Covid-19 pandemic

The emergence of the coronavirus (COVID-19) and new variants of the virus around
the world, and particularly in the United States and Canada, continues to
present significant risks to the Company, not all of which the Company is able
to fully evaluate or even to foresee at the current time. The pandemic affected
the Company's financial results and business operations in the Company's first
fiscal quarters ended March 26, 2022 and March 27, 2021, and economic and health
conditions in the United States and across most of the globe have continued to
change since the beginning of the pandemic. Notably, a number of the Company's
franchised store locations were temporarily closed to in-store consumer
activities from time to time due to various restrictions. Such temporary store
closings may reoccur and customer traffic may continue to be impacted depending
on the duration and severity of the pandemic, the length of time it takes for
normal economic and operating conditions to resume, additional governmental
actions that may be taken and/or re-imposition of restrictions that have been
imposed to date, and numerous other uncertainties.

Even as governmental restrictions may be relaxed and markets reopen, the ongoing
economic impacts and health concerns associated with the pandemic may continue
to affect consumer behavior, spending levels and shopping preferences. Changes
in consumer purchasing patterns may increase demand at our franchised stores in
one quarter, resulting in decreased demand in subsequent quarters. We continue
to see shifts in product and channel preferences as markets move through varying
stages of restrictions and re-opening at different times. In addition, we
continue to see an increase in demand in the e-commerce channel and any failure
to capitalize on this demand could adversely affect our franchised stores
ability to maintain and grow sales and erode our competitive position.

Due to the above circumstances and as described generally in this Form 10-Q, the
Company's results of operations for the three-month period ended March 26, 2022
are not necessarily indicative of the results to be expected for the full fiscal
year. Management cannot predict the full impact of the pandemic on the Company's
management and employees, its franchisees or leasing customers nor to economic
conditions generally, including the effects on consumer spending. The ultimate
extent of the effects of the pandemic on the Company is highly uncertain and
will depend on future developments, and such effects could exist for an extended
period of time even after the pandemic might end.

Insight

We are a franchising business focused on sustainability and small business
formation. As of March 26, 2022, we had 1,276 resale franchises operating under
the Plato's Closet, Once Upon A Child, Play It Again Sports, Style Encore and
Music Go Round brands. Our franchise business is not capital intensive and is
designed to generate consistent, recurring revenue and strong operating margins.

Financial criteria that management closely monitors to assess current business operations and future prospects include royalties and selling, general and administrative expenses.

Our most significant source of franchising revenue is royalties received from
our franchisees. During the first three months of 2022, our royalties increased
$1.3 million or 9.5% compared to the first three months of 2021.

Management continually monitors the level and timing of selling, general and
administrative expenses. The major components of selling, general and
administrative expenses include salaries, wages and benefits, advertising,
travel, occupancy, legal and professional fees. During the first three months of
2022, selling, general and administrative expenses increased $0.4 million, or
8.6% compared to the first three months of 2021.

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Management also monitors several nonfinancial factors in evaluating the current
business operations and future prospects including franchise openings and
closings and franchise renewals. The following is a summary of our franchising
activity for the first three months ended March 26, 2022:

                                                                                 AVAILABLE
                                    TOTAL                             TOTAL         FOR       COMPLETED
                                  12/25/2021    OPENED    CLOSED    3/26/2022     RENEWAL     RENEWALS
Plato's Closet
Franchises - US and Canada               489         5         -          494            8            8
Once Upon A Child
Franchises - US and Canada               401         3       (1)          403           21           21
Play It Again Sports
Franchises - US and Canada               273         -       (1)          272           15           15
Style Encore                                                                                          .
Franchises - US and Canada                71         1       (2)           70            -            -
Music Go Round
Franchises - US                           37         -         -           37            -            -
Total Franchised Stores                1,271         9       (4)        1,276           44           44


Renewal activity is a key focus area for management. Our franchisees sign
10-year agreements with us. The renewal of existing franchise agreements as they
approach their expiration is an indicator that management monitors to determine
the health of our business and the preservation of future royalties. During the
first three months of 2022, we renewed 44 of the 44 franchise agreements
available for renewal.

Our ability to grow our operating profit depends on our ability to: (i) effectively support our franchise partners to generate higher revenues, (ii) open new franchises, and (iii) control our selling expenses, general and administrative.

In May 2021, we made the decision to no longer solicit new leasing customers and
will pursue an orderly run-off of our middle-market leasing portfolio, the
operations of which constitute our leasing segment. Leasing income net of
leasing expense for the first three months of 2022 was $2.7 million compared to
$2.8 million in the first three months of 2021. Our leasing portfolio (net
investment in leases - current and long-term), was $2.8 million at March 26,
2022 compared to $3.1 million at December 25, 2021. Given the decision to
run-off the portfolio, we anticipate that leasing income net of leasing expense
and the size of the leasing portfolio will continue to decrease through the
run-off period. See Note 5 - "Investment in Leasing Operations" for information
regarding the lease portfolio, including future minimum lease payments
receivable under lease contracts and the amortization of unearned lease income.

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Results of Operations

The following table sets forth selected information from our Consolidated
Condensed Statements of Operations expressed as a percentage of total revenue:

                                                    Three Months Ended
                                             March 26, 2022    March 27, 2021

Revenue:
Royalties                                              76.7 %            75.3 %
Leasing income                                         14.3              17.3
Merchandise sales                                       4.6               3.2
Franchise fees                                          2.1               1.9
Other                                                   2.3               2.3
Total revenue                                         100.0             100.0

Cost of merchandise sold                              (4.3)             (3.0)
Leasing expense                                       (1.1)             (2.1)
Provision for credit losses                               -               0.2
Selling, general and administrative expenses         (27.6)            (27.3)
Income from operations                                 67.0              67.8
Interest expense                                      (2.6)             (1.7)
Interest and other income (expense)                       -                
-
Income before income taxes                             64.4              66.1
Provision for income taxes                           (15.3)            (16.2)
Net income                                             49.1 %            49.9 %

Comparison of the three months ended March 26, 2022 at three months ended March 27, 2021

Revenue

Revenues for the quarter ended March 26, 2022 totaled $20.0 million compared to
$18.7 million for the comparable period in 2021.

Royalties and Franchise Fees

Royalties increased to $15.4 million for the first three months of 2022 from
$14.0 million for the first three months of 2021, a 9.5% increase. The increase
is primarily from higher franchisee retail sales and from having additional
franchise stores in the first three months of 2022 compared to the same period
in 2021.

Franchise fee of $0.4 million for the first three months of 2022 were comparable to $0.4 million for the first three months of 2021.

Rental income

Leasing income decreased to $2.9 million for the first quarter of 2022 compared
to $3.2 million for the same period in 2021. The decrease is primarily due to a
lower level of equipment sales to customers and lower levels of interest income
from the smaller lease portfolio when compared to the same period last year.

Sale of goods

Merchandise sales include the sale of product to franchisees either through our
Computer Support Center or through the Play It Again Sports buying group
(together, "Direct Franchisee Sales"). Direct Franchisee Sales increased to $0.9
million for the first quarter of 2022 compared to $0.6 million in the same
period of 2021. The increase is primarily due to an increase in technology
purchases by our franchisees.

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Cost of Merchandise Sold

Cost of merchandise sold includes in-bound freight and the cost of merchandise
associated with Direct Franchisee Sales. Cost of merchandise sold increased to
$0.9 million for the first quarter of 2022 compared to $0.6 million in the same
period of 2021. The increase was primarily due to an increase in Direct
Franchisee Sales discussed above. Cost of merchandise sold as a percentage of
Direct Franchisee Sales for the first quarter of 2022 and 2021 was 94.6% and
94.3%, respectively.

Leasing Expense

Leasing expense decreased to $0.2 million for the first quarter of 2022 compared
to $0.4 million for the first quarter of 2021. The decrease was primarily due to
a decrease in the associated cost of equipment sales to customers discussed
above.

Selling, general and administrative expenses

Selling, general and administrative expenses increased by 8.6% to $5.5 million in the first quarter of 2022 from $5.1 million during the same period of 2021. The increase is mainly due to higher advertising expenses and conference and travel expenses.

Interest charges

Interest expense increased to $0.5 million for the first quarter of 2022 compared to $0.3 million for the first quarter of 2021. The increase is mainly due to higher average corporate borrowing compared to the same period last year.

Income Taxes

The provision for income taxes has been calculated at an effective rate of 23.8% and 24.6% for the first quarters of 2022 and 2021, respectively. The decrease is mainly due to lower state taxes and higher tax benefits on the exercise of stock options.

Comparison of segments for the three months ended March 26, 2022 at three months ended
March 27, 2021

Franchise segment operating profit

First-quarter 2022 Franchise segment operating profit increased by $0.5 million for $11.2 million from $10.7 million for the first quarter of 2021. The increase in the segment contribution is due to the increase in royalty income, partially offset by an increase in selling, general and administrative expenses.

Operating result of the leasing segment

The leasing segment's operating income for the first quarter of 2022 increased
by $0.3 million to $2.2 million from $1.9 million for the first quarter of 2021.
The increase in segment contribution was due to a decrease in selling, general
and administrative expenses.

Cash and capital resources

Our primary sources of liquidity have always been cash flow from operations and borrowings. Components of the condensed consolidated statements of income that reduce our net income but do not affect our liquidity include non-cash items for stock option amortization and compensation expense.

We ended the first quarter of 2022 with $0.3 million in cash, cash equivalents and restricted cash compared to $8.0 million in cash, cash equivalents and restricted cash at the end of the first quarter of 2021.

Operating activities provided $13.3 million of cash in the first three months of 2022, comparable to $13.6 million provided in the first three months of last year.

Investing activities used $21,500 of cash in the first three months of 2022. Activities in 2022 consisted of the purchase of property, plant and equipment.

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Financing activities used $24.4 million of cash during the first three months of
2022. Our most significant financing activities during the first three months of
2022 consisted of $36.6 million to repurchase 164,586 shares of our common
stock, payments on notes payable of $1.1 million and $1.6 million for the
payment of dividends; partially offset by $13.6 million in net borrowing on our
line of credit and $1.3 million of proceeds from exercise of stock options. (See
Note 7 - "Shareholders' Equity (Deficit) and Note 8 - "Debt").

As of March 26, 2022, our borrowing availability under our Line of Credit was
$25.0 million (the lesser of the borrowing base or the aggregate line of
credit). There was $13.6 million in borrowings outstanding at March 26, 2022
under the Line of Credit bearing interest at 3.50%, leaving $11.4 million
available for additional borrowings.

The Line of Credit has been and will continue to be used for general corporate
purposes. The Line of Credit is secured by a lien against substantially all of
our assets, contains customary financial conditions and covenants, and requires
maintenance of minimum levels of debt service coverage and maximum levels of
leverage (all as defined within the Line of Credit).

As of March 26, 2022, we had aggregate principal outstanding of $46.6 million
under our Note Agreement with Prudential consisting of $9.7 million in principal
outstanding from the $25.0 million Series A notes issued in May 2015, $6.9
million in principal outstanding from the $12.5 million Series B notes issued in
August 2017 and $30.0 million in principal outstanding from the $30.0 million
Series C notes issued on September 2021.

The final maturity of the Series A and Series B notes is 10 years from the
issuance date. The final maturity of the Series C notes is 7 years from the
issuance date. For the Series A notes, interest at a rate of 5.50% per annum on
the outstanding principal balance is payable quarterly, along with required
prepayments of the principal of $500,000 quarterly for the first five years, and
$750,000 quarterly thereafter until the principal is paid in full. For the
Series B notes, interest at a rate of 5.10% per annum on the outstanding
principal balance is payable quarterly, along with required prepayments of the
principal of $312,500 quarterly until the principal is paid in full. For the
Series C notes, interest at a rate of 3.18% per annum on the outstanding
principal balance is payable quarterly until the principal is paid in full. The
Series A, Series B and Series C notes may be prepaid, at our option, in whole or
in part (in a minimum amount of $1.0 million), but prepayments require payment
of a Yield Maintenance Amount, as defined in the Note Agreement.

Our obligations under the Note Agreement are secured by a lien against
substantially all of our assets, and the Note Agreement contains customary
financial conditions and covenants, and requires maintenance of minimum levels
of fixed charge coverage and maximum levels of leverage (all as defined within
the Note Agreement).

From March 26, 2022we complied with all financial covenants under the line of credit and note agreement.

On April 12, 2022the line of credit has been modified for, among other things:

? Provide a new $30.0 million deferred draw term facility, with available

draws summarized as follows:

We can draw up to five (5) loans over an 18 month period, with each draw having a

o principal amount not less than $3.0 million (or higher integer multiples of

$1.0 million), with ongoing cumulative drawdowns not exceeding $30.0 million;

o The final maturity of all loans drawn from April 12, 2029with all payments from

principal due on that date;

o Interest at a rate to be determined at each drawing, payable monthly

overdue on the total outstanding principal balance.

? Decrease total commitments for revolving loans by $25.0 million for

$20.0 million;

? Extend the termination date for revolving loans by August 31, 2024 to april

12, 2027;

? Remove the borrowing base covenant restriction for revolving loans;

Replace LIBOR with SOFR as the interest rate option under

? borrowings on revolving credits and adjust the definition and reduce the

the applicable margin to reflect this replacement;

Change definition of fixed charge coverage ratio to exclude principal payments

? on non-amortizing term loans that are refinanced with the proceeds of

debt (as defined in the amendment);

? Allow us to issue additional term notes under a new private storage contract

   with Prudential (as described below).


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The foregoing discussion is a summary of the amendment to the Line of Credit and
is qualified in its entirety by reference to the full text of the amendment,
which is referenced by exhibit to this 10-Q and included as Exhibit 10.1 to the
Current Report on Form 8-K filed with the Securities and Exchange Commission on
April 13, 2022.

Upon closing on the amendment to the Line of Credit, we completed a $15.0
million draw on the delayed draw term loan at a rate of 4.60%, the proceeds of
which were used to pay down all amounts outstanding on the revolving portion of
the Line of Credit and increase our cash balances.

On April 12, 2022we have entered into a private storage agreement (the “Storage Agreement”) with Prudential, summarized as follows:

For a period of three years from the conclusion of the set contract, subject to

certain customary terms we may offer and Prudential may purchase from us

? Senior Over-the-Counter Notes (“Shelf Notes”) in Global Principal

amount up to (i) $100.0 millionminus (ii) the total capital of

Notes then outstanding (including Notes outstanding under the

Prudential Note Agreement, which April 12, 2022 totaled $46.6 million);

Each Shelf Note issued will have an average life and maturity not exceeding

? 12.5 years from the date of original issue, with interest payable at a rate

per year determined at each issue;

The Shelf Notes will be collateralized by all of our assets and the Shelf Notes will be

? pari passu with our obligations to lenders under the amended line of credit

Credit and Amended Note Issuance Agreement;

Additional Tickets may be prepaid, at our option, in whole or in part (within

? minimum quantity of $1 million), but prepayments will require the payment of a yield

Maintenance amount (as defined in the set contract);

The storage agreement contains usual positive and negative clauses

? undertakings which are substantially the same as those contained in the

Line of credit and modified note agreement.


The foregoing discussion is a summary of the Shelf Agreement and is qualified in
its entirety by reference to the full text of the agreement, which is referenced
by exhibit to this 10-Q and included as Exhibit 10.3 to the Current Report on
Form 8-K filed with the Securities and Exchange Commission on April 13, 2022.

On April 12, 2022the ticket agreement has been amended to, among other things:

? Enable us to enter into the obligations described and to comply with any changes made

by our entry into the modifications to the line of credit described above;

? Enable us to enter into the obligations described and to comply with any changes made

by our entry into the storage contract.


The foregoing discussion is a summary of the amendment to the Note Agreement and
is qualified in its entirety by reference to the full text of the amendment,
which is referenced by exhibit to this 10-Q and included as Exhibit 10.4 to the
Current Report on Form 8-K filed with the Securities and Exchange Commission on
April 13, 2022.

We expect to generate the cash necessary to pay our expenses and to pay the
principal and interest on our outstanding debt from cash flows provided by
operating activities and by opportunistically using other means to repay or
refinance our obligations as we determine appropriate. Our ability to pay our
expenses and meet our debt service obligations depends on our future
performance, which may be affected by financial, business, economic, and other
factors including the risk factors described under Item 1A of our Form 10-K for
the fiscal year ended December 25, 2021 and under Item 1A below. If we do not
have enough money to pay our debt service obligations, we may be required to
refinance all or part of our existing debt, sell assets, borrow more money or
raise equity. In such an event, we may not be able to refinance our debt, sell
assets, borrow more money or raise equity on terms acceptable to us or at all.
Also, our ability to carry out any of these activities on favorable terms, if at
all, may be further impacted by any financial or credit crisis which may limit
access to the credit markets and increase our cost of capital.

While significant uncertainty exists as to the full impact of the COVID-19
pandemic on our liquidity and capital resources, as of the date of this report
we believe that the combination of our cash on hand, the cash generated from our
franchising and leasing businesses and our Line of Credit will be adequate to
fund our planned operations through 2022.

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Critical Accounting Policies
A discussion of our critical accounting policies is contained in our annual
report on Form 10-K for the year ended December 25, 2021. There have been no
changes to our critical accounting policies from those disclosed on our Form
10-K for the year ended December 25, 2021.

Forward-looking statements

The statements contained in this Item 2 "Management's Discussion and Analysis of
Financial Condition and Results of Operations" that are not strictly historical
fact, including without limitation, specific and overall impacts of the COVID-19
pandemic on the Company's financial condition or results of operations, the
Company's belief that it will have adequate capital and reserves to meet its
current and contingent obligations and operating needs, as well as its
disclosures regarding market rate risk are forward looking statements made under
the safe harbor provision of the Private Securities Litigation Reform Act. Such
statements are based on management's current expectations as of the date of this
Report, but involve risks, uncertainties and other factors that may cause actual
results to differ materially from those contemplated by such forward looking
statements. Additionally, many of these risks and uncertainties are currently
elevated by and may or will continue to be elevated by the COVID-19 pandemic.
Investors are cautioned to consider these forward looking statements in light of
important factors which may result in material variations between results
contemplated by such forward looking statements and actual results and
conditions. See the section appearing in our Annual Report on Form 10-K for the
fiscal year ended December 25, 2021 entitled "Risk Factors" and Part II, Item 1A
in this Report for a more complete discussion of certain factors that may cause
the Company's actual results to differ from those in its forward looking
statements. You should not place undue reliance on these forward-looking
statements, which speak only as of the date they were made. The Company
undertakes no obligation to revise or update publicly any forward-looking
statements for any reason.

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