Q3 2021 Kura Sushi USA Inc Earnings Call
Good afternoon, ladies and gentlemen, and thank you for standing by and welcome to the Cure Sushi USA, Inc. Fiscal third quarter 2021 earnings conference call. At this time, all participants have been placed in a listen only mode and the lines will be opened for your questions. Following the presentation. Please note that this call is being recorded on the call today, we have Hajime Jimmy Uber.
President and Chief Executive Officer, Steve, Ben Ruby, Chief Financial Officer, and Benjamin important Investor Relations Director and now I would like to turn the call over to Mr. Bortz.
Thank you operator, good afternoon, everyone and thank you all for joining by now everyone should have access from our fiscal third quarter 2021 earnings release. It can be found at www Dot current sushi dot com and the Investor Relations section a copy of the earnings release has also been included in an 8-K, we submitted to the SEC.
Before we begin our formal remarks and need to remind everyone that part of our discussions today will include forward looking statements as defined under the private Securities Litigation Reform Act with Nike and I.
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 retail 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, we will discuss certain non-GAAP measures, which we believe can be used when evaluating our performance and presentation of this additional information should not be considered in isolation, nor as 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'd like to turn the call Liberty true.
Thank you Dan and thank you everyone for joining us today.
And then you begin by saying how pleased I am with the late of any company.
Total he called it related to all day, it's not returning G.
We've experienced all of our capacity and 16 months.
You already got low if he's called from the quota.
And you're not the only saw meaningful improvement.
But oh, and Phil will be able to improve operating efficiency and the rest of them.
The profitability and really steadily.
And any increased our dining room chassis and according.
And for the state and local and renewed excellence.
And then he briefly expand on this.
I think he made from all of that and cold much performance improvement well gradually the repo and by that you'd have to based on organic it and its pretty chunk and meet the team.
Thank you much and good.
He said that he thought dumped from Colombia operations and debt.
And you need it and a lot 9 and all of it.
And putting your philosophy.
And increased the indoor dining jockey and non California, I guess launch.
During the quarter.
Although albeit it's available seat and chunky, but approximately 60% against the core debt available tea coffee and.
Approximately 25%.
I'll say this momentum continued through April and May, culminating in South Dakota and Libya.
18 point, Joe and Donald.
1 of them W E E.
Quarter.
Looking at hundreds of total.
Authenticity comedy and continue the visa lifting or operating restrictions and California, you meet the June.
That being the interim month of June revenue of $8 million.
And then with July and fast.
And it's wrong system light well have 2 operating absolutely true.
And he is no restrictions in place.
Yes, the response to that and he kind of off the hook without city and has it been terrific and we thought that he's pretty standard activation.
Koto.
From that day.
And that's what I'm doing and operating profit for the from full time and.
And the pandemic.
We believe we are.
And the past 2 to 3 times and equal I'll hit the BTG.
And you say that so much.
It's tough because the food is hitting jockeys. So the majority of the quota and they do.
And what do you feel comfortable the type of thing and.
The 2 and 3 a pound any COVID-19 day bidding.
Total liens and meet the June the opening of California.
And why the comps begin to exceed the total and he's got a 19.
And although California location and are making big strides throughout the economy, if you strip and any clue and activity levels.
July is off to an even flow and lost out well pivotal by the function of our funding and it'll be put up on the tight collaboration.
Finally ill provide it.
And the design of Hello, Kitty and the other iconic kind of fall below and a place on the video declaration on the consumer and the Exxon and it being strong.
I'm very excited to put our put almost not a piping and Huntington Beach.
Each increased globally from global Peace and is cross.
And you have penalties.
And I'll touch on all the open and he says Oh sorry.
And of course, all these knowledge continue to support our belief that off premises can be alarmed upon on the increment that upon each day.
In spite of a dining room and your openings and.
Increases on our system line of hidden and coffee.
Oh, how the quota and Seasonique and it was a from a pinball effect.
And thank you, Mike the flip and any cold rainy season mix, but many more around the 1 boss and.
We are very pleased with is equal net.
It's also worth noting that while it.
And would take little beneath him if minamata paid out about it.
A primary communication Antonio Blah, Blah, blah blah blah blah.
160000, and nimble and Nicholas.
Painting, 60, plus and the growth of our previous call about the member count of 100 and telecom.
Despite the accountable and Bloom and E O, putting me safe and compare that to before the pandemic.
It's part of our P channel you've been seeing nice.
And on the V remain very excited about its long upon potential.
And you can do all the development I'm pleased to say that he's got a pizza from 'twenty, 1 has been alopecia and.
Possibly a most productive development yeah if off.
And you already know about fiscal third quarter, we opened 1 new restaurant and Chamonix, California.
And from cyclically into TV and over the quarter.
We opened an iPhone units and day to be watching from.
Bringing our total count to the 32 restaurants.
And these openings we have completed our developmental put on for if he started because of hunting and 1 consisting of hidden unit from on the type of new market authority and compete by all of the development of the team.
The challenging macro environment.
We continue to be pre COVID-19 craft and he's got a coupon on 'twenty, 1 including royalties and the openings.
V. P E. Yeah unit from D. C got vintage and have the potential to become some of the top performer in our system.
For example in June.
Italy on the day and with your laundry effectively.
On the public flow don't get a hallmark and a long and strong base.
The success or opening uplift from new market is a clear demonstration of the below the upheaval across the street and the U S.
And the components of the enormous opportunities and how far ahead of us.
The continued to expand a lot footprint.
Oh go ahead.
Excited about how our fiscal 'twenty development and put them in shaping up.
And then benefiting from you the other state opportunities created by the pandemic.
And the more types of excellent gross and 2 hour.
And you did put up a home Pomona analytics is everything in the most exciting pipeline.
And that in all states.
To date, we have already executed 8 and new D C, including 3 new market and has gone up.
On the Pennsylvania.
And although sometimes the ideal location in San Francisco is currently under construction.
He's got a 'twenty 1 although nickel the day broken yeah for Qunar.
And we expect that to maintain your.
Gross momentum my opening even more.
And he's kind of thing.
Oh is that cannot and fully decided to hiring a new chief operating officer from Auto me.
So her extensive experience in debt if not indefinitely.
Most recently and the heel and do not believe.
And the winner among bugger.
But he has caught it.
Oh piece on the bottom.
We are tremendously excited to have shown and Jo mill Chi and the believes that he will be instrumental in cross sales.
And comedy Yeah, 3 and it'll be Saturday and comedy and it's fair.
And so so far and.
Our team is ready to kept that I've, just pent up demand plus a photograph stadiums.
And of course novel genes accomplishment and they have been possible without the hard work on the dedication of our team members.
I'll do that possibly is hungry and Philip that idiot and wanting to these uncertain times.
Is that many times Dakota, all that too steep to briefly discuss our financial results and the liquidity.
Yeah.
Thank you Jimmy.
For the fiscal third quarter total sales were $18.5 million as compared to $2.8 million and the past 2 year period.
We believe measurement of comparable sales growth is most relevant versus the pre COVID-19 period of 2019.
On that basis comparable sales declined 19% with California down 36% due to varying COVID-19 operating restrictions and continuing throughout the quarter, while our Texas market increased 5% as COVID-19 restrictions were removed from that market and the third week of the quarter.
Turning to costs food and beverage costs as a percentage of sales were 31, 7% compared to 38% and the prior year quarter, reflecting largely normalized performance as sales volume and proved and lower inventory spoilage.
Labor and related costs as a percentage of sales decreased to 8.9% from 126, 3% and the prior year quarter, primarily due to higher sales leverage and a $5.8 million dollar employee retention credit recognized under the cares Act extension.
Excluding the credit and retention and hiring bonuses labor and related costs would have been 36, 6% primarily due to the effect of lower sales and minimum staffing needed to operate our restaurants at reduced capacities.
Occupancy and related expenses as a percentage of sales improved to 10, 2% from 56, 5% and the prior year quarter, primarily due to higher sales leverage.
Other costs as a percentage of sales decreased to 14, 7% compared to 34, 3% and the prior year quarter due to fixed cost leverage as a result of the increase in sales.
General and administrative expenses were $4.3 million compared to $2.9 million and the third quarter last year.
Excluding the impact of the $500000 employee retention credit recognized under the cares Act extension and $1 million litigation accrual general and administrative expenses would have been $3.7 million.
This increase was primarily due to compensation related expenses.
As a percentage of sales general and administrative expenses improved to 23, 2% compared to 102, 6% and the prior year quarter.
Operating income was $900000 compared to an operating loss of $8 million and the third quarter of 2020.
Restaurant level operating profit was $1.1 million compared to restaurant level operating loss of $5.3 million and the third quarter of 2020.
Adjusted EBITDA was a negative $2.6 million compared to a negative $8.2 million and the third quarter of 2020.
Income tax expense was $30000 compared to income tax expense of $1.2 million and the third quarter of 2020 debt.
Prior year included a valuation allowance on our deferred tax assets.
Taking all these together net income was $800000 or <unk> <unk> per diluted share compared to net loss of $9.2 million or negative $1.10 per diluted share and the third quarter of 2020.
Adjusted net loss was $4.5 million or negative <unk> 54 per diluted share compared to adjusted net loss of $10.7 million or a negative $1.29 per diluted share and the third quarter of 2020.
Turning to our cash and liquidity at the end of the fiscal third quarter, we had $4.7 million and cash and cash equivalents and $17 million and debt as we borrowed an additional $5 million on our revolver to meet our planned capital expenditures for fiscal year 2021.
In terms of capital expenditures, we continue to maintain the following expectations for the remainder of the fiscal year.
Weekly Capex spending for Q4 will be approximately $260000. We continue to expect our weekly G&A spend to be approximately $320000 as we scale, our organization and preparation for our new units and growing system size.
To reiterate my comments from our last earnings call, where I had mentioned that we were moving from a relatively defensive strategy to a more aggressive won on the strength of our sales recovery and new unit performance.
Our performance and the third quarter has only made us more confident and the investments that we're currently making and preparation for the next fiscal year are a demonstration of this confidence.
Lastly, as a reminder, due to the ongoing uncertainty driven by COVID-19, we will not issue additional financial guidance for fiscal year 2021 at this time.
Now I'll turn the call back to Jimmy.
This concludes our prepared remarks, and know how peak onsite and equally as something you huh.
Operator, please open the line for questions.
As a reminder, your line is a Q&A session and you may answer.
Current and Japanese before my desk is translated into English.
And they always have.
Thank you.
At this time, we'll be conducting a question and answer session.
We would like to ask a question. Please press star 1 on your telephone keypad and a confirmation tone will indicate your line is and the Q.
Press Star 2 if you would like to remove your question from the queue for participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys, 1 moment, please while we poll for questions.
Our first question is from James Rutherford with Stephens, Inc. Please proceed.
Alright. Thank you good afternoon, guys I wanted to start off on the comments around unit development and Thank you. You noted you expect continued momentum into fiscal 'twenty 'twenty, 2 and <unk>.
Just to clarify do you mean, you aim to keep a similar growth rate of units and 2022 or is it a number of units you intend to keep it kind of a consistent level next year.
So thank you Jim before you'll have 2 question, please that Amit and from Japanese and mother, and all contract and all.
And maybe 18 months ago, you must think it and want what do I called him up on and you.
And you're talking funnel cake on the light and so I think we'll sit with us and wealth and get them all and clunky.
And I think plug and Muslim day My model.
Okay, and then I think you all know simple but.
Oh, no that's suitable for what's to come out and put them on an equal from it.
And all Hopkins and told me that I don't know.
Hi, James This is Ben.
So our comment in the prepared remarks isn't for resetting of our guidance for our us providing new guidance, it's simply a reference to US having opened 7 units in fiscal 'twenty, 1 and our expectation to open more than 7 units and the coming fiscal year.
And I need to go to a special on or committed looking about bubbles.
Hi, Brian.
Management and our pipeline I thought he could you can you just talk will be Colombia, and they'll put 30 day mcquade, Oman and when he does come up from debt, but putting that money to start where they might not make low.
How do you think on 1 hand, that's the thinking on what that ultimate debt on the playground for henkel.
And <unk>.
In terms of our our unit opening pace Theres always.
Considerations between you and a pipeline, having the management pipeline and place pet.
Potential pandemic delays and our liquidity and well.
Once we have greater clarity out and all of those factors.
We hope to provide some more granular guidance.
Okay. That's helpful. I wanted to shift over to the cost side of the discussion I. If I heard you correctly you were exiting June with total company 2 year comps slightly positive correct me, if I heard that wrong, but I wanted to ask for California, specifically, what youre seeing.
And there was a recovery there and that gets pretty robust where do you think that shakes out here and the near term and Texas.
Texas is kind of settled in that and mid single digit positive. What do you think California will look like and the near term.
Hi, James This is Steve and I'll speak a little bit to the June comp performance.
As I think you know June 15th the state of California lift at all of the remaining restrictions on indoor dining and we were able to go to a 100% capacity and we did see a change and performance debt.
Kim right along with that almost.
Mediately for the full month of June the total company we were.
Down low single digits on our comp.
Texas was low double digit positive.
California was a mid teens negative as we were just starting to transition the restaurants to triple our capacity and then for the second half of the month alone. If you just look at the period, where everything and California, and Texas was 100% we were actually up.
4% and those last couple of weeks of the month, California.
And single digit non comps, so well on our way to getting getting back to 2019 productivity levels and continued strength and Texas actually and the double digit range and and that all came together to be a 4% positive for the back half of June.
That's super helpful. Thanks for all the detail, Steve if I can squeeze 1 more and on labor costs, and then I'll pass it on it sounds like 36% of sales normalizing for a few items.
Sales were still on and total for the full quarter, what do you think that post pandemic like normal sales level.
What should we expect for labor and that environment, given sort of the wages wage dynamic today.
Yeah.
At both cost of goods and labor pre pandemic, where historically and that low thirty's range for the company and Cogs came came right in there for the quarter Labor. We were pleased with the leverage pick up that we got from about mid forties percentage of sales in Q2 to the 36%.
Adjusted and Q3, and we hope to be working ourselves eventually toward the same kind of pre pandemic labor rates and that low thirty's range there.
There are some factors just the fact that we've got.
And with a lot of hiring to get stores back to full capacity you know theres a lot of green people and some of those locations and it does take time and both new stores and newer employees to reach.
Peak efficiencies and so labor may run a little bit more elevated for a period of time, but eventually getting back and that and that low thirties neighborhood as our target you know there is some.
<unk> pressure and in categories like dishwasher wages as a for instance.
But we.
We still believe that over time, we can work our way to a pretty similar kind of labor leveraging both both with the sales recovery and and continuing improvement on efficiencies and the restaurants.
Alright, I really appreciate it congratulations.
Thanks.
Thank you James.
Thank you. Our next question is from Peter <unk> with BTG. Please proceed.
Great. Thanks.
Jimmy could you comment a little bit on the performance of the restaurants that are not and the comp base, especially those and some of the new markets and how they are line or match up with your expectations as you went into those markets.
Sure I'm happy to answer this question.
Or do I forgot how did they are simple and it comes from amongst you bumped it up a little it must be and gone up ability. It takes off and you talked about the journey and on 19th and stopped system, especially monkey and because I'm not sure gotcha and just focus that.
And you don't tell us exactly how long and it also of course it takes us a step just a bylaw and all.
And the funnel and all clinical golf course, and that's I don't have to worry about and let's get them all on 1 day better than with the multiple single digit to line up a bit on my Kid on day, 1 of you and not a citizen and antibody and our field.
And what kind of demand.
And <unk>.
Terms of sales recoveries, we're seeing similar results and Texas to the rest of Texas comp base and it's been a very strong performer, California, it's been adjusted a little bit slower to recover I think this is a function of us having smaller scores and California, and so they tend to fill up more quickly.
But.
And then just Steve mentioned, even though sports outside of our comp base are well within our expectations and are on track to hit pre pandemic productivity levels.
That's all my Broccoli and avocado sales I think then you got somebody who's only months.
But all of them are preparing them up and wants to get them upload video bit of and you've got somewhat toxicity total to 2 and Oklahoma.
I don't know why it wasn't a concept a couple.
A couple of and a bit and all and started with economics and.
And I'll touch it.
And they get it on the simple taught us that gift and getting that.
And I'm optimistic.
And as Jimmy mentioned in the prepared remarks, we're extremely pleased with from and for new scores, certainly and Bellevue and particular neck and neck for the second and third top performing spots and that's continued through July they're just they're great scores.
New units that we've opened and new markets have really been encouraging.
And looking at these units.
We're very confident that it's just a matter of time until we are able to return to the same unit level economics that you were delivering for COVID-19.
Excellent and that's great to hear I could could you just comment a little bit on the commodity environment and inflation that you guys are seeing and are expecting over the next.
Several quarters and what level of pricing do you anticipate you'll need to take.
And to cover that inflation.
Sure Peter I'll speak a little bit to that and just for starters to to kind of remind on our commodity basket. We are fortunate to have a very diverse mix of proteins and other commodities and our restaurants with over 130 items on the menu and our top 5 commodities are and the neighborhood of 25 to 20.
6% only of our purchase mix. So it's not heavily concentrated in any particular area, but having said that we have seen some inflationary pressure and spots across our commodity mix and hard to know how much of that's transient versus more longer term.
At this point, it's Fortunately not a big factor as you can see and our Cogs performance for the quarter.
But you know we're going to remain mindful of what we see develop in that arena and if we see or feel like.
Things are a little more sticky that way and long term.
And we do feel like as we have and the past there there's opportunity.
And to adjust pricing and in an appropriate way to go along with what we're delivering.
And food products and not getting into any expectations or plans about the future on pricing, but suffice to say now.
As we've done in the past precedents on minimum wage increase day.
Dates there could be further pricing move that goes along with with what we see and food and labor.
Alright, Thank you very much and I'll pass it along.
Thank you Peter.
Thanks Peter.
Our next question is from Andrew <unk>.
<unk> <unk> with BMO capital markets. Please proceed.
Hey, good afternoon, everyone.
My first question is on the White space opportunity I know you said that you thought it was greater than you thought and the past and you're going to do some work to kind of explore what that might look like and I'm curious, where you are and that process and if you have any insights to share at this point.
So this is Jamie and help us.
And the hockey parlance I'd just question.
This study and it goes up and my mother.
And all of them at the open up the line loss and so not all of it but underneath the mother company and let's see if I look at day 90 day, Mark called out that he got it got it let's think about all on ore type study.
And let's put off and all study you have to get out from Optima.
In terms of our thinking about the white space opportunity growing as a result of the pandemic that remains unchanged, we're very optimistic.
That being said, we're still very much and early days of the pandemic winding down and so we're waiting until things stabilize further and things or is it we're clearly at the end.
Commissioner and White space study.
Okay that makes sense.
I think last quarter, you pointed to Texas in particular and the off premise mix. There and said you know it hasn't really dipped below 5% at any point I'm just curious for an update there as you've seen Texas move to positive comps and and also also and California is.
The GAAP is narrowing their relative to 2019 line.
And what does the off premise mix look like as those key markets are more fully opening.
So the full June off premises mix of 6% so within that mid single digit to high single digits.
Expectation that we have for post pandemic off premises sales, we're seeing similar results across markets and we think this is a great demonstration for the long term stickiness of off premise is correct.
Okay, Great and then just my last 1 here you mentioned.
And you still have a bunch of hiring to do I'm. Just curious how fully staffed are you now relative to before the pandemic and and what is the what has the experience been high.
During as these markets have opened how are you finding the environment to be from the branch.
Simple down a bit and they need people on a total of interest that you took a step up with them.
Total grafts as youre going to see slight and Ohio.
Even though total.
Okay great.
But youre going to ebb and flow right. They just get them on a lot of Ala and <unk>.
And up and looking on our hiring and all and hired him, but he came from the day and so I'm not a jumping off point and muscle because they didn't know hanging on bonus average you'll not find mobile and not that he called out of 1 of Oklahoma City, and I'll kick up again, and some type of neighborhood and know how youll feel good about the debt against that plenty going on and same thing going to get much at bloom on the stuff that the Philippines.
And I'm the only myself.
So obviously, we knew that California would be reopening on June 15th and so we made a very serious effort mid made at the end of May.
And begin this hiring care. This is particularly focused on hiring and retention bonuses. The major change that we made in terms of the hiring and the.
Referral bonuses would.
It would be that instead of having the bonuses disbursed after a month or 2 months or 3 months and staying with the company. We made this and upfront bonus and that was tremendously effective and as a result, we were able to fill all the positions, we needed and California to operate normally.
It was a tremendously successful hiring campaign.
Great. Thank you very much.
Thank you Andrew.
Thank you as a reminder, if you'd like to ask a question. Please press star 1 and then.
The conference tone will indicate your line is and the Q.
Our next question is from Jeremy Hamblin with Craig Hallum Capital Group. Please proceed.
Thanks, and congratulations and managing through this really well.
And I wanted to come back to the commentary around and Bellevue and relocations.
And.
In terms of that incredible performance youre seeing from those locations and the early days.
Is there something about the design of those restaurants and the size of those locations.
And that maybe serves as a template.
Or perhaps even where they're located.
What you might do going forward.
I mean, because these are in markets that you've never been in before.
And that probably don't have a lot of brand equity.
But any color you can add in terms of how.
Those breast.
Restaurants are operating so strong right out of the gate.
Mhm.
Okay. Thank you didn't mean for your question.
And when it got it.
Looking at monetizing and he says and a little clarity can you just give them more unopposed or you'll have to fund and they basically have to be on same day.
I don't know they'll put them on mono flow autonomy. So that's what I thought I would I'll get to you look identical and you'll get some but I don't know Scott gained out and depending on upon that and when to pull them out.
Yeah.
In terms of you'd asked about the size of the template for at least about 3000 square feet. Bellevue is about 4000 square feet. So it is the very strong sales. We're seeing is not a function simply of larger sizes or greater occupancy limits and.
So in terms of Bellevue or Fort we changed our thinking about sizing or templates prototypes.
It's really it's not going to impact our thinking its more about having chosen very good there.
Site selection for the within those markets was excellent.
And much at all and let them or whatever you call and Steve.
And all that much at all and so let me say at the Olympic You'll I don't know that they must get them all and all I was hoping you might.
What is a quite the demographics and sort of cut out when I go on line.
And all we did get the study could you you don't know and I'm 1 of them anymore and automotive.
Easter close and not see the chamber and the Macondo beta when he comes came up on the shelf, but it wasn't tunnel and what are the only dental once you've seen a couple of people tend to stay open and some people call. How you've got all that from a political it took a little from a high volume and you kind of update us on kind of a thing.
From a ticket and giving you kind of tightened and the demand that I feel like you took all of them and I thought that the and I didn't go back and up even though most of them have no debt.
Mike you guys have done a demographic because that's the day when I got the whole day it'll be about cinema line.
No.
And Mike you can go and upon like and a thought and mono.
But you don't know studies debt on all at once it all and sickle and I'll sneak in on NUCYNTA and yet with the video and she can take almost a month.
In terms of.
Looking at Bellevue, and Portland, specifically, I think we might have benefited a little bit from relatively higher demand from our revolving sushi and those markets.
The rest of the country.
We're also benefiting from the fact that.
And for at least our first store on the East Coast Bellevue is our first from the West Coast and so I think we're drawing from.
A larger radius than we.
We would for more.
Infill market just to give you an idea of when we opened our first Texas Scurried people drive and 3 hours down from Oklahoma and so we do draw from a very wide.
Area.
In terms of the demographics.
We're not seeing anything truly unique to Belvieu report leap it is.
Related directly to its success.
And just to drill down further to see what we can.
Gleaned from these openings or to inform future future openings I just note.
We do take and unusual approach and our unit growth and that we are not hub and spoke model. We're taking non continuous approach, which is powered by a remote management system and I'd say that this is a huge competitive advantage for us. If we were operating from a more traditional hub and spoke model we would've been much later and our corporate life that we would have discovered just how lucrative.
And attractive.
West and the east coast doors as markets for us.
Yes.
Thanks for that color.
You mentioned I think that you have 8 leases executed already and I know youre not prepared yet to give.
Specific unit growth guidance for fiscal 'twenty 2.
But typically when you have those leases signed.
Wood development take more than a year.
Or less than a year whats kind of the average timeline from lease execution to having that store open.
So I'm thinking along and you say just to give us from Carla mother's day.
And any months they get another on all my Fuzhou and I'll come to yoga.
And I'm looking at and just get them, all but don't even flow the macondo eating at home did not have to worry about them a full day vinyl construction on this telephone upon menthol or total political spending 2 days ago, and you must non debt I'll first talk with about a month and we must look at it.
Typical Dakota, please and what you need because they don't want I E. If I needed and it cost a lot depending on the capital market and the phone.
And historically it was almost always the case that we would open a store within a year. After after executing the lease that being said as we've seen over the last year and a half the pandemic there are externalities construction delays.
And beyond just construction and permitting delays as well as municipal governments or our spreads and so its.
It's harder for us to predict the construction timeline right now, but typically yes.
And executed lease stores opened within a year.
Okay, great and.
And then just coming back to.
Your labor model and.
<unk> technology that you have within your restaurants.
If you think to the future.
Of what the core of Sushi model is going to look like in the U S.
Do you anticipate that that model drifts, a little closer towards your core of Japan locations, where.
<unk> there is even more functions.
Are performed.
And kind of true technology or are more automated than you currently have in your restaurants or even what you had and your restaurants kind of pre pandemic.
Okay.
And of course.
Other non credit pumped a total stuck with it and of course, that's it. Thank you Jenny Mccarthy from equal to day on a commercial state.
Yeah, Thanks, Tycho and locking them on and I'll put it to price difficult part and I didn't get caught up and I'm talking about like you don't need to tell them all day.
And so let's start from especially the ones that are low commodity when you come and see what what do I know.
Probably probably meant almost from day authority and not put out and refreshing the chicken little deal and not put any unarticulated touch about almost no debt.
How about this and he felt that they could do on a football.
And all on all she took a poke on state and I'll cut it down and all and I hope this systemic and why do they come up.
And I'm wondering you talked about my brother and I thought that your debt medical and a whole nickel on all handguns and you have to go up.
And they'll typically take any update on the catch up with Sumitomo and must be well what about them, but you know when all and all that up and mucking out you and you've got to take that they didn't come back in line.
Okay.
And perhaps some comparisons to Japan, it's just the labor model is so fundamentally different prices for different commodities are different the rent is different and so we're very well could draw a direct comparison.
But that being said, we do have a shared services agreement with the parent and we have a quarterly exchange of technological developments from.
They are coming from the parent or sister company, and Taiwan or ourselves, we regularly exchange developments and we're also working on our own internal stuff.
The parent doesn't have to.
And to introduce our own.
Improvements, but just to add on to Jimmy's comments, you'd mentioned stuff that the parent has to bring what is 1 major difference would be that Japan is a more self service culture and so they can deliver it bring spy conveyor belts, where is that that really.
It is not part of what people expect for hospitality and the United States and so are our sort of analog for that would be the touch panel drink ordering debt. We're testing right now this will allow.
Surfers won't be taking drinks there'll be ordered through the touch panels.
Servers have.
Their absolute labor.
And responsibilities are reduced and they're able to focus more on hospitality. We're also working on tableside payment and.
And as I'm sure you know our our labor is really our labor as a percentage of revenue is really a function of sales leveraging where tableside payment were hoping to reduce our table turn times and.
<unk> increased the number of parties that we can see per day and.
And.
And that would be another way to improve our restaurant level economics.
Great. That's helpful last 1 from me.
Steve in terms of debt.
The may quarter.
Third party delivery charges off premises swipe charges through square what was that as a percentage of sales of your total sales.
Well on the delivery charges, we actually don't subsidize that cost, which runs right around $8 per transaction, so the customer picks that up.
Themselves directly and to us that there's no net cost related to that and the square charges are really baked into the credit card transaction fees that they charge us for processing.
The sales themselves.
A few basis points.
Just like any processor, a few basis points premium that they charged to what their internal cost is but it's a pretty you know for us it's a pretty transparent thing in terms of.
Not a significant incremental cost bye bye and even going through square and certainly delivery is just a wash.
Great. Thanks for taking all my questions and.
Best wishes.
Hey, good and Mary.
Thank you. Our next question is from George Kelly with Roth Capital Partners. Please proceed.
Hi, everybody thanks for taking my questions.
And so.
Maybe I'll start with with.
With pricing you mentioned in response to 1 of the earlier questions just that Youre considering.
Managing through this inflationary environment by taking modest pricing at least that's what I.
<unk>.
So question for you is.
I know you've taken some real modest nothing major in the past.
Much sensitivity and have you kind of tested the upper bounds if and when.
And that sensitivity does start to show through.
Yeah.
And I went to handle.
Thank you and go ahead and that means.
Okay Macquarie.
And on what is non op honestly can muster with automotive.
And though the thing about the whole muddied up and I'll get into it.
And I'll start with volume I think there's a mall.
No affordable and the price would it take us little tickle the proposal that they didn't know they can't dig and you put them rather than our average and I'll start off.
I mean, you've got a few months ago and yet the Bob Douglas.
And if anything at all.
And do you spend and development, but the markets are little bit Ocado got picked up a little and omani possible, but not that he hall, you cannot go out and a commvault.
And my neighbour and other preclinical ophthalmology and traditional mccourt at all at the Kindle and our profitability and we just you know a lot of.
I don't know if and a lot of it at all affordable and appointed accumulated a demo and you just take a pause.
My son, and I point, almost up to stay on the price you get on a simple you don't know.
And then you're not going to get to 60 months.
In terms of testing what the potential upper limits of pricing would be up.
We haven't done any test specifically geared towards that and we when we do take pricing and I think that.
We're considering would be up.
We monitor the plate price.
And not to play price and the number of plates being eaten the average tickets. Our goal is for our sushi to remain accessible and so we try and keep our ticket and in line with.
Ticket averages of our peers and casual dining industry that being said in terms of sensitivity because we take such minor pricing because of our small plates menu. It's on the order of <unk> 10.25.
And there has been pretty minimal sensitivity or pushback from our guests and the past in terms of margin management that that remains a very robust lever, whether we're talking about labor inflation and or commodity inflation.
Still room to take price.
Okay. That's helpful and then different topic back to the trends that you've seen just and same store sales so did I Miss it.
Did you commented on July <unk>.
<unk> seen and I'm just curious if you can see and continued acceleration.
Yeah, We haven't commented on and July same store, we really talked about through the end of June.
Jimmy did allude to the Sanrio Hello Kitty.
Promotion, which launched on July 1st and like many of our other brand partnerships, where we're very excited and happy about.
And how that customer reception has been to that since the beginning of July but.
Well, we'll share more of that.
Next time, we talk.
Okay.
Okay, Great and then last question from me.
And when I look across your store base.
<unk>.
And I see wait times and consistently at most of your restaurants and.
And I heard and response to a different question just fit.
Stuart you are pretty comfortable with the size and everything but what why not open can you just I don't know what the exact question as well.
What is your largest restaurant and why not and future units.
Why not and tweak up the size a little bit just to boost your capacity.
Thank you.
Hum.
And so much at all what about and I don't want me, saying all day live and let me take that Masimo Buckler and now that you're getting from other.
And so would you say musket and more multi don't Wanna, whatever their thoughts and but what do I get and the silicon and we thought that you need and what can let me take a commodity simo on EBITDA.
Total debt at do you look at it.
And I'm, not Ottawa on or something like that.
And then the ability and Kansas and a couple articles talking about other pick them up from all day and Boyd.
And that you're bound and canola, yeah did I didn't know if.
And if you just put that down on all our different model and all.
And I just wanted to touch on silicon.
And I'll put it out on this pivotal and our capabilities.
But look to monetize it and we'll get to a stable demand from our funds.
And with and became a another color on or get them into a female that ultimately the day you can go off and all the other 1.
And I just thought I was hungry Tonight.
And so we're fully aware that we have long wait times.
During weekends in particular, but.
As Jimmy mentioned earlier actually we weren't talking about Bellevue importantly, larger sizes don't necessarily have a 1 to 1 correlation to stronger sales are our largest store is 6800 square feet, but Bellevue and 44003 thousand square feet, respectively and are stronger performers and so.
Thinking about it you know a cash on cash.
Restaurant build out costs, it's not.
Not always.
Or simply just growing bigger and expecting.
Comparable margins are comparable returns and so this is going to be something that is part of an ongoing discussion between.
And the executive management team at current Sushi, there continue to figure out what the.
And the most appropriate sizes or whether there are different appropriate prices for different markets.
Okay. Thank you and I guess I do have more and more quick 1.
Texas impressive statistics that you gave on same store sales within that.
And Im sure Youre, not going and want to get too granular, but within that which you reported positive.
Positive comps there and everything is there a large range and what I'm trying to understand if there is a group of stores within the Texas market that still is being really negatively impacted by Covid and that's my last question. Thank you.
Okay.
I'd say you know just again.
Oh go ahead go ahead Jamie.
Oh, Yeah just to reiterate.
Texas as a whole is as you know, we're very happy with the rebound and the performance. There you could look at maybe some markets and and and consumer psychology around Covid and general and maybe a little more cautious for instance, and and the Houston market, then it might be and the Dallas market and you would see to some degree.
<unk>, a little difference and numbers, but on the whole, Texas is clearly doing very well as evidenced by.
The overall rebound that we saw very quickly and sustained since then over the last few months.
Yeah.
Okay.
Ladies and gentlemen, there are no more further questions and this will conclude today's conference you may disconnect. Your lines at this time. Thank you very much for your participation have a great day.