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Yesterday Nathan's Famous reported 3Q 2008 results.

** Revenue from continuing operations up 4.1% to $10.28 million from $9.88 million in 3Q 2007

** Net income $877K ($0.14 per share) from $1.06 million ($0.17 per share) in 3Q 2007
** Income from continuing operations up 7% to $877K ($0.14 per share) from $820K ($0.13 per share)
** Profit margin 8.53% from 8.3% in 3Q 2007
** Diluted share count 6,492,000

** Cash flow from operating activities $1.52 million
** Cash flow from investing activities $424K
** Cash flow from financing activities $0

** Cash and equivalents $33.28 million
** No debt

Press release
http://tinyurl.com/2gfwwa

SEC 10-Q filing
http://tinyurl.com/2b94xh

I have to admit that this wasn't that great of a quarter. Growth in revenue and income was almost nonexistent, although so far this fiscal year the Branded Product Program has grown revenue at 8.4%. Even so, Nathan's needs to do something to keep the company expanding at a consistent and decent rate. Right now the company is very slowly expanding and management doesn't seem to be doing a heck of a lot about it. Nathan's business requires very little continuing investment, thus the very low CapEx and financing activities. It is also why the balance sheet is growing every quarter.

One has to wonder if this is what this management team wants. Nathan's certainly has strong margins as far as restaurants go due to the relatively low costs. But management must at least explore other potential options for the company to further expansion into other areas. Of course, this is easier said than done because the company has already done quite a bit of expansion with the Branded Product Program and store franchising. But I think there is still a lot of value in the Nathan's name. Heck, it seems like they're the only national hot dog company in the country. I think there is still much potential for expansion here in the U.S. (I've never even seen a Nathan's restaurant), but maybe that simply isn't what this management team is about. I'd recommend that they do something fairly soon though that shows they are at least looking at other options, because shareholders will want growth. Management will have to deliver or face the consequences.

There are still no analysts following the stock, which probably explains why the stock hasn't been too volatile compared to the rest of the market over the past several weeks. I'd actually be fairly tempted to sell the stock if it did get a boost from an analyst as long as this management team continues to sit on its hands. Sitting on hands isn't the worst thing they can do, but if that's what they want to do my money is better invested elsewhere. I think Nathan's still has a lot of potential to be a market-beating investment, but only if management can prove it's doing more than running the company for personal gain.

David K
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<<<<<<<<<< there is still a lot of value in the Nathan's name. Heck, it seems like they're the only national hot dog company in the country.>>>>>> Yup, and imho they make the best all beef hot dog under the sun. I have often wondered why the big national chain fast food restaurants do not offer hot dogs on their menu. Anybody know why? Maybe Nathan's can strike a deal with one of these guys???
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Hot dogs is street food, baseball park food, not restaurant food. People love hot dogs yet they are not served as such in restaurants where they are served without the bun on a plate with a salad and instead of calling them hot dogs you call them a German Platter or something. Don't know why.

Denny Schlesinger
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<<<<<<<< Hot dogs is street food, baseball park food, not restaurant food>>>>>>>>>> au contraire; no less so than the lowly hamburger; hot dog with mustard and sauerkraut with fries= perfect fast food meal, imho.
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Hi missash,

I agree with you. I've sometimes felt tempted to sell Nathan's, but they really seem to be the only national chain focused on selling hot dogs. And like you said, hot dogs aren't even on the menu at many other fast food chains. And honestly, I don't know why this is. Hot dogs may have been left out of the fast food push (burgers seemed to be the big thing when fast food was being developed 50+ years ago) and Nathan's could be on the verge of pushing hot dogs closer to the top. Tough to say, but when Americans stop eating hot dogs something will be seriously wrong, so I'll hold onto this investment. It seems that Nathan's would be able to strike a deal somewhere and bring hot dogs back into the mix.

I believe the original McDonalds (the one operated by the two Mcdonalds brothers) did have a hot dog on the menu but was eventually dropped when burgers were clearly the hot item.

David K
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hot dogs aren't even on the menu at many other fast food chains. And honestly, I don't know why this is.

pencils2


Because hot dogs is street food, ball park food. This is part of the culture.

In the restaurant they are called something else, German platter, for example.

I think it has something to do with the format. A single burger is a meal but a single hot dog isn't. For a full meal you need two or three dogs but they don't fit into a neat samich. So you make them extra long or extra thick and they are no longer dogs but something special. BTW, I love hot dogs but I would never think of ordering one in a restaurant. I eat them at home mostly but seldom in samich format.

Denny Schlesinger
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David,

Burger King used to have a hot dog on the menu. The only reason I remember this is, because ervery time my grandmother babysat my brother and I when I was a kid she'd bring us to the Burger King near our house and she'd order herself a hot dog. I remember thinking that she was the only one I had ever seen actually eat the hot dog at Burger King. This had to be when I was ~7-10yrs old, so late 70's - early 80's.

--Eric
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Denny, with all due respect, I cannot agree with you.....Here in the States I've never seen a "German platter" on the menu; some casual restaurants offer franks and beans and a frankfurter is often on the children's menu......and as far as a "meal" is concerned, a frank on a bun with fries is as much of a meal as a hamburger of the size typical at McD or Burger King.
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I've never seen a "German platter"
missash


So it's not German platter but "franks and beans" or "frankfurter," same difference. How often do you see "hot dog" on the menu?

What is hot dog? A wiener or a frankfurter?

Denny Schlesinger
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