BT Brands, Inc. (BTBD) stock intrinsic value fair value estimate & owner earnings analysis

BT Brands owns and operates nine restaurants: six Burger Time drive-thru burger restaurants in Minnesota, North Dakota and South Dakota (the brand opened its first restaurant in Fargo, North Dakota in 1987), Keegan's Seafood Grille in Indian Rocks Beach, Florida, Pie In The Sky Coffee and Bakery in Woods Hole, Massachusetts, and Schnitzel Haus in Hobe Sound, Florida. It also owns 40.7% of Bagger Dave's Burger Tavern, an operator of five restaurants, which has been losing money and is carried at zero. Revenue was $13.5 million in fiscal 2025, down about 9% from $14.8 million in 2024 in a period when the Village Bier Garten restaurant closed in January 2025 and the Minot, North Dakota Burger Time closed in July 2025 (that site is now leased to a third party, with rent expected to begin in 2026). What the shares are worth. We measure what the business leaves for shareholders after operating cash costs, stock compensation and the capital spending needed to keep the restaurants running. Growth spending is separated from maintenance spending, and we discount at 6% a year. On that basis owner earnings were $0.26 per share in 2020 and $0.16 in 2021 (before the 2022 acquisitions, on a much smaller share count), then turned negative after the 2022 expansion: about -$0.07 in 2022, -$0.18 in 2023 and -$0.20 in 2024. In 2025 they were positive but small, $118 thousand or about $0.02 per share. Interest and dividend income on the company's $3.6 million securities portfolio was $149 thousand in 2025, so the restaurants themselves were roughly at break-even. In the first half of 2026 operating cash flow was $117 thousand against $93 thousand of equipment spending and $59 thousand of stock compensation, which is roughly break-even before working capital movements. That is consistent with 2025, not evidence of improvement. Bear case, $0.00 per share. Owner earnings were negative in three of the last four years. Between 2022 and 2024 owner earnings averaged about a $0.9 million loss per year. The company holds about $4.4 million of cash and securities against $2.1 million of debt, so at that pace its net liquid assets of about $2.4 million would be used up in under three years. In 2025 it also recorded a $521 thousand impairment on its investment in a related company and on water-bottle inventory, and a $304 thousand loss on its Bagger Dave's stake. The bear case assumes the losses return and nothing that can be evidenced remains for shareholders. Base case, $0.14 per share. We hold owner earnings at the 2025 level of about $0.019 per share for ten years, with no growth, and give no value after that. 2025 is the only full year covering the current, smaller set of restaurants, so this is a judgement rather than a proven run rate; the four-year median is negative. Growth in owner earnings from 2024 to 2025 cannot be expressed as a rate because 2024 was negative, and we assume none in year one. We credit no new units, no sales growth and no margin recovery, because the company has not shown a steady record of any of these. Bull case, $0.74 per share. Owner earnings of $0.10 per share for ten years, or about $0.6 million a year. That is roughly two-thirds of what the Burger Time restaurants alone produced in 2021 ($0.16 per share) and well below 2020 ($0.26); we did not use those years at full value because pandemic-era conditions may not repeat. The named levers are the Minot land-lease rent expected to begin in 2026 and the closures of the Village Bier Garten and Minot restaurants. The pending merger. On September 2, 2025, BT Brands agreed to merge with Aero Velocity Inc., a private maker of unmanned aerial vehicles. Before closing, the restaurants would be spun off into a new company, BT Group, Inc., and the spin-off is not expected to be tax-free. Aero holders would receive convertible preferred stock with a stated value of $101.1 million, about 89% of the combined company, leaving today's shareholders and the company's financial advisor with about 11%. Our values are for the restaurant business only. We give no value to the drone business or to the 11% stake because nothing in the filings lets us measure it, and current shareholders would be substantially diluted in any merged company. What would make this wrong. The value would be higher than our bull case if the restaurants sustain the 2020-2021 earnings, and lower if the 2025 result was helped by investment income that does not recur. Fiscal 2018 and 2019 are left out because the 2019 figures were restated and we did not reconcile them. Accounting judgements. Owner earnings are operating cash flow, less the cash effect of working capital swings, less stock compensation, less maintenance capital spending. Depreciation, impairments and equity-method losses are non-cash charges that are already added back in operating cash flow. The 2025 cash flow reconciles to the reported net loss and non-cash items within $20. The 2024 operating cash flow of -$713,505 is taken from the 2025 annual report; the 2024 annual report's tagged data showed -$723,505, which does not tie to the statement's line items.