Q3 2022 One Group Hospitality Inc Earnings Call
Ladies and gentlemen, please continue to standby the conference will begin momentarily. We thank you for your patience nasty piece, you might know them.
[music].
Our total revenue grew to $73 million.
Our U S average weekly sales of 290000, an SDK and 95000 and that's going to go up.
Okay.
[music].
One group third quarter 2022 earnings conference call at this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation.
The results to differ materially from what we expect.
Please also note that these forward looking statements reflect our opinion only as the date of this call.
We undertake no obligation to revise our publicly release any revisions of a forward looking statements in light of new information or future events.
We refer you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial conditions.
During today's call, we will discuss certain non-GAAP financial measures, which we believe can be useful in evaluating our performance. However, the presentation of these measures or other information should not be considered in isolation or as a substitute for results and repaired in accordance with gap.
Reconciliation of these measures such as adjusted EBITDA adjusted net income restaurant operating profit comparable sales and total food and beverage sales, it's owned and managed and license unit at GAAP measures along with the discussion of why we consider these measures useful please.
<unk> earnings release issued today with that I'd like to turn the call over to Mammillaria Manning.
Thank you Chandler and Hello, everyone. We sincerely appreciate you joining us today and for your interest in the company.
After one group we are committed to executing on our mission to be the best restaurants in every market now we operate by delivering exceptional and unforgettable experiences every guest every time.
Let me think all of our team members will continue to work exceptionally hard to provide world class operations and bring our mission to lives every day.
It is because of them than we have been able to strengthen our leadership position in high end and upscale casual dining and that we have great confidence moving forward.
For the third quarter or total revenue agreed to $73 million, reflecting R. U S. Average weekly sales of 290000 and S. D K and 95000, that's going to grow.
On a trailing 12 month basis, we believe R. U S average unit volumes of $16.5 million for S. D K and $5.4 million for going to grill remain among the highest in the industry.
In addition to those impressive average unit volumes with open Sdk's San Francisco in August , which is averaging over 350000 per week in sales.
Ah consolidated comparable sales increase 0.5%.
<unk> is an increase of $3 five per cent at S. D K and a 3.6% decrease excellent grill.
When compared to 2019 at pre pandemic base here.
Salivated comparable sales increased 45.6% consisting of an increase of 76 and F. C K and the $22 three per cent increase that's gonna grill, which shows that we've retained the share increases for both brands and that are differentiated five dining experience.
Is resonating with our guests.
It is important to note that hurricane Ian had a negative impact on boats S. D. K M's Gonna Grill comparable sales is 14% of our sales pace resides in the state of Florida.
Adding more power to these results we took advantage of numerous activations to drive bus at our restaurants and.
In July we celebrated national Steakhouse months with Wagging specials, and SDK is gonna grow.
In addition, we celebrated national <unk> National Mac, and cheese, gay and National Cheeseburger day to drive excitement with our culinary innovations and differentiated beverage programs.
Lastly on Labor day, we offered 50 per cent off for our frontline workers, which was very successful and incredibly well received by local communities.
Additionally, will continue to emphasize and enhance happy hour offerings at both <unk> gonna grow and our $3 $6 and nine dollar happy hour menu is working well with our guests.
We have put a lot of market behind this valley offering on our social channels and through our loyalty program is allow us to capture traffic during our shoulder periods excess capacity and exposes guests to our branch at approachable price points.
We then see many of these gas back in our dining rooms in order to celebrate their special occasions with us.
In addition to happy hour at both brands. We are currently running other value driven programs such as the weekday power lunch midweek date night offerings pre theater menus, and takeout and delivery specials.
We also continue to leverage the important brunch State Park.
Craveable, a newsworthy culinary offerings and bottomless new Moses.
Lastly, we are seeing our events business come back after two years of a pause.
We look to the fourth quarter or event bookings are building and more expense check driven business is returning as we have an incredible slates of exciting holiday and seasonal many offerings clients.
Moving onto the current cost environment.
As you are aware we are currently in a period of historically high double digit inflation across our industry.
Based on our interest in building market share in the current economic environment, we decided to take modest price increases during the third quarter.
A slower seasonal quarter, knowing that we would not offset all the inflationary headwinds at.
<unk> K, we took an approximate 2% price increase and that's going to grow with took in approximately 5% increase both midway through the quarter.
Based on the results I'm pleased to say that we saw no noticeable resistance and I'm confident that we can take more price during the fourth quarter, which is our strongest seasonal quarter gas.
Guests come to celebrate the holidays and are less likely to notice the increases longterm.
Longterm, we believe that we still have significant pricing power in both brands and will exercises <unk>.
Expectedly, our third quarter restaurant consolidated operating profit decreased from last year.
Fashion operating profit at S. D K decreased but it was still a strong $18 five per cent.
Branch, so inflationary pressures outpaced price increases during the quarter.
It's important to remember that the third quarter is historically, a lower margin quarter as we make investments to be fully staffed for the busy fourth quarter.
Over the longterm actually address the current inflation to price differential you still expect F. CK restaurant operating profit to be in the 20% to 25% range and corner grow restaurant operating profit to be in the 15 to 20 per cent range.
Despite the costs headwinds, we still delivered over $7 million and adjusted EBITDA for the quarter, bringing are trailing 12 months adjusted EBITDA to approximately $41.5 million.
Now turning to development in August we open our first coffee on SDK of 2022 in downtown San Francisco on market Street.
As previously mentioned the restaurants off to a terrific start and we.
Could not be more excited about the future of this location.
Also this week, we open SDK Dallas on Mckinney Avenue.
This restaurant has an elevator dining room with plentiful outdoor space to enjoy great culinary selections world famous cocktails and live music spun by renown Djs.
In July we open our first of three virtual locations through a license deal with <unk> in Austin, Texas.
Guessing Austin cannot enjoy delivery of select menu items from our award winning value concepts corner dwell in value.
Partnership enables us to further expand and capture a new customer base with limited capital investments.
Despite the challenges construction environment, we plan to open during the remainder of 2022 and first quarter of 2023.
One within the next couple of weeks managed SDK in Stratford, London U K.
Three company owns corner grows.
Gonna grow in Riverton, Utah grow in Columbus, Ohio, and corner grow in Desert Ridge, Arizona.
And finally, we plan to from two additional license units in partnership with beef with kitchens, and provide takeout and delivery only featuring offerings from on the grill and by concept and taxes.
Additionally, Ah remaining 2022 pipeline as strong for.
For the second through fourth quarter, we plan to open seven new units which include three.
Three company own Sdk's, one manage our license SDK and three company one corner grows.
We have long stated we are early in our growth strategy with significant Whitespace ahead.
Excited about our long term opportunities as we believe our units deliver best in class returns.
New restaurants with targeting between 40, and 50% are wise, New company on Sdk's and for a company owned corner grows.
Before she a total addressable market of at least 400 restaurants, including 200, SDK restaurants globally and at least 200 corner grills domestically.
To conclude our team is doing a fantastic job, providing our guest exceptional and unforgettable dining experiences.
Ultimately are focused on operations in day to day execution has proven effective and translate into his trunk beer now and we plan to continue on our current trajectory of industry, leading comparable sales.
From cost management, and the new store development.
Now I'll turn the call back to Tyler.
Are you there.
Let me start by discussing our third quarter financials in greater detail.
Third quarter, total GAAP revenues or $73.0 million, increasing the 1.6% from $71.9 million for the same quarter last year <unk>.
Including or a total revenues as our own restaurant net revenue of $69.5 million, which increased 2.3% from $68 million for the same quarter last year.
The increase in revenue is primarily attributable to the opening.
<unk> San Francisco in August of 2022.
Domestic consolidated comparable sales increased 0.5% for the quarter compared to 2021 for SDK comparable sales increased 3.5% versus 2021.
Conant Royal comparable sales decreased 3.6% versus 2021.
Versus 2019 domestic consolidated comparable sales increased 45.6%.
SDK comparable sales have increased 70.6%.
And coda grow comparable sales increased 22.3%.
Management license, an incentive fee revenues were $3 5 million decreasing 10.8% from $3.9 million in the third quarter of 2021.
This decrease is primarily the result of decreased revenue in our manage property in London, England.
One restaurant cost of sales as a percentage of one restaurant net revenue decreased of 120 basis points to 24.9% in the third quarter of 2002 compared to 26.1% in the prior year, primarily due to operational cost reduction initiatives, partially offset by increased commodity prices.
Is.
This represents a 90 basis point improvement versus the second quarter of 2022.
One restaurant operating expenses as a percentage of owned restaurant net revenue increased 510 basis points to 62.0% in the third quarter of 2022 from $56, 9% in the third quarter of 2021.
Primarily due to consolidated average wage increases and higher operating expenses.
Restaurant operating profit decreased 400 basis points to 13.1% for the quarter compared to 17.1% in the prior year third quarter rests.
The restaurant operating profit.
Decreased approximately 410 basis points, but we're still a strong 18.5%.
Conan Grill operating profit decrease 460 babies rooms, and was six 4% for the period.
Both brands saw it inflationary pressures outpaced price increases during the quarter.
On a total reported bakers general and administrative expenses or $6 $4 million compared to $6 million in the prior year.
Increase was attributable to additional investments ahead of growth increased accounting and legal fees and increased stock based compensation expense.
Partially offset by a decrease in performance based variable compensation expense.
In addition, the company experience increased travel expenses due to rising hotel and airfare costs.
When adjusting for stock based compensation, adjusted general and administrative expenses or $5.4 million in the third quarter of 2022 and $5.3 million in the same quarter of last year.
Interest expense was zero point $4 million in the third quarter of 2022 compared to zero point $8 million in the third quarter of 2021.
The decrease was driven by lower average outstanding balances and lower interest rates driven by the refinancing of our credit facility in August of last year.
Income tax benefit with zero point $3 million in the third quarter of 2022 compared to an income tax expense of $1.5 million for the third quarter of 2021.
R 2022, annualize the effective tax rate is estimated at 15.9%.
Net income attributable to the one group hospitality.
With 0.4 million or one.
Income per share compared to a net income of $11.6 million in the third quarter of 2021 or 34 cents a net income for sure.
Prior to your net income included a 10 million dollar game related to the forgiveness of care exact loans.
When adjusting for the games on chairs that loans COVID-19 related expenses. Another nonrecurring expenses are gay adjusted net income was $2.1 million or seven adjusted net income per share compared to an adjusted net income of $3.7 million in the third quarter of 2021 for 11th Ajar.
Net income per share.
Adjusted EBITDA for the third quarter attributable to the one group hospitality.
With $7.1 million compared to $10 billion in the third quarter of 2021.
We have included a reconciliation of adjusted EBITDA and the table and our third quarter of 2022 earnings release.
During the third quarter of 2022, we repurchased 500000 shares of our common stock.
As of September 30th 2020, $265 million in share repurchases remained available under the $10 million share repurchase program announced on September 7th 2022.
Management will continue to use this discretion in determining the conditions under which shares may be purchased from time to time if at all.
Now turn the call back to Manning.
Thank you Tyler and thank you all for your time today, let.
Let me conclude by saying that our business remains very solid despite the obvious headwinds.
We are in the early stages of our long term growth strategy as we continue to build a portfolio of high volume higher margin brands with compelling returns.
Above all I'm grateful to our teammates who bring I mentioned to live every day to beat the best restaurant in every market, where we operate.
They do this by delivering exceptional and unforgettable guests experiences to every guest every time.
I also like to thank our customers that visit and continued to return to our restaurants. So that they can enjoy the highly differentiated drive dining experience and I have been craving.
We appreciate everyone joining us on the call today.
And are happy to answer any questions that you may have.
Operator.
Thank you.
Do anything rewind 31.
One.
With any kind of prozac.
You will hear at <unk> request. If your question has been answered and you would like to withdraw your registration. Please press the one might've tree putting them on peace for the first question.
Our first question comes from the line of Mark Smith with Lake Street. Please proceed with your question.
Hi, guys first I just wanted to dig in a little bit more on the corner grill.
Can you guys just talk a little bit more about the comps there and what you saw as far as consumer behavior.
Insight into traffic versus check or how.
People kind of use of restaurants during the quarter.
Sure so for the quarter.
Having a prepared statements kind of grow was done about three points for the for the quarter and we were down about seven.
Seven eight on traffic and that that was offset by check.
Going up I think that the check growing up.
Is primarily due to more which selling more steak than that historically have.
Terms of consumer behavior, I don't think that we've seen.
Any thing significant.
Other than if you look at our comps for calling to grow on a three year stack.
They're still pretty significant on that through your stack. So I wouldn't say per se that there is a lot other than we just had a very.
Third quarter for clinical or last year.
Okay, and then as we look at the restaurant operating profit.
Four four corner Grill did did mix have a negative impact.
Or was it just inflationary pressure and labor that really push that lower.
I mean, I think as we sat on our prepared statements I think our biggest.
You know item with clinical is obviously we.
We want to preserve market share and and we want to make sure that we.
Look at the traffic into longterm store, our biggest concern was really about how much pricing we should take as you saw.
And I prepared comments, who did race.
We took about five points clinic grow mid quarter.
Pricing and I think we can see a lot of resistance I will do.
Another five points in the fourth quarter. So I would say that all of the what you saw in clinic Grill margin depression was mostly related to to the the fact that within kicking the pricing to offset inflation pressure as a matter of fact.
<unk> in general have a pretty good for the whole company. So it was mostly about not having enough pricing to offset the increases that was selling operating expenses and labor.
Okay.
Labour will use staffing pretty heavily in hiring.
Late in Q3 in preparation for kind of a heavy Q4.
Yeah, and we were 100%.
To our part in the quarter. So we kept our.
Taxing, where we want her to be at.
So the answers <unk> and of course, having that many and please on board.
We obviously have to make sure there were scheduling them and we keep training and keep them well.
So the.
Obviously is always reflected not just this year, but typically on our third Corps P. Now just because.
That's when we get ready for the big quarter that is usually a port court.
Okay.
And then any additional and setting the timing of the three conenose for for openings and I know that a lot of things can shift you're in queue for the disease.
Those three done here in queue for Wilson was shifted to choose one of next year.
Yeah. So we just opened a dialogue SDK, which we're super excited about that.
That opening corner grow Columbus.
Is in its final stage of construction, so we should be April .
<unk> to go into it here in the next week or so don't want decision that we're making right now to be honest about it is that.
I'm trying to win the risk reward of keeping the training teams and opening mode or or just wait until the first couple of weeks in January to open up a Columbus.
So really that's a decision here that we're going through is.
We want to focus on fourth quarter.
Execution or open up so.
Thanks.
Really the answer is will either open Columbus.
In the next two weeks and it's natural will open right away in the beginning of 2023.
Okay.
And then the last one for me just as as you look at real estate and opportunities as you start to open more restaurants here on us Takeda in Kona are you seeing anything change really as far as availability.
What kind of sites are you looking at these days available.
<unk>.
The availability has been significant for us we we have the largest pipeline.
We've ever had since I've been with the company. So we're super.
Happy about that we we have also seen.
A tremendous amount of.
Availability of Ti from landlords the reality of it is that.
With the with Covid and occurrence economic situations.
There's not a lot of local operators getting into real estate. So that has made the availability of of real estate for more organized companies.
Usually available just because smaller independent shaft driven concepts.
Are not growing because they're they're really struggling in the current environment. So we certainly have seen.
The availability of high quality real estate B.
Very strong for us.
Mmk, great. Thank you all got stuck in the tube.
Thanks.
As a reminder to register for question personal one pop might've for any telephone keypad. Our next question comes from the line of G. P. One with Roth Capital Partners. Please proceed with your question.
Great. Thanks for taking the questions guys just the first one.
I think he touched on a little bit, but if we could talk about what kind of the the power line shall we say and you know maybe Manhattan is more geared towards that but can you just kind of made the comment on the corporate we're expense attract business is that picked up especially around lunchtime any anything to highlight there.
Yeah. So.
The suits are definitely back so if you go into a restaurant.
In urban centers, you're definitely seeing a lot more business.
And we're also seeing a significant increase in.
And and demand for corporate events, So I would say that that business is.
Definitely back but obviously.
I look around and there's still a tremendous amount of.
They can see in the city, so I looked at that as a upside opportunities for the business as rebounded there and I can actually see an uptick. We're also seeing an increase in convention So convention cities like Denver.
Orlando Vegas, we're starting to see a lot of activity.
Conventions, particularly that small to midsize convention business is definitely back so.
Mixing.
Tick on that business and then I think your question was also around lunch, specifically I would say in markets, where we have in urban markets. We're seeing an uptick in launch predicting places like Midtown New York.
Ah client.
Pretty.
Pretty much anywhere where we have a.
Presence of office space, So I would say lunch businesses is definitely starting to pick up.
In bigger cities.
Great. Thank you and then maybe if we could just talk about commodity costs for a minute.
Anything.
I think may be still near term headwind, but anything to call out about some of your food inputs. I know you guys do a good job managing the mix at restaurants, but anything any trendy move sir.
Alright.
I mean, I think properly without getting some maybe macroeconomic comments for more about us <unk>.
Typically I do see.
Date of stabilization underway side, so I think that's been.
It was a lot more aggressive in the second quarter.
Third quarter, I mean started kind of slowed down a little bit on that Burger.
So that that's at least a positive to us in terms of the chest.
The core commodities b.
Et cetera, I mean, obviously, we're still seeing a pressure on those commodities further but again as you can see from our cost of goods performance.
We expect that to be an ongoing into business. So we we manage that to our product offerings and and promotions that we do and and I think that's continued to be Super fact that so.
So at least for me I'm, a short term for the companies that I will continue to look for relief from our better management.
<unk> two product mix and then for the other line items.
Think we'll take that through the pricing increases that we're doing and as we said in.
Are they were taken pricing and the and the fourth fourth quarter.
There's a tremendous amount of pricing power.
And that in our business model as we look to our prices compared to our competitors I still think we have a lot of leeway in pricing error.
Commodities to persist into the long term.
Got it I appreciate that and then one last quick one just on the Florida restaurants, and the impact on Hurricane Ian is there anything that you can quantify in terms of maybe Mr revenue or perhaps kind of how how long any restaurants had to close and anything you can quantify.
And that.
I mean I think.
Tyler mentioned on his comments.
The sales basis about 14% of total sales so.
It's not it's not.
Super Big portion of our sales base, but it it's it's big enough to make a difference I would say the whole week around the.
The the Hurricanes, maybe four days before and maybe a week after selects pilot total is 11 days.
We sell a lot of.
People just want interested to go to the restaurants, one and then two we're in places like Disney Springs and Disney.
Basically closed the park's pretty early and decided to keep them close.
After the hurricane so I think like I said properly.
Attempt to 11 day window around the hurricane and as.
As we said earlier about 14% of our sales base.
Yes, I also have your own restaurant in the corner.
Clinical portfolio above restaurants had a garage partner right next to it collapsed, it's the garage that.
The Russian uses and then we lost both electrical and gas.
Couple of days and then we basically were without gas for the majority of the quarter again, we don't we don't Wanna get into a whole list of things that cost numbers to be what they are but we did also have.
One restaurant that did have.
Several days, where there were not of it to be at 100% capacity.
Got it thank you guys.
Thank you Sir.
Our next question comes from the line of Nicole Miller with papers Tyler. Please proceed with the questions.
Hi, guys. This is Abby on for Nicole Thanks for taking my question.
My first I guess clarification.
<unk> and I understand the reiteration on the operating margin mine about 20% to 25% Uhm is there anything else, we should be thinking about below the line that might be interesting I know that seasonally this will be one of your better quarters, but just anything you can provide there.
Yeah. So I mean color on the margin I think we mentioned on the call third quarter is usually one of our lower seasonal quarter. So that's why I will see the the margin.
Be a little lower and then we also.
Do prepare labor for the fourth quarter in the third quarter I would say that the fourth quarter by far is our strongest.
Quarter four margin so we always have.
Great margin profile their knowledge because of the seasonality of sales, but we also do a tremendous amount of.
Promoting around premium items.
Always feature either why do or the <unk> or the premium products in the quarter.
And the way that we pricing and frankly, just the demand for the product is super high So that does help us with having a very high margin profile. So.
Fourth quarter will tend to be.
Significantly higher.
The third quarter in terms of March and so that's why we usually make it up.
Got it okay. Thank you for that and then the second question can you just high level talk about what you're seeing in terms of supply chain.
You know our suppliers delayed I understand there's still commodity pressure, but more to do with what you are getting in the store or I guess in the units.
Yeah, I I think the good question from a supply chain perspective.
The island I'm, not so sure about the not showing up.
Rockmore substitution that does happen with your suppliers, which is they won't have the primary product that you are trying to order so they though sometimes.
Option B and options see on the alternative items that will use but but we haven't seen.
Trucks naturally the restaurants will can seem more.
The vendors submitting.
The <unk> items and then.
The events of that.
The vendors are out of stock in some of the items. We do always have a backup made us supplied by restaurants.
Then we'd go too so we've been able to get the product, but sometimes they may not be our primary skew and so that's how we've seen in the in the environment from a supply chain.
Okay and the last one for me I know you talked about holiday bookings are already coming in and it's looking good can you compare that to like 2019 at least pre COVID-19.
Is it beating expectations or in mine.
I would say.
Compared to pre Covid the biggest trend that we're seeing on the events businesses, we get a lot of more requests for.
Venue buyout, which frankly are very profitable because we were selling the restaurant for the whole day and so we're seeing a lot of more.
Companies during holiday party. So they don't want to have their party with other people around so so there's a lot more demand for that business, which frankly, we looked at it as an opportunity as we charge.
Charged premium prices for buyouts, and so we see that as an opportunity for us in terms of chest.
General bookings, we've had actually the last couple of weeks.
Due to the convention business, we've seen a lot of bookings.
Business and Franklin into the houses now with fancy.
Corporate.
For a holiday party, so I would say I will now we've seen uptick.
And on that business I'm I'm not sure. We've recovered 100 per cent profit is pre COVID-19 Jessica as I mentioned earlier, there are still a significant amount of vacancy in urban markets, but but.
But I would say overall I'm pretty pleased and I think it's gonna be a very good events in business for us in the fourth quarter.
Well that sounds great. Good luck on the credit guys. Thank you.
Thank you Larry.
As a final reminder to register for question comes to one helpline, a four on your telephone keypad. Our next question comes from the line of Daniel Stevens. Please proceed with the questions.
Hi, Thank you for taking my question I just have a couple of quick one first.
Sorry, if I missed this earlier did you disclose how much price was in the three Q comp how much do you expect to carry moving forward.
Yeah. So on the third quarter, we said we had a 3%.
Factor for SDK in about five Grand when we put it in.
Play Smith quarter, So I would say, that's one and a half effective or corner and about I guess I'm, just having a two and a half or SDK for the fourth quarter, because we put it at this point and then for the fourth quarter.
We're looking at another 5% coming in pricing for SDK and grill, and we're putting that effectively at the beginning.
November which are around right now.
Okay. Thank you that's helpful.
Then.
What is your visibility in terms of the basket heading into 2023.
Okay.
I'm sorry, we lost your question that could you mind repeating a question.
Yeah. So what is your visibility in terms of your commodity basket and how much of it is locked heading into 2023.
I mean, our visibility right now is at least from what.
Where do we stand here, we don't see.
Any immediate either pressure a relief and and.
So so I would say that's not anything really material shifting that we have seen.
Some positivity on frozen seafood, so we have been some buys.
<unk> and.
And crap.
<unk> I would say.
<unk>, it seems to be becoming favorable but.
Really no change and.
On beef and then on the labor side as I mentioned earlier.
One of the questions we have seen.
At least a stabilization on the rates.
And the third quarter, so we don't see as much.
Regularly increases as we saw in the second quarter for the way So I would say basically a stabilization and a slight decrease.
Civilization labor and be in a in a slightly quite a decrease on our secret going forward.
How far I get an accident.
I want the two parts I mean those.
In a commodity seems to be very flex flex. These days, so I, probably would say that my views on that hold for the fourth quarter and perhaps a little bit early first quarter of next year.
Thank you.
Our next question comes from the line of David Cain with keen wealth management. Please proceed with a question.
Hi, guys.
Just a couple of quick questions when I look at the numbers it seems like.
Cogs in margins help them pretty nicely for the quarter.
So my guess is with the price for taking will get a little bit of.
Gross margin improvement, but a year over year.
The item that's south of me is operating expenses I think we're up for 5 million quarter over quarter. So could you give us a little more color on that and is there any like pullin or we're opening up a lot of stores.
Is there any hiring that we're doing in advance.
Potentially will and also rent expense that we weren't able to match up with.
Sales yet from the consuming revenues were going to get from the new store openings, how much of that was a factor too well.
Yeah. So so let me maybe answer the question. This way we did have information on costs. The reason that you don't see it. It's obviously is do you have a line items.
Cause we did a lot of product introductions promoting on other items. So thank for instance.
Promoter things like our pumpkin pasta, which has a much better cost profiles.
Then b for seafood wood from a presentation perspective, so we offset a tremendous amount of.
Inflationary pressure on the carbs ninth by a lot of it.
Promoting and a lot of products that we did we also emphasize the bar business significantly in the third quarter, we weren't happy with with our cocktail program. We have for instance, a pumpkin spots.
Martini and so forth in an old fashion work really successful in the brands and <unk> and our liquor program carries premium prices. So that really helps offset pressure on cause the reason that you'd see that the pressure on the operating mine.
Of the Labour inflation, which was definitely double digit on the west side and then the other thing that comes out is for instance, a lot of the operating costs that we have are things that Jennifer Terrell surface D. J.
Repair and maintenance work, which usually use labor and all of those services in the quarter you would've seen an increase on the.
Per cost just because of the inflation of the labor that is embedded in those services, obviously, having very modest pricing and a quarter. It was mad enough to offset.
The.
The impact on those numbers as a percentage of revenue. So I would say that as we go into the fourth quarter and was affected more.
This increases we got another five points for corner.
For <unk> I think that alone will bring those percentage line line items more in line with the historical so I would say, it's mostly just a function of.
Pricing and costs and inflation of being off our cycle. So I think as we get the pricing and that will get fixed in terms of investments into into the growth of the company properly where you would have seen a bigger impact that would have been to the G&A line because we have obviously in advance of opening.
<unk> and bring in more multi unit leaders. So we've been training and developing a class of leaders for four weeks before multiunit spot, but again it got stuck let me summarize the whole margin and costs for the company is.
Very nice job on managing Pops with product mix management, and obviously are opportunities that we haven't taken the pricing to offset offset operating costs and.
The growth investments will be more are the G&A started really on the operating margin side.
Okay and then the numbers that you gave on San Francisco kind of surprised me it's out of pace much.
Higher than what I would have modeled at that kind of run rate north of 15 million do hit 20% store level EBITDA.
With the inflation that we're seeing especially in labor.
Yeah. So so good question so the volume pattern for.
San Francisco is actually closer to 20 million dollar pay it's I think it's around 17 18 million pace, which frankly for a brand new restaurant is fantastic and it's actually we sustained for several weeks and actually we're not on the months basis with that so we're very pleased with that performance about double what we expect that for the restaurant and revenue.
The restaurant has been incredibly.
Received in city the city has been dormant since COVID-19, so not a lot of activity in that city. There was not a lot of restaurants that had opened or anything really significant there. So the city has really embraced the restaurant and.
Very happy with that in terms of what the evidence from margin is that San Francisco does have a higher minimum wage and city. So we do have to put up more.
For Labour, but I think at those kinds of volumes.
R. S. K margins are significantly higher probably 20% to 25% higher range, if not even higher than that so I would expect.
San Francisco to have a very healthy margin at the volumes that they're running right now.
Okay, Great. Yeah, that's I was being conservative when I said 15, but yeah.
It sounded like you were of the run rate of 17, and a half or better.
And then with the seasonality and the sort of the tailwind tummy.
Coming from private parties events et cetera.
New stores and then the seasonality do we get back to growth EBIDTA by two four or do you expect to grow assuming the economy is kind of status quo.
With the price, we're taking the new stores and.
The seasonality start to grow year over year EBITA in Q4 and beyond.
Yeah, I'm a great question I I I do think that the price increases.
Putting in this in the fourth quarter are happening right now so we do have a little bit of.
A four week, if you're willing to the quarter that we didn't have that price and but I would say as as I said in our in my prepared comments I do see SDK in clinical row margin is getting back to where we say that can be I think we we said 15 to 20 corner grill and somewhere between 20 and 25 on Sdk's. So I do think that.
With a price and that we're putting in right now and.
The level that we're operating and frankly, the fact that these new stores has a very high quality class. We have now so we just opened this week, we have San Francisco then.
Then we opened up.
Just recently and then the the class of.
Corner Grill restaurants that were opening up Columbus.
Riverton and.
Desert Rich, which is in Phoenix those restaurants are when we consider to be the more.
Margin friendly restaurants with smaller.
Sushi bar replacements and stuff like that so those restaurants, they actually expect it to be more margin efficient than the current portfolio of Russia. So we're actually looking forward to the positive impact of a new class of corner grows into the conical margin profile as they are actually more efficient reference the way that we've designed.
And we plan to operate them. So we're I'm I'm I'm pretty.
Bullish on the margin profile for the restaurants and.
And.
To the 23 year in the fourth quarter 2002.
Alright. Thank you. Good luck guys have a nice holiday if I don't speak to you.
Thank you David D well.
Mr. Hilarious there are no further questions for these scientists Tom I will now turn a call back to you.
Thank you thanks, everyone for joining us on the call today.
Do I would like to thank our tremendous team for other contributions.
And frankly hard working what's a very challenging environment, but also.
Very rewarding to see his operate great restaurants, and every single market that way and so thank you all of you for that.
For our guests and people, who like our brands and and loved the five value that would provide look forward the senior out in our restaurants. So everyone has a good one thank you.
That does conclude the conference call for today, we thank you for your participation in nasty piece disconnect your lines.
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