Q3 2022 FAT Brands Inc Earnings Call
Good afternoon, ladies and gentlemen, and thank you for standing by welcome.
To the Fat brands, Inc. Third quarter fiscal 2022 earnings conference call. At this time, all participants have been placed in a listen only mode. Please note that this conference is being recorded today October 22022 on.
On the call today from Fat brands are President and Chief Executive Officer, Andy <unk>, and Chief Financial Officer, Ken cubic by now everyone should have access to the earnings release, which can be found on our investor Relations website at IR Dot fat brands Dot Com and 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 those indicated by these forward looking statements due to a number of risks and uncertainties the company.
Does not undertake to update these forward looking statements at a later date.
For a more detailed discussion of the risks that could impact future operating results and financial condition. Please see today's earnings press release, and our recent SEC filings.
During today's call the company May discuss non-GAAP financial measures, which it believes can be useful in evaluating its performance. The presentation of this additional information should not be considered in isolation, nor as a substitute for results prepared in accordance with GAAP.
Reconciliations to comparable GAAP measures are available in today's earnings release.
I'd now like to turn the call over to Andy We don't Ward, President and Chief Executive Officer.
Thank you operator, and Hello, everyone. We sincerely appreciate you joining us today and for your interest in fat brands.
This afternoon, we made our third 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 Dot com each.
Each contain additional details about the third quarter, which closed on September 25th 2022.
I would like to start by thanking our entire team who worked so diligently as we continue to scale this business.
Due to the hard work of our team members franchisees and their employees that we move forward with confidence in the long term opportunities for Kathryn.
Let me also note that this month, we celebrated our five year anniversary of becoming a publicly traded company on the NASDAQ.
I couldn't be prouder of where we are today back in 2017, we launched fat brands with the goal of becoming a global leader in the restaurant franchise in space.
What started as just got Burger under our ownership 20 years ago has grown to a 17 brand portfolio company with over 2000, and 350 locations and 760 franchisees around the world in over 40 countries.
Also we have more than 325 multi unit operators operating anywhere from 2% to 75 restaurants. This is truly impressive and we're just getting started.
Now I'd like to discuss our recent performance we.
We reported total revenue of $103 $2 million in the third quarter of 2022 compared to $29 8 million in the third quarter of 2021, a 247% increase a significant increase in revenue was the result of our 2021 acquisitions, coupled with ongoing sales recover.
From the negative effects of the COVID-19 pandemic and the prior year.
Comparable system wide sales increased 7% year to date on a pro forma basis, including all of our brands acquired it's 5% year to date.
System wide sales grew 540, <unk> grew to $548 2 million or about 57% when compared to the prior year quarter of $349 8 million.
Year to date system wide sales increased two 1 billion $623 9 million.
For the full fiscal year 2022 we remain on track to deliver an annual run rate of approximately $400 million of revenue and system wide sales of over $2 2 billion.
Our sales remain resilient in this economic environment due to our diverse portfolio of brands with average checks ranging from approximately $8 to $37.
Our topline growth was matched by a strong increase in adjusted EBITDA.
EBITDA increased to $24 $6 million in the third quarter and year to date $69 $2 million.
We expect Q4, adjusted EBITDA will be similar to Q3 for an annualized run rate adjusted EBITDA of approximately $90 million to $95 million for fiscal year 2022.
At that brands, we continue to execute on a two pronged growth strategy, consisting of organic growth and growth by acquisition.
While our acquisition activity has gained significant attention over the last few years as we've acquired nine brands in a two year time period, our organic pipeline is equally impressive.
During the third quarter, we opened 38 restaurants, bringing our year to date openings through tomorrow to over 100 restaurants, we plan to open 25, more restaurants before yearend, bringing us to approximately 125, new restaurants. This year, a new opening milestone for tablets.
Looking to our 2023 restaurant pipeline.
We'll continue this robust growth as we already have more than 90 additional units under construction and anticipate we will open between 130 and 150, new restaurants in 2023.
To further fuel this growth at the end of August we hosted our biannual franchisee summit in Las Vegas, with our franchisees suppliers and key stakeholders.
This was the first time, we hosted an in person event for our franchisees since the pandemic yet and the first time, we held all of our brand partners together in the same place the energy level and the enthusiasm couldnt have been higher.
At the summit, we offered incentives for franchisees to buy additional units and signed over 150, new development deals.
We now have agreements in place for over 1000, new franchise restaurants, which represents 43% unit growth and will provide us with an estimated $60 million in incremental adjusted EBITDA of approximately 66% adjusted EBITDA growth over the next few years organically.
And while the summit was a financial investment and this happens we expect to see a significant return on this investment I E. A substantial increase in royalties due to the number of franchise agreements signed in conjunction with this investment.
We also made an exciting announcement regarding our community involvement.
We're always looking to make an impact in the areas in which we operated we've decided to take this step further and the newly formed backgrounds Foundation 501 C. Three organization was announced mission of the foundation is to change lives by supporting local causes that uplift and unite fat brands communities, we will look to partner with local nonprofits to provide.
Central programs to help families and communities thrive we've seeded the foundation with $125000 for 2022 and $125000 for 2023, a total of $250000 to start things off.
Franchise partners and their employees, our corporate employees and our brand partners can all contribute as well Pat branches covering 100% of the administrative cost of the organization. So 100% of the money goes to the beneficiaries. We look forward to sharing more details on this in the coming weeks.
Now back to a growth pipeline, we are seeing significant franchisee interest across our diverse portfolio of restaurant concepts in our polished casual segment at twin peaks, we plan to open our 95th restaurant by year end with over 100, New twin peaks remaining in the pipeline next.
Next year, we plan to open between 15, and 20, new twin peaks with a similar number of new stores opening each year going forward for the foreseeable future.
This is a high growth brand with very strong margins and extraordinary average unit volumes, our newest class of twin peaks stores have approximately $6 million in average unit volumes a significant focus for 2023 is to accelerate the opening of stores in our pipeline as the equipment supply chain pumps. The sooner those new stores opened the sooner we received royalty.
11.
In the fast casual Burger category, we have deals for over 350, new fab burgers, and Johnny rockets, both domestically and internationally and.
And speaking of Fat Burger last week, we earned the prestigious honor of being ranked the number one fast food Burger in the country by Los Angeles Times speeding out 22 other top chains.
He was our business also has a solid pipeline of more than 400 restaurants, especially yet there's always round table pizza, great American cookies and marble slab premiums.
We also continue to play into the synergies and the nature of our portfolio with co branding offerings Cobra and he is a great opportunity for us to drive sales and leverage margins through a combined menu approach.
We first started.
So branding strategy back in 2013, with Buffalo's cafe launching a fast casual version of the chicken chain Buffalo's Express co branded with fabric.
The growth of this co branded offering remains strong with over 100 locations worldwide.
Really we have seen great success with pairing great American cookies and marble slab clean read together with approximately 225 cobranded units.
Most recently, we have diversified our Burger and wing Cobranded options and debuted Johnny rockets with a newly created motto of Hurricane Grilling wings named Hurricane wings to close out the or we will also unveil our first tri band, probably branded unit, if Apple youre talking to stick and Buffalo's Express.
We're also launching a new initiative to expand into non traditional venues, including airports universities amusement parks in stadiums across our portfolio. We have opened 13 non traditional locations. This year looking ahead, we see great value investing further resources to expand in this area.
As we have stated another important part to our growth lever is our Atlanta based manufacturing facility, which produces pretzel mixing cookie dough for several of our brands.
During the third quarter, our manufacturing facility generated over $7 8 million in sales and sales of approximately $25 million year to date.
Our focus continues to be on adding to the goods. We currently manufacture for our entire portfolio of brands and selling goods to third party brands not in our current portfolio.
We believe our factory business today is in its early stage of growth and is now operating at about 33% capacity with significant white space to expand we expect to see an increase in operating utilization from 33% to 38% related to the May acquisition of the Nestle Tollhouse Cafe by chip franchise business once it's fully integrated into the coming months.
We're still in the process of rebranding approximately 55, Nestle Tollhouse cafe stores to Great American cookies are first rebranded unit opened in August and we will look to convert several more locations by year end.
As a result of this acquisition, we are now able to produce the cookie dough ourselves instead of Nazi franchisees buying so from a third party. This allows the franchisees to buy the cookie dough at an approximate 20% discount. We're also able to capture the manufacturing revenues, which contribute approximately $15 million of our adjusted EBITDA. We continue.
To evaluate acquisitions that will increase our manufacturing capacity and grow our EBITDA.
Now turning to fat brands second strategic pillars growth by acquisition as you know our main objective. This year has been to digest. The eight new restaurant brands, we acquired in 2021 and capitalize on potential synergies and cost savings as we scale because as.
We are extremely impressed with how seamlessly these brands that fit into our portfolio.
So been significant interest from our franchise used to purchase and develop other fat brands owned restaurant concepts in other words, adding second or third brands to their territories, we're always evaluating acquisitions to capitalize on particularly brands that strategically fit within our current operations that have a proven track record of long term sustainable and profitable operating performance or are they.
Give us the chance to expand our factory business in other words, we're not looking for turnarounds, but rather growth trends you're.
We've seen a number of opportunities in the current environment and expect to see more in the coming months and hope to announce some of that activity before the end of the year.
Looking at the current landscape, we remain in a period of historically high inflation along with supply chain challenges. However was 17 brands in our portfolio. We were fortunate to have a strong purchasing power of more than $600 million per year in food beverage and paper costs. As a result, we're able to generate savings for our franchise partners and approximately 2% to 3% which is highly beneficial.
In this inflationary environment.
That said many price increases are inevitable in this current environment, we continue to coach our franchisees on the review of the financial metrics in their business. So that they can continue to profitably operated served their communities, it's about making sure they understand the labor and food costs and to know if they need to raise any prices and even though our franchisees have been taking pricing we've not seen a notable decline in same store sales.
Looking at our balance sheet, we are actively pursuing the rating and refinancing of our different securitization facilities, beginning with our fat royalty 'twenty 'twenty. One in fact G. F. G 2021, securitization trusts, which we expect to complete in Q2 of 2023.
And while we may not see huge interest expense savings from the ratings process. In this current environment. We are picking up a portion of the savings in fact in the topline royalties as prices go up royalties will go up further.
Further the ratings process will create substantial additional liquidity in our bond portfolio, which will help us fuel new acquisitions and growth.
Tomorrow, we plan to redeem $43 million or $1 821831 shares of our series B preferred stock at a price per share of $23.69 from one of our private equity Counterparties, who sold us the twin peaks brand in 2021.
The redemption of the series B preferred stock will yield significant cash flow savings for us as our securitization facility, which will fund the transaction has a lower cost of capital than the preferred share dividend rate.
We're actively working with our bankers towards the redemption of another $95 million of series B preferred stock sometime in the coming two or three quarters.
In summary, the opportunities ahead for backgrounds are considerable and we are well positioned for growth, we have a strong and dynamic brand management platform capable of seamlessly and cost effectively integrating new brands. We also have a healthy and growing organic development pipeline that will fuel organic growth for many years to come.
Look forward to updating you on our progress on future calls and with that I would like to hand, it over to Ken to talk about our financial highlights from the quarter Kent.
Thanks, Andy the total revenue during the third quarter increased 247% to $103 $2 million.
Reflecting a full quarter of revenue from global franchise group acquired in July of 2021, and revenue from twin peaks as always and native grilling wings, all of which were acquired during the fourth quarter of 2021.
Additionally, revenue benefited from the ongoing recovery from the negative effects of COVID-19 in the third quarter last year.
Costs and expenses increased to $102 $2 million in the third quarter compared to $27 4 million in the year ago quarter, primarily due to the 2021 acquisitions.
Included in cost and expenses general and administrative expense increased to $28 $8 million in the third quarter from $10 $6 million in the prior year period.
This increase was attributable to the 2021 acquisitions, coupled with an increase in compensation costs.
First of all fees and travel, reflecting the significant expansion of the organization.
Cost of restaurant in factory revenues increased to $55 $3 million in the third quarter of 2022.
Compared to $7 $1 million in the prior year period.
Primarily related to the 2021 acquisitions, including the operations of the acquired company owned restaurant locations and our Atlanta based manufacturing facility.
Depreciation and amortization expense increased to $6 $9 million in the third quarter from $2 4 million in the year ago quarter attributable to the 2021 acquisitions, including depreciation of acquired a company owned restaurants, and the amortization of acquired intangible assets.
Advertising expense was $11 2 million in the third quarter compared to $5 $5 million in the prior year period.
These expenses vary in relation to the advertising revenue and reflect advertising expenses related to the 2021 acquisitions, including company owned restaurant locations and also the increase in customer activity as the recovery from Covid continues.
Other expense for the quarter was $23 $9 million.
<unk> 272 million in the year ago quarter, and was primarily comprised of interest expense on our securitizations.
Net loss for the quarter was $23 $4 million or $1 42 per diluted share compared to a net loss of $3 $6 million or 26 per diluted share in the prior year quarter.
And on an as adjusted basis, our net loss was $16 $3 million or <unk> 98 per diluted share compared to $2 3 million or 16 SaaS per diluted share in the prior year quarter.
And for those that are focused on cash flows and it's worth noting that our 23 $4 million net loss for the quarter included $7 million of noncash depreciation and amortization $2 million of noncash share based comp 1 million of noncash lease expense and $6 9 million of non.
Recurring litigation expenses.
And with that operator, please open the line for questions.
Yeah.
At this time, we will be conducting a question and answer session.
To ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line 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.
One moment, please while we poll for questions.
Our first question comes from the line of Joe Gomes with Noble capital. Please proceed with your question.
Good afternoon, Andy and Ken and congratulations on a quarter.
Thank you Joe.
Thank you.
So looking at.
Recently had a chance to scan through the relief.
Total revenue for the quarter was up 247%, but cost and expenses were up 273% just kind of get a feel from you.
When do you think that revenues will start growing faster than the costs and expenses when when can we start seeing those kind of level out.
Well I think we're there.
There is some there are some reserves that we took in the quarter and if added back would show it as a as a growing revenue number over growing expense number and were just trying to be conservative here for the for the rest of the year, but we.
We think that if you.
Because if you look at the the add backs that Ken just mentioned plus this bad debt reserve that we that we reserved for.
It's only a couple of million dollars of actual.
Net loss of cash it's a cash loss.
Outside of insurance reimbursements, and things like that or tax credits. So I think it's pretty narrow now we're definitely on track to be positive cash flow generating sometime next year net of dividends and everything else.
Hopefully by the end of next year, we'll be in a positive net income standpoint, remember, there's a lot of depreciation in there too from company owned stores. So.
You have to keep that in mind.
Right right, Okay and.
Talking about the cash flow.
Can you kind of quantify what the cash flow savings will be from the redemption of the $43 million of the series B preferred.
It's it's a it's a several million dollars a year at the $43 million Theres a.
10 point savings in there at a minimum if not more so that's that's more than $4 million a year.
Because the securitization.
Sure.
At a lower rate.
Okay.
Thanks, Thanks for that.
And just on the it.
Salaries, you're saying twin peaks in a number of the other look.
Concepts they'll continue to.
Seem to be performing well or any pardon me or any of the brands are concepts.
Performing below expectations.
And what is what are you guys. If so kind of what are you doing that.
Try and move the needle in a positive direction.
Whats the.
Given what's going on here in the economy.
Guest counts at the franchisees are those are they still remaining relatively healthy.
Well, you know where the business is really good not just good but really good across the system not every brand is.
You've seen it on you know as much as another band and you have you definitely have.
Variations amongst the different brands in terms of how much there.
We're generating but we're really seeing.
No.
They tend to be mid single digits positively copying in this environment, we're happy with that to see traffic solid we're happy with that.
No you you have maybe we have a.
The first group of brands right with Kyocera brands, all the way up to polished casual dining brands. So interestingly when you get down into the <unk> side of things, sometimes it's tied to gas prices gas prices go up people don't drive around and go through the drive thru with gas prices come back down to go to the drive through more often so we've seen some of that.
Where it's very sensitive in and.
Elastic in that sense.
You know look at twin peaks, where they're generating like 13% same store sales year to date, it's off the charts and I know people want to get out they want to be in restaurants, they want to be in sports parts. It's a good sports season, and we just haven't missed a beat there.
The only thing.
When we look at revenues being off our our expected revenues by a little bit it's literally because we have a couple of stores that couldnt get opened in time, because either the restaurants are stuck in permitting with state and local authorities or the equipment hasn't been available yet and so it's going to push the opening a couple of months. These aren't these aren't like long time long term misses. These are off by a couple of months and I'll Miss you know yearend and Mr. <unk>.
But our business was really strong I mean, the fact that we have an.
Inorganic pipeline of now more than a thousand stores and we have.
90, something stores under construction already for next year and it's only October .
No, it's really strong franchise demand so.
We're just not seeing it in terms of.
Recessionary.
Environment for our customers in a restaurant.
Excellent one more if I may and I'll step aside so.
Beginning here in the fourth quarter.
Had hurricane and come through the South East.
Obviously, you've seen the devastation in Florida has that had any impact on the.
Any any significant impact on the operations on any of the any of the stores or locations.
Yes, as a matter of fact it has sales are up in Florida, which is not what you would expect me to say, but like our Fort Myers store, which is the number one twin peaks in the San Fran system lost a couple of shingles off the roof and that's it and so is immediately back open and operating and serving relief workers and serving locals and sales were significantly higher week over week because of that.
Over the last few weeks and the Hurricane Grilling wings is seeing the same thing we've done donations and.
And had events in the parking lot to serve the locals and serve the relief workers as well, where we've donated food and things like that so.
We've not been that adversely affected thank goodness and our thoughts are to everyone of course, who who was adversely affected but.
We Fortunately didnt get handed out a lot of pain there.
That's great news, thanks for taking the questions Andy can and look forward to continued progress.
Thank you.
Thanks, Joe.
Our next question comes from the line of Roger lifting with Lyft in financial services. Please proceed with your question, Yes, I can I just following up briefly on the point that Joe is talking about in terms of.
<unk> concept by concept.
It sounds as if.
You didn't see much trading down within your brands.
What can you insight can you give us in terms of.
Whether customers are trading down.
And this stagflationary economy have you seen that as well.
You know one of the things I mean, we have seen.
Over the summer when gas prices went nuts, we saw some softness in there's always and then it came right back when prices got back in line again so.
It's there's a little bit of definitely kyocera and I mean, that's the average check of $8 and the average check with price increases and if somebody's got went to $9 <unk>.
And so that's and that's a real number for some of those drivers when gas prices go up by 20 or 30% in the Midwest that affects people want to go through the drive through 99% of those restaurants have drive throughs, so those kind of things.
No matter, but it hasn't stuck it's bounced right back and we've just been very fortunate.
In that regard to not to not really have that effect.
Every brand has is growing as much but you have I mean with ponderosa and Bonanza steakhouses that are up significantly big numbers.
Year to date over 9% and.
Some of the Burger brands, just skyrocketing up so yeah, we really haven't felt it like you would think we would.
Right well.
Of course, the fact that twin peaks as your largest single brand business.
It's doing well just about the best.
The rest of the brands are lower ticket, so they'll get their share of.
Customers Ed.
Did you say that the manufacturing.
Dual manufacturing facilities.
Already running at a $15 million EBITDA.
Run rate, yes. It is yes, yes, I did and yes. It is right at 33% capacity.
Yeah.
Aside from the <unk> business.
Is there anything else on the near term horizon two.
They use that facility.
More heavily.
So nothing will take it from 30 something percent to almost 40% we have several things that we're working on that would be additional manufacturing business for the facility. We'll see if we can get those things done and we will see.
Third party through third party manufacturing like manufacturing for others, using our plant and we're working on both of those things.
No. It's just a it's an interesting environment out there and so we want to make sure. If we're going to buy something that it is appropriate for the business and we have all the synergies and it's strategically important to us and then.
No just cost of capital we want to be mindful of that if we're going to make an investment today.
Okay. That's all I've got for the moment I'll come back to you later thank you.
<unk>.
And as a reminder, if you have any questions you May press star one on your telephone keypad. Our next question comes from the line of Greg fortunate for private Investor. Please proceed with your question.
Hey, Andy Hey, Ken how are you the job Hi, Greg.
Okay, a couple questions, Ken maybe just to start with you.
Can you talk about balance sheet, how much cash is on the balance sheet at this time.
And.
On the reserves are.
Yes at the end of the quarter, we have about $24 million of non restricted cash on the balance sheet.
Okay, and then added to that is another 35.
$40 million of restricted cash that is an increase from the second.
Second quarter.
Okay, and the total debt that makes us obviously you're moving.
The preferred to that now so what is the total debt at this time.
Yes.
Total debt is.
Just one second $977 million face.
Okay.
So.
And one last thing I noticed that you have in us.
The other expense line that is very large.
What is what is all of that.
I know you've talked about some things on the call, but then add up to.
A large number that that was.
Which number is this this is other oh other income and expense, which is 2008.
Oh, Yeah, all but 500000 of that is interest expense, so pretty small noninterest expense fees of $24 million of books, yes.
Okay.
So a couple for you.
So based on the debt level that Kansas Southern the EBITDA expected, you're trading like around nine and a half let's call. It 10 times EV to EBITDA, which is probably about five turns less than other people such such as Jack in the box other franchise type restaurants.
I guess.
A question for you is like why do you think we're trading at such a discount and how do we.
Narrow that gap.
Well I'd like to see.
Similar to previous answers I think that printing the EBITDA for 2022, like we've committed to and hitting that that $90 million to $95 million.
Run rate really just shows that this acquisition strategy worked and we were able to bring out the synergies.
And having the.
60% organic growth opportunity with these additional stores that have been signed up and paid for by franchisees. This isn't aspirational franchise sales either already signed paid for deals with schedules for franchisees to open new stores. So I think we can print it pointed out and that naturally de levers us as you know so if EBITDA goes from $95 million 150.
Something million dollars over the next few years, we naturally delever on their own let alone you know raising some equity and we know that there's you know theres float that needs to be increased out there just so that institutional investors can get a bigger stake in the business and where we're definitely in talks with our bankers about about doing that and I think getting the debt rated.
We'll help in terms of liquidity and the bonds and if there's liquidity in the bonds then.
Long term cost of capital will decline and that will that ratings process is sort of another validation of the brands in the business. We've been rated before we were rated by Ddr's Morningstar.
2020, before the pandemic and then of course.
Sided issue unrated debt to make the acquisitions in a hurry and now we're in talks to go back and get rid of it again, so I think those things will help printing EBITA.
The organic growth coming out.
And demonstrating that and then the ratings process.
Okay.
Speaking about guidance are you like what are you thinking for 'twenty. Three are you ready to prepare to give them some kind of EBITDA guidance or not yet or what are you thinking.
Well I think that we will.
Indicate some sort of range.
As we get through.
End of the year, but it's going to be somewhere knock on wood north of where we are today, but we just have to watch the recessionary situation and how fast we can get these new stores open.
But it's we're in really good shape and so I think we see the.
The refinance on the horizon will.
We will be able to point to that pretty quickly would also be some.
Some other acquisitions, you know knock on with it and we can talk to as well. So you know we'll have to adjust for that on a comparable basis, but.
We just want to be very strategic about if we're going to invest money in a subsequent acquisition to what we've bought today how does it how does it strategically help our business.
A lot of stuff, we've said no two over the last six months. However, I think there'll be opportunities in 2023 sort of like we saw during COVID-19. There are a lot of M&A deals that have not gotten done in the last six months or a year as you well know and those some of those are opportunities. Some of those are just things we wouldn't touch and we said no to so we want to have capital ready for that.
We want to make sure that the bondholders are supportive and they feel like we're getting the bonds rated and reissued in those things and then you know I think we will have a big war chest to take advantage of that.
So earlier in the call you mentioned that you hope to announce something on the deal front.
For that end of the year.
How would you finance the deal I guess prior to.
Getting re rated in being able to to raise that money what what are you.
We used for that.
Yeah, I mean, I'm not going to comment in detail about any pending acquisitions or financings that we have.
Actual credit available under our securitization facilities. So we could issue more bonds today to do that.
We could issue preferred stock to do that we could issue common with $480 million effective shelf.
We are subject to baby shelf limitations right now so we can't use all of that but there's a bunch of levers we can pull we can also.
Get some sellers are willing to take stock back. So there's a lot of ways to pay for it if we want to buy something we have the ability to raise the capital to buy it that's not a concern of mine.
And we just want to be very strategic and make sure. It's in line with all of the other things we just talked about.
Right, Okay, Alright, Andy. Thank you have a good fourth quarter on a travel safely in New York for your meetings. Thank you.
Thank you Greg.
And our next question comes from the line of Roger Lipson with Lyft in financial services. Please proceed with your question, Yes, Hi again.
A quick question.
Operational question, the $40 million of restricted cash.
What basis is that restricted.
It's a pretty large number and it would be good obviously, if it were available is there any possibility of bringing that up.
No. It's it's it's tied up with our securitization facilities has an interest reserve so don't count on it at all.
Okay.
It should be used in terms of like reducing if you look at net debt you would take that out of that right. Because it's it's like an interest reserve against it that knock on wood you never touch that so.
No we haven't none of our securitization facilities have tripped any covenants.
Loan any triggers anything like that nor do we anticipate that they will but that's just the nature of how asset backed securities restructuring.
Well that's interesting.
When peaks.
Many of the 15 to 20 locations over the next year will any of them. The company stores do you think.
Yes, yes, there are.
Three to five of them will be company owned stores depends on if we get to 'twenty versus 15, but yes. There are a number of them planned are under construction today.
I'd imagine you could finance them with some sort of a third party financing since the concept so profitable.
Good assumption, we have we have pushed the accelerator.
Hard on.
Organic growth of company owned twin peaks stores, and I think that they'll move from three stores a year to five or more stores a year.
As we get into 2023, there's an 18 month sort of.
Lead process to find the location.
Build it and get it through permitting and get the equipment all of that.
But we're definitely trying to trying to lean into that because the return on investment is is really comparable.
Is there anything else we have added we see out there. So we could invest quite a bit of money in that in that business and see real payback from it and we plan to do so and so we're very happy with the management team and how they're executing today and opportunities I think there's also the opportunity to convert locations that were.
Some of your concept, but there could be converted into a twin peaks just to accelerate growth that's a big focus strategically for <unk>.
For me and for our whole team for 2023 is to accelerate the openings of new stores and if that means converting existing restaurants, everyone loves second generation spaces right now you're not building.
Allethrin is you're not building the building.
The grease traps all those things are already there.
They take a long time they are expensive.
And so we really want to accelerate franchisee growth in opening pace as well as company and stores in 'twenty three and is there any geographical focus in that regard.
Well there isn't a twin peaks has has has its own focus of states, where there are significant development deals in place, whether that's Florida or some of the other.
Our southeast states. So so there's definitely a focus it's not it's not just a shotgun approach we definitely have deals in different markets. I mean, Mexico has got a big development deal as well.
And so you know, that's that's key but but across the portfolio that.
That new store opening pipeline of what will be a knock on wood again 130 to 150 new units in 2023.
We'll be in many different markets not just in one market, but a twin peaks, we're gonna do company owned stores and I think it'll be.
Along the east coast in the mid Atlantic region, I think it'll be Florida.
And maybe one other market.
Okay. Thanks very much.
Thank you Roger.
And we have anyone else have any questions.
We have reached the end of the question and answer session I'll now turn the call back over to Andy We don't want for closing remarks.
Operator, thank you and I'd like to thank all the listeners and participants for them.
On our call today, and I hope that you all have a great evening and thank you very much for your attention.
And this concludes today's conference and you may disconnect your lines at this time.
Thank you for your participation.
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