bagger Dave's [Member] MICHIGAN	Sep. 28, 2014 Bagger Dave's [Member] INDIANA	Sep. 28, 2014 Bagger Dave's [Member]	Sep. 28, 2014 BWW [Member] AMC Real Estate [Member]	Sep. 28, 2014 BWW [Member] MICHIGAN	Sep. 28, 2014 BWW [Member] INDIANA	Sep. 28, 2014 BWW [Member] FLORIDA	Sep. 28, 2014 BWW [Member] ILLINOIS	Sep. 28, 2014 BWW [Member]	Sep. 28, 2014 Sales Revenue, Net [Member] Geographic Concentration Risk [Member] Midwest Region [Member]	Sep. 29, 2013 Sales Revenue, Net [Member] Geographic Concentration Risk [Member] Midwest Region [Member]	Sep. 28, 2014 AMC Real Estate [Member]
Note 1 - Business and Summary of Significant Accounting Policies (Details) [Line Items]
Number of Restaurants	61		47	51	52	52	4	14	8	22	4	18	4	14	4	40			8
Number of Operating Segments	2
Concentration Risk, Percentage																	79.80%	80.60%
Goodwill (in Dollars)	$ 10,998,630	$ 8,578,776

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Note 8 - Stock-Based Compensation (Details) (USD $)	3 Months Ended		9 Months Ended							18 Months Ended	9 Months Ended	1 Months Ended			12 Months Ended				9 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014 Employee Stock Option [Member] Minimum [Member] Stock Incentive Plan [Member]	Sep. 28, 2014 Employee Stock Option [Member] Stock Incentive Plan [Member]	Sep. 28, 2014 Restricted Stock [Member] Minimum [Member] Stock Incentive Plan [Member]	Sep. 28, 2014 Restricted Stock [Member] Stock Incentive Plan [Member]	Sep. 29, 2013 Restricted Stock [Member] Stock Incentive Plan [Member]	Jun. 29, 2014 Restricted Stock [Member] Stock Incentive Plan [Member]	Sep. 28, 2014 Maximum [Member] Employee Stock Purchase Plan [Member]	Jul. 30, 2013 Director [Member]	Jul. 30, 2010 Director [Member]	Jul. 30, 2007 Director [Member]	Dec. 29, 2013 Director [Member]	Sep. 28, 2014 Director [Member]	Sep. 29, 2013 Director [Member]	Sep. 28, 2014 Stock Incentive Plan [Member]	Sep. 28, 2014 Employee Stock Purchase Plan [Member]	Sep. 29, 2013 Employee Stock Purchase Plan [Member]
Note 8 - Stock-Based Compensation (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized																		750,000
Share-based Compensation Arrangement by Share-based Payment Award, Purchase Price of Common Stock, Percent					100.00%			100.00%			85.00%
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period						10 years							6 years	6 years
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period							1 year			3 years			6 years	3 years
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value (in Dollars per share)								$ 4.82	$ 5.85
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized (in Dollars)								$ 700,648
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition								2 years 36 days
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period, Fair Value (in Dollars)								193,996	169,593
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant								543,434											236,704
Common Stock, Capital Shares Reserved for Future Issuance																210,000			250,000
Stock Issued During Period, Shares, Employee Stock Purchase Plans																			8,523	2,061
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross													210,000	150,000
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price (in Dollars per share)													$ 2.50	$ 2.50
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period												150,000
Share-based Compensation Arrangements by Share-based Payment Award, Options, Exercises in Period, Weighted Average Exercise Price (in Dollars per share)												$ 2.50
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period, Intrinsic Value (in Dollars)															679,680
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Intrinsic Value (in Dollars)																476,700	852,600
Allocated Share-based Compensation Expense (in Dollars)	$ 84,072	$ 70,563	$ 237,079	$ 205,668
Preferred Stock, Shares Authorized	10,000,000		10,000,000
Preferred Stock, Par or Stated Value Per Share (in Dollars per share)	$ 0.0001		$ 0.0001
Preferred Stock, Shares Issued	0		0
Preferred Stock, Shares Outstanding	0		0

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Note 16 - Subsequent Events (Details) (USD $)	9 Months Ended		0 Months Ended					0 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Nov. 05, 2014 Subsequent Event [Member] Mortgages [Member] Note Payable June 2030 [Member]	Nov. 05, 2014 Subsequent Event [Member] DLOC [Member]	Nov. 05, 2014 Subsequent Event [Member] Property Closed under Sale and Leaseback Agreement [Member] Spirit Master Funding IX [Member]	Nov. 05, 2014 Subsequent Event [Member] Property Subject to Sale and Leaseback Agreement [Member] Spirit Master Funding IX [Member]	Nov. 05, 2014 Subsequent Event [Member] Spirit Master Funding IX [Member]	Nov. 05, 2014 Subsequent Event [Member]
Note 16 - Subsequent Events (Details) [Line Items]
Number of Restaurants	61				7	12
Sale Leaseback Transaction, Net Book Value							$ 13,100,000
Repayments of Long-term Debt	$ 5,865,644	$ 58,460,520	$ 1,900,000	$ 3,100,000				$ 5,000,000

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Note 12 - Earnings Per Common Share (Details) - Earnings Per Share Reconciliation (USD $)	3 Months Ended		9 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013
Earnings Per Share Reconciliation [Abstract]
Income (loss) available to common stockholders (in Dollars)	$ (182,109)	$ 69,810	$ 85,252	$ 311,847
Weighted-average shares outstanding	26,107,627	26,054,118	26,074,797	23,231,403
Effect of dilutive securities		132,145	99,796	119,725
Weighted-average shares outstanding - assuming dilution	26,107,627	26,186,263	26,174,593	23,351,128
Earnings (loss) per common share (in Dollars per share)	$ (0.01)	$ 0.00	$ 0.00	$ 0.01
Earnings (loss) per common share - assuming dilution (in Dollars per share)	$ (0.01)	$ 0.00	$ 0.00	$ 0.01

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Note 6 - Related Party Transactions (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013
Related Party Transactions [Abstract]
Professional Fees	$ 131,050	$ 101,440	$ 378,988	$ 295,642

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Note 1 - Business and Summary of Significant Accounting Policies

9 Months Ended

Sep. 28, 2014

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

1.           BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Diversified Restaurant Holdings, Inc. (“DRH”) is a fast-growing restaurant company operating two complementary concepts:  Bagger Dave’s Burger Tavern^® (“Bagger Dave’s”) and Buffalo Wild Wings^® Grill & Bar (“BWW”).  As the creator, developer, and operator of Bagger Dave’s and as one of the largest franchisees of BWW, we provide a unique guest experience in a casual and inviting environment.  We were incorporated in 2006 and are headquartered in the Detroit metropolitan area.  As of September 28, 2014, we had 61 locations in Florida, Illinois, Indiana, and Michigan.

DRH and its wholly-owned subsidiaries (collectively, the “Company”), AMC Group, Inc. (“AMC”), AMC Wings, Inc. (“WINGS”), AMC Burgers, Inc. (“BURGERS”), and AMC Real Estate, Inc. (“REAL ESTATE”) own, operate, and manage Bagger Dave's and DRH-owned BWW restaurants located throughout Florida, Illinois, Indiana, and Michigan.

DRH originated the Bagger Dave’s concept with our first restaurant opening in January 2008 in Berkley, Michigan.  Currently, there are 22 Bagger Dave’s, 14 in Michigan and eight in Indiana. The Company expects to operate between 47 and 51 Bagger Dave’s locations by the end of 2017.

DRH is also one of the largest BWW franchisees and currently operates 40 DRH-owned BWW restaurants (18 in Michigan, 14 in Florida, four in Illinois, and four in Indiana), including the nation’s largest BWW, based on square footage, in downtown Detroit, Michigan. We remain on track to fulfill our area development agreement (“ADA”) with Buffalo Wild Wings International, Inc. (“BWLD”) and expect to operate 52 DRH-owned BWW restaurants by the end of 2017, exclusive of potential additional BWW restaurant acquisitions. 

The following organizational chart outlines the current corporate structure of DRH.  A brief textual description of the entities follows the organizational chart. DRH is incorporated in Nevada.  

AMC was formed on March 28, 2007 and serves as our operational and administrative center. AMC renders management, operational support, and advertising services to WINGS, BURGERS, REAL ESTATE and their subsidiaries. Services rendered by AMC include marketing, restaurant operations, restaurant management consultation, hiring and training of management and staff, and other management services reasonably required in the ordinary course of restaurant operations.

BURGERS was formed on March 12, 2007 and serves as a holding company for our Bagger Dave’s restaurants.  Bagger Dave’s Franchising Corporation, a subsidiary of BURGERS, was formed to act as the franchisor for the Bagger Dave’s concept and has rights to franchise in Illinois, Indiana, Kentucky, Michigan, Missouri, Ohio, and Wisconsin.  We do not intend to pursue franchise development at this time.  

WINGS was formed on March 12, 2007 and serves as a holding company for our DRH-owned BWW restaurants.  We are economically dependent on retaining our franchise rights with BWLD.  The franchise agreements have specific initial term expiration dates ranging from March 2020 through June 2034, depending on the date each was executed and the duration of its initial term.  The franchise agreements are renewable at the option of the franchisor and are generally renewable if the franchisee has complied with the franchise agreement.  When factoring in any applicable renewals, the franchise agreements have specific expiration dates ranging from March 2035 through June 2049.  We believe we are in compliance with the terms of these agreements.

REAL ESTATE was formed on March 18, 2013 and serves as the holding company for the real estate properties owned by DRH. REAL ESTATE’s portfolio currently includes eight properties, four of which are Bagger Dave’s restaurants and four of which are DRH-owned BWW restaurants. The restaurants at these locations are all owned and operated by DRH.

Basis of Presentation

The consolidated financial statements as of September 28, 2014 and December 29, 2013, and for the three-month and nine-month periods ended September 28, 2014 and September 29, 2013, have been prepared by the Company pursuant to accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission. The financial information as of September 28, 2014 and for the three-month and nine-month periods ended September 28, 2014 and September 29, 2013 is unaudited, but, in the opinion of management, reflects all adjustments and accruals necessary for a fair presentation of the financial position, results of operations, and cash flows for the interim periods.

The consolidated financial information as of December 29, 2013 is derived from our audited consolidated financial statements and notes thereto for the fiscal year ended December 29, 2013, which is included in Item 8 in the Fiscal 2013 Annual Report on Form 10-K, and should be read in conjunction with such consolidated financial statements.

The results of operations for the three-month and nine-month periods ended September 28, 2014 are not necessarily indicative of the results of operations that may be achieved for the entire year ending December 28, 2014.

Reclassifications

Certain reclassifications have been made to the consolidated financial statements to conform to the prior year's presentation.

Segment Reporting

The Company has two operating segments, Bagger Dave’s and BWW. The brands operate within the ultra-casual, full-service dining industry, providing similar products to similar customers. The brands also possess similar economic characteristics, resulting in similar long-term expected financial performance. Sales from external customers are derived principally from food and beverage sales. We do not rely on any major customers as a source of sales. We believe we meet the criteria for aggregating our operating segments into a single reporting segment.

Concentration Risks

Approximately 79.8% and 80.6% of the Company's revenues are generated from food and beverage sales of restaurants located in the Midwest region during the nine-month periods ended September 28, 2014 and September 29, 2013, respectively.

Investments

The Company’s investment securities are classified as available-for-sale. Investments classified as available-for-sale are available to be sold in the future in response to the Company’s liquidity needs, changes in market interest rates, tax strategies, and asset-liability management strategies, among other reasons. Available-for-sale securities are reported at fair value, with unrealized gains and losses, net of taxes, reported in the accumulated other comprehensive income (loss) component of stockholders’ equity, and accordingly, have no effect on net income. Realized gains or losses on sale of investments are determined on the basis of specific costs of the investments. Dividend income is recognized when declared and interest income is recognized when earned. Discount or premium on debt securities purchased at other than par value are amortized using the effective yield method. See Note 3 for details. 

Goodwill

Goodwill is not amortized and represents the excess of cost over the fair value of identified net assets of businesses acquired. Goodwill is subject to an annual impairment analysis or more frequently if indicators of impairment exist. At September 28, 2014 and December 29, 2013, we had goodwill of $ 11.0 million and $8.6 million, respectively that was assigned to our BWW operating segment. See Note 2 for additional information.

The impairment analysis, if necessary, consists of a two-step process. The first step is to compare the fair value of the reporting unit to its carrying value, including goodwill. We estimate fair value using market information (market approach) and discounted cash flow projections (income approach). The income approach uses the reporting unit’s projection of estimated operating results and cash flows that is discounted using a weighted-average cost of capital that reflects market conditions. The projection uses management’s best estimates of projected revenue, costs and cash expenditures, including an estimate of new restaurant openings and related capital expenditures. Other significant estimates also include terminal growth rates and working capital requirements. We supplement our estimate of fair value under the income approach by using a market approach which estimates fair value by applying multiples to the reporting unit’s projected operating performance. The multiples are derived from comparable publicly traded companies with similar characteristics to the reporting unit. If the fair value of the reporting unit is less than its carrying value, the second step of the impairment analysis must be performed in order to determine the amount of impairment loss, if any. The second step compares the implied fair value of goodwill with the carrying amount of that goodwill. If the carrying amount of the goodwill exceeds its implied fair value, an impairment charge is recognized in an amount equal to that excess. As of December 29, 2013, based on our quantitative analysis, goodwill was considered recoverable. At September 28, 2014, there were no impairment indicators warranting an analysis.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP 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 consolidated financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

Interest Rate Swap Agreements

The Company utilizes interest rate swap agreements with RBS Citizens, N.A. (“RBS”) to fix interest rates on a portion of the Company’s portfolio of variable rate debt, which reduces exposure to interest rate fluctuations.  The Company does not use any other types of derivative financial instruments to hedge such exposures, nor does it use derivatives for speculative purposes. The Company’s interest rate swap agreements qualify for hedge accounting. As such, the Company records the change in the fair value of its swap agreements as a component of accumulated other comprehensive income (loss), net of tax. The Company records the fair value of its interest swaps on the Consolidated Balance Sheet in other long-term assets or other long-term liabilities depending on the fair value of the swaps. See Note 7 and Note 14 for additional information on the interest rate swap agreements.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"), which supersedes nearly all existing revenue recognition guidance under GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP.  The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein.  We are currently evaluating the impact of our pending adoption of ASU 2014-09, although based on the nature of our business we do not expect the standard will have a significant impact on our consolidated financial statements. 

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Note 13 - Supplemental Cash Flows Information (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013
Note 13 - Supplemental Cash Flows Information (Details) [Line Items]
Interest Paid	$ 438,679	$ 319,689	$ 1,400,000	$ 1,300,000
Income Taxes Paid	22,000	22,000	22,000	65,500
Property And Equipment [Member]
Note 13 - Supplemental Cash Flows Information (Details) [Line Items]
Capital Expenditures Incurred but Not yet Paid			$ 1,400,000	$ 1,400,000

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Note 4 - Property and Equipment (Details) - Property and Equipment (USD $)	Sep. 28, 2014	Dec. 29, 2013
Property, Plant and Equipment [Line Items]
Property and equipment	$ 105,405,270	$ 84,865,543
Less accumulated depreciation	(30,905,075)	(26,288,809)
Property and equipment, net	74,500,195	58,576,734
Land [Member]
Property, Plant and Equipment [Line Items]
Property and equipment	5,823,050	3,610,453
Building [Member]
Property, Plant and Equipment [Line Items]
Property and equipment	4,316,263	4,316,263
Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment	26,459,185	22,212,594
Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Property and equipment	6,950,744	5,822,813
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Property and equipment	57,304,857	46,469,088
Construction in Progress [Member]
Property, Plant and Equipment [Line Items]
Property and equipment	$ 4,551,171	$ 2,434,332

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Note 5 - Intangible Assets (Tables)

9 Months Ended

Sep. 28, 2014

Disclosure Text Block [Abstract]

Schedule of Finite-Lived Intangible Assets [Table Text Block]

	September 28 2014			December 29 2013
Amortized intangibles:
Franchise fees	$	659,863		$	568,363
Trademark		64,059			59,199
Non-compete agreement		76,560			76,560
Favorable lease		239,000			239,000
Loan fees		465,497			346,758
Total		1,504,979			1,289,880
Less accumulated amortization		(481,961	)		(361,009	)
Amortized intangibles, net		1,023,018			928,871
Unamortized intangibles:
Liquor licenses		2,206,469			2,019,142
Total intangibles, net	$	3,229,487		$	2,948,013

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

Year	Amount
Remainder of 2014	$	42,847
2015		165,794
2016		147,614
2017		146,078
2018		71,516
2019 and thereafter		449,169
Total	$	1,023,018

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Note 4 - Property and Equipment (Tables)

9 Months Ended

Sep. 28, 2014

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment [Table Text Block]

	September 28 2014			December 29 2013
Land	$	5,823,050		$	3,610,453
Building		4,316,263			4,316,263
Equipment		26,459,185			22,212,594
Furniture and fixtures		6,950,744			5,822,813
Leasehold improvements		57,304,857			46,469,088
Restaurant construction in progress		4,551,171			2,434,332
Total		105,405,270			84,865,543
Less accumulated depreciation		(30,905,075	)		(26,288,809	)
Property and equipment, net	$	74,500,195		$	58,576,734

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Note 9 - Income Taxes (Details) - Income Tax (Benefit) Provision Reconciliation (USD $)	3 Months Ended		9 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013
Income Tax (Benefit) Provision Reconciliation [Abstract]
Income tax provision at federal statutory rate			$ (32,235)	$ 116,298
State income tax provision			6,331	18,663
Permanent differences			53,499	123,778
Tax credits			(207,625)	(206,553)
Income tax provision (benefit)	$ (48,100)	$ (14,444)	$ (180,030)	$ 52,186

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Note 5 - Intangible Assets (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013
Disclosure Text Block [Abstract]
Amortization of Intangible Assets	$ 15,935	$ 13,989	$ 45,144	$ 41,437
Weighted Average Amortization Period			8 years 73 days

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Note 7 - Long-Term Debt (Tables)

9 Months Ended

Sep. 28, 2014

Disclosure Text Block [Abstract]

Schedule of Long-term Debt Instruments [Table Text Block]

	September 28 2014			December 29 2013
Note payable - $46.0 million term loan; payable to RBS with a senior lien on all the Company’s personal property and fixtures. Scheduled monthly principal payments are approximately $547,619 plus accrued interest through maturity in April 2018. Interest is charged based on one-month LIBOR plus an applicable margin, which ranges from 2.25% to 3.15%, depending on the lease adjusted leverage ratio defined in the terms of the agreement. The rate at September 28, 2014 was approximately 2.7%.	$	26,690,476			31,619,048
Note payable - $15.0 million development line of credit; payable to RBS with a senior lien on all the Company’s personal property and fixtures. Scheduled monthly principal payments are $178,571 plus accrued interest through maturity in April 2018. Interest is charged based on one-month LIBOR plus an applicable margin, which ranges from 2.25% to 3.15%, depending on the lease adjusted leverage ratio defined in the terms of the agreement. The rate at September 28, 2014 was approximately 2.7%.		14,107,143			12,759,420
Note payable - $20.0 million development line of credit II; payable to RBS with a senior lien on all the Company’s personal property and fixtures. Interest is charged based on one-month LIBOR plus an applicable margin, which ranges from 2.25% to 3.15%, depending on the lease adjusted leverage ratio defined in the terms of the agreement. The rate at September 28, 2014 was approximately 2.7%. Once fully drawn, payments will be due monthly; the note matures in April 2018.		14,207,752			-
Note payable to a bank secured by a senior mortgage on the Brandon Property. Scheduled monthly principal and interest payments are approximately $8,000 through maturity in June 2030, at which point a balloon payment of $413,550 is due. Interest is charged based on a fixed rate of 6.7%, per annum, through June 2017, at which point the rate will adjust to the U.S. Treasury Securities Rate plus 4.0% (and every seven years thereafter).		1,063,990			1,081,047
Note payable to a bank secured by a junior mortgage on the Brandon Property. The note matures in 2030 and requires monthly principal and interest installments of approximately $6,300 until maturity. Interest is charged at a rate of 3.6% per annum.		786,648			813,806
Total long-term debt		56,856,009			46,273,321
Less current portion		(12,327,788	)		(8,225,732	)
Long-term debt, net of current portion	$	44,528,221		$	38,047,589

Schedule of Maturities of Long-term Debt [Table Text Block]

Year	Amount
Remainder of 2014	$	2,558,034
2015		13,148,218
2016		13,151,117
2017		13,154,578
2018		13,276,923
2019 and thereafter		1,567,139
Total	$	56,856,009

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Note 8 - Stock-Based Compensation (Tables)

9 Months Ended

Sep. 28, 2014

Stockholders' Equity Note [Abstract]

Nonvested Restricted Stock Shares Activity [Table Text Block]

	Number of Restricted Stock Shares
Unvested, December 29, 2013		116,667
Granted		91,966
Vested		(41,031	)
Expired/Forfeited		(2,068	)
Unvested, September 28, 2014		165,534

	Number of Restricted Stock Shares
Unvested, December 30, 2012		54,900
Granted		145,375
Vested		(26,500	)
Expired/Forfeited		(48,400	)
Unvested, September 29, 2013		125,375

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Consolidated Statements of Cash Flows (Unaudited) (USD $)	9 Months Ended
	Sep. 28, 2014	Sep. 29, 2013
Cash flows from operating activities
Net income	$ 85,252	$ 311,847
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	7,641,090	5,539,874
Write off of loan fees		76,408
Realized loss on sales of investments	33,406
Loss on disposal of property and equipment	353,333	83,711
Share-based compensation	237,079	205,668
Deferred income taxes	(223,928)	(13,248)
Changes in operating assets and liabilities that provided (used) cash
Accounts receivable	1,017,606	(136,544)
Inventory	(110,794)	(300,064)
Prepaid assets	125,563	(67,541)
Intangible assets	(210,937)	(546,831)
Other long-term assets	(77,832)	(299,267)
Accounts payable	1,292,321	759,930
Accrued liabilities	(107,580)	(458,825)
Deferred rent	(356,943)	614,182
Net cash provided by operating activities	9,697,636	5,769,300
Cash flows from investing activities
Purchases of investments	(7,469,555)	(12,690,397)
Proceeds from sale of investments	11,106,241	5,278,048
Purchases of property and equipment	(23,685,771)	(17,297,791)
Acquisition of business, net of cash acquired	(3,202,750)
Net cash used in investing activities	(23,251,835)	(24,710,140)
Cash flows from financing activities
Proceeds from issuance of long-term debt	16,448,332	55,862,559
Repayments of long-term debt	(5,865,644)	(58,460,520)
Payment of loan fees	(118,739)
Proceeds from employee stock purchase plan	41,833
Proceeds from sale of common stock, net of underwriter fees		31,994,823
Net cash provided by financing activities	10,505,782	29,396,862
Net increase (decrease) in cash and cash equivalents	(3,048,417)	10,456,022
Cash and cash equivalents, beginning of period	9,562,473	2,700,328
Cash and cash equivalents, end of period	$ 6,514,056	$ 13,156,350

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Note 9 - Income Taxes (Tables)

9 Months Ended

Sep. 28, 2014

Income Tax Disclosure [Abstract]

Schedule of Components of Income Tax Expense (Benefit) [Table Text Block]

	Three Months Ended						Nine Months Ended
	September 28 2014			September 29 2013			September 28 2014			September 29 2013
Federal:
Current	$	-		$	-		$	-		$	-
Deferred		(20,315	)		(14,246	)		(189,473	)		23,908
State:
Current		(24,389	)		33,568			43,898			65,434
Deferred		(3,396	)		(33,766	)		(34,455	)		(37,156	)
Income tax provision (benefit)	$	(48,100	)	$	(14,444	)	$	(180,030	)	$	52,186

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

	September 28 2014			September 29 2013
Income tax provision at federal statutory rate	$	(32,235	)	$	116,298
State income tax provision		6,331			18,663
Permanent differences		53,499			123,778
Tax credits		(207,625	)		(206,553	)
Income tax provision (benefit)	$	(180,030	)	$	52,186

Schedule of Deferred Tax Assets and Liabilities [Table Text Block]

	September 28 2014		December 29 2013
Deferred tax assets:
Net operating loss carry forwards	$	494,900	$	983,682
Deferred rent expense		593,237		131,249
Start-up costs		133,744		130,136
Tax credit carry forwards		2,591,009		2,427,861
Interest rate swaps		85,179		111,218
Investments		8,061		15,030
Stock-based compensation		275,606		129,514
Other		259,280		186,814
Total deferred tax assets		4,441,016		4,115,504
Deferred tax liabilities:
Tax depreciation in excess of book		2,804,681		2,708,544
Other		282,654		244,199
Total deferred tax liabilities		3,087,335		2,952,743
Net deferred income tax asset	$	1,353,681	$	1,162,761

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Note 3 - Investments (Details) (USD $)	Sep. 28, 2014	Dec. 29, 2013
Investments, Debt and Equity Securities [Abstract]
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value	$ 4,900,000	$ 7,000,000
Available-for-sale Securities, Accumulated Gross Unrealized Loss, before Tax	$ 23,711	$ 44,442

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Note 8 - Stock-Based Compensation (Details) - Restricted Shares Transactions (Restricted Stock [Member])	9 Months Ended
	Sep. 28, 2014	Sep. 29, 2013
Restricted Stock [Member]
Note 8 - Stock-Based Compensation (Details) - Restricted Shares Transactions [Line Items]
Unvested,	116,667	54,900
Granted	91,966	145,375
Vested	(41,031)	(26,500)
Expired/Forfeited	(2,068)	(48,400)
Unvested,	165,534	125,375

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Consolidated Balance Sheets (Current Period Unaudited) (USD $)	Sep. 28, 2014	Dec. 29, 2013
Current assets
Cash and cash equivalents	$ 6,514,056	$ 9,562,473
Investments	4,911,848	8,561,598
Accounts receivable	231,334	1,248,940
Inventory	1,182,420	1,017,626
Prepaid assets	429,581	555,144
Total current assets	13,269,239	20,945,781
Deferred income taxes	1,353,681	1,162,761
Property and equipment, net	74,500,195	58,576,734
Intangible assets, net	3,229,487	2,948,013
Goodwill	10,998,630	8,578,776
Other long-term assets	199,500	121,668
Total assets	103,550,732	92,333,733
Current liabilities
Accounts payable	5,210,270	4,416,092
Accrued compensation	1,565,911	2,060,082
Other accrued liabilities	1,035,623	809,104
Current portion of long-term debt	12,327,788	8,225,732
Current portion of deferred rent	377,812	306,371
Total current liabilities	20,517,404	15,817,381
Deferred rent, less current portion	2,992,190	3,420,574
Unfavorable operating leases	712,223	759,065
Other long-term liabilities	410,600	327,561
Long-term debt, less current portion	44,528,221	38,047,589
Total liabilities	69,160,638	58,372,170
Stockholders' equity
Common stock - $0.0001 par value; 100,000,000 shares authorized; 26,147,999 and 26,049,578, respectively, issued and outstanding	2,582	2,580
Additional paid-in capital	35,554,165	35,275,255
Accumulated other comprehensive loss	(180,997)	(245,364)
Accumulated deficit	(985,656)	(1,070,908)
Total stockholders' equity	34,390,094	33,961,563
Total liabilities and stockholders' equity	$ 103,550,732	$ 92,333,733

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Note 5 - Intangible Assets (Details) - Intangible Assets (USD $)	Sep. 28, 2014	Dec. 29, 2013
Intangible Assets [Abstract]
Franchise fees	$ 659,863	$ 568,363
Trademark	64,059	59,199
Non-compete agreement	76,560	76,560
Favorable lease	239,000	239,000
Loan fees	465,497	346,758
Total	1,504,979	1,289,880
Less accumulated amortization	(481,961)	(361,009)
Amortized intangibles, net	1,023,018	928,871
Liquor licenses	2,206,469	2,019,142
Total intangibles, net	$ 3,229,487	$ 2,948,013

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Consolidated Statements of Comprehensive Income (Loss) (Parentheticals) (USD $)	3 Months Ended		9 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013
Unrealized changes in fair value of interest rate swaps, tax	$ 43,284	$ 77,315	$ 26,039	$ 18,011
Unrealized changes in fair value of investments, tax	$ 2,232	$ 16,876	$ 6,969	$ 8,423

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Note 10 - Operating Leases (Including Related Party) (Details) - Future Minimum Lease Payments (USD $)	Sep. 28, 2014
Note 10 - Operating Leases (Including Related Party) (Details) - Future Minimum Lease Payments [Line Items]
2019 and thereafter	$ 1,567,139
Open Restaurants [Member]
Note 10 - Operating Leases (Including Related Party) (Details) - Future Minimum Lease Payments [Line Items]
Remainder of 2014	1,528,696
2015	6,065,811
2016	5,841,663
2017	5,568,461
2018	5,282,794
2019 and thereafter	24,090,959
Total	48,378,384
Restaurants Under Development [Member]
Note 10 - Operating Leases (Including Related Party) (Details) - Future Minimum Lease Payments [Line Items]
Remainder of 2014	37,008
2015	496,736
2016	520,872
2017	522,552
2018	524,236
2019 and thereafter	4,107,260
Total	$ 6,208,664

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Note 14 - Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 28, 2014

Fair Value Disclosures [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

FAIR VALUE MEASUREMENTS
Description	Level 1		Level 2			Level 3		Asset/(Liability) Total
Interest rate swaps	$	-	$	(250,528	)	$	-	$	(250,528	)
Debt securities
Obligations of states/municipals		-		2,607,841			-		2,607,841
Corporate securities		-		2,304,007			-		2,304,007
Total debt securities		-		4,911,848			-		4,911,848
Total debt securities and derivatives	$	-	$	4,661,320		$	-	$	4,661,320

FAIR VALUE MEASUREMENTS
Description	Level 1		Level 2			Level 3		Asset/(Liability) Total
Interest rate swaps	$	-	$	(327,561	)	$	-	$	(327,561	)
Debt securities
U.S. government and agencies		-		3,498,135			-		3,498,135
Corporate securities		-		5,063,463			-		5,063,463
Total debt securities		-		8,561,598			-		8,561,598
Total debt securities and swaps	$	-	$	8,234,037		$	-	$	8,234,037

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Note 15 - Accumulated Other Comprehensive Income (Loss) (Details) - Components of Accumulated Other Comprehensive Income (Loss) (USD $)	9 Months Ended	12 Months Ended
	Sep. 28, 2014	Dec. 29, 2013
Accumulated Other Comprehensive Income (Loss) [Line Items]
Total Accumulated other comprehensive loss ending balance	$ (180,997)	$ (245,364)
Interest Rate Swap [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Fair value	(165,347)	(216,188)
Available-for-sale Securities [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Fair value	$ (15,650)	$ (29,176)

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Note 14 - Fair Value of Financial Instruments

9 Months Ended

Sep. 28, 2014

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

14.           FAIR VALUE OF FINANCIAL INSTRUMENTS

The guidance for fair value measurements, FASB ASC 820, Fair Value Measurements and Disclosures, establishes the authoritative definition of fair value, sets out a framework for measuring fair value, and outlines the required disclosures regarding fair value measurements. Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. We use a three-tier fair value hierarchy based upon observable and non-observable inputs as follows:

●	Level 1	Quoted market prices in active markets for identical assets and liabilities;
●	Level 2	Inputs, other than level 1 inputs, either directly or indirectly observable; and
●	Level 3	Unobservable inputs developed using internal estimates and assumptions (there is little or no market data) which reflect those that market participants would use.

As of September 28, 2014 and December 29, 2013, respectively, our financial instruments consisted of cash and cash equivalents, accounts receivable, available-for-sale investments, accounts payable, and debt. The fair value of cash and cash equivalents, accounts receivable, and accounts payable approximate carrying value, due to their short-term nature.

The fair value of our interest rate swaps is determined based on valuation models, which utilize quoted interest rate curves to calculate the forward value and then discount the forward values to the present period. The Company measures the fair value using broker quotes which are generally based on market observable inputs including yield curves and the value associated with counterparty credit risk. Our interest rate swaps are classified as a Level 2 measurement as these securities are not actively traded in the market, but are observable based on transactions associated with bank loans with similar terms and maturities. See Note 1 and Note 7 for additional information pertaining to interest rates swaps.

The estimated fair values of the Company’s investment portfolio are based on prices provided by a third party pricing service and a third party investment manager. The prices provided by these services are based on quoted market prices, when available, non-binding broker quotes, or matrix pricing. The third party pricing service and the third party investment manager provide a single price or quote per security and the Company has not historically adjusted security prices. The Company obtains an understanding of the methods, models and inputs used by the third party pricing service and the third party investment manager, and has controls in place to validate that amounts provided represent fair values. Our investments are classified as a Level 2 measurement as these securities are not actively traded in the market, but are observable based on the quoted prices provided by our Portfolio managers.

As of September 28, 2014 and December 29, 2013, our total debt was approximately $56.9 million and $46.3 million, respectively, which approximated fair value. The Company estimates the fair value of its fixed-rate debt using discounted cash flow analysis based on the Company’s incremental borrowing rate (Level 2).

There were no transfers between levels of the fair value hierarchy during the three and nine months ended September 28, 2014 and the fiscal year ended December 29, 2013.

The following table presents the fair values for those assets and liabilities measured on a recurring basis as of September 28, 2014:

FAIR VALUE MEASUREMENTS
Description	Level 1		Level 2			Level 3		Asset/(Liability) Total
Interest rate swaps	$	-	$	(250,528	)	$	-	$	(250,528	)
Debt securities
Obligations of states/municipals		-		2,607,841			-		2,607,841
Corporate securities		-		2,304,007			-		2,304,007
Total debt securities		-		4,911,848			-		4,911,848
Total debt securities and derivatives	$	-	$	4,661,320		$	-	$	4,661,320

The following table presents the fair values for those assets and liabilities measured on a recurring basis as of December 29, 2013:

FAIR VALUE MEASUREMENTS
Description	Level 1		Level 2			Level 3		Asset/(Liability) Total
Interest rate swaps	$	-	$	(327,561	)	$	-	$	(327,561	)
Debt securities
U.S. government and agencies		-		3,498,135			-		3,498,135
Corporate securities		-		5,063,463			-		5,063,463
Total debt securities		-		8,561,598			-		8,561,598
Total debt securities and swaps	$	-	$	8,234,037		$	-	$	8,234,037

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Note 15 - Accumulated Other Comprehensive Income (Loss) (Tables)

9 Months Ended

Sep. 28, 2014

Disclosure Text Block [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

	September 28 2014			December 29 2013
Fair value of interest rate swaps (net of tax of $85,179 and $111,218)	$	(165,347	)	$	(216,188	)
Fair value of investments (net of tax of $8,061 and $15,030)		(15,650	)		(29,176	)
Total Accumulated other comprehensive loss ending balance	$	(180,997	)	$	(245,364	)

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Note 16 - Subsequent Events

9 Months Ended

Sep. 28, 2014

Subsequent Events [Abstract]

Subsequent Events [Text Block]

16.           SUBSEQUENT EVENTS

On October 31, 2014 and November 5, 2014, the Company closed on its previously announced sale and leaseback transaction with Spirit Master Funding IX (“Purchaser”), with regard to seven of the 12 properties that are subject to the agreement. The aggregate sales price for the properties closed to date was $13.1 million. The Company plans to use $5.0 million of the proceeds to pay down debt, including $1.9 million to retire mortgages on its Brandon Buffalo Wild Wings property and $3.1 million to pay down its DLOC. The Company intends to use the remaining proceeds from the transaction to fund growth capital. Closing on the remaining properties, all of which remain under construction, is anticipated to occur upon completion of the construction, subject to customary diligence by Purchaser and satisfaction of other conditions precedent to closing. For additional information, refer the 8-K filed on November 5, 2014.

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Consolidated Statements of Stockholders' Equity (USD $)	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Retained Earnings [Member]	Total
Balance at Dec. 30, 2012	$ 1,888	$ 2,991,526	$ (284,294)	$ (1,205,216)	$ 1,503,904
Balance (Shares) (in Shares) at Dec. 30, 2012	18,951,700
Issuance of restricted shares (in Shares)	145,575
Forfeitures of restricted shares (in Shares)	(48,399)
Sale of common stock from follow-on offering, net of fees and expenses	690	31,906,989			31,907,679
Sale of common stock from follow-on offering, net of fees and expenses (in Shares)	6,900,000
Stock options exercised	2	74,997			74,999
Stock options exercised (in Shares)	104,638
Employee stock purhcase plan		12,145			12,145
Employee stock purhcase plan (in Shares)	2,061
Share-based compensation		205,668			205,668
Other comprehensive income (loss)			18,709		18,709
Net income				311,847	311,847
Balance at Sep. 29, 2013	2,580	35,191,325	(265,585)	(893,369)	34,034,951
Balance (Shares) (in Shares) at Sep. 29, 2013	26,055,575
Balance at Dec. 29, 2013	2,580	35,275,255	(245,364)	(1,070,908)	33,961,563
Balance (Shares) (in Shares) at Dec. 29, 2013	26,049,578				26,049,578
Issuance of restricted shares (in Shares)	91,966
Forfeitures of restricted shares (in Shares)	(2,068)
Employee stock purhcase plan	2	41,831			41,833
Employee stock purhcase plan (in Shares)	8,523
Share-based compensation		237,079			237,079
Other comprehensive income (loss)			64,367		64,367
Net income				85,252	85,252
Balance at Sep. 28, 2014	$ 2,582	$ 35,554,165	$ (180,997)	$ (985,656)	$ 34,390,094
Balance (Shares) (in Shares) at Sep. 28, 2014	26,147,999				26,147,999

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Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) (USD $)	Sep. 28, 2014	Dec. 29, 2013
Common stock, par value (in Dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	26,147,999	26,049,578
Common stock, shares outstanding	26,147,999	26,049,578

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Note 9 - Income Taxes

9 Months Ended

Sep. 28, 2014

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

 9.           INCOME TAXES

The (benefit) provision for income taxes consists of the following components for the three-month and nine-month periods ended September 28, 2014 and September 29, 2013, respectively:

	Three Months Ended						Nine Months Ended
	September 28 2014			September 29 2013			September 28 2014			September 29 2013
Federal:
Current	$	-		$	-		$	-		$	-
Deferred		(20,315	)		(14,246	)		(189,473	)		23,908
State:
Current		(24,389	)		33,568			43,898			65,434
Deferred		(3,396	)		(33,766	)		(34,455	)		(37,156	)
Income tax provision (benefit)	$	(48,100	)	$	(14,444	)	$	(180,030	)	$	52,186

The (benefit) provision for income taxes is different from that which would be obtained by applying the statutory federal income tax rate to income before income taxes before income taxes.  The items causing this difference are as follows:

	September 28 2014			September 29 2013
Income tax provision at federal statutory rate	$	(32,235	)	$	116,298
State income tax provision		6,331			18,663
Permanent differences		53,499			123,778
Tax credits		(207,625	)		(206,553	)
Income tax provision (benefit)	$	(180,030	)	$	52,186

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.  The Company expects the deferred tax assets to be fully realizable within the next several years. Significant components of the Company's deferred income tax assets and liabilities are summarized as follows:

	September 28 2014		December 29 2013
Deferred tax assets:
Net operating loss carry forwards	$	494,900	$	983,682
Deferred rent expense		593,237		131,249
Start-up costs		133,744		130,136
Tax credit carry forwards		2,591,009		2,427,861
Interest rate swaps		85,179		111,218
Investments		8,061		15,030
Stock-based compensation		275,606		129,514
Other		259,280		186,814
Total deferred tax assets		4,441,016		4,115,504
Deferred tax liabilities:
Tax depreciation in excess of book		2,804,681		2,708,544
Other		282,654		244,199
Total deferred tax liabilities		3,087,335		2,952,743
Net deferred income tax asset	$	1,353,681	$	1,162,761

If deemed necessary by management, the Company establishes valuation allowances in accordance with the provisions of Accounting Standards Codification (“ASC”) 740, Income Taxes ("ASC 740") issued by FASB. Management continually reviews the likelihood that deferred tax assets will be realized and the Company recognizes these benefits only as reassessment indicates that it is more likely than not that such tax benefits will be realized. 

The Company expects to use net operating loss and general business tax credit carryforwards before their 20-year expiration. As of September 28, 2014, the Company has available federal net operating loss carryforwards of approximately $2.1 million. Of that amount, approximately $600,000 relates to stock-based compensation tax deductions in excess of book compensation expense that will be credited to additional paid in capital in future periods when such deductions reduce taxes payable as determined based on a "with-and-without" approach.  Net operating losses relating to such benefits are not included in the table above. General business tax credits of $2.6 million will expire between 2028 and 2035. 

The Company applies the provisions of ASC 740 regarding the accounting for uncertainty in income taxes.  There are no amounts recorded on the Company's consolidated financial statements for uncertain positions.  The Company classifies all interest and penalties as income tax expense.  There are no accrued interest amounts or penalties related to uncertain tax positions as of September 28, 2014.

The Company files income tax returns in the United States federal jurisdiction and various state jurisdictions.

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Document And Entity Information	9 Months Ended
	Sep. 28, 2014	Nov. 05, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	Diversified Restaurant Holdings, Inc.
Document Type	10-Q
Current Fiscal Year End Date	--12-28
Entity Common Stock, Shares Outstanding		26,185,375
Amendment Flag	false
Entity Central Index Key	0001394156
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Accelerated Filer
Entity Well-known Seasoned Issuer	No
Document Period End Date	Sep. 28, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q3

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Note 10 - Operating Leases (Including Related Party)

9 Months Ended

Sep. 28, 2014

Leases, Operating [Abstract]

Operating Leases of Lessor Disclosure [Text Block]

10.           OPERATING LEASES (INCLUDING RELATED PARTY)

Lease terms range from five to 20 years, generally include renewal options, and frequently require us to pay a proportionate share of real estate taxes, insurance, common area maintenance, and other operating costs. Some restaurant leases provide for contingent rental payments based on sales thresholds.

Total rent expense was $1.4 million and $1.2 million for the three-month periods ended September 28, 2014 and September 29, 2013, respectively (of which $34,299 and $18,820, respectively, were paid to a related party).  Total rent expense was $3.8 million and $3.7 million for the nine-month periods ended September 28, 2014 and September 29, 2013, respectively (of which $103,961 and $56,394, respectively, were paid to a related party). On October 30, 2014, Detroit Burgers, Inc., one of our wholly-owned subsidiaries, acquired 100% of the membership interests of DMM Group, LLC from a trust controlled by the spouse of our President, CEO and Chairman, T. Michael Ansley for $250,000. DMM Group’s sole asset is the land and improvements used for our Detroit Bagger Dave’s restaurant.

Scheduled future minimum lease payments for each of the five years and thereafter for non-cancelable operating leases with initial or remaining lease terms in excess of one year at September 28, 2014 are summarized as follows:

Year	Amount
Remainder of 2014	$	1,528,696
2015		6,065,811
2016		5,841,663
2017		5,568,461
2018		5,282,794
2019 and thereafter		24,090,959
Total	$	48,378,384

Scheduled future minimum lease payments for each of the five years and thereafter for non-cancelable operating leases for restaurants under development with initial or remaining lease terms in excess of one year at September 28, 2014 are summarized as follows:

Year	Amount
Remainder of 2014	$	37,008
2015		496,736
2016		520,872
2017		522,552
2018		524,236
2019 and thereafter		4,107,260
Total	$	6,208,664

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Consolidated Statements of Operations (Unaudited) (USD $)	3 Months Ended		9 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013
Revenue	$ 32,782,092	$ 26,368,090	$ 93,264,727	$ 80,410,174
Operating expenses
Food, beverage, and packaging costs	9,456,106	7,759,146	26,784,277	24,336,433
Compensation costs	8,405,116	6,972,432	24,170,212	20,903,931
Occupancy costs	1,873,693	1,600,278	5,052,643	4,704,380
Other operating costs	7,220,083	5,436,252	19,627,639	16,100,223
General and administrative expenses	2,133,564	1,558,924	6,345,810	5,058,879
Pre-opening costs	609,664	639,498	2,063,800	2,036,022
Depreciation and amortization	2,865,794	2,070,841	7,612,125	5,539,874
Loss on disposal of property and equipment	33,013	22,970	353,333	83,711
Total operating expenses	32,597,033	26,060,341	92,009,839	78,763,453
Operating profit	185,059	307,749	1,254,888	1,646,721
Interest expense	(483,057)	(320,798)	(1,436,092)	(1,375,646)
Other income, net	67,789	68,415	86,426	92,958
Income (loss) before income taxes	(230,209)	55,366	(94,778)	364,033
Income tax provision (benefit)	(48,100)	(14,444)	(180,030)	52,186
Net income (loss)	$ (182,109)	$ 69,810	$ 85,252	$ 311,847
Basic earnings (loss) per share (in Dollars per share)	$ (0.01)	$ 0.00	$ 0.00	$ 0.01
Fully diluted earnings (loss) per share (in Dollars per share)	$ (0.01)	$ 0.00	$ 0.00	$ 0.01
Weighted average number of common shares outstanding
Basic (in Shares)	26,107,627	26,054,118	26,074,797	23,231,403
Diluted (in Shares)	26,107,627	26,186,263	26,174,593	23,351,128

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Note 4 - Property and Equipment

9 Months Ended

Sep. 28, 2014

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment Disclosure [Text Block]

4.          PROPERTY AND EQUIPMENT

Property and equipment are comprised of the following assets:

	September 28 2014			December 29 2013
Land	$	5,823,050		$	3,610,453
Building		4,316,263			4,316,263
Equipment		26,459,185			22,212,594
Furniture and fixtures		6,950,744			5,822,813
Leasehold improvements		57,304,857			46,469,088
Restaurant construction in progress		4,551,171			2,434,332
Total		105,405,270			84,865,543
Less accumulated depreciation		(30,905,075	)		(26,288,809	)
Property and equipment, net	$	74,500,195		$	58,576,734

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Note 3 - Investments

9 Months Ended

Sep. 28, 2014

Investments, Debt and Equity Securities [Abstract]

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

 3.           INVESTMENTS

Investments consist of available-for-sale securities that are carried at fair value. Available-for-sale securities are classified as current assets based upon our intent and ability to use any and all of the securities as necessary to satisfy the operational requirements of our business. Based on the call date of the investments, all securities have maturities of one year or less. Unrealized losses are charged against net earnings when a decline in fair value is determined to be other than temporary.

The amortized cost, gross unrealized holding gains, gross unrealized holding loss, and fair value of available-for-sale securities by type are as follows: 

	September 28, 2014
	Amortized Cost		Unrealized Gains		Unrealized Loss			Estimated Fair Value
Debt securities:
Obligations of states/municipals		2,613,309		-		(5,468	)		2,607,841
Corporate securities		2,322,250		-		(18,243	)		2,304,007
Total debt securities	$	4,935,559	$	-	$	(23,711	)	$	4,911,848

	December 29, 2013
	Amortized Cost		Unrealized Gains		Unrealized Loss			Estimated Fair Value
Debt securities:
U.S. government and agencies	$	3,497,951	$	236	$	(52	)	$	3,498,135
Corporate securities		5,107,853		-		(44,390	)		5,063,463
Total debt securities	$	8,605,804	$	236	$	(44,442	)	$	8,561,598

As of September 28, 2014 and December 29, 2013, $4.9 million and $7.0 million of investments were in a loss position with a cumulative unrealized loss of $23,711 and $44,442, respectively. The Company may incur future impairment charges if decline in market values continue and/or worsen and the impairments are no longer considered temporary. All investments with unrealized losses have been in such position for less than 12 months.

Gross unrealized gains and losses on available-for-sale securities, recorded in accumulated other comprehensive income (loss), as of September 28, 2014 and December 29, 2013, were as follows:

	September 28 2014			December 29 2013
Unrealized gains	$	-		$	236
Unrealized loss		(23,711	)		(44,442	)
Net unrealized loss		(23,711	)		(44,206	)
Deferred federal income tax benefit		8,061			15,030
Net unrealized loss on investments, net of deferred income tax	$	(15,650	)	$	(29,176	)

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Note 15 - Accumulated Other Comprehensive Income (Loss)

9 Months Ended

Sep. 28, 2014

Disclosure Text Block [Abstract]

Comprehensive Income (Loss) Note [Text Block]

15. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table summarizes each component of Accumulated Other Comprehensive Income (loss):

	September 28 2014			December 29 2013
Fair value of interest rate swaps (net of tax of $85,179 and $111,218)	$	(165,347	)	$	(216,188	)
Fair value of investments (net of tax of $8,061 and $15,030)		(15,650	)		(29,176	)
Total Accumulated other comprehensive loss ending balance	$	(180,997	)	$	(245,364	)

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Note 11 - Commitments and Contingencies

9 Months Ended

Sep. 28, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

11.           COMMITMENTS AND CONTINGENCIES

The Company’s ADA requires DRH to open 32 restaurants by March 1, 2017.  Failure to develop restaurants in accordance with the schedule detailed in the agreement could lead to potential penalties of up to $50,000 for each undeveloped restaurant, payment of the initial franchise fees for each undeveloped restaurant, and loss of rights to development territory.  As of September 28, 2014, we have opened 22 of the 32 restaurants required by the ADA.  With the remaining 10 restaurants, along with two additional franchise agreements, we expect the Company will operate 52 BWW restaurants by 2017, exclusive of potential additional BWW restaurant acquisitions.  

The Company is required to pay BWLD royalties (5.0% of net sales) and advertising fund contributions (3.0% of net sales globally and 0.5% of net sales for certain cities) for the term of the individual franchise agreements.  The Company incurred royalty fees of $1.4 million and $1.2 million for the three-month periods ended September 28, 2014 and September 29, 2013 and $3.9 million and $3.5 million for nine-month periods ended September 28, 2014 and September 29, 2013, respectively.  Advertising fund contribution expenses were $813,579 and $690,096 for the three-month periods ended September 28, 2014 and September 29, 2013 and $2.3 million and $2.1 million for nine-month periods ended September 28, 2014 and September 29, 2013, respectively.

The Company is required by its various BWLD franchise agreements to modernize the restaurants during the term of the agreements.  The individual agreements generally require improvements between the fifth and tenth year to meet the most current design model that BWLD has approved.  The modernization costs for a restaurant can range from approximately $50,000 to approximately $700,000 depending on an individual restaurant's needs.

The Company is subject to ordinary and routine legal proceedings, as well as demands, claims and threatened litigation, which arise in the ordinary course of its business.  The ultimate outcome of any litigation is uncertain.  While unfavorable outcomes could have adverse effects on the Company's business, results of operations, and financial condition, management believes that the Company is adequately insured and does not believe an unfavorable outcome of any pending or threatened proceedings is probable or reasonably possible.  Therefore, no separate reserve or disclosure has been established for these types of legal proceedings. 

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Note 7 - Long-Term Debt

9 Months Ended

Sep. 28, 2014

Disclosure Text Block [Abstract]

Long-term Debt [Text Block]

 7.           LONG-TERM DEBT

Long-term debt consists of the following obligations:

	September 28 2014			December 29 2013
Note payable - $46.0 million term loan; payable to RBS with a senior lien on all the Company’s personal property and fixtures. Scheduled monthly principal payments are approximately $547,619 plus accrued interest through maturity in April 2018. Interest is charged based on one-month LIBOR plus an applicable margin, which ranges from 2.25% to 3.15%, depending on the lease adjusted leverage ratio defined in the terms of the agreement. The rate at September 28, 2014 was approximately 2.7%.	$	26,690,476			31,619,048
Note payable - $15.0 million development line of credit; payable to RBS with a senior lien on all the Company’s personal property and fixtures. Scheduled monthly principal payments are $178,571 plus accrued interest through maturity in April 2018. Interest is charged based on one-month LIBOR plus an applicable margin, which ranges from 2.25% to 3.15%, depending on the lease adjusted leverage ratio defined in the terms of the agreement. The rate at September 28, 2014 was approximately 2.7%.		14,107,143			12,759,420
Note payable - $20.0 million development line of credit II; payable to RBS with a senior lien on all the Company’s personal property and fixtures. Interest is charged based on one-month LIBOR plus an applicable margin, which ranges from 2.25% to 3.15%, depending on the lease adjusted leverage ratio defined in the terms of the agreement. The rate at September 28, 2014 was approximately 2.7%. Once fully drawn, payments will be due monthly; the note matures in April 2018.		14,207,752			-
Note payable to a bank secured by a senior mortgage on the Brandon Property. Scheduled monthly principal and interest payments are approximately $8,000 through maturity in June 2030, at which point a balloon payment of $413,550 is due. Interest is charged based on a fixed rate of 6.7%, per annum, through June 2017, at which point the rate will adjust to the U.S. Treasury Securities Rate plus 4.0% (and every seven years thereafter).		1,063,990			1,081,047
Note payable to a bank secured by a junior mortgage on the Brandon Property. The note matures in 2030 and requires monthly principal and interest installments of approximately $6,300 until maturity. Interest is charged at a rate of 3.6% per annum.		786,648			813,806
Total long-term debt		56,856,009			46,273,321
Less current portion		(12,327,788	)		(8,225,732	)
Long-term debt, net of current portion	$	44,528,221		$	38,047,589

On April 15, 2013, the Company entered into a $63.0 million senior secured credit facility with RBS (the “April 2013 Senior Secured Credit Facility”). The April 2013 Senior Secured Credit Facility consists of a $46.0 million term loan (the “April 2013 Term Loan”), a $15.0 million development line of credit (the “April 2013 DLOC”), and a $2.0 million revolving line of credit (the “April 2013 RLOC”). The April 2013 Term Loan is for a period of five years. Payments of principal are based upon an 84-month straight-line amortization schedule, with monthly principal payments of $547,619 plus accrued interest through maturity on April 15, 2018, at which time the entire unpaid principal and interest is due. The April 2013 DLOC converted to a term loan on March 11, 2014, with monthly principal payments of $178,571 plus accrued interest beginning May 2014 through maturity on April 15, 2018, at which time the entire unpaid principal and interest is due. The April 2013 RLOC is for a term of two years. As of September 28, 2014 no amounts were outstanding under the April 2013 RLOC. Amounts borrowed under the April 2013 Senior Secured Credit Facility bear interest at a rate of one-month LIBOR plus an applicable margin.

On March 20, 2014, the Company amended the April 2013 Senior Secured Credit Facility to include a $20.0 million development line of credit II (the “March 2014 DLOC II”). The March 2014 DLOC II is for a term of two years and is convertible upon maturity into a term note. The amendment also provided a 25 basis point reduction to the April 2013 Senior Secured Credit Facility’s applicable margin rate, which reduced the range from 2.5%/3.4% to 2.25%/3.15%, which commenced April 2014. 

Based on the long-term debt terms that existed at September 28, 2014, the scheduled principal maturities for the next five years and thereafter are summarized as follows:

Year	Amount
Remainder of 2014	$	2,558,034
2015		13,148,218
2016		13,151,117
2017		13,154,578
2018		13,276,923
2019 and thereafter		1,567,139
Total	$	56,856,009

For the three-month periods ended September 28, 2014 and September 29, 2013, interest expense was $483,057 and $320,798, respectively. For both the nine-month periods ended September 28, 2014 and September 29, 2013, interest expense was $1.4 million.

The current debt agreement contains various customary financial covenants generally based on the performance of the specific borrowing entity and other related entities. The more significant covenants consist of a minimum debt service coverage ratio and a maximum lease adjusted leverage ratio, both of which we are in compliance with as of September 28, 2014.

At September 28, 2014, the Company has four interest rate swap agreements to fix a portion of the interest rates on its variable rate debt. The swap agreements all qualify for hedge accounting. The swap agreements have a combined notional amount of $40.2 million at September 28, 2014. Under the swap agreements, the Company receives interest at the one-month LIBOR and pays a fixed rate. The April 2012 swap has a rate of 1.4% (notional amount of $10.5 million) and expires April 2019, the October 2012 swap has a rate of 0.9% (notional amount of $4.3 million) and expires October 2017, the December 2013 swap has a rate of 1.4% (notional amount of $12.5 million) and expires April 2018, and the April 2015 forward swap has a rate of 1.54% (notional amount of $12.9 million) and expires April 2018. The fair value of these swap agreements was a liability of $250,528 and $327,561 at September 28, 2014 and December 29, 2013, respectively. Since these swap agreements qualify for hedge accounting, the changes in fair value are recorded in other comprehensive income (loss), net of tax. See Note 1 and Note 14 for additional information pertaining to interest rate swaps.

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Note 11 - Commitments and Contingencies (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013
Note 11 - Commitments and Contingencies (Details) [Line Items]
Number of Restaurants	61		61
Royalty Percentage	5.00%		5.00%
Advertising Fund Contribution	3.00%		3.00%
Royalty Expense	$ 1,400,000	$ 1,200,000	$ 3,900,000	$ 3,500,000
Modernization Cost Per Restaurant Range Low			50,000
Modernization Cost Per Restaurant Range High			700,000
Original Number of Restaurants Required [Member] | Scenario, Forecast [Member]
Note 11 - Commitments and Contingencies (Details) [Line Items]
Number of Restaurants	32		32
Potential Penalty Per Undeveloped Restaurant [Member]
Note 11 - Commitments and Contingencies (Details) [Line Items]
Loss on Contract Termination for Default			50,000
Open Restaurants [Member]
Note 11 - Commitments and Contingencies (Details) [Line Items]
Number of Restaurants	22		22
Restaurants Required [Member]
Note 11 - Commitments and Contingencies (Details) [Line Items]
Number of Restaurants	32		32
Additional Openings Not Related to Area Development Agreement [Member]
Note 11 - Commitments and Contingencies (Details) [Line Items]
Number of Restaurants	10		10
Additional Agreements [Member]
Note 11 - Commitments and Contingencies (Details) [Line Items]
Number of Restaurants	2		2
Scenario, Forecast [Member]
Note 11 - Commitments and Contingencies (Details) [Line Items]
Number of Restaurants	52		52
Certain Cities [Member]
Note 11 - Commitments and Contingencies (Details) [Line Items]
Advertising Fund Contribution	0.50%		0.50%
Advertising Fund Contribution Expenses [Member]
Note 11 - Commitments and Contingencies (Details) [Line Items]
Advertising Expense	$ 813,579	$ 690,096	$ 2,300,000	$ 2,100,000

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Note 5 - Intangible Assets

9 Months Ended

Sep. 28, 2014

Disclosure Text Block [Abstract]

Intangible Assets Disclosure [Text Block]

5.        INTANGIBLE ASSETS

Intangible assets are comprised of the following:

	September 28 2014			December 29 2013
Amortized intangibles:
Franchise fees	$	659,863		$	568,363
Trademark		64,059			59,199
Non-compete agreement		76,560			76,560
Favorable lease		239,000			239,000
Loan fees		465,497			346,758
Total		1,504,979			1,289,880
Less accumulated amortization		(481,961	)		(361,009	)
Amortized intangibles, net		1,023,018			928,871
Unamortized intangibles:
Liquor licenses		2,206,469			2,019,142
Total intangibles, net	$	3,229,487		$	2,948,013

Amortization expense for the three-month periods ended September 28, 2014 and September 29, 2013, was $15,935 and $13,989, respectively. Amortization expense for the nine-month periods ended September 28, 2014 and September 29, 2013, was $45,144 and $41,437, respectively. Amortization of favorable leases and loan fees are reflected as part of occupancy and interest expense, respectively.

Based on the current intangible assets and their estimated useful lives, future intangible-related expense for the next five years is projected as follows:

Year	Amount
Remainder of 2014	$	42,847
2015		165,794
2016		147,614
2017		146,078
2018		71,516
2019 and thereafter		449,169
Total	$	1,023,018

The aggregate weighted-average amortization period for intangible assets is 8.2 years.  

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Note 6 - Related Party Transactions

9 Months Ended

Sep. 28, 2014

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

6.           RELATED PARTY TRANSACTIONS

Fees for monthly accounting and financial statement services are paid to an entity owned by a member of the DRH Board of Directors and a stockholder of the Company. Fees paid during the three-month periods ended September 28, 2014 and September 29, 2013, were $131,050, and $101,440, respectively. Fees paid during the nine-month periods ended September 28, 2014 and September 29, 2013, were $378,988 and $295,642, respectively.

See Note 10 for related party operating lease transactions.

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Note 8 - Stock-Based Compensation

9 Months Ended

Sep. 28, 2014

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

8.            STOCK-BASED COMPENSATION

The Company established a Stock Incentive Plan in 2011 (“Stock Incentive Plan”) to attract and retain directors, consultants, and team members and to align their interests with the interests of the Company’s shareholders through the opportunity for increased stock ownership.  The plan permits the grant and award of 750,000 shares of common stock by way of stock options and/or restricted stock.  Stock options must be awarded at exercise prices at least equal to or greater than 100.0% of the fair market value of the shares on the date of grant. The options will expire no later than 10 years from the date of grant, with vesting terms to be defined at grant date, ranging from a vesting schedule based on performance to a vesting schedule that extends over a period of time as selected by the Compensation Committee of the Board of Directors (the “Committee”) or another committee as determined by the Board of Directors. The Committee also determines the grant, issuance, retention, and vesting timing and conditions of awards of restricted stock. The Committee may place limitations, such as continued employment, passage of time, and/or performance measures, on restricted stock. Awards of restricted stock may not provide for vesting or settlement in full of restricted stock over a period of less than one year from the date the award is made.

During the nine months ended September 28, 2014 and September 29, 2013, restricted shares were granted to certain team members at a weight-average fair value of $4.82 and $5.85.  Restricted shares are granted with a per share purchase price at 100.0% of the fair market value on the date of grant. Based on the Stock Award Agreement, shares vest ratably over a three year period or upon the three year anniversary of the granted shares, the vesting terms are determined by the Committee.  Unrecognized stock-based compensation expense of $700,648 at September 28, 2014 will be recognized over the remaining weighted-average vesting period of 2.1 years. The total fair value of shares vested during the nine months ended September 28, 2014 and September 29, 2013 was $193,996 and $169,593, respectively.  Under the Stock Incentive Plan, there are 543,434 shares available for future awards at September 28, 2014.

The Company also reserved 250,000 shares of common stock for issuance under the Employee Stock Purchase Plan (“ESPP”). The ESPP is available to team members subject to employment eligibility requirements. Participants may purchase common stock at 85.0% of the lesser of the start or end price for the offering period. The plan has four offering periods, each start/end dates coincide with the fiscal quarter and are awarded on the last day of the offering period. During the nine months ended September 28, 2014 and September 29 2013, we issued 8,523 and 2,061 shares, respectively. Under the ESPP, there are 236,704 shares available for future awards at September 28, 2014.

The following table presents the restricted shares transactions during the nine months ended September 28, 2014:

	Number of Restricted Stock Shares
Unvested, December 29, 2013		116,667
Granted		91,966
Vested		(41,031	)
Expired/Forfeited		(2,068	)
Unvested, September 28, 2014		165,534

The following table presents the restricted shares transactions during the nine months ended September 29, 2013:

	Number of Restricted Stock Shares
Unvested, December 30, 2012		54,900
Granted		145,375
Vested		(26,500	)
Expired/Forfeited		(48,400	)
Unvested, September 29, 2013		125,375

On July 30, 2007, DRH granted options for the purchase of 150,000 shares of common stock to the directors of the Company at an exercise price of $2.50 per share. These options vested ratably over a three-year period and were set to expire six years from issuance, July 30, 2013. All 150,000 options were fully vested as of July 30, 2013 and were exercised either through cash or cashless exercise at a price of $2.50 per share. The intrinsic value of options exercised in 2013 was $679,680.

On July 30, 2010, DRH granted options for the purchase of 210,000 shares of common stock to the directors of the Company.  These options are fully vested and expire six years from issuance, July 30, 2016.  Once vested, the options can be exercised at a price of $2.50 per share. At September 28, 2014, 210,000 shares of authorized common stock are reserved for issuance to provide for the exercise of these options. The intrinsic value of outstanding options is $476,700 and $852,600 as of September 28, 2014 and September 29, 2013, respectively.

Stock-based compensation of $84,072 and $70,563 was recognized, during the three-month periods ended September 28, 2014 and September 29, 2013, respectively, and $237,079, and $205,668 for the nine-month periods ended September 28, 2014 and September 29, 2013, respectively, as compensation cost in the Consolidated Statements of Operations and as additional paid-in capital on the Consolidated Statement of Stockholders' Equity to reflect the fair value of shares vested.

The Company has authorized 10,000,000 shares of preferred stock at a par value of $0.0001.  No preferred shares are issued or outstanding as of September 28, 2014.  Any preferences, rights, voting powers, restrictions, dividend limitations, qualifications, and terms and conditions of redemption shall be set forth and adopted by a Board of Directors' resolution prior to issuance of any series of preferred stock.

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Note 14 - Fair Value of Financial Instruments (Details) - Fair Value of Assets and Liabilities Measuredo on a Recurring Basis (USD $)	Sep. 28, 2014	Dec. 29, 2013
Note 14 - Fair Value of Financial Instruments (Details) - Fair Value of Assets and Liabilities Measuredo on a Recurring Basis [Line Items]
Interest Rate Swaps	$ (250,528)	$ (327,561)
Debt securities
Debt securities	4,911,848	8,561,598
Total	4,661,320	8,234,037
Obligations of States/Municipals [Member] | Fair Value, Inputs, Level 2 [Member]
Debt securities
Debt securities	2,607,841
Obligations of States/Municipals [Member]
Debt securities
Debt securities	2,607,841
Corporate Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Debt securities
Debt securities	2,304,007	5,063,463
Corporate Debt Securities [Member]
Debt securities
Debt securities	2,304,007	5,063,463
US Government Agencies Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Debt securities
Debt securities		3,498,135
US Government Agencies Debt Securities [Member]
Debt securities
Debt securities		3,498,135
Fair Value, Inputs, Level 2 [Member]
Note 14 - Fair Value of Financial Instruments (Details) - Fair Value of Assets and Liabilities Measuredo on a Recurring Basis [Line Items]
Interest Rate Swaps	(250,528)	(327,561)
Debt securities
Debt securities	4,911,848	8,561,598
Total	$ 4,661,320	$ 8,234,037

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Note 15 - Accumulated Other Comprehensive Income (Loss) (Details) - Components of Accumulated Other Comprehensive Income (Loss) (Parentheticals) (USD $)	3 Months Ended		9 Months Ended			12 Months Ended	9 Months Ended	12 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014 Interest Rate Swap [Member]	Dec. 29, 2013 Interest Rate Swap [Member]	Sep. 28, 2014 Available-for-sale Securities [Member]	Dec. 29, 2013 Available-for-sale Securities [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Tax	$ 2,232	$ 16,876	$ 6,969	$ 8,423	$ 85,179	$ 111,218	$ 8,061	$ 15,030

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Note 14 - Fair Value of Financial Instruments (Details) (USD $)	3 Months Ended	9 Months Ended	12 Months Ended
	Sep. 28, 2014	Sep. 28, 2014	Dec. 29, 2013
Fair Value Disclosures [Abstract]
Long-term Debt, Fair Value	$ 56,900,000	$ 56,900,000	$ 46,300,000
Fair Value, Assets, Level 2 to Level 1 Transfers, Amount	0	0	0
Fair Value, Liabilities, Level 2 to Level 1 Transfers, Amount	0	0	0
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Transfers Into Level 3	0	0	0
Fair Value, Measurement with Unobservable Inputs Reconciliation, Liability, Transfers Into Level 3	$ 0	$ 0	$ 0

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Note 12 - Earnings Per Common Share (Tables)

9 Months Ended

Sep. 28, 2014

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three months ended
	September 28 2014			September 29 2013
Income (loss) available to common stockholders	$	(182,109	)	$	69,810
Weighted-average shares outstanding		26,107,627			26,054,118
Effect of dilutive securities		-			132,145
Weighted-average shares outstanding - assuming dilution		26,107,627			26,186,263
Earnings (loss) per common share	$	(0.01	)	$	0.00
Earnings (loss) per common share - assuming dilution	$	(0.01	)	$	0.00

	Nine months ended
	September 28 2014		September 29 2013
Income available to common stockholders	$	85,252	$	311,847
Weighted-average shares outstanding		26,074,797		23,231,403
Effect of dilutive securities		99,796		119,725
Weighted-average shares outstanding - assuming dilution		26,174,593		23,351,128
Earnings per common share	$	0.00	$	0.01
Earnings per common share - assuming dilution	$	0.00	$	0.01

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Note 7 - Long-Term Debt (Details) - Principal Maturities of Long-Term Debt (USD $)	Sep. 28, 2014	Dec. 29, 2013
Principal Maturities of Long-Term Debt [Abstract]
Remainder of 2014	$ 2,558,034
2015	13,148,218
2016	13,151,117
2017	13,154,578
2018	13,276,923
2019 and thereafter	1,567,139
Total	$ 56,856,009	$ 46,273,321

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Note 13 - Supplemental Cash Flows Information

9 Months Ended

Sep. 28, 2014

Supplemental Cash Flow Elements [Abstract]

Cash Flow, Supplemental Disclosures [Text Block]

13.            SUPPLEMENTAL CASH FLOWS INFORMATION

Other Cash Flows Information

Cash paid for interest was $438,679 and $319,689 during the three-month periods ended September 28, 2014 and September 29, 2013, and was $1.3 million and $1.4 million for the nine-month periods ended September 28, 2014 and September 29, 2013, respectively.

Cash paid for income taxes was $22,000 during the three-month periods ended September 28, 2014 and September 29, 2013, respectively, and $22,000 and $65,500 for the nine-month periods ended September 28, 2014 and September 29, 2013, respectively.

Supplemental Schedule of Non-Cash Operating, Investing, and Financing Activities

Noncash investing activities for property and equipment not yet paid during both the nine months ended September 28, 2014 and September 29, 2013, was $1.4 million.

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Note 2 - Significant Business Transactions (Tables)

9 Months Ended

Sep. 28, 2014

Schedule Of Significant Business Transactions [Abstract]

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block]

Working capital	$	57,600
Property and equipment		656,146
Franchise fees		72,750
Goodwill		2,419,854
Net Cash paid for acquisition	$	3,206,350

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Note 7 - Long-Term Debt (Details) - Long-Term Debt Obligations (USD $)	Sep. 28, 2014	Dec. 29, 2013
Debt Instrument [Line Items]
Total long-term debt	$ 56,856,009	$ 46,273,321
Less current portion	(12,327,788)	(8,225,732)
Long-term debt, net of current portion	44,528,221	38,047,589
April 2018 DLOC II [Member]
Debt Instrument [Line Items]
Secured debt	14,207,752
April 2018 Term Loan [Member]
Debt Instrument [Line Items]
Secured debt	26,690,476	31,619,048
April 2018 DLOC [Member]
Debt Instrument [Line Items]
Secured debt	14,107,143	12,759,420
Note Payable June 2030 [Member]
Debt Instrument [Line Items]
Secured debt	1,063,990	1,081,047
Note Payable 2030 Junior [Member]
Debt Instrument [Line Items]
Secured debt	$ 786,648	$ 813,806

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Note 3 - Investments (Details) - Investments (USD $)	Sep. 28, 2014	Dec. 29, 2013
Debt securities:
Amortized Cost	$ 4,935,559	$ 8,605,804
Unrealized Gains		236
Unrealized Loss	(23,711)	(44,442)
Estimated Fair Value	4,911,848	8,561,598
Obligations of States/Municipals [Member]
Debt securities:
Amortized Cost	2,613,309
Unrealized Loss	(5,468)
Estimated Fair Value	2,607,841
Corporate Debt Securities [Member]
Debt securities:
Amortized Cost	2,322,250	5,107,853
Unrealized Loss	(18,243)	(44,390)
Estimated Fair Value	2,304,007	5,063,463
US Government Agencies Debt Securities [Member]
Debt securities:
Amortized Cost		3,497,951
Unrealized Gains		236
Unrealized Loss		(52)
Estimated Fair Value		$ 3,498,135

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Consolidated Statements of Comprehensive Income (Loss) (USD $)	3 Months Ended		9 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013
Net income (loss)	$ (182,109)	$ 69,810	$ 85,252	$ 311,847
Other comprehensive income (loss)
Unrealized changes in fair value of interest rate swaps, net of tax of $43,284, $77,315, $26,039 and $18,011, respectively	84,022	(150,082)	50,841	34,962
Unrealized changes in fair value of invesments, net of tax of $2,232, $16,876, $6,969 and $8,423, respectively	(4,333)	32,750	13,526	(16,253)
Total other comprehensive income (loss)	79,689	(117,332)	64,367	18,709
Comprehensive income (loss)	$ (102,420)	$ (47,522)	$ 149,619	$ 330,556

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Note 2 - Significant Business Transactions

9 Months Ended

Sep. 28, 2014

Schedule Of Significant Business Transactions [Abstract]

Schedule Of Significant Business Transactions [Text Block]

2.           SIGNIFICANT BUSINESS TRANSACTIONS

On April 23, 2013, the Company completed an underwritten, follow-on equity offering of 6.9 million shares of common stock at a price of $5.00 per share to the public. After deducting underwriting discounts, commissions, and other offering expenses the net proceeds to DRH were $31.9 million. The Company invested a portion of the proceeds from the follow-on offering in highly liquid short-term investments with maturities of less than one year. At September 28, 2014, the Company held available-for-sale securities with an estimated fair value of $4.9 million. See Note 3 for additional information.

On June 30, 2014, the Company completed the acquisition of substantially all of the assets of Screamin’ Hot Florida, LLC and Screamin’ Hot Trinity, LLC, each a Florida limited liability company. The assets consist of three BWW restaurants in Clearwater, Port Richey and Oldsmar, Florida (the “Restaurants”). The purchase price was $3.2 million in cash, subject to working capital adjustment, and one-half of the transfer fees imposed by BWLD under its franchise agreements for these Restaurants. After the acquisition, the Company will own the entire Tampa, FL BWW market, giving DRH control of the local Advertising Co-Op. This ownership provides DRH a unique opportunity to gain local market scale, in addition to providing greater geographic diversity to the Company’s restaurant portfolio.

The following table summarizes the estimated fair values of net assets acquired and liabilities assumed:

Working capital	$	57,600
Property and equipment		656,146
Franchise fees		72,750
Goodwill		2,419,854
Net Cash paid for acquisition	$	3,206,350

The excess of the purchase price over the aggregate fair value of assets acquired is allocated to goodwill. Goodwill will be deductible for tax purposes. The results of operations of these locations are included in our Consolidated Statements of Operations from the date of acquisition.

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Note 10 - Operating Leases (Including Related Party) (Details) (USD $)	3 Months Ended		9 Months Ended		1 Months Ended	3 Months Ended		9 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013	Oct. 30, 2014 Chief Executive Officer [Member] Subsequent Event [Member] DMM Group, LLC [Member] Detroit Burgers, Inc. [Member]	Sep. 28, 2014 Rent Expense [Member]	Sep. 29, 2013 Rent Expense [Member]	Sep. 28, 2014 Rent Expense [Member]	Sep. 29, 2013 Rent Expense [Member]	Sep. 28, 2014 Minimum [Member]	Sep. 28, 2014 Maximum [Member]
Note 10 - Operating Leases (Including Related Party) (Details) [Line Items]
Lessee Leasing Arrangements, Operating Leases, Term of Contract										5 years	20 years
Operating Leases, Rent Expense	$ 1,400,000	$ 1,200,000	$ 3,800,000	$ 3,700,000		$ 34,299	$ 18,820	$ 103,961	$ 56,394
Business Acquisition, Percentage of Voting Interests Acquired					100.00%
Business Combination, Consideration Transferred					$ 250,000

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Note 3 - Investments (Tables)

9 Months Ended

Sep. 28, 2014

Investments, Debt and Equity Securities [Abstract]

Available-for-sale Securities [Table Text Block]

	September 28, 2014
	Amortized Cost		Unrealized Gains		Unrealized Loss			Estimated Fair Value
Debt securities:
Obligations of states/municipals		2,613,309		-		(5,468	)		2,607,841
Corporate securities		2,322,250		-		(18,243	)		2,304,007
Total debt securities	$	4,935,559	$	-	$	(23,711	)	$	4,911,848

	December 29, 2013
	Amortized Cost		Unrealized Gains		Unrealized Loss			Estimated Fair Value
Debt securities:
U.S. government and agencies	$	3,497,951	$	236	$	(52	)	$	3,498,135
Corporate securities		5,107,853		-		(44,390	)		5,063,463
Total debt securities	$	8,605,804	$	236	$	(44,442	)	$	8,561,598

Unrealized Gain (Loss) on Investments [Table Text Block]

	September 28 2014			December 29 2013
Unrealized gains	$	-		$	236
Unrealized loss		(23,711	)		(44,442	)
Net unrealized loss		(23,711	)		(44,206	)
Deferred federal income tax benefit		8,061			15,030
Net unrealized loss on investments, net of deferred income tax	$	(15,650	)	$	(29,176	)

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Note 2 - Significant Business Transactions (Details) (USD $)	1 Months Ended	9 Months Ended			0 Months Ended
	Apr. 23, 2013	Sep. 29, 2013	Sep. 28, 2014	Dec. 29, 2013	Jul. 01, 2014 Screamin' Hot Florida, LLC and Screamin' Hot Trinity, LLC [Member]
Note 2 - Significant Business Transactions (Details) [Line Items]
Stock Issued During Period, Shares, New Issues (in Shares)	6,900,000
Sale of Stock, Price Per Share (in Dollars per share)	$ 5.00
Proceeds from Issuance of Common Stock	$ 31,900,000	$ 31,994,823
Short Term Investments Maturity	1 year
Available-for-sale Securities			4,911,848	8,561,598
Number of Restaurants			61		3
Business Combination, Consideration Transferred					$ 3,200,000

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Note 12 - Earnings Per Common Share

9 Months Ended

Sep. 28, 2014

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

12.          EARNINGS PER COMMON SHARE

The following is a reconciliation of basic and fully diluted earnings per common share for the three-month and nine-month periods ended September 28, 2014 and September 29, 2013:

	Three months ended
	September 28 2014			September 29 2013
Income (loss) available to common stockholders	$	(182,109	)	$	69,810
Weighted-average shares outstanding		26,107,627			26,054,118
Effect of dilutive securities		-			132,145
Weighted-average shares outstanding - assuming dilution		26,107,627			26,186,263
Earnings (loss) per common share	$	(0.01	)	$	0.00
Earnings (loss) per common share - assuming dilution	$	(0.01	)	$	0.00

	Nine months ended
	September 28 2014		September 29 2013
Income available to common stockholders	$	85,252	$	311,847
Weighted-average shares outstanding		26,074,797		23,231,403
Effect of dilutive securities		99,796		119,725
Weighted-average shares outstanding - assuming dilution		26,174,593		23,351,128
Earnings per common share	$	0.00	$	0.01
Earnings per common share - assuming dilution	$	0.00	$	0.01