Contingent Liabilities and Liquidity

6 Months Ended

Mar. 31, 2020

Commitments and Contingencies Disclosure [Abstract]

Contingent Liabilities and Liquidity

Note 9. Contingent Liabilities and Liquidity

We remain contingently liable on various leases underlying restaurants that were previously sold to franchisees. We have never experienced any losses related to these contingent lease liabilities, however if a franchisee defaults on the payments under the leases, we would be liable for the lease payments as the assignor or sub-lessor of the lease. Currently we have not been notified nor are we aware of any leases in default by the franchisees, however there can be no assurance that there will not be in the future which could have a material effect on our future operating results.

The Company and a third-party are both primary tenants on a lease related to a former Good Times restaurant.  The third-party has an agreement with the Company to pay all amounts due under this lease.  The third party operated the restaurant under a franchise agreement and is also a current franchisee of another Good Times restaurant and is the non-controlling partner in seven joint-venture Good Times restaurants.  The Company performs accounting services for the third-party and has direct visibility to its financial position and credit worthiness.   Based upon its assessment of such, the Company has not recorded any liability associated with this obligation as it does not expect to be required to pay any amount on the obligation. 

Additionally, in the normal course of business, there may be various claims in process, matters in litigation, and other contingencies brought against the company by employees, vendors, customers, franchisees, or other parties. Evaluating these contingencies is a complex process that may involve substantial judgment on the potential outcome of such matters, and the ultimate outcome of such contingencies may differ from our current analysis. We review the adequacy of accruals and disclosures related to such contingent liabilities in consultation with legal counsel. While it is not possible to predict the outcome of these claims with certainty, it is management’s opinion that potential losses associated with such contingencies would be immaterial to our financial statements.