Q1 2022 FAT Brands Inc Earnings Call
Good afternoon, ladies and gentlemen, and thank you for standing by while we come to the X H L brands incorporated first quarter fiscal 2022 earnings conference call. At this time all participants have been placed in a lease then only mode. Please note that this conference is being recorded today may 522.
Two on the call today from a tea brands, our President and Chief Executive Officer, Andy Reid of wine and Chief Financial Officer, Ken Quake by now everyone should have access to the earnings release, which can be found on our investor Relations website at IR Dot F. H P.
<unk> Dot com in the press release section before we begin I need to remind everyone that part of our discussion today will include forward looking statements. These forward looking statements are not guarantees of future performance and therefore undue reliance should not be placed upon them.
Actual results may differ materially from dose indicates up by this forward looking statements due to a number of risks and uncertainties.
The state must due to a number of Greece and uncertainties. The company does not undertake to update these forward looking statements at a later date for a more detailed all the risks that could impact future operating results and financial condition. Please see today's earnings press release, and our recent S E C filings drink space.
Call. The company May discuss non G. A a P financial measures, which it believes can be useful in evaluating its performance. The presentation of this additional information should not be cause the dirt in isolation, nor as a substitute for or is that in accordance with G. A a P recalculations to compress bogey.
A a P measured Oh boy, but in today's earnings release, I would now like to turn the call over to you and be a bit of Hart, President and Chief Executive Officer.
Thank you operator, good evening, everyone and thank you all for joining us on the call. Today, we are excited to be here on our first earnings call for fiscal 2022.
This afternoon, we made our first quarter 2022 financial results publicly available. Please refer to the earnings release and our earnings supplement both of which are available in the investors section of our website at www fat brands Dot com.
Each contain additional details about the first quarter, which closed on March 27th.
The first quarter was an excellent start to 2022 from fat brands and I would like to thank our whole team for their impressive execution as we continue to grow this visits.
Our brand is truly differentiated because we have a scalable platform affords us the opportunity to synergistically incorporate new concepts with minimal incremental corporate overhead costs.
Also have a long runway for organic growth highlighted by 27 store openings in the first quarter 34 year to date on our way to well over 100 by the end of this year.
In addition, you have a huge pipeline of more than 860 additional locations to be built providing us with the potential of approximately 33% additional unit growth at $50 to 55% additional EBITDA growth in other words, another $50 million of incremental EBITDA over the next.
Few years.
Today, I'm, particularly excited to talk to you about our strong brand performance organic growth synergies from our acquisition strategy in 2021 potential further acquisitions in 2022.
And planned balance sheet and refinancing strategies for 2022.
In the first quarter, our strong momentum exiting 2021 continued as our franchise partners in company owned restaurants continued to report impressive sales.
In the first quarter many of our restaurants produce sales that were in line or above pre pandemic levels. Despite modest headwinds from winter weather in the presence of omicron in January .
This speaks to the strength of our portfolio of brands and the hard work and dedication of our franchise partners employees. You believe this is just the beginning and we expect this strong performance to continue throughout the year.
In addition, I would like to highlight that this quarter marks the first quarter that includes all of our acquisition activity from 2021, allowing for a better view into a revenue run rate growth.
While we continue to look for tuck in acquisitions, primarily view 2022 is a year to absorb M&A activity from last year, we're excited about the synergies and growth there already deliveries.
Our legacy Fat brands portfolio of brands owned for all of 2021 likes that Burger Johnny Rockets Hurricane Grill <unk> wings saw an increase in system wide sales, 15.8% over the first quarter of 2021.
If we include the brands acquired in 2021, essentially showing how our portfolio is doing system wide sales increased 13, 5% compared to Q1 of 2020 one.
For the first quarter of 2022 same store sales, which only includes those brands owned for all of fiscal 2021 increased 16, 8% over Q1 2021.
Driven by an increase of 41% at Johnny Rockets, and 9.1 presented Hurricane Grill <unk> wings.
Please that international same store sales increased 24, 1% over the same period.
If we include recently acquired concepts in calculating comparable same store sales, we would have seen an increase of 11, 8% for the portfolio compared to Q1 of 2021.
Our top performing acquired brands were twin peaks and round table pizza, which saw an increase in comparable same store sales versus Q1 of 2021 of 24, 4% and 7% respectively. In total comparable same store sales for the brands acquired in 2021 increased 10.
2% versus Q1, 2020 one.
Most notably twin peaks had outstanding performance March marking the 14th consecutive month of positive same store sales post COVID-19 versus 2019.
<unk> same store sales have significantly exceeded the knapp track industry averages consistently over the last 19 months.
It's also worth noting that even with the reopening of dining rooms Liberty sales are showing resilience facilitated by the rollout of all O Captain which is formerly known as hunger both of which are online ordering providers and Shao Lee, which is a third party and online Aggregators you a P O S systems across our portfolio.
Turning now to our organic growth strategy, new construction franchise sales continue to outperform and maintain the momentum. We saw in 2021, there were 27, new store openings across the portfolio in the first quarter of 2022 and 34 year to date.
With over additional 80 locations of new stores expected to open this year.
We continue to build on our growing development pipeline of over 860 locations throughout the world that have signed and paid four agreements in place. So far this year. Our development team has signed its 44 deals representing commitments to build 139, new locations across various brands throughout the world as.
As we've integrated new brands into the Fat family, we continue to see robust demand from our existing and new franchise partners to develop a variety of other brands in our portfolio as well.
In addition, we are also expanding our footprint in nontraditional locations, having just completed the first opening the fabric or at six flags great adventure in Jackson, New Jersey, as well as in 'twenty 'twenty launched largest cruise ship in the world.
Caribbean the wonder of the seats.
Also we have upcoming Johnny rockets and fabric of your locations in the Las Vegas Convention Center, the Excalibur and Venetian casinos in Las Vegas, the soaring Eagle Casino in Michigan.
He and his state University Stadium Reagan National Airport, Bangalore Airport.
And the hotel and capital Park, Washington D C as.
As well in.
In addition, we have new international locations, such as Paris, Mexico City, Morocco, and the Democratic Republic of Congo, All coming soon.
Our factory in Georgia has been able to mitigate the supply chain headwinds faced in recent months and reported Q1 sales of $8 $2 million.
Factory now supplies nearly 1000 of our locations throughout the country and is only running at approximately 30% capacity with therefore tremendous growth opportunity.
A quick comment here on the inflation and supply chain pressures our industry continues to face.
We have strongly encourage our franchisees to take price and maintain their margins in order to keep the business is healthy.
Additionally, we continue to coach our franchisees with every tool at our disposal and how to navigate the supply chain and current economic environment to continue delivering strong results.
Equally important to our organic growth strategy is our second pillar of growth, which is our acquisition strategy.
We have a disciplined and selective approach to evaluate potential targets with a focus on brands with a proven track record of long term sustainable and profitable operating performance in.
In 2020, one we were very active acquiring eight new restaurant concepts with five brands coming through the global franchise group acquisition also in the fourth quarter. We acquired three additional brands, which include twin peaks, there's always in need of grilled weeks.
We were capable of this activity because we have a robust management and systems platform that supports the expansion of our existing brands, while enabling the accretive acquisition strategy and efficient integration of additional restaurant concepts as I mentioned before on the transaction front. Our primary goal to start this year is to digest, these acquisitions and to identify and capitalize on potential.
Synergies.
That being said there are strategic acquisition candidates, we expect to capitalize on in 2022.
That are additive and fit within our current operations and give us the chance to expand our factory business through tuck in acquisitions.
Moving forward, we expect to fund future acquisitions with a combination of cash on hand proceeds from securitization vehicles and potentially tapping the equity capital markets.
I want to quickly highlight two of our most recent acquisitions twin peaks and facilities, both of which closed in the fourth quarter.
To date, we were very pleased with the assimilation of both brands and we were already experiencing significant synergies given our existing infrastructure and purchasing power.
Twin peaks, which we acquired on October one of 2021 you're seeing record sales growth and industry, leading a vs. In the range of five to $6 5 million.
Also of note twin peaks same store sales are among the highest in the polished casual dining category. According to the Knapp track industry benchmark.
I believe we can grow this brand globally at a rapid pace and we were pleased to report that three new area development agreements have been signed thus far in 2022, we continue to expect twin peaks to contribute between 25 and $30 million of EBITDA in 2022.
On December 16th 2021, we completed the acquisition of <unk>, which is today, a 217 store brand from Sentinel capital partners for $130 million. The brand's performance here in 2022 has been in line with our expectations and we look forward to the increased royalties and successfully executing their new unit openings.
Plant.
It was always has a 117 new store development pipeline, which is part of our 860 unit overall pipeline.
Diving in a bit on the synergies, we see significant opportunities to generate savings for our franchise partners given our substantial purchasing power of more than $600 million per year in food beverage and paper costs as well as cross selling opportunities between our now 17 brand portfolio.
On the balance sheet side of things, we are actively pursuing the rating and refinancing of our different securitization facilities, beginning with our fat 2021 and F. G. F. G 2021 securitization trusts we.
We will turn our attention to the other two securitization trusts later in the year.
In addition, we are working with our bankers on the planned redemption of $135 million of our series B preferred stock from the sellers of twin peaks and global franchise group over Q2 and Q3, respectively.
Securitization refinancing and the preferred stock redemption will each provide substantial savings from a free cash flow perspective, the company, including a lower cost of capital and it is a top priority for us.
Turning now to our outlook for fat brands for 2022 we are reiterating our expectations, but system wide sales in fact will rise to over $2 2 billion.
This should bring our normalized post COVID-19 EBITA to an annualized run rate of between 90 and $95 million by the end of 2022.
$15 1 million of adjusted EBITDA in Q1, a big jump from our adjusted EBITDA of $10 4 million in the fourth quarter of 2021, we are well underway to the $22 million to $25 million quarterly run rate, we expect to achieve by the end of this year.
With regard to the pending government investigations I reiterate the comments I made on our fourth quarter 2021 earnings call in March of this year regarding the investigations. There is nothing new to add at this time and I reiterate that fat brands has been told that it is not a target of the investigation.
It remains business as usual here at fat I look forward to putting these legal matters behind us and continuing to grow our amazing portfolio of brands. Our team of more than 20 Senior management members are working tirelessly to move the needle forward and operate our brands with wind at their back. Most recently, we added a new chief information officer, Michael to choose which will really.
Radius for moving forward the technology effort across our brands.
With that I would like to hand, it over to Ken to talk about our financial highlights from the quarter.
Thanks, Andy I'll provide brief comments on our capital structure, and then discuss the financial highlights of the first quarter and then give some insight into our expectations for normalized performance.
As a reminder, reflecting the issuances of new notes in 2021, our securitization facilities totaled $938 $2 million with a weighted average stated interest rate of $6 98 per cent.
Future issuances of our series B cumulative preferred stock and our common stock are available to us, which would provide us with additional flexibility to fund potential acquisitions further reduce our capital costs and drive shareholder value.
Turning to our financial highlights total revenue during the first quarter increased 1365% to 97 $4 million, reflecting revenue from global franchise group twin peaks as always and native growing wings, all of which were acquired during 2021.
Additionally, the ongoing after from the negative effects of COVID-19 was a meaningful contributor to the strong revenue performance in the first quarter.
Costs and expenses increased to $96 9 million in the first quarter.
Compared to $6 $6 million in the year ago quarter.
Costs and expenses in the quarter includes $54 $8 million.
Company owned restaurant and factory operating costs relating to our 2021 acquisitions.
Additionally, these acquisitions contributed to higher G&A expense during the quarter.
Lastly, advertising expense increased $9 $1 million, reflecting advertising expenses from global franchise group twin peaks and as always.
And an increase in customer activity as the Covid recovery continues.
Other expense was $19 $7 million in the first quarter, primarily comprised of interest expense.
GAAP net loss for the quarter was $23 $8 million or $1 45 per diluted share compared to a net loss of $2 $4 million or <unk> 20 per diluted share in the year ago quarter.
On an as adjusted basis, our net loss was $18 $5 million or $1 13 per diluted share.
Compared to $2 million or <unk> 17 per diluted share in the prior year quarter.
Lastly regarding full year 2022, we are reiterating our expectation of total annual run rate revenues of approximately $400 million.
And in closing 2021 was a transformational year for fat brands. This quarter marked the first that includes the operating results from all of our 2021 acquisitions, giving better perspective into our future performance and we believe we are poised for strong revenue growth and EBITDA growth in 2022 and beyond and with that opera.
Later, please open the line for questions.
Thank you Mr cubic, ladies and gentlemen, if you would like to ask a question. Please state your now by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned off to allow us to reach of equipment well pause for just a moment to allow everyone an opportunity to signal for question.
We will now take the first question from Joe Gomes from Noble Capital. Your line is open. Please go ahead.
Good evening, Eddie Kevin and thanks for taking the questions.
Hi, Joe.
So first wanted to start off is that you know that.
First quarter with everything all together here you know how did it come in compared to what your expectations were for the quarter, you know, what what performed better or what underperformed to.
To your plan in the quarter.
Well I think that.
We're very happy with the with the step up in adjusted EBITDA from Q4 to Q1, and we expect a further step up in Q2, so things are really on track for that.
We definitely saw a little bit of weather in the Midwest. During Q1, certainly had a little bit of Omnicom in Q1 that we didn't think we would continue at the end of last year.
So those things caused a little bit of.
A slower sales, but our topline sales exceeded our expectations to start with it just could have been even more if we didn't have some of the weather that we had to deal with and of course, you know inflation is out there we've taken price across the system and encourage our franchisees do the same.
We will see the results of that in Q2 for sure. If you didn't see it in Q1 already.
Okay, one more thing that I would mention one more thing I would mention there Joe is that our franchise sales remain very very strong and so sort of the new store openings and so that's probably exceeded our expectations. Just the continued demand for our new development agreements and new individual agreements from our franchise community.
Excellent.
And speaking of I've been playing she has read the article this morning.
That one of the big wing.
Restaurant companies were saying that wing prices were down roughly 50% year over year.
Are there any are you seeing that number one number two any other commodity type prices. There that you know meaningfully either are increasing or are you seeing some decreasing like the way, they're saying these wing prices are going down.
We are definitely seeing wing prices come down I mean, they they've come down significantly.
10 tens of dollars per case from where they were.
Multiple times like each quarter, they've come down so that's been a big help it we haven't seen that really on the meat side as much as on the on the wing side that we've definitely seen it there.
Okay and.
When you talk about trying to.
Pardon me the re rating of the Securitizations.
You know and hopefully some refinancing there.
With rates going up here given the fed moves.
Do you still think you're going to see significant savings on that and if so what gives you the belief that you will.
Yeah, I mean, we look we have a substantial savings to achieve by getting our bonds rated that'll that'll implicitly dropped the yield quite a bit I'm sure rates have backed up a little bit and they'll continue to back up a little bit but it also has to be tied to the maturity of the different bonds and.
And how you know how long it'll be outstanding so it's not quite as severe but we thought originally we'd see 3% to 4% savings, we might see a little bit less than that maybe 8% less than that but whatever that effect is it still tremendous free cash flow positive and beneficial to us to get these deals are rated and reissued during.
2022, it tastes it saves us tens of millions of dollars no matter what.
Okay.
That's excellent and then maybe you could you could talk a little bit more.
So you don't really do a whole lot there on cash flow or cash on the balance sheet is in you know kind of what what do you see the capital needs here, especially if you're looking to redeem the $135 million of the be preferred for the rest of this year. Thanks.
Sure. So there are really a couple of ways that that will occur we may tap the equity markets at some.
For.
Some additional capital for the redemption, but we believe that in the process of calling and reissuing. The securitization trust there is substantial excess equity available or capital available because of the deals have performed so well and they were originally underwritten and sold with it.
Low leverage rate and using 'twenty 'twenty data and not 2021 data. So if you apply.
Normalized sales 'twenty, 'twenty, one or even 2022 normalized sales and normal.
Normal leverage multiple there's plenty of excess capacity in those facilities. So I'm using those facilities to redeem the preferred is always something that was intended to do and something that we're pursuing but that doesn't mean, we're ruling out using our shelf, which is available to us as well.
Okay, great. Thanks for taking the questions Andy I'll get back in queue, let someone else ask some questions. Thank you Joe.
We will now take the next question from Greg Fortune of private and that's J. Your line is open. Please go ahead.
Hey, Andy head Count how are you guys.
I agree.
Okay.
Andy just one thing because you you just said this a minute ago that you'd tap the equity markets.
Can you clarify many are you thinking about selling common at these levels or is there a level where you would.
Can you just clarify that.
I'm, just saying that it's an available option to us using our shelf, we have a $488 million shelf, that's effective and available should we need to supplement any refinancing and the securitization trusts.
No plans today to do anything, but that's an available option to us.
Okay, maybe I'll ask you. Another question would you sell common at $6.
So I'm not going to comment on a potential transaction under the shelf.
But it's it's something that's available to us.
You're allowed to sell stock at $100, but that's really an issue that will decide at the time.
Based on good market conditions.
Okay.
So I guess, we're a month in a few days into the second quarter and your.
You said that youre going to have a significant ramp in EBITDA.
Is it is it too soon to comment how the quarters going in.
Uh huh.
I guess the numbers have to go up pretty good to get up to that 90 $95 million by the end of the year.
So can you just elaborate on that a little bit we think.
Yeah, we're having a very strong second quarter. We continue to think we'll see a significant ramp ramp something similar to.
What we saw in Q.
Q4 to Q1, I think we'll see them at least that ramp into Q2 and now will continue the business is just.
Building quickly the synergies are dropping into place we've done this before multiple times and so we really don't see any.
Issues adversely affecting it.
There are things we haven't dealt with before and then there's also the opportunity just to grow our factory business, which really adds to that.
Looking forward to doing over the next six to 12 months, but on the synergies themselves in new stores that are opening will go from not just 30, something new stores year to date, but that'll that'll double or triple as we keep going here and that just adds a lot of incremental lending.
Okay, and what percentage of the stores are not franchised.
It's about 5% we have about 125 company owned stores out of 2000, and 360 restaurants at the tiny number in that context, it's a big number in terms of sales because there are approximately 30 corporate down twin peaks 50, southern facilities 33 Hot dog sticks in a few round tables and Johnny rockets, but.
I had a $2 2 billion in sales and there's about $300 million in sales that come from the company Outsources, It's maybe 15% of.
Of the total sales system wide or company owned but it's less than 5% of the unit count.
So as far as inflation affecting the overall system of fat brands, it's not a big it is.
It is a factor, but it's not big at all I mean is that a fair statement.
It will affect us as a franchise or much much less than it would if we were at 100% company owned store business, even at our company owned stores, we've taken price we've encouraged our franchisees to take price and maintain the margin and obviously, we get a royalty based on gross sales so France.
He raises price by seven or 8% as many of them have to.
Adapt for inflation and our royalties will increase accordingly, so you actually benefit at the franchisee level from that.
Okay I just have a couple more Ken maybe this one's for you.
So even though we're EBITDA positive we're still losing money is there a level at what point does the the losses turned to flat or even positive is it a revenue number or is it like what what does that look like.
Yes, I think Greg. Thanks for the question I think substantially it's Laurie and the debt service costs.
<unk> that drops the significant amount of.
Additional income to the bottom line and cash flows.
Yes, we could.
It could be net income positive in.
'twenty 'twenty three depending on the timing and the rate of the securitization savings if not for sure. It would be in 'twenty 'twenty four but it would be a very small loss relative to them.
The losses before that because of the interest expense.
Okay, two more quick ones, Andy I'd, just like to ask this one I just wanted to ask you is the dividend on the common and the preferred something that's safe in your mind.
Yes, we continue to expect to pay the dividend on the preferred and the common.
It helps us and how do you know what prices are going to be buying back.
I'm sorry.
And hope to see some dividend growth during the year okay.
Do you know what prices are going to be paying that.
For the $135 million is that a set.
Rice.
Yeah. So the.
$135 million of series B preferred was issued in the 22 to $23 per share range and we will redeem it at the same price. It was issued at so it'll traded that price of the current trading prices and significant discount to where we will redeem preferred and.
Obviously, it's a bargain today.
Yeah clearly okay last question. So in February we had this this leaked report about investigations et cetera stock was trading around 11 now it trades at six.
As far as I can tell things are only getting better.
Theres not one thing that you said that sounds like it well anywhere but in a positive direction since that time and since even last year.
Do you have any comment about just the stock price or any.
Or any other reason why there hasn't been a recovery other than the possible investigation, which you've said it should not affect the company.
Well you know the certainly the stock price drop occurred.
Subsequent to the.
News story, but you know that if you look across the industry and look at.
Other restaurant franchisee companies out there, there's certainly been other drops in value. So I think you have to really look through those and see if we have a franchise model that is much more resilient to inflation is much more resilient to the current economy, you know who's going to perform better when you look and see you know shake shack.
Starbucks Dine brands, all down 25% to 45% in the last 12 months and I think that's reflective of the industry I don't believe the soft brands would be down that much but not sure that newspapers rate. Nonetheless, it it's a great value here at these levels and the dividend yield is an outstanding here and since the dividend is solid.
I think there's a ton of room for upside.
Okay. Thanks, guys keep up the good work I'm going to step off.
Thank you Greg.
Ladies and gentlemen, once again, please press star one to ask a question. We'll take the next question from Rajeev <unk> from <unk> Financial services Youre line is open. Please go ahead, yes. Thanks, so much just hiking.
And if I can could we talk a little bit more about well about twin peaks since you've got company operated stores.
Of the 30 to 30 company operated and how many franchise why they know how many franchise twin peaks rather at the moment about 60 that are open and a whole lot more on the way those 30, 30, 30 or 60 franchise.
60, 60 franchises 30 company owned stores.
And so.
The recent openings how many of them are company operated.
Twin peaks have opened so far this year and how many are you planning the balance of this year.
Yeah.
Yeah, we have a we have three new company owned stores under development today.
And I think we've opened one new company owned store during the year so far.
Okay.
And how do you finance them to you do you can you can you get third party financing for those or you have to lay out cash.
Two two.
Financing.
They they do require a modest investment.
I think generally you know theyre involved.
Involves acquiring the land and building the location doing a sale leaseback and having a modest investment maybe somewhere.
$1 million to $2 million range into the store, but those stores also generate around $1 billion or more of EBITDA. So you really you know you've got at 40 50, 60% cash on cash return depending on the actual build costs and real estate costs. It's a very good use of capital. We just have to manage it carefully to make sure it doesn't use up too much.
Liquidity, there's also other opportunities of different ways to finance that.
And even reduce that further.
Okay.
And then the largest item on your on your income statement as the G&A, even bigger than the interest expense.
So that the G&A of $31 million is that.
Can we expect that to stay at that level or go down.
Subsequent quarters, what should be our expectation there.
Well I think that you you always want to see your G&A go down and we're not done recognizing synergies of putting the businesses together.
So you know that that is our expectation.
The thing that you have to keep in mind.
Right, because I'm always cautious to make a broad statement like that is obviously, if we make incremental acquisitions.
Or are we open.
Few hundred more stores, let alone 860 more stores, you're going to see an increase in G&A to support those stores and so it's not quite as simple as a is it going to stay the same or is it going to go down right as the business grows it's going to it's going to grow by some amount, although hopefully a lesser percentage. So we think there are additional G&A savings.
From the synergies of the acquired brands that we have not yet recognized we think there's additional revenue growth and of course, the new unit openings are a massive delevering effect for us.
Increasing our EBITDA from this $90 million to $95 million run rate, we hope to hit by the end of the year by another.
$50 million.
With just organic growth dramatically de levers the company over the next few years simply by just opening more stores. So.
We're very focused on getting those stores open and growing the factory business on getting the securitization is refinanced in Dallas and Virginia, the stock because it saves is quite a bit of money from the dividend rate on that stock. So I think we've got a lot of good things going on without even needing to make another acquisition is as I've said before at the scale. We're at today, we do not need to make another act.
Position whatsoever, we just need to build out our pipeline and build out our factory capacity.
In terms of more product to produce there. However, there are quite a few acquisition opportunities I think prices have certainly come down from a year ago or longer because of the general economic environment and the rate environment. So I think that's an opportunity for us.
Thank you.
You're still going to see higher prices for brands that have built in growth that sort of locked in and I think that's where the premium is going to be had and I think you know otherwise I wouldn't see us trying to do a turnaround brand we haven't done that in a long time I don't think we do that again, so I think there's a real opportunity for tuck in acquisitions that give us manufacturing business that.
That are easy to recognize synergies on our we don't need to do heavy lifting and we wanted to see brands, where there's an opportunity to have our franchise sales team and our development team construction team rollout new units just as quickly as they can because the franchisees are ready and they have plenty of capital available despite the rate increase to get.
More units open.
Okay, well, so what I was what I was hoping to conclude is that excluding any major acquisitions G&A expense as a percentage of total revenues.
Can we expect it to come down over time.
Yeah, I mean, theoretically you're 100% right Youre, 100% right. It's just a function of if we build more company owned stores it might it might.
Go up as a percentage of revenues, yes, it should come down but in terms of leveraging the platform, which is really leveraging the platform. It is a percentage of.
You've got you've got some margin opportunity.
So the bottom line. This system grows with G&A will grow percentage wise as fast as the as the top line as well.
Absolutely right that's right.
Great.
Lastly for the moment.
Have your franchisees been inhibited in terms of their opening pace because of his supply chain delays that we're all reading about.
So there's always a little bit of slippage. When you have this kind of you know inflation situation, where they can't get equipment, they can't get refrigerators, and freezers or certain other equipment delays, it's really modest if we will have some units that slipped into Q1 of 2023 that we would've hoped to get done in Q4 of 2022.
That's just something you see out there, but where we're gonna hit well over 100, new stores. This year and we just have this huge pent up demand and pipeline.
800, I mean, it's 33% unit count growth.
So franchisees are active and we're doing everything we can to help them get open and find locations and there's also the labor issues have you just got to find the staff to hire and train and get the stores opened so all those things play into it the business is really good we're seeing it.
Very solid demand everywhere customers are out and coming into restaurants, there's still delivery going on on the <unk>.
Sports bars are packed with people and and and packed with new openings hitting big numbers I mean, even though our <unk> are five to six and a half million a lot of the new stores are well above that.
And we're excited about that for US. All these has just been a blockbuster concept in the Midwest with drive through 99% drive thru I was taken a price increase there, which I think was needed and it was.
Very active development pipeline and then you've got brands like fabric and Johnny Rockets, which have 300 of the 860 units in their pipeline to build and you have your special venues you know coming out of the woodwork to say Hey, we want one of you guys in a location like the casinos or the cruise ships in airports and things like that so I think there's a real opportunity to.
To accelerate those brands and those are easier to get opened I mean building a twin peaks as the $75 million of enterprise building, a fabric or a giant rockets can be four to $500000 in it would be pretty quick. So you know that's part of the velocity right.
Relative to the Johnny rockets existing system.
Presumably there's still.
Some locations still closed in Europe .
How does that stand.
We have a very small number of Johnny rockets still closed on South America. Some some markets Asia in some markets and I don't think there's anything still closed in Europe , but we're I think we're open everywhere there, but it definitely south America's had some closures.
That brand you know, we're rolling out a 200 and so our partnership with Qdoba in the middle east involving fabric or and angina.
And Johnny Rockets, and there's a real opportunity there to get brick and mortar restaurants built get additional ghost kitchens built I think that.
We're excited to see Johnny rockets, I mean, it's done really well it was a.
Significant opportunity to buy that brand during the pandemic before there was a vaccine and add that to our.
Portfolio and really haven't missed a beat with that acquisition.
Alright, thanks very much.
Thank you Roger.
Ladies and gentlemen, once again, if you have any question. Please press star one.
Once again please.
Please go ahead.
Yeah. It looks like there are no more questions then I would like to turn the call back over to Mr. M. D V. The hawk for his closing remarks.
Thank you everyone for joining today's call I would encourage you to listen to my interview.
The corporate competitor podcast interview on Chief Executive magazine, or Chief Executive got net it's a really good piece, explaining a lot of customer focused mindset and tips I think you'll find it very interesting enjoy your evening everyone. You may now disconnect your lines.
Thank you everyone for joining today's call enjoy your evening you may now disconnect your line.
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