Q2 2023 BT Brands Inc Earnings Call
Speaker 1: O.
Speaker 2: significant loss it really wasn't a big consumer of cash during the quarter and simple math will show everybody that that that seven million dollars in in cash is a little more than a dollar a share in cash and certainly our priority is to put that money to work in a prudent fashion and obviously as we get it to work and generate more revenue and hopefully bottom line profits you know we're going to able to leverage some of these G&A costs which also
Speaker 2: impact us. If you look at the tabular numbers, we run around 13 percent GNA right now. And that's really too high. We need to get the business growing to the point where that's much more down in the below 7 percent range and closer to 5. So that's the long-term goal in terms of growing this business. We have the cash to grow the business and...
Speaker 2: And those of you who have taken a few minutes to study our 10Q and our balance sheet are certainly well aware. We've got a modest amount of long-term debt, a very low percentage of our 10 million in equity. We have roughly 2.5 million, counting the current portion of debt.
Speaker 2: where our commodity costs are at, where our labor costs are at, and I would say you can certainly hold us accountable as we get on the next call. So write this one down. We're very aggressively turning to get Kehans on back where we thought we bought it. The village beer garden is a little bit of a different animal. It's a large open space. I'm going to assume nobody's been there, but it's a traditional German. If you were to go to Germany, it's what you might see in a beer garden. A lot of outdoor picnic tables, which give us a lot of capacity.
Speaker 2: and somewhat negatively.
Speaker 2: Our team in Cocoa, Florida where the beer garden is located certainly points to the weather This year as having some fluctuations that have hurt business now What impact that's had we're going to also have to figure out and turning to just rounding the horn up high in the sky is
Speaker 2: performing better than last year and certainly better than our expectation. It's offset a little bit by the BurgerTime business, which came out of the pandemic with really unbelievably strong numbers. And yeah, that's fair, the feel
Speaker 2: It faces the competition of fast food. Now we've been able to maintain margins in the face of some rising beef costs there. And in general, we've kept our menu costs.
Speaker 2: As those of you are familiar with the history of BurgerTime, we tend to want to be a value provider. We try and be, in terms of our competition, priced just a little bit lower than anybody else, and we've maintained that. We'll probably be looking at a price increase here as we go into the fall because our competitors certainly have been very...
Speaker 2: aggressive in increasing prices. I want to just talk for a minute as we get to the bottom of the income statement. We pick up our equity portion, our equity in Bagger Dave's. Most of you are aware we own 41.2% of Bagger Dave's.
Speaker 2: And that has been, again, the loss, but the loss is, for the most part, a non-cash loss. It's depreciation.
Speaker 2: It's, and our equity in the law certainly made up a significant portion.
Speaker 2: If you look at the 26 week numbers, at the six month numbers, we had a loss of $375,000, which I talked about at the beginning of the call, and $145,000 before the tax benefit related to our equity share in the Bagger-Daves loss.
Speaker 2: That also, if you want to line up our priorities aside from the number one priority, investing the capital that we have in a way that generates a return that is acceptable and that's a high return. Number two is fixing Florida, which we're aggressively working at.
Speaker 2: A big priority is to really look at the Bagger-Dave business, which is principally over in Michigan, also in Indiana and Ohio. And we, our goal there is those stores are, and we've had a lot of...
Speaker 2: I would say friends, people in the restaurant industry who maybe have ideas for us. Probably four different groups go over and tour the Six Bagger Dave stores and the reports have been consistent as can be. A, the locations are pretty good, some are better than others. And then there's many special things.
Speaker 2: But generally, the locations are decent. The properties are in like new condition. They're in very good shape. They're not run down. And the staffs in the restaurants are all reasonably good in terms of the interaction that the they don't have a door in their assisting
Speaker 2: that people had with them. Now the problem with baggers is, as we've assessed it, is really a problem with the concept. So we're in the process of pursuing some other concept, and we've looked at and discussed internally several different times whed you're leading through this different alliance,
Speaker 2: alternatives. My own view is we could change it to almost anything and we would probably get a 30-40 percent increase in sales and you know those of you are quick with a calculator if you take those six stores and multiply it by
Speaker 2: even a reasonable sales effort, which would be an average of a million and a half, and certainly we have the capacity to do over 2 million in all those locations, but let's just say the 6 times 1.5 million is 9 million dollars, and we're able to generate 15% and it's tax sheltered.
Speaker 2: drops to the bottom line in those locations, that's a pretty significant impact on BT Brands financials and obviously would be building cash that we could put to work inside of BakerDake. So that's, again we've sort of been talking to people and considering things.
Speaker 2: But I think we're, as we get in the second half of the year, are going to take some aggressive steps to reposition all of those locations with something that is newer and more exciting in terms of the consumers' desire to try what we're doing and to
Speaker 2: participate as a regular customer. So that actually I'm pretty excited about because I think that solves a problem both at BT and obviously allows us to build cash in the Bagger Dave's public company which we own.
Speaker 2: 41.2% of that. So that's kind of a rundown of where we're at. And I think hopefully.
Speaker 2: Obviously, we're in a very enviable, strong financial position. We've got the ability to move forward and do take advantage of opportunities. I mean, certainly when you look at Florida where we put our toe in the water, we've got some stores that are
Speaker 2: unless we find an opportunity to take advantage of some higher interest income on our available cash balance.
Speaker 2: So with that, I know there's going to be probably some questions on our...
Speaker 2: interest in noble Romans which is included in our investments and the
Speaker 2: proxy fight that we went through and I'm not going to bore you with all the details as to why our votes got excluded. We did collect significantly more proxies than Nobles did although we were not allowed to nominate Gary Koppelroot to the board which was
Speaker 2: our desire because we hoped that Gary would be a catalyst for change and I guess from our standpoint and I'm going to let Gary add words on that. As we have said in the press in Indianapolis and have said publicly regarding our investment in noble Romans, although things could change anytime, certainly it's our current intention is –
Speaker 2: is not to go away. We're going to stay with it. That's our plan, and we think we have the opportunity next year to perhaps elect multiple directors and to definitely influence the outcome of our investment.
Speaker 2: So Gary you want to add anything on the Noble side before we throw it open to questions? Well just commenting on it a little bit is that you know we are only running for one out of five board seats and so we didn't plan really on any significant changes
Speaker 3: other than holding the directors accountable for their actions in which they've continued to dilute the existing shareholders with employee stock options which mainly went to the insider executives that are already overcompensated and
Speaker 3: And at the end of the day, over a 10-year period, they've diluted the existing shareholders by up to 23% of the outstanding shares, and they're all approved by, or not getting approved by outstanding shareholders. So that was pretty significant in addition to their overcompensation. That being said is that
Speaker 3: we have the ability to fix what their problems are. And the main problem is really twofold. One is the overcompensation of what management takes out for a large portion of their years and not fully. The other is the overcompensation of what management takes out for a large portion of their years and not fully. And the main problem is really twofold. One is the overcompensation of what management takes out for a large portion of their years and not fully.
Speaker 3: disclosing what that full compensation is. And the other is that just their usury rates on which they're borrowing money at, in which we feel that we can get bank financing with and paring back their 1.6 million of.
Speaker 3: of interest costs at 15% round numbers is that we have the ability to change that. What is significant only from the standpoint is is that we've made a investment in the company of, I don't know, half a million dollars plus or minus, which We made up over about drops in. whit at the
Speaker 3: is not big in relationship to our liquidity that we do have on our books. But we have significant ways in order to lower that cost significantly. And we anticipated that it was probably gonna run over two elections before we got much done. But the reality is when we had these publicouf concessions and various checkoffs that eventually
Speaker 3: fiduciaries to the outside shareholders is basically rubber stamping to the existing management that they've done for a number of years. So at the next election because there wasn't a quorum is that there's going to be three out of the five board seats.
Speaker 3: that'll be up for election and we plan on being there doing what we did this year, next year as well. And, you know, anything can change from all kinds of different things with these, with the characters that are currently involved in it.
Speaker 3: And we look forward to significantly having an impact when we do have three board members on it next year, assuming that we have the same 75 percent of the existing shareholders that vote for us.
Speaker 3: The company did state in their 8k that they had 9 million shares that voted for them in which on our Tabulations is is that the two officers that that are also board members? Ended up voting their 3 million shares and plus or minus another half a million shares by the board of directors
Speaker 3: that voted for them. So on the tabulations that we have is that we feel that that they probably ended up getting four million votes and we ended up getting roughly about 10 million shares because pretty much the existing shareholders.
Speaker 3: have seen over the years, the 90% decrease in stock price and the decline in shareholder equity has gone, 50% of it or 40% of it has gone to the insiders to no benefit of the existing shareholders. So how they can...
Speaker 3: give out all of the stock options each and every year and the compensation that they give these people, we think that it's way outside of the box of being normal.
Speaker 3: So other than that,
Speaker 3: I think we can open it up for questions.
Speaker 2: Go ahead, Jen, you can see if there are any questions out there.
Speaker 2: Okay, thank you. If you would like to ask a question, please press star 1 on your telephone keypad now. You'll be placed into the queue in the order received.
Speaker 4: Please be prepared to ask your question when prompted.
Speaker 4: Once again, if you have a question, please press star 1 on your phone now.
Speaker 4: And once again, that's star 1 to ask a question.
Speaker 4: And Mr. Bremer, it appears there are no questions at this time.
Speaker 3: I would say a quick, a couple more quick closing the loops is that one of the things that Ken had talked about is that the $2.5 million that we have on debt is against the real estate at roughly about 50% of what the appraisal value was.
Speaker 3: fixed cost of about four and a half percent for ten years is what that we've got mortgages on that's the only debt that we've got with the company.
Speaker 2: Okay, Gary and I are both available. I think our phone numbers are easy to find. If you... for those who are machine learning accessed what they needed to know.
Speaker 2: have a question following this call or want to follow up on specific items, but again, we appreciate everybody joining us today. We appreciate your interest. I think there's one more comment that both Ken and I are almost shocked about is that
Speaker 3: I mean, we went into Noble as a shareholder because we saw value there. And what is significant to us is that in spite of us reaching out and willing to lend them some money to pay down that debt, is that we have yet to get a simple phone call.
Speaker 3: on how we can help them when we have the ability to be in order to do it. So that was the other significant thing I think that really shocked and surprised us is that nobody from the company has ever reached out to us.
Speaker 5: OK, all right, which is true.
Speaker 2: Jen, thank you for hosting and thank everybody for joining. And we look forward to speaking with you and being held accountable to those priorities as we head to the end of the third quarter.
Speaker 5: I thank you for joining us.