Q3 2022 Kura Sushi USA Inc Earnings Call
Good afternoon, ladies and gentlemen, and thank you for standing by welcome to the Cure Sushi USA, Inc. Fiscal third quarter 2022 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 Jamie Hooper, President and Chief Executive Officer, and Benjamin Bray, Vice President Investor Relations and business development.
Now I would like to turn the call over to Mr. Corey.
Thank you operator, good afternoon, everyone and thank you all for joining by now everyone should have access to our fiscal third quarter 2022 earnings release. It can be found at www Dot dot com in the Investor Relations section.
A copy of the earnings release has also been included in the 8-K, we submitted E C.
T.
As we begin our formal remarks I need to remind everyone that part of our discussions today will include forward looking statements as defined under the private Securities Litigation Reform Act of banking 95 East.
These forward looking statements are not guarantees of future performance and therefore, you stop at 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 refer all of you to our SEC filings for more detailed discussion of the risks that could impact our future operating results and financial condition.
During today's call, we will discuss certain non-GAAP financial measures, which it believes to be useful in evaluating our performance. The 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 in our earnings release.
That out of the way I would like to turn the call over to Kimi.
Thank you Ben and thank you everyone for joining us today.
It hasn't been a period, where they got to see how rapidly and completely although picking up how did he come out. He is the most challenging to date of the pandemic.
You haven't seen it yet I'm just curious on what cuda.
You can contact me at least pretty soon and we are performing better than ever.
It's a challenge that's Colby presented artisan agree prohibit it could be an opportunity for us.
And much stronger than we have.
How did you imagine when we are in the peak of the pandemic and I'm, So proud and grateful for everything that all of our team member at the time you make a disposable.
No that's good.
A full month of most recent quarter and why we think yeah on Sunday.
Well, even greater interest income.
The strong sales momentum when the alcohol blah blah, if he's got it yeah. Okay.
The third.
Third the quota.
Once again has proven to be a nickel to pay this quarter for the company.
As compared to three about three pounds and he's got a 2019 results.
Comparable sales growth quarter.
Of course that was 28, 3%.
And I think the ear company, though again, although if he's got it what do you want to have the quota.
Comparable sales grew by.
Like 60, 65 point that people think.
With that we are looking at that after a year or about <unk>.
Many.
Although comparable instead its little has been spectacular.
Anthony comedy in our California market.
Especially pronounced inside the quarter comparable comparable.
95%.
As compared to two <unk>.
He won't be better.
Fixing as I say that the impact of dining room set each song.
The previous year.
During the same period.
Any bad Daddy three point of express and compatible with it it's a little of.
Compare that to our 2021 without.
Have you seen already or when he sees the data here in the.
The quarter was one.
One 3 million dollar.
Three 5% almost favorite mix.
It's great to see such strong any company across the board.
In spite of ongoing inflationary pressure.
Consumer sentiment what could a fishy you.
You mean extremely strong as demonstrated by all of you sent them back.
Although a typical customer of higher income.
Oh excellent the body for a bunch of them.
We are seeing continuing to things.
Inc, and check sizes continues to grow.
I'll say it is a hallmark of the end of the summer continue to be very strong with June .
June Baby and you trade at one point several medium bottle.
But much of the ethanol industry has been facing headwinds in terms of stocking on the inflation.
I'm extremely pleased that they say that he has been lucky yeah, and believe that we continue to ultrahigh uniquely pretty minutes without these macro pressure.
Well of course, as a percentage of a pen or the foster hospital, he's got it yeah, well at 30%.
Marking an all time best in corporate history.
But if we have them be integrity freeform quantity Krishna.
Taking a breath in conjunction with these smaller practices.
Allowed us to offset commodity inflation.
As a percentage of sales.
At least I have thought about 30 basis points in the third quarter.
As a percentage of sales.
But isn't running at 31%.
Presenting a sequential improvement of 210 basis points almost the entire quarter.
Do you feel like the video side.
Why do we had previously faced and stuffing headwinds.
These are the only corona related stuff for quite unchanged on the quarter.
We are pleased to say that he had no such issue wedding or for the quarter and we remain very close to achieving optimal I. Thank goodness.
These combine to <expletive> that how would you sort of get the interest around maybe the operating profit margin of 22 point like I said.
Presenting 470 basis points of margin expansion.
Due to the prior quarter.
The 210 basis points compared to the same with videos.
The next fiscal year 2019.
Yeah, you mean ample opportunity for margin to exceed 20%, we've historically achieved refunded.
Turning to development, we opened one unit you went into the quarter you know a new market.
Talking about the TSA.
We are very encouraged by what that Ali performer.
As little of the Canadians are things or I don't know if he's got a 'twenty openings.
In terms of upcoming openings.
Expect although nobody left for them to open in the coming weeks.
To close out although he's got it yeah.
A total of eight new restaurant openings.
We expect the remaining school, what's under construction to open in fiscal 'twenty three.
No it sounds good and update on recent injection.
In past earnings calls I have mentioned on the topic.
And he put on the two companies with a system wide rollout, although what Starbucks they've just had the payment and touch upon an ability or the system by the end of it I think about it yet.
I'm proud to say that yeah, I had scheduled and adopt the complete it.
Although at the end of May.
As we previously mentioned yesterdays phone on the inquiry defunct.
Phenomenal.
Hello Bucks Carla a great addition to the correct stadiums and what the focus of our recent marketing campaign.
Now that you've completed the Lula Alto, Kansas City Egypt.
I'll give that to discuss what we have coming out of our pipeline.
Yeah in the purpose of upgrading or either ecosystem through our partnership with wisely.
We hope to improve the guest experience until at least at least some dates associated with our long guns.
We are also in the book is moving really Gotta keep pep at home to the punch.
Or do you have the name basketball base is now up and watching how some of your member and by moving to more living because it's a more cooperative punched out of home media.
Have you considered he begins.
And look at other even benefit.
You've had the program jump ball.
We expect them to implement these initiatives relating to the huff parcel off over the upcoming if he's got it yeah.
As I kind of look at what I think of approximately 6% although up in July .
Although the mine up but I think I definitely we took three months well enough to offset inflationary pressure through the thought.
For the quarter.
And that's a month over month inflationary trend through the quarter, including a minimum wage increase in our California market.
He did eat is 6% is appropriate considering the exit in Nevada, we continue to put up like maybe that's even a few of our competitors.
They said he is over in the first place.
He will also be lapping our pricing to eat in I believe September .
Quaint ethics stupid pricing it'll be at 1.8 Department.
Okay I'll do that.
Extend my thanks to all of our team member in our restaurant.
Couple of sinter.
The hard work they put in every day into leasing.
That could assist you in such a space out of context.
And we stuck out of town at all but two of them would equally you're stuck with a financing.
The liquidity yeah.
Yeah.
Thank you Jamie.
For the third quarter total sales were $38 million as compared to $18 5 million in the prior year period comparable sales growth as compared to the prior year period was 65, 3% with regional comps 95, 5% in California, and 33, 6% for taxes.
As compared to our pre pandemic results of the fiscal 2019 third quarter, our comparable sales growth was 28, 3% with regional comps of 18, 2% in California, and 45% in Texas.
Turning to costs food and beverage costs as a percentage of sales were 29, 7% compared to 31, 7% in the prior year quarter due to pricing taken at the start of the fiscal first and third quarters and higher food spoilage costs in the prior year, partially offset by food cost inflation.
Labor and related costs as a percentage of sales increased to 31% from eight 9% in the prior year quarter due to the lapping of the employee retention credits recognized in the prior year.
Excluding the impact of the ERC in retention, new hiring bonuses labor and related costs as a percentage of sales in the prior year quarter would've been 36, 6%.
The year over year improvement in labor and related costs as a percentage of sales. Excluding DRC was due to higher sales leverage partially offset by increases in minimum wage.
Occupancy and related expenses as a percentage of sales improved to seven 1% from 10, 2% in the prior year quarter, primarily due to higher sales leverage.
Other costs as a percentage of sales decreased to 11, 5% compared to 14, 7% in the prior year quarter due to higher sales leverage as well.
General and administrative expenses were $5 9 billion compared to $4 $3 million in the prior year quarter, excluding the impact of the ear and you recognized in the prior year quarter general and administrative expenses would've been $4 $8 million.
This increase was primarily due to compensation related expenses as we made investments in our team to support our accelerated growth plans, partially offset by a litigation accrual in the prior year quarter.
As a percentage of sales general and administrative expenses were 15, 5% compared to 23, 2% in the prior year quarter.
Operating income was $473000 compared to operating income of $866000 in the prior year quarter.
Excluding the impact of the European litigation accrual in the prior year quarter operating loss would have been a negative $4 $4 million.
Income tax provision was a benefit of $2000 compared to an income tax expense of $30000 in the prior year quarter notes that we expect to continue to incur a nominal income tax expense irrespective of our pre tax income or loss as a result of a full valuation allowance against our deferred income tax assets and incurrence of minor income taxes payable at state level.
Yes.
Net income was $477000 or five cents per diluted share compared to net income of 70, $770000 or nine cents per diluted share in the prior year quarter when adjusting for the E. R. C benefit in litigation accrual in the prior year quarter. Adjusted net loss would have been $4 5 million or negative <unk> 54.
<unk> per diluted share.
Restaurant level operating profit as a percentage of sales was 22, 5% compared to restaurant level operating profit as a percentage of sales or five 8% in the prior year quarter.
Adjusted EBITDA was $3 2 million compared to a negative $2 $6 million in the prior year quarter.
Turning to our cash and liquidity at the end of the fiscal third quarter, we had $36 million in cash and cash equivalents and no debt.
In light of our fiscal third quarter results I would like to provide the following updated guidance.
We expect total sales between $137 million and $142 million.
We expect general and administrative expenses as a percentage of sales of approximately 16, 5% and we expect the opening of eight new units with net capital expenditures per unit of $2 $2 million now I'll turn the call back to Jimmy.
Thank you Ma'am. This concludes our prepared remarks, yeah, no happy to answer any questions you have.
Operator, please open the line for questions.
As a reminder, during the Q&A session I may answer in Japanese before my response is a profit ATP into English.
Yeah Lisa.
And at this time, we will be conducting a question and answer session.
Ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
One moment, please while we poll for questions.
Okay and our first question comes from the line of Jeremy Hamblin with Craig Hallum Capital Group. Please proceed with your question.
Thank you and congratulations on the strong results.
Wanted to focus first on your restaurant level margins of 22.5% I think is a record for the company.
You know labor down, 31%, and obviously youre doing that in a fairly high food and labor inflation environment. So I wanted to get a sense of the sustainability of those margins.
How much of the improvement in labor is a reflection of the price increases versus.
The use of a box.
Bob.
Hi, Jeremy this is been a great to.
Talk to you.
In terms of.
Pricing, we really use pricing to manage our.
Prime cost of Cogs and labor that that's really why we've been able to keep it so consistent over the last three quarters in terms of the improvement to our restaurant level operating profit margin that would be a function of.
Uh-huh greater sales leverage part of which would be the curb.
Okay.
Got it.
And then just in terms of.
You provided some color on you know back in April on your March sales trends I think you did about $12 5 million in the month of March.
It looks like it kind of sustain that those trends in April and may but in terms of looking forward here to this the kind of implied guidance for Q4, it looks like you've seen some acceleration in productivity typically Q4 has your highest average unit volumes.
Can you give us a sense of what you've seen quarter to date, thus far you know and how much of the.
The increased guidance is reflective of the price increase.
Sure in terms of June results as Jimmy I discussed in my opening remarks, we had a $12 $7 million in revenue.
That is that would it be the run rate for the remainder of the quarter that would be the sort of the lower end of the guidance in terms of.
Seasonality Q4 is certainly the strongest quarter that we have you can see that effect.
Every meaningfully in <unk>.
Pretty much every year.
Hi.
July and August are the.
That's really when the summer it begins to ramp up and so we do expect improvement over that 12 seven that we saw in June which is what gets us to the higher end of that guidance.
I didn't mean, but he thought I don't need it.
I cannot explain yourself when you thought I mean speaking Japanese things goes on top of it.
Well most of you've got the what's the hit and Miss It on the Q3 took whatever did I give you a whole lot. He's not even told my board. Thank you buttonville uplift through the cable like my hope quite a lot of what I had look button panel, but I think with a tunnel that took anything I'll. Let me go to make up the total amount of a lucky about.
Right.
And then my follow up for me again, you guys thought that the body on all but you don't like it.
Okay.
So forgive me if what are your guy needs to put up an all day monster they can't be understated.
Julien when you're putting them onto the effectiveness.
To give you some additional.
For a granular detail historically the sales improvement in Q4 relative to Q3 has been five 9% and then we took an additional 6% price in July and so that gets us higher up in that.
Guidance range that we get and then we have a number of other things that are in play as well conserved units layer collaboration campaign, which if it proves as successful as we hope it will be then that would get us to the high high end of that guidance.
Got it that's that's great color one last follow up here in terms of where your average volumes versus kind of pre pandemic levels.
I calculate it's up about 25% in the may quarter versus what you were generating.
Three years ago.
Can you give us a sense for the components of that you know how much of that is.
You know average check change versus transactions.
Sure. So if you look at a three year stack going back to fiscal 19, which as you know our pre pandemic comparison, the effective pricing is a little over 22% our comps over that same period or 28, 3%.
Still not 100% back to pre pandemic traffic and so that.
That offsets a little bit, but the rest of it would be it.
Organic ticket growth just from people eating more place than they used to.
Got it thanks, so much for the color guys and best wishes.
Thanks, Terrence you hear me.
Our next question comes from the line of Sharon Zackfia with William Blair. Please proceed with <unk>.
Hi, good afternoon I.
I guess I just wanted to follow up on the restaurant level margin because it was a very impressive metric.
And I understand the sales buybacks component of it but can you talk about structurally do you think there is a change in where your restaurant level margin can settle out now and over the next maybe three to five years.
And I'd also be curious to.
Here your thoughts I'm, sorry, if I missed this on development for 2023, particularly as it sounds like maybe a one or two locations might have slipped into 'twenty three.
Sure. Let me answer the second question first so you are right. We did tighten our guidance from eight to 10 units.
So eight units and so those remaining two units we expect to open early in fiscal 'twenty three.
Excited to provide more granular guide.
Guidance in terms of organic growth expectations for fiscal 'twenty three.
The Q4 earnings call or our next earnings call, but what we can say at this point is that since going public. We told the street that we expect to maintain a 20% unit growth CAGR and we absolutely expect the same.
For 2023 with that 20% as a floor in terms of the restaurant level operating profit margin expectations. It's.
I don't have a crystal ball for five years in the future, but just looking at the trends from Q1 and Q3 I think you could certainly are expected.
Right.
For restaurant level profit operating profit margin. We don't think this is a flu does it continue into the next fiscal year.
Okay, and then just a follow up it sounds as though you feel very confident about the cadence of your business and clearly that's the fourth quarter guidance implies such and are you seeing any signs of your customer weakening at all or anything on the margins that were kicked out.
The trends Youre seeing right now might not be sustainable.
Another thing.
I'll go out on a well.
Well. Thank you mentioned about dawn, if you don't think I'm ready to put on a organic Illinois.
Yeah.
And you can get out of getting a lot more kidney toxicity establish the IBD chiquita, you'll think you'll button on it but it isn't like that's all I'm going to get completed in total I'm looking at my phone I can do you feel about your vote on all that somebody put it automatically put them all.
My goal as I spoke to the English kind of physical subtle.
Most of the chip let me go in they go live in Q1, when I put all those topics demo killed them silicon and profit Sunday minus probably they will often below the input. It was still on day, one of the probably come up at all.
We didn't see a related comorbidity.
But the big enough that you don't need to eat what they know today opinion uncollectible.
And the last one.
So we've been extremely fortunate in that we really haven't seen any sort of softening interest.
<unk> sentiment one of the things that we found most encouraging was that.
Our our merck's pricing of one 8%.
Significantly outpaced by check growth of four 9% over that same period between Q2 to Q3, and so we know that our guests are not managing their tech sizes.
I think that's a great indicator that we have yet to hit any sort of consumer elasticities, pointing that that gave us a lot of comfort about that that 6% that we decided to take it getting a July and looking at or traffic rates were really Q3 was pretty much in line with Q1, which was exceptionally strong.
And certainly better than Q2, which had those omicron headwinds and so yeah.
In terms of customer sentiment, we feel that we're in a very very fortunate position.
Okay. Thank you very much.
Thank you said al Thanks sure.
Our next question comes from the line of George Kelly with Roth Capital. Please proceed with your question.
Hey, everyone. Thanks for taking my question.
Congrats on a strong quarter.
The first one is did I hear you right that you are contemplating taking pricing again in September as well.
No just to clarify that that was just referring to the September 2021 pricing. If we were just mentioned get we'd be lapping that price in two months. Okay. Gotcha, and then still on pricing I mean, I understand that it's a challenging environment as far as labor and food cost.
And everywhere, but you just generated such a strong.
Four wall margin in the quarter and here you are taking another 6% pricing and I understand that your consumer is showing no signs of it.
Hesitation or it doesn't seem like you've hit a ceiling, but I guess the question is just a higher level, one which is why continue to kind of push.
Margin through pricing.
And.
But.
If you can just talk sort of directionally.
Should we expect more going forward or.
It seems like maybe you changed your thought process on the opportunity around pricing.
Sure in terms of the.
Our decision for that 6% in July this is really reflective over are reflective of the month over month inflation that we saw through Q3 and then into June .
You look at you know our past.
Quarters through fiscal 'twenty, two you can see that our.
Prime cost structures stayed very very stable and so basically that.
That's to say that our SG&A team has done a tremendously good job in terms of forecasting inflation for the upcoming period and that's what we've done for July as well the goal isn't to drive margin by taking price. It's really just to keep our labor and Cogs consistent so gross margin is more from.
Just great ourselves leveraging a combined with that seasonal.
Boost that we get.
Okay, Okay, great and then.
Last one for me I think.
You mentioned a couple.
<unk> of initiatives Youre working on and expect to implement in the first half of fiscal year 'twenty three I missed the first one could you just walk through what that debt longer term initiatives and that's all I had thank you.
Sure.
Funky.
Okay.
Yeah.
So I think youre talking about the way it was improvement searches that correct Yep Yep I think that was it okay.
Okay, great. So just to give you. So we've been very happy with the waitlist stopped it served us very well, but we know that we can get to a greater level of.
Accuracy in terms of the wait times the algorithm that we use is pretty.
Pretty straightforward it doesn't really take historical behavior into account and so just to give you an idea let's say.
You know, we're an hour before closing but.
The wait time says there's a two hour wait naturally youre going to have a lot of people drop off because you think there's going to be able to get a seat, but then because those people have dropped off the waitlist.
Also there was the wait times should also shrink.
Because those people have already left that traffic that we can capture and so on.
Incorporating these attrition rates around especially shoulder periods and stuff like that do you think that we'd be able to see a couple more people per day and certainly you know just having a more accurate tide is better for the consumer experience.
Okay understood. Thanks.
Thanks, George Thank you Doug.
And as a quick reminder, if anyone has any questions you May press star one.
On your telephone keypad to join the question queue.
Our next question comes from the line of Andrew <unk>.
With bank of Montreal. Please proceed with your question.
Hi, This is Daniel on for Andrew.
I just had a question on off premise I was curious where that mix is standing now.
Maybe offset some.
Information on the drag or outlook.
Sure off premises mix was three 5% of sales in Q3 or about $1 $3 million. That's on a dollar basis very very close to what we had in Q1.
So that that lower mix is really just reflective of greater revenue total in terms of our expectations for the future. We think this is in line.
We think this is appropriate.
Off premises is gravy for us, we're basically hitting our kitchen capacity limits and so there was a point were trying to push additional off premise. This is no longer incremental in terms of our topline and bottom line growth. The opportunity is vastly vastly greater just unit growth and so for the foreseeable future, we're gonna be putting our energies is.
A company into just growing our unit base as opposed to trying to deliver additional.
Additional off premise sales.
Got it and what have you are also able to provide any color on where your pipeline is right now.
Sure. So so we're we've got three units we expect to open in July and August and then to early in.
Fiscal 'twenty three but in terms of any further details on that.
We're going to wait until the next quarter.
Our guidance update.
Got it thank you.
Yeah.
And our next question comes from the line of George Kelly with Roth Capital. Please proceed with your question.
Hi, everyone just one more quick one for me.
Can you remind me when you open a new restaurant like Youre doing three here.
Last quarter.
How much.
Pre opening marketing expense and training and all this kind of stuff like what is it.
Iraq opening a restaurant.
Although all at temple marketing reps, calling on a whole any kidney pumping up against what or what else do you want to get them on the digital marketing gets thrown at it that's about him.
I'd have to get out of a small on a couple of thousand a couple on them.
It's a whole lot of it at all on the marketing defeated although although it looks like you thought you could do something with it but we don't need to put on a marketing both I and I got him on open I'm going to let it take Wilson with multiple market almost a month.
And back them up.
And you might get them a bylaw.
So commodities open simultaneously, what about and hope it isn't simply put.
Put them all on Osama different I put up there.
I don't know if I'm putting into video opens it will take place.
One of those.
I am looking at are Preopening marketing fees, it's pretty insignificant, we don't do anything like Big AD buys no TV campaigns.
Television commercials, we focus mostly on digital and then leveraging local media.
The spend could be.
It's pretty insignificant.
In terms of it.
We think that you know.
Sorry did I hear you right. When you said it was two to $3000 per store or $2 20 to 30.
Yeah.
Yeah.
Yeah, So 20 to 30000, which obviously is not a very big spend but just given how strong or openings continue to be in spite of in place and we think that spend rate is appropriate in terms of pre opening labor costs or operations are very simple and automated as you know and so the trading periods very truncated wary.
To open pretty rapidly following our final inspections and approvals and so because of that trading period is short preopening labors is I imagine substantially Westwood a comparable casual dining restaurant.
Okay. That's helpful. Thanks.
Thank you.
Thanks George.
Our next question comes from the line of Jeremy Hamblin with Craig Hallum Capital Group. Please proceed with your question.
Thanks for taking the follow up.
So I wanted to get an understanding rather than asking about the number of units on a go forward basis I wanted to get a better understanding of the type of unit and potential size that youre looking at I know.
You know that the Watertown, Massachusetts has been great, but I think the San Antonio location has been off the charts and maybe a challenging for the best unit you have in the system, but in terms of thinking about the square footage.
And wait times and so forth are you thinking about having a slightly bigger footprint on a go forward basis, given where demand is.
Any color you can share on that would be great.
Although I'm up almost like you know muddle Hinton until cleanup I think one must it cause then qualify key a couple of them. They tell me Peter O'connor demand doubled up when you talked about.
But it looks like its picking up till then and I'll talk about what kind of size those little things in particular.
Although what are they all on all saw development, then I'll stop the multilingual hub and predictive modeling.
Although not all of them all on all study, albeit somewhat they get attainable.
So I guess, we'll get them in front of them imagine that philosophically.
Philosophically I don't I'll save the demo, especially beginning Kessler I'm guessing you're talking about something.
At the bottom of it.
It sounds funny about that still must be the margin I'll say more so now than you might see formidable Kumar Piper.
And of course, he bought it on a.
The Honeywell among them.
All right.
Wait, let's get on with it.
My telephone like amount of index, where they get it they have to go month to month.
Okay, well, thank you for commenting on what her time at San Antonio we couldn't be prouder of those locations. We've mentioned this in past calls, but the vintages in fiscal 'twenty, one and 'twenty two have been the best vintages, we've ever put out and so we've been very pleased by the strong performance.
There's very strong demand within one of those within a given market and there happens to be a larger box that's available in a great site location within that bucket, that's something that we would consider taking but we've always thought of our box flexibility is a huge competitive strength. We don't have a set prototyping you don't have a set square.
Footage, we're able to look at the entire.
Country, and just identify sites that mirror best successes, and then SEDAR SEDAR concept into those spaces and Thats what are the reasons that we've had such strong.
Such strong unit economics, one one other thing is that we it regardless of the size or are you just could be highly successful we could have a smaller unit that maybe has a lower <unk> than the system average, but the cash on cash returns for that unit or could it be just didn't.
Just as strong as the system average or even stronger and square footage doesn't necessarily.
Correlate one to one with higher sales for for example, our Fort relocation is actually lower than.
The system average, but it is in our top three performers and so.
The bigger factor really here is just the quality of the site selection more than the square footage.
Got it then.
I can now target the question in a slightly different way in terms of thinking about your your occupancy cost, which pre pandemic, we're right around 7% I think before you Republic. They were closer to 6% do you have kind of a target range are you looking to be back in that six to seven.
Percent on a longer term basis.
Or how do you think about that.
So that's six months sent goes.
Hello.
Okay, and what about it.
Jumping I don't want to put business wants to go to open I mean, if they can all bulking up the hill just won't get any time that you came up with it.
They are getting a pick up or stable footing on our coastal to call myself I didn't quite get you can last thought that most of that up with a state stupid here, but I did get enough data.
I'll make it must be unethical.
They get them, but you must be thinking about I don't know if that's what I'm guessing. He found wasn't there like any catalyst that would it just don't give me another tunnel I'm, hoping I know you had seen dental plug it in on a Monday.
So when you think about our units Holistically whenever we do a go no go decision.
With real estate committee in terms of opening any new segments, we evaluate a pro forma do you expect it.
Financials for that unit and really the single most important metric that we spoke decided it's all cash on cash return and so there might be a location that has higher rent, but its an AR.
Lower labor market with higher earnings or whatever.
We look for a unit that can deliver the cash on cash returns that were accustomed to and so.
Rent is just a part of that.
So we don't necessarily have a target for rent, it's really more our expectations for.
All of the cost items.
Great. Thanks, so much for taking the additional questions.
Thanks, Jeremy.
And we have reached the end of the question and answer session and this also concludes today's conference and you may disconnect. Your lines at this time thank.
Thank you for your participation.
Yeah.
Okay.
[music].
Okay.