Q2 2021 Kura Sushi USA Inc Earnings Call
[music].
Good afternoon, ladies and gentlemen, and thank you for standing by and welcome to the Cumulus Sushi USA, Inc. Fiscal second quarter 2021 earnings Conference call.
At this time, all participants have been placed in a listen only mode and the lines will be open for your questions. Following the presentation.
Please note that this call is being recorded.
Our call today, and Yeah, Jimmy Boyle, President and Chief Executive Officer.
We've been really Chief financial Officer, and Benjamin <unk> Investor Relations Director and.
Now I'd like to turn the call over to Mr. Important.
Thank you operator, good afternoon, everyone and thank you all for joining by now everyone should have access to our fiscal second quarter 2020. One earnings release. It can be found at www doctorates and stock comp and the Investor Relations section.
The earnings release and has also been included and they can be submitted to the SEC.
Before we begin our formal remarks I need to remind everyone that part of our discussion today will include forward looking statements as defined under the private Securities Litigation Reform Act and <unk>.
95.
These forward looking statements are not guarantees of future performance and therefore, you should not put undue reliance on them.
These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect we.
We refer all of you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition.
Also during today's call and we'll discuss certain non-GAAP measures, which we believe can be one about your performance and the presentation of this additional information Duffy considered and isolation north and a substitute for results prepared in accordance with GAAP and reconciliations to comparable GAAP measures are available and our earnings release with that out of the way I would like to turn the call over to Jim.
Thank you Ben and thank you everyone for joining us today.
And he started with a high level review of our quota and you did touch on the beach and it's off the day before steep code the C level finance assets.
As I mentioned briefly on the previous call.
He's got to take on the quarter ending February well my theory impacted by the increased liabilities Colby predictions.
And that's particularly the case in California, where 50%.
Right.
You can get cold, California impose the total from both indoor and outdoor dining in early December.
Right.
Total dining was partially lifted after the end of January.
And do you mean effective and thought.
He's going to take on the quarter.
While we are pleased to visa from Oklahoma or would it be seed sales.
It was not enough to offset the total salt sales due to the inability to want our gift and photo codecs gradients created by our day.
And California began did you come about everybody leaves the resumption of ansible and <unk>.
Oh towards these were partially offset by severe winter weather in Texas.
And the temporary equal job all day long at all about what's exactly from.
It's not up to a week depending on the location.
Glad to do so, but unfortunately, we are happy that our team member and pixel.
And I'm proud of the audio video and it's pretty good.
These open up into different niche companies.
And I'm going to airports or takes us cooler continues to perform there and you split over the winter storm and the leading association.
And that's equal to the previous quarter.
Our system wide at ATC and from Williams and February.
Oh the impact from weather.
Amongst the best we've ever seen since entering the pandemic.
Switching to the kind of quarter on the beyond meat believes that we are poised for continued as a company.
And then you wind down.
Our multi revenue exceeded $5 million and Martini of improvement of our favorite items revenue.
$31 million.
Yeah, good evening, and driven by that and you have traditional shopping and dining but to predict some and mid to late March including.
And Samsung of outdoor dining and.
But he predicted indoor dining in our California stores.
And the resumption of Colombia and at the operations in California.
Increased indoor and although it takes some restaurants to 100 per cent.
And.
The increase of EUR 90, trustee and several other states.
The month over month sales growth we've seen in March is very encouraging, especially considering that we only benefited from fees when they get up and eating a conditional full cutover per month.
Well it kicks off market, we can now huh, north seeking jumbo Cds pretty chunky and.
Already began comping pretty guilty, okay, great Colby and 90 comps.
And that lead time and you think this is a great indication of all of that and comedy we can expect once a day at.
And at least it from our system.
Again, I couldn't be more proud of all of it from operations team and resilience. Despite the confront the challenges.
During the day that Oh, yeah.
How nimble and they have been ramping up operations quickly and efficiently.
Excellent.
No.
Yeah.
Let me reiterate why.
And you got to bring about current experience to our guests.
Total priorities.
And the hit us on the safety of our guests and team members.
Is that and we are continuing to to promos and say what you do on the outside of La and vitamins.
Through the use of personal protective equipment for each Opel and I can't remember and.
And the cleaning processes plus net of discounting.
And just don't think at this.
As shown from between Lewis and the team member I hit a six but I got to the start of each day.
Our sales in our existing stores continue to show progress.
And also maintained our developmental momentum.
And do anything without pizzicato stick on the quarter.
Opened up two new law firms.
Our eventual and really get location opening in early January and.
Troy, Michigan location opening and over the quarter.
We have been very pleased though with the RV performance overseas and your reference.
Additionally on April two we opened a new restaurant and Sherman Oaks, California, and we expect a lot there to be watching current effort and Oakland later this quarter.
With these latest openings weighted.
<unk> completed a put on disabling and new restaurant openings well if he's got a good one from 'twenty one.
Looking ahead, we believe and you need and our people kind of pick up from 'twenty to 'twenty two pipeline amongst the best we've ever had.
Well, our new data platform for analytics and <unk>.
Each corner is from analysis of our.
And it can wait.
And have linked and companies get into off price pick some protests.
We remain on track to achieve our 20% they need to growth kick I'll go with a slightly up here starting in fiscal 2019.
Turning to do I've got you got you.
The continued strength of our longer term business model by expanding opportunities for our guests to enjoy the Quebec city.
And Genuity.
And our new craft and shop.
Is that a better integration.
A combined a lot lately.
Online ordering from do you watch program only one place.
Okay.
Over 100000, combined the rewards members and offer you though.
We believe this upgrade that's putting Bryan I'll put them he sees and say this April.
Even while we continue to feel a lot different.
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During the fiscal second quarter, our total off premise sales revenue was $2 $4 million and put a fence.
And sustained and material growth all by the previous call and kind of off premise sales revenue of approximately $1 $3 million.
Well it gets PTO to clean site study Felipe indoor and outdoor dining and California.
We believe the biggest driver over this growth was almost from.
The integration will be and scooter.
The company and December.
My mouth.
Primacy and status while $870000 in December.
$860000 in January.
And the $650000 in February.
Total debt by $680000 and much of the we began our fiscal fourth quarter.
Our fiscal second quarter previously and the mix was 26 months and.
A far cry from the one simple associated with mix.
And it seems like it, but it's indicative and Danny.
Well, we don't expect that this mix controlling full monthly and postal bonds any price and does.
And our business and all the way you need to put up the experience.
About much off premise sales revenue increased they're not even through February and spike over dining room openings and California.
This is tremendously encouraging for long term prospects for our open and we see the sales.
And clothing, but they are still operating in a couple and environment.
We believe we are starting to see that right. After the end of the from there.
As Covid cases, continuing and continuing to decline and vaccines and becoming more widely available.
Our team is really focused upon and equally comedy and eager to capitalize on pent up demand cooler couldn't fukuda from expanding.
Experience.
With that let me turn the call over to Steve to briefly discuss our final Saturdays and somebody quiddity steep.
Thank you Jamie.
For the fiscal second quarter total sales were $9 1 million as compared to $19 4 million and the past year period, resulting in comps of negative <unk>, 60%.
Turning to cost food and beverage costs as a percentage of sales were 35.0% or 32, 9%, excluding spoilage compared to 31, 5% and the prior year quarter the.
And the increases and part result of the geographical mix of sales towards Texas restaurants that have lower sushi plate prices.
Labor and related costs as a percentage of sales decreased to 22, 7% from 31, 7% and the prior year quarter, primarily due to a $2 2 million dollar employee retention credit recognized under the cares Act extension.
<unk> the credit labor and related costs would have increased to 46, 9% primarily due to the effect of lower sales and and minimum staffing needed to operate our restaurants at reduced capacities.
Occupancy and related expenses were consistent as compared to the prior year quarter at $1 $6 million with costs from new restaurants, offset by reductions and percentage rent.
Other costs as a percentage of sales increased to 22, 6% compared to 11, 4% and the prior year quarter due to fixed cost deleverage as a result of the decrease in sales.
General and administrative expenses were $2 9 million.
Compared to $2 8 million and the second quarter last year ex.
Excluding the impact of the 400000 dollar employee retention credit recognized under the cares Act extension.
General and administrative expenses would have been $3 3 million.
This increase was primarily due to compensation related expenses.
As a percentage of sales.
General and administrative expenses increased to 31, 6% compared to 14, 4% and the prior year quarter.
Operating loss was $3 8 million compared to an operating loss of $200000 and the second quarter of 2020.
Restaurant level operating loss was $1 $3 million compared to restaurant level operating profit of $3 $9 million from the second quarter of 2020.
Adjusted EBITDA was a negative $4 $7 million.
Compared to $1 million and the second quarter of 2020.
And income tax expense was $29000 compared to income tax expense of $30000 and the second quarter of 2020.
Taking all of these together net.
Loss was $3 $9 million or negative <unk> 46 per diluted share comp.
Compared to net loss of $100000 or negative <unk> <unk> per diluted share and the second quarter of 2020.
Adjusted net loss was $6 $5 million or negative <unk> 78 per diluted share compared to adjusted net loss of $100000 or negative <unk> <unk> per diluted share and the second quarter of 2020.
Turning to our cash and liquidity.
At the end of fiscal second quarter, we had $2 $3 million and cash and $12 million and debt as we borrowed an additional $9 million on our revolver to meet our planned capital expenditures for fiscal year 'twenty one.
Subsequent to quarter, and we borrowed an additional $2 million and expanded our revolving line of credit from current sushi, Japan from $35 million to $45 million.
I'd also like to provide and update on our expenditure expectations for the remainder of our fiscal year.
With our strong performance in March and indications that the pandemic may and sooner than we had expected we feel ready to move from a relatively defensive position to a more aggressive strategy.
Did this and we expect our weekly Capex spend during Q3 and Q4 to be $250000.
<unk> us to accelerate the opening timeline for our fiscal 'twenty two pipeline.
We expect our weekly G&A spend to be 300000 to $310000 exclusive of expected employee retention credits as we scale, our organization and preparation for our new units and growing system size.
Lastly, as a reminder, due to the ongoing uncertainty driven by COVID-19, we will not issue additional financial guidance for fiscal year 'twenty one at this time.
Now I'll turn the call back to Jimmy.
This concludes our prepared remarks, we are now happy to answer any questions that you hop operating.
Please open the line for questions.
During the Q&A session I may onsite and Japanese before my desk once he's calling from <unk> into English. Please.
And there'll be less.
Thank you.
At this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is and the question to you and me.
Press Star two if you'd like to and maybe a question from the queue.
Participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
And our first question is from Peter.
And that.
P I G.
Great. Thanks, Thanks for taking the question Jimmy.
I think you mentioned that Texas was already Comping positive.
I think that was versus 2019 results can you just give us a little bit more color is that a and <unk>.
Number from the month of March or April or how do we think about that performance, so far and Texas.
Sure Peter Thank you for your question. Please allow me to answer and Japanese banks.
Prepared remarks debt honest Donald could total comping.
And as you already gave moving on and put them off pickup and you have hung up.
And so he didn't jump out you'd have quite simple and that the economy moving.
Okay, well it sounds like your muscle and a 2019 to put out the tip pool and put up what are your market share.
Okay.
Hi.
So the period that we're referring to in terms of Texas Comping positively would be the period and March subsequent to the reopening of our seating capacity to 100% I believe that was on March 10.
But that compare to the same period and 2019 is what we're comping positively against.
So post.
Post March channel correct Okay.
Alright.
Very helpful.
Okay, and then on the off premise sales and.
Thanks for giving all the detail on the monthly figures.
Any color you can provide I mean, it does look like the off premise business gave back out a couple of hundred thousand.
In terms of revenue there from January going into February and it kind of safe consistent and in March.
I'm, assuming that's all just because the dining rooms, reopen and can you provide a little bit more color and if you expect to kind of sustain that level that $6 56 to 80 or you expect that that number will come down even further thanks.
Yeah, Hey, Peter this is Steve and Ruby and I'll speak a little bit to that and we did see in February when outdoor dining was opened up again and California. It clearly had some impact and the amount of off premise assets, where we went from 860 and January to the 650 and February what was really encouraging.
To us it and.
Spider the mid March or even in early March and Texas further.
Further expansion of capacities, we still saw that off premises. It actually grew in the month of March and dollars to 680000, which was about 13% of sales and from our standpoint, it's a little speculative at this stage, but we do feel like theres, some level or some core of Cora sushi customers that continue.
Tomorrow, Hunton will want AB off premises as an option and it gives us confidence that we feel like and opportunity for mid to high single digits mix when things normalize could be.
We could end up at all.
For the mix.
Excellent and then just lastly on your commentary it would be a little bit more aggressive.
For now and getting ahead of 2022 development and just talk about the real estate environment.
And what you're seeing are you seeing good opportunities at day at least it sounds like you are.
And to build more stores or are you just getting better real estate and just give us a sense on construction.
And construction costs and if youre seeing any relief there or is it just more of the same more inflation. Thanks.
And I don't want to have this question.
Steve and I'll take all the horizontal well I need you and you know on all opening on time without and go squishy Oxyt unequal pseudo vehicles, along with it against endo and or whatever.
And we need deposits on alternate Tony Buffin funnel cake.
<unk> put it all on a mark and I see what am I not so simple.
And they wanted us.
Alright.
So when Steve.
And Steve referred to sort of more aggressive strategy regarding fiscal 'twenty. Two this would be more in terms of a push.
Pushing the overall timeline further towards the beginning of the fiscal year 'twenty two as opposed to increasing the number of units our goal remains that 20% unit growth CAGR.
We keep mentioning.
And that's why I know opportunity and if I could just get them and put them on site neutral on easily get them up get them on Monday August what can you do on mosquito and EMA and Omega and Peter.
And the muscle all day and all.
What about out and all and all these from our financed and let's get them hooked anymore come from.
Absolutely it will widen.
And also to note on a look into the funnel and then Mike you Tony <unk> pipeline and you have got theaters, all that equal to and also I still just.
In terms of real estate opportunities were seeing a truly great.
Pool to draw from and as a result, we already have a substantial number of leases signed for fiscal 'twenty. Two pipeline, we have a number of leases and LOI is under negotiation and the real estate opportunities are great.
Peter if I could just add you'd asked about the number I just mentioned that we haven't commissioned a white space study yet.
And we still feel that the best time to do this is following the pandemic.
And just given that there's so many moving targets, but we do believe the white space pre pandemic and the white space post pandemic will not be the same with the war was a different world now.
Great. Thanks for the color.
And I think you'd asked about construction costs as well.
And of course the Penny.
And any sort of.
And then it'll go bankrupt.
Good day to day, I'm thinking on <unk> and or any of them and talk about opdivo debt on all get quality must get them off putting on hold if I'm thinking of monoclonal and taking the construction hopefully that will get caught up with him.
Understand.
So it would be the biggest variable in terms of our build out costs would be whether or not we're using and union labor in fiscal 'twenty. One we opened two stores in.
Areas that required union labor from the first time and they were materially more expensive than our typical build out costs, but otherwise were expecting our fiscal 'twenty two stores to be and in line with what we've seen in the past.
Thank you.
Thank you Peter.
And our next question is from James Rutherford with Stephens, Inc. Please proceed.
Hey, Thanks, guys for taking the questions I wanted to follow up first on the question Peter asked at the beginning about comps and Texas, It's a really positive sign to see that to turn positive since they reopened.
Could you, perhaps quantify the magnitude of that positive comp and then also just give us where California is running on a comp basis compared to 2019, just to help us as we calibrate our models.
Yeah, I'll share an on net on the Texas. It was it was a low single digit positive comp and just to confirm what Ben had said earlier it was March 10th.
When Texas went from 75% to 100% capacity.
Capacity and the restaurants. So it was really for a three week period.
Obviously, it's still a short window and we would caution reading too much into.
Short time like that but it was encouraging.
For the month of March overall, we came in at a negative 31% comp that's coming off of of February and again, that's negative 31 and two.
2019, and that's coming off of.
Down 57 and February so so there is a clear positive moves really throughout the business.
California for instance, staring during that.
Post beginning of indoor capacity period, California was running mid.
Mid thirties down comp and March and that was for the last half of the month and that was much better than what we were seeing.
Through the course of Q2, where the cost per calorie.
Came and down 77%, so a lot to be excited about but at the same time a lot to be careful about knowing that theres still a road ahead and.
Until until everything is really back to normal.
That's super helpful. Thanks, Steve and I know, there is still capacity restrictions and play and California as well, but.
On the Florida opening up.
To get so granular, but I have to ask is there any insight you can provide and to the acceptance of that location and is there anything you can share about sort of a sales level of that store compared to what you've seen with new store openings and other markets and I asked and I know you did them.
Fort Lee location. So curious if you could do the same with debt Florida.
Florida store.
Sure I will answer this question and.
And you got to.
And I'll speak to the cable harness studio and <unk> and all my employees your patents and as you think capacities get them all my friends and family statement, Mike you do any and all.
And eat the whole months.
And I've been Sheila and.
Total macro not there and you're kind of chemo and <unk>.
What did it do you need to wait and eat the whole months almost equal Donaldson.
So in terms of for at least partly continues to perform very well it's materially outperforming what you would expect based offerings.
Its capacity restrictions against a run rate $3 5 million AAV like Fort Lee insurer, and Troy or are both doing very well, we're very pleased with their performance.
And whats truly notable about these three units is that theyre, all with new markets and they're all in completely different markets, but they're all doing well, we're very pleased and so I think this is a great bellwether in terms of the portability of our concept across the country.
That's all on my Soapbox on essentially them up and open and they might not be don't want the musical and just get them all greatest public debt.
And you could tell and host I spoke with equal total Ottawa and slips and Mike will get up and go to spend a couple of blips and what might open up from them on all I don't know if you think you don't get somewhat.
And equal to them it doesn't seem to market then it goes from one of them or not.
Interest you got it and I pick up on the country My standard.
And my follow up I don't think to myself and content cost.
And I told you must.
So sure Sherman Oaks opened very recently, so it's a little bit early to discuss it and too much debt, but we've seen a very strong opening and one of the things that was most interest to us was the.
And what are the customers that were coming into Sherman Oaks, where new customers. So that leads us to believe that there's still plenty of room to infill or existing markets, especially given that southern California, which is where Sherman Oaks is located is Arkansas market and so between the portability and infill and we still feel there's tons of room for growth.
And nobody on all of it and it could you tell them from all seem to indicate if at all and if I'm wrong, because again, it all day and all Heidi and integral part of it and again Lucas and locate the stemming from all day model.
From the scared them, all up and kind of go out and go public without a doubt comedies and Michael Doyle.
Since the end up and after you do the Nicola and everything is still on I thought and muscle are different from one of the gateway Edelman from them.
I think that's about on all and you'd have to visit and how do you think some high coupon debt.
And what do you get nothing when you and spread them out on a postal pumped and it blew up on all the items.
And let me get missed.
So our remaining key stores that we've opened this fiscal year.
Korea town and D C.
And very metropolitan areas, and whether we're looking at new units or existing units.
Legacy and instead have done very well well historically, we're seeing pretty much across the board.
And metropolitan sales are suffering the most and so while restrictions are beginning to be lesson in those markets, we're still seeing a slower recovery.
Our existing restaurants, and those metropolitan areas, and we're expecting maybe a little bit longer than typical for free time and D. C to reach typical maturity, but just like how Texas.
Has begun and Comping positively once we've been able to once all the restrictions have been lifted we're very confident that Korea, China and eastern Youre going to be strong performers over the remainder of current leases.
Alright, it's encouraging to see the results. Thank you guys.
Thanks, James Thanks.
And our next question is from Andrew Charles <unk> with BMO capital markets. Please proceed.
And good afternoon, and hope everyone's doing well.
And I actually had a couple more on Texas and I also find the positive comps to be very encouraging. So you mentioned.
And that you think mid to high single digit off premise mix is kind of and achievable normalized environment type of level is that actually what youre seeing and Texas right now from an off premise perspective, and Thats. Your comping positively and are you actually and Texas operating at 100% capacity or there is some inherent kind of capacity limitations.
And just and the operations there.
Yeah, well we are operating.
And at 100% capacities, we are continuing to ask guests to wear masks and when they when they come into the restaurant and and when they're moving around away from tables, but but it is at effective 100% capacity and we're able to do that within all of the the laws within the state of Texas.
And distancing and so forth and I will I will speak just just in general that that mid to high single digit off premises level, we've seen that consistently and restaurants that have had significant amounts of indoor dining capacity really across the chain and Texas and elsewhere.
For a period of time now and that that's another element that's kind of a barometer for us on what what can be a sustained kind of off premises level.
Okay.
Yes.
And since we have opened up Texas to a 100% or off premises sales and that market have not fallen below mid single digits, not a single, Texas stores selling low single digits in terms of off premises and so this is hugely encouraging given that it's our only market that's at 100%, but the off premises remain sticky.
Okay, that's great to hear.
My second question.
I'm just curious as you kind of fully restored.
And you could be the conveyor belt service model have you seen any change and the way that people are using the brand are you seeing more touchpad ordering as it kind of has the mix all the same and.
Day parts moving parts any other just broad changes and so obviously such a high touch and vibrant environment I'm just wondering if youre seeing any kind of nuance changes to how customers are using the brand.
Sure I'll answer this question My mother and Memorial day, almost ethical, especially although it did and just get them all and all of them.
And I'm talking any and all emo Vincent it on or could I experience take or they get you don't get them from.
On the corner behavior.
And pulled on a linkup and relative to particularly at night and.
And I'll just I'll tell you that you can just book at all on the minions I'll put it out and just look at the monoclonal day to talk out of total about two more two more locomotives. It's not that he is coming from what you're talking about working on.
And because of medical and then ultimately demand.
So it's actually been quite surprising for US right now all of our restaurants are opening with a full per experience and we really haven't seen much.
Change in consumer behavior, whether we're talking about menu preferences, where the mix between things that are taken off the adult versus things that are at work for the touch panel how long guests have been.
And how long we take to finish their meals, it's been surprisingly stable.
And just get it all and until then and on safety and comfort of SQL and all other.
They must be my Pogo Mcdade's, I'll, just state and that equal diligence side, and most of them with it and bottles and postal bond and you put them all microscope 60 major E muscle did and one of them on local sequel called Mono, Kansas City, Mossy Oak and out there, but it all comes from contact with no operational and all of them from using almost day, one single day muscular system, all analysts critical including mental physical and update.
How do you contact but it's now operational mistakes that you cannot upon like the most.
This being said, we do believe that.
Safety and.
Food and restaurants safety food safety is going to be more present in diners mines and prior to the pandemic and so all the safety measures that we've rolled out through the pandemic, whether thats the plexiglass for cleaning procedures all of those are going to remain in place and.
We're also working to develop our systems further to provide for a more contactless experience. So that if there are guests that are concerned about high touch.
<unk>.
It won't be an issue for them.
Okay, Great and then just quickly and my last one and then we're hearing from a lot of people about the challenges and the labor market.
Hiring and how competitive that is just curious as youre looking to ramp up the store growth be more aggressive there into 'twenty.
Two I guess.
Just can you can you comment on how you are finding the labor environment meant to be from the brand. Please.
Sure.
And after they didn't they didn't want them too much money, what ultimate and any challenges or kicking you must get a little more and how do you go get debt and our recruit them and for T Mo and material cost to get out and people don't want and he must be it might you might as well from a hold on the let me say debt on our skeletal and if I can use a couple of stay on and I'm wondering if you can maybe people communicate and bottomed and it'll more and for any question and what might have been put on hold and thought it must be getting a bit.
Day and open it sounds like you might one day Monday nickel and our money. If you could give us till then what about on a little bit sequence you can book that they must go out and Julien.
And you look at debt and not.
And they still go head and neck and neck typical duodenal jabil and let's hope they seemed like all day tunnel.
And if you took a toll on our study and all.
And I'm wondering if you didn't book any conflict.
Right.
The hiring has been an issue industry wide and certainly we've experienced this as well to some degree.
And we're doing our best to try to get in front of the issue by building out our recruitment team our recruitment team to date versus the size. It was prior to the pandemic is completely different.
Further our strong efforts.
All of our restaurants are able to operate without operational issues with their current staffing in place, but we realized that with the fiscal 'twenty two pipeline.
Management is critical and so we're actually hiring earlier than we typically do from management candidates.
And we're ramping up hiring efforts preparing and preparing for that June 15th day that Governor Newsom has mentioned as a potential day that we might be able to reopen we certainly want to make sure that we have we're adequately staffed to capture all of that demand.
Okay, great. Thank you very much for all the color.
Thank you and thank you thanks Andrew.
And our next question is from Jeremy Hamblin, with Craig Hallum and interesting.
Thanks, and well done on navigating this challenging environment.
Just a follow up on the off premises sales here.
Could you tell me what the average ticket.
And for your off premises versus your in store ticket has been in the and that Texas market.
Sure Steve do you mind, if I take this.
Yeah. Yeah go ahead go ahead, so and <unk>.
Premises.
And it's been about.
Low thirties, whereas the indoor dining has been low twenties, but I would caveat that it's it's.
Unclear what the party size so to speak is for off premises orders, it's possible that they're splitting these or it's entirely possible as well, but off premises just leads to a larger ticket people sort of.
Bigger baskets.
Right understood, but helpful info.
In terms of you know I think that's kind of a remarkable thing where you know off premises was de minimis.
A couple of years ago, and now it looks like it could be mid single digits, maybe even high single digits on an ongoing basis totally changes what was already and impressive and <unk>.
Store economic model.
Does it make you think.
About potentially changing the type of real estate.
Debt, you have or building the box a little bit differently to make your off premises.
Sales, maybe a little bit more customer friendly.
Because I don't know that the restaurants right now are designed optimally for off premises sales.
My mother and all.
But it needs to be pay your stuff I don't know cycles and Exxon just took on the storm and you think your content and just get them, all and others, but is that any costs a full day on a hormonal geopolitical book. So I could ask you can you hear a lot about them and Disney and all saying you and I'll pick up and the physical it's clearly this book I must say to.
Hello, and try and dental and especially Newmont Simona improvement book didn't put them out and open up the total homeowners and the amount of Ecuador and.
And all of that.
And I'd be comfortable and I think the overcrowding and auto book against that market. They didnt want a lot Nigel and pace.
But there is a couple months.
And from sort of prototype we do expect our outcomes. This demand to be studied post pandemic and so our future restaurants are going to feature dedicated pickup areas just for off premises. We may see if there are additional efficiencies, we can find and the back of the house just in terms of bill.
Building, a kitchen layouts, it's more conducive to parallel operations for off premises and our in store dining in terms of the type of real estate certainly up. This is now a part of our site selection criteria for instance, before.
Curbside dining was not a consideration now if we have access to a curve, it's a bonus and so that's that.
These off premises opportunities are just part of the overall site selection suite now I wouldn't say that we're doing anything as aggressive is rolling out.
<unk> or <unk>.
And anything like Starbucks is doing and having like stand alone <unk>.
And alone kiosks with drive throughs, but we do understand that off premise is an important part of our business and we're.
And trying to make sure to be.
Most of it.
And so on and we'll still I think the tailwind and I'll just get one more critical than putting means he is not moving in one month, you don't quote is from oxy and putting that anymore to what day and a couple.
And all simple in Oklahoma, so and when.
And a simplified and Ottawa and conquer Macquarie on local items like he stated and again most of them and put them you see the well and they're supposed to know quota per scan and Congo and.
Thanks, a lot I think about I don't know total part 90 day and that's also modifies and if it took compensating interest about how about weighted at the old units and he comes in and nicely and I think that looks like it did not see and all and.
And it was putting me tease and more formal FID. It took them a quota share of that and I'll come back to you.
And I'll talk about this to convey to you guys take any kind of items.
In terms of our store size won't be trading off off premises opportunity.
And just one factor.
And really how we will be treating it for our site selection criteria.
Whatever we determine its force besides for a given store works.
And to maximize our return on investment and so if the offer and so the store size for a given places is going to be.
Influenced by the off price this opportunity.
Generally speaking I think the pattern and square metropolitan areas, hence trend smaller and suburban areas kind of larger.
We're going to stay in place, but we do have a new additional consideration, which we think will help us hone in on.
That much more opportunity.
Isn't that what the final and my children and so depending on how do you Buck and putting.
But and it is almost at all in fact clinics from the funnel filling them design, a heightened and my script and I'll Echo what day, you must get them, all but and you're doing and the reason and I don't know that.
And well get a hypothetical Mcdonald Sue this book I don't know.
And any and all the digital what are the kind of the opening and he says you anymore and but a couple and all and simple stemming from the balloon and taking you to my focus and what type of I get that.
And the whole thing and you said that you've got and you also have the honeymoon how're you, you'll see and all shake out or David and I'll come on to.
Hum and ideas and I'm supposed to stick on that.
You called out my statement until just.
So the message that we want to leave you with is that while our processes is important.
Really just one factor in terms of our decision, making we're not going to be deciding which states, we're going to enter and not enter based off of the off premise opportunity, we're not going to be building our market strategies around this but it will just be a standard part of every decision, making process and our site selection going forward.
Great and and I that was.
My next leading into my next question about.
Your future store openings and you know you've had success now and.
And certainly Fort Lee, New Jersey really impressive given.
Kind of the restrictions around their Florida, Michigan.
And you know D C and I think youre going to the state of Washington as well.
In terms of thinking about the next.
And then locations or 20 locations.
What percent are likely to be and existing markets.
Versus you know looking into new markets like a miss.
Michigan or new Jersey.
Florida et cetera.
So all I can say much at all and all it's and any update that someone gets with Imogen and there are no heat to the Eagles, plus and double digit percent book.
You might get the lunch plus a day because he thinks and what do you buy and bill.
Can you, let us down and I'll come back and mistake My paper and what you might think.
Just one of them and a cup of tea and put them with you don't want to take it up there and in particular to logical and ideas.
Yeah.
So and this is a point of ongoing reevaluation and force, we're always trying to decide what the ideal mixes but for the last several years, we've pursued a two pronged strategy of about an even mix between and filling in existing markets and entering new markets and it's worked very well for US. We think it's been very useful in terms of establishing our brand presence.
And just given how few units, where we have we think the best way for the country to get to know us is by going around the country and so.
So.
The new market strategy has been very successful for us just as Jimmy mentioned earlier.
And with Sherman Oaks, drawing so many new guests, there's still abundant opportunity and infill and existing markets and so for the foreseeable future we're gonna be.
And this strategy of course, if conditions change, we want and maintain our flexibility and respond appropriately.
Okay, Great and then last couple here in terms of thinking about food cost in the near term given.
Where your business mix is.
Should we assume that your food cost food and beverage costs are going to be a little closer to that 35% level thing and in Q2 and.
In Q3, as Texas continues to be outsized in terms of percentage of mix.
Yeah, Jeremy I think I think it is wise to keep in mind that the mix of our business because it does have an impact and that was at least some of what you were seeing and the.
35% Cogs level for the quarter and then I would just say generally speaking if you're thinking about food cost really and labor to some degree if youre thinking about a normalized environment and kind of our normal step store economics one.
One is we believe we'll be able to get back to the kind of store economics, we saw pre pandemic, but really both of those costs and their own ways are affected by operating at something below historical sales levels and in the area of Cogs and.
In addition to that market balance of <unk>.
Sales there are elements that are COVID-19 related that can put some pressure on cost of goods around having to move inventory around our substitute some items. When when demand is just a little bit harder to project and then even some level of spoilage.
Endeavor to have non but but in an environment like this it can get more complicated and the supply chain and create occasions of some spoilage and so looking at where Cogs is you can maybe think about it and not necessarily as a linear move but but you look at where we are now and then you know where we stand.
And when we get to a normalized world.
You can probably anticipate something in between.
And then labor of course with the minimum staffing requirements and restaurants, Yeah. We ran a 47% labor for the quarter were historically low 30, percents is where you see could be and it really does take back to pre pandemic.
Kind of volumes and leveraging of of hourly staff in order to optimize our get all the way there again on labor and I would say just like Cogs, it's not necessarily a linear progression but.
There should be some element of understanding that is sales productivity isn't back to pre pandemic.
And the leveraging of labor.
It's just it's kind of a challenge until that happens.
Understood.
To assume though that your labor costs here in and certainly the may quarter.
Likely to track to your kind of the highest levels overall versus during the time during the pandemic.
Meaning that.
Above that $4 4 million that you had and in the November quarter.
Yeah.
You know thinking about labor as a percentage of sales is probably.
Good paradigm or place to start from in terms of restaurant economic and and with the you know the move in March to a debt.
Our monthly volume over five mill versus about a 3 million average and the prior months prior quarter.
Yes that does create some degree of labor leverage improvement and percent of sales improvement on labor, but but as he says as we all know that move in and March sales.
We still have a journey to get back to pre pandemic levels of sales and just the same getting back to pre pandemic levels of labor leverage.
We're on the path, but.
Work to do still.
Sure understood great job guys and thanks for taking all the questions. Good luck.
Thanks.
Yes.
And tableau and next and final question is from them towards you can lose it wont capital partners.
Hey, everyone. Thanks for taking my questions.
So maybe I'll start with a two part question for you on menu pricing.
So the first part of that is <unk>.
And go through and check.
Restaurants menu prices, especially just for the conveyor belt pricing and I've seen some modest increases and California recently.
I was curious.
And what have you seen in the past when you take.
And take pricing and then part two.
Just earlier in response to one of the questions you commented just.
And the world is going to look so much different post COVID-19.
With the competitive landscape and so I was curious if you think longer term pricing could be more of a.
And.
A lever than it has and the past.
Sure I'll answer this question.
George.
And I don't know how to go and ask you to it but I think when it comes to Oklahoma and micro see open up they didn't need all the vertical and then he pay state and I sort of opposite facility by the day I know my mother's day, but I think completes on them, but I think when you open up.
Today and put them on almost all of it it's getting them all and all.
And that's what I'll be cleaner and then you've got people and I.
And I guess my focus and what's it all and I'll quote unquote that you get somebody and you can only non discussing just get them all but one of them from.
And that's you got from a computer Cookie, Oklahoma with Michael and the money that you can have you can you know contacting us.
Hi.
In terms of the California pay price increase this is the same thing that we've done in past years, where we peg a minor price increase to offset minimum wage increases we haven't used it the increased margin. It's really just to offset the minimum wage increase one one real advantage that we have is we have a small fleets menu.
So the pricing that we take on and order 510 25.
It's not like.
And traditional entre based meal, where you've got this big protein et cetera. The place. It's gone from 40 to $60 a 40 to $50. We've really had minimal pushback in the past as demonstrated by our.
We've never seen a day.
Drop and traffic as a result of pricing and as far as we can tell from our March results are the same. So the same has held true for the most recent pricing.
That's a lot and mouse or keyboard and give up off the table day, mechanical pricings and Opel to just get them and put a lot and almost got it but I think any kind of cure and all humble and hungry and you got it and it doesn't matter.
And he got luminal musket and Tyco and <unk>.
And what's your own condensate they'll still have from the Coca Cola and you couple a kilometer of minimum wage and that the kidney and put out.
And I'll put it put us and I'll get it to you and all that.
And so it must be my photo and I attending the dog and you still got more price and I mean, obviously, if you go to Oakland I'll kind of tell much EBITDA 90 months and months ago, and then I got on a complete and put them Dumont NYC.
In terms of pricing.
Ready to sort of reevaluate market by market, what the appropriate pricing is in the past our pricing has purely been a response to minimum wage increases, but we're thinking.
Going forward there might be other.
Occasions for us to take pricing as well there are a lot of different possibilities that we are open to but nothing concrete right now.
We have got them on our pricing relative to what I would've thought might slip and fall could also be day, but what are they got they already but obviously your model.
And what are they oxonian my state that on a photo of the book to take effective woman Lady Muslim All day, everybody My son, who almost cutting EQM and I got off on.
And all my I get it.
Thank you and I'll talk about the step from that to get I don't want them.
The last thing we'd like to mention on pricing is that we really do pride ourselves on being a concept that can provide sushi for everybody.
We don't want to price anybody out, but we wanted we want seems to be and everyday accessible thing for many more people than it's been in the past and that's always going to be something that we keep our eye focused on whenever we take pricing.
Okay. Okay, that's very helpful.
And then second question from me.
And going back to Texas. So this might be a quick answer but curious if you could break down the comps that you've seen within your portfolio there.
And what I'm trying to get at is are there any urban locations that are may be dragging down even since reopened in march 10th or whenever you said it was.
Are there any locations that are dragging that down.
And what I'm trying to learn is.
And is is there a base of stores performing well above that sort of I think you gave a low single digit positive comp is there a group of stores performing well above debt.
George I'll just to speak a little bit to that we have seen a little bit of difference and some of that we would attribute to just the market by market.
Sentiment towards towards Covid, and and how much they were affected during during the worst parts of it you know and example is is Houston from a comp standpoint.
And hasnt been relatively speaking as strong coming back out of it and.
And as Dallas has and and you know if you know that market at all.
And understand just how much you know Harris County, and the Houston area was affected and kind of what sentiments are around COVID-19 restrictions and and and how that contrasts with a market like Dallas, you could probably guess that there might be a quicker rebound and the Dallas market. So we really attribute more of that too.
Two.
Covid Covid point of view than anything else the fluctuation there, but really as a whole I mean, we're very pleased with with what we've seen early on granted but with what we've seen and Texas all around.
Okay. Okay.
I guess just to dig a little deeper on that so is it are there some.
Metros in Texas, where you have 120, you'd have 20% comps or is that is that way too high.
Yeah.
I want to get into calibrating too much on a store level or a submarket within the state I think it would suffice to say that across the board I mean, where we're happy with their debt.
With the customer reaction and Texas as we've come back online.
To full capacities and the restaurants, and we think it bodes well for ultimately for every part of the state.
Okay understood and then last question from me G&A I think the guidance was 300.
K 300 to 310 per week.
And what that's a pretty big step up from where its been trending and what are those investments that youre, making.
And it's really and the team.
Side of things and any of that and a couple of ex one there had been.
Freezes on compensation increases through through the pandemic period, there was a period of time.
Level.
We had a salary reductions and place that that now with more visibility and more added that.
That's reverting back to standard levels, and then also really we had held off or deferred and the hiring intended for the current fiscal year until until we saw and felt better and so there are some areas and the organization.
We're going to grow the business and the smartest way possible, we think it's going to be.
A few a few.
Supplements to the to the team really and in a number of different parts of the business Ben talked about recruiting for instance is an area where we brought on some additional resource given the labor environment and just knowing our plans to be more front front and with our growth plan and in 'twenty two and.
And just other ways to analyze the best places for us to be in that and that you know.
Operate delivers on the brand promise as we as we move forward.
These are hot always intended for this year, but we had held off on until we have more visibility.
Okay. Thank you.
And Dave Stoehr.
Thanks George.
And ladies and gentlemen, and be breached and ended the question and answer session and I'd like to turn the call back over to management for any closing remarks.
Again, thank you for joining us vehicle quantity athene to you at.
Our next earnings call. Thank you.
Yeah.
Okay.
This concludes today's webinar.
And your participation and have a great day.