Q3 2023 BurgerFi International Inc Earnings Call

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Speaker 1: Good morning everyone and thank you for participating in today's conference call to discuss BurgerFi International's financial results for the third quarter ended October 3rd, 2023.

Good morning, everyone and thank you for participating in today's conference call to discuss Burger Fi Internationals financial results for the third quarter ended October three 2023.

Speaker 1: Joining us today are Karl Bachmann, CEO , and Chris Jones, CFO . Following their remarks, we'll...

Joining us today are Carl Boston, CEO, and Chris Jones CFO.

Following their remarks, we'll open the lines for your questions.

Speaker 1: Before we begin, I want to remind everyone this conference call may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.

Before we begin I want to remind everyone. This conference call may contain forward looking statements as defined in the private Securities Litigation Reform Act of 1995.

Speaker 1: These forward-looking statements may be related to BurgerFi's estimates of its future business outlook, liquidity, store opening plans, same-store sales, and restaurant operating margin growth plans, prospects or financial results including projected sales, restaurant, evening, and

These forward looking statements may be related to your Burger fives, the estimate of its future business outlook liquidity store opening plans same store sales and restaurant operating margin growth plan prospects or financial results, including projected sales restaurant EBITDA.

Speaker 1: Forward-looking statements generally can be identified by words such as anticipates, believes, estimates, expects, intends, plans, predicts, projects, will be, will continue, will likely result in similar expressions.

Forward looking statements generally can be identified by words, such as anticipates believes estimates expects intends plans predicts projects will be.

We will continue will likely result in similar expressions. These forward looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause the company's actual results differ materially from those reflected in the forward looking statements.

Speaker 1: These forward-looking statements are based on current expectations and assumptions. They're subject to risks and uncertainties which could cause the company's actual results different materially from those reflected in the forward-looking statement.

Speaker 1: Factors that could cause or contribute to such differences include but are not limited to those discussed in the annual report on Form 10-K the year ended January 2nd, 2023, and those disclosed in other documents that the company files with the Securities and Exchange Commission.

Factors that could cause or contribute to such differences include but are not limited to those discussed in the annual report on Form 10-K, the year ended January.

Second 2023, and those disclosed in other documents that the company files with the Securities and Exchange Commission.

Speaker 1: All subsequent written and oral forward-looking statements attributable to BurgerFi or persons acting on BurgerFi's behalf are expressly qualified in their entirety by the cautionary statements included in this conference.

All subsequent written and oral forward looking statements attributable to Burger Fi or persons acting on Burger fives behalf are expressly qualified in their <unk>.

Entirety by the cautionary statements included in this conference call.

Speaker 1: The company undertakes no obligation to revise or publicly release the results of any revisions to these forward-looking statements, stepped as required by law.

The company undertakes no obligation to revise or publicly release the results of any revision to these forward looking statements.

As required by law.

Speaker 1: Given these statements and uncertainties, listeners are cautioned not to place undue reliance on such forward-looking statements.

Given these statements and uncertainties listeners are cautioned not to place undue reliance on such forward looking statements.

Speaker 1: Also, the following discussion will contain non-GAAP financial measures. For discussion and reconciliation of these non-GAAP financial measures, please see the earnings release for the third quarter of 2020.

Also the following discussion will contain non-GAAP financial measures for a discussion and reconciliation of these non-GAAP financial measures. Please see the earnings release for the third quarter 2023.

Speaker 1: I would also like to remind everyone that this call will be available via telephonic replay for two weeks starting today. A webcast replay will also be available via the link provided in today's press release as well as on the company's website at www.burgerfi.com.

I would also like to remind everyone that this call will be available via telephonic replay for two weeks starting today.

Webcast replay will also be available via the link provided in today's press release as well as on the company's website at Www Dot Burger five dot com.

Speaker 1: Now I'd like to turn the floor over to BurgerFi CEO , Karl Bachman. Karl, you may go ahead.

Now I'd like to turn the floor over to Burger five CEO Karl Bachman Carl you May go ahead.

Speaker 1: Thank you for joining us today, and we appreciate your interest in BurgerFi. Let me begin by thanking our entire team, franchisees, and employees for their dedication and hard work in this challenging environment.

Thank you for joining us today and we appreciate your interest in Burger five let me begin by thanking our entire team franchisees and employees for their dedication and hard work in this challenging environment.

Speaker 2: Our third quarter performance is clearly unacceptable and certainly not reflective of what we believe these brands and the people of this organization can accomplish.

Third quarter performance is clearly unacceptable and certainly not reflected well with what we believe these brands and the people at this organization can accomplish.

Speaker 2: Having arrived at the company only 10 days into the quarter, these results are in no way indicative of the work we are doing or where we intend to take the business.

Having arrived at the company only 10 days into the quarter.

Results are in no way indicative of the work, we are doing or where we intend to take the business.

Speaker 2: As mentioned on our last quarterly earnings call, we are implementing strategic priorities that we believe are setting the company up for long-term profitable growth.

As mentioned on our last quarterly earnings call. We are implementing strategic priorities that we believe we're setting the company up for long term profitable growth.

Speaker 2: And as we embed these positive changes into our operating model, we highlight our early and ongoing wins as part of this journey, so as to gain your confidence in our vision and ability to build shareholder value from current levels.

And as we embed these positive changes into our operating model, we highlight our early and ongoing wins as part of this journey so as to gain your confidence in our vision and ability to build shareholder value.

Current levels.

Speaker 2: Positive initial trends in the third quarter succumb to softer performance later in the quarter. As we laugh at last year's 20th anniversary celebration in Anthony's, coupled with the impact of reduced marketing spend initiated prior to our arrival.

Positive initial trends in the third quarter should come to softer performance later in the quarter as we lapped last year's 20th anniversary celebration in Anthonys, coupled with the impact of reduced marketing spend initiated prior to our arrival.

Speaker 2: Similar to others in the industry, we also were impacted by softer performance in South Florida, one of our key markets.

Similar to others in the industry. We also were impacted by softer performance in South Florida, one of our key markets. We believe this was due to seasonality as a region returned to norm more normalized trends.

Speaker 2: We believe this was due to seasonality as the region returned to more normalized trends.

Speaker 2: Importantly, the challenges of Third Quarter are behind us now, with many of the initial initiatives we put in place taking hold, including the expanded menus at BurgerFi and in-

Importantly, the challenges of third quarter are behind US now with many of the initial initiatives, we put in place taking hold including expanded menus at Burger Fi and Anthony.

Speaker 2: Most recently, we successfully executed the biggest enhancement of the BurgerFi menu in the company's history, adding wings and salad bowls, and the response has been resounding. This is only the beginning, as further menu refinement, including new chicken sandwiches, will hit company stores by the end of the month. So it's official.

Most recently, we successfully executed the biggest enhancement of the Burger five menu in the company's history, adding wings and salad bowls and the response has been resounding. This is only the beginning as further menu refinement, including new chicken sandwiches will hit company stores by the end of the month.

So it's official Burger fine that's entered the chicken wars.

Speaker 2: And we're only getting started. These updates are critical to the brand's turnaround as they eliminate the veto vote, expanding our high quality offering to an even larger segment of the market.

We are only getting started these updates are critical to the brand's turnaround as they eliminate the veto vote, expanding our high quality offerings to an even larger segment of the market.

Speaker 2: BurgerFi is also accelerating the adoption of technology to drive food costs down, which are now approaching industry benchmark levels. Looking forward with the combination of new unit growth and improving same store sales trends driven by our expanded offering and overall more effective marketing messages, we anticipate BurgerFi returning to positive comps in early 2024 and positive EBITDA by the second half of 2024.

Verify is also accelerating the adoption of technology to drive costs down which are now approaching industry benchmark levels looking forward with a combination of new new unit growth and improving same store sales trends driven by our expanded offering and overall more effective marketing messages, we anticipate burger five returning to positive.

Comps in early 'twenty, 'twenty, four and positive EBITDA by the second half of 2024.

Speaker 2: Additionally, we're equally competent in the return to positive comps at ANS.

Additionally, we're equally confident and then returned to positive comps at Anthonys.

Speaker 2: driven by similar initiatives, including menu modification, an aggressive focus on food costs, and the benefits from an updated POS platform.

Given by similar initiatives, including menu modification and aggressive focus on food cost and the benefits from an updated Pos platform.

Speaker 2: Perhaps, most importantly, we are setting the stage for franchising company-owned Anthony's stores starting as early as the first quarter of 2024. But more on that later. To give you a sense of why we are confident that we can reach these goals in 2024, I'm going to follow the form from last quarter and provide a detailed update on our five strategic priorities.

Perhaps most importantly, we're setting stage for franchise and company owned Anthonys stores, starting as early as the first quarter of 'twenty 'twenty four but more on that later.

Sense of why we are confident that we can reach these goals in 2024 I'm going to follow the form from last quarter and provide a detailed update on our five strategic priorities.

Step one is infrastructure it starts with employees I believe we must have the best team on the field to play and they need to develop and train them properly.

Speaker 2: starts with employees. I believe we must have the best team on the field to play and the need to develop and train them properly.

Speaker 2: In just a few months, we've already been able to decrease turnover at both brands and significantly reduce the training labor needed at the restaurant level.

Just a few months, we've already been able to decrease turnover at both brands has significantly reduced the training labor needed at the restaurant level <unk>.

Speaker 2: These efforts have resulted in higher consumer satisfaction scores, as well as faster throughput and ticket times. While these encouraging metrics are not reflected in our financial performance, they are leading indicators that we are on the right path towards higher sales and market.

These efforts have resulted in higher consumer satisfaction scores as well as faster throughput and ticket times. While these encouraging metrics are not reflected in our financial performance. They are leading indicators that we are on the right path towards higher sales and margins we plan to build upon this during the remainder of the year and expect to see an improvement in the labor line at Burger body.

Speaker 2: We plan to build upon this during the remainder of the year and expect to see an improvement in the labor line at Burger Party and Anthony's over the next year. As noted above, we are also upgrading our POS system across both brands, so they are on one system to allow for better inventory control. At Anthony's, we are evaluating outfitting our servers with handheld tablets that allow them to beam orders directly to the kitchen, which will help drive the...

Anthonys over the next year.

As noted above we are also upgrading our Pos system across both brands.

You are on one system to allow for better inventory control and Anthonys, where value outfitting, our servers with handheld tablets that allow them to beam orders directly to the kitchen, which will help drive efficiencies.

Speaker 2: Step two, taste and quality, which are paramount to everything we do, and why we're going to make sure we continue to have the best products and most innovative LTO.

Yep to taste and quality, which are paramount to everything we do and why are we going to make sure. We continue to that best products and most innovative L. T O S.

Speaker 2: In October , Ante's launched new classic menu items, including a chicken alfredo and artichoke pizza, and two pasta dishes, spaghetti and meatballs, and Italian predettini alfredo. Guest feedback has been encouraging so far. At BurgerFi, when reading guest comments, we noticed a lot of criticism around the french fries. With taste loss due to prior costs cutting to the menu item, we noticed a lot of criticism around the french fries.

In October anti you'd watch new classic menu items, including a chicken Alfredo Artichoke pizza and two pasta dishes, spaghetti and meatballs and Italian credit Genie up Brito.

Feedback has been encouraging so far at.

At Burger five when reading guest comments, we noticed a lot of criticism around the French fries with tasteful loss due to prior cost cutting procedures.

Speaker 2: Upon receiving this feedback, we immediately changed the process to prepare the prize in a crisper way, and so it bounced back in taste satisfaction.

Upon receiving this feedback we immediately change your processes or surprising that CRISPR way, that's a bounce back in taste satisfaction.

Yes.

Speaker 2: Additionally, we also right-sized the menu at BurgerFi, removing less popular and process-intense items that slowed down throughput and ticket time.

Additionally, we also right sized the menu with burger by removing less popular and processing fence items that slowed down throughput at ticket times and on November 1st we launched all new menu items, the burger by including three flavors of chicken wings and four types of Burger five bowls. Additionally, we are launching a chicken sandwich option.

Speaker 2: And on November 1st, we launched all new menu items at BurgerFi, including three flavors of chicken wings and four types of BurgerFi bowls. Additionally, we are launching a chicken sandwich option that will come sous vide, making it easy and efficient for our employees to prepare. Until now, we haven't really offered a compelling crispy chicken sandwich. We've spent the last few months perfecting this crispy chicken sandwich, as well as a new grilled chicken sandwich, to close our menu gap.

Cup sous-vide, making it easy and efficient for our employees to prepare.

Till now we haven't really offered a compelling crispy chicken sandwich. We spent the last few months protecting the crispy chicken sandwich as well as the new grilled chicken sandwich to close our menu gap.

Speaker 2: fast casual burger brand should have a 10 to 15% chicken mix and until now we had virtually none. This will allow us to open a whole new audience of chicken fans.

Our fast casual Burger brand should have a 10 to 15 per cent chicken mix and until now we had virtually none this will allow us to open a whole new audience of chicken fans.

Speaker 2: To add to the menu innovation, Birdify will also launch a seasonal white chocolate peppermint shake for a limited time only. This shake features vanilla frozen custard mixed with white chocolate and peppermint topped with whipped cream and crushed peppermint.

To add to the menu innovation certified will also launch a seasonal white chocolate peppermint shake for a limited time only vishay features vanilla frozen custard mixed with white chocolate peppermint topped with whipped cream and crushed peppermint pieces.

Speaker 2: Step three is gold standards. Gold standards is a term that defines our product and product, process and facility and creates brand promises.

Step three is gold standards. Both standards is a term that defines our pride in product processing facility and creates brand promises.

Speaker 2: We're executing at a higher level than before, listening to employee and guest feedback and moving in the right direction to drive

Executing at a higher level than before listening to employee and guest feedback and moving in the right direction.

Drive long term sales growth.

Speaker 2: As I began getting a feel for the business through my store tours and...

As I began getting a feel for the business through my store tours and Anthony.

Speaker 2: I realized that neither employees nor customers were happy with our AI phone answering bot named Becky. As you might recall, Anthony's added the AI bot to its 60 corporate locations last December to handle the roughly 500,000 phone orders that come in every year.

I realize that neither employees and our customers were happy with our AI phone answering botany Becky as you might recall, if he's added to a bot to its 60 corporate locations last December handle the roughly 500000 phone orders that come in every year.

Speaker 2: The goal of this rollout was to drive labor savings and higher check averages. However, Becky wasn't doing a very good job. The system had too many prompts and too many steps, which frustrated customers. Team members also expressed that they missed interacting with guests.

The goal of this rollout was to drive labor savings and higher check averages. However, Becky wasn't doing a very good job. It's just about too many prompts and too many steps, which frustrated customers team members also expressed that they miss interacting with guests as a result, one of my first acts as CEO was to go back having employee answer the phone.

Speaker 2: As a result, one of my first acts as CEO was to go back to having employees answer the phone. Removing Becky now allows employees to go to Human Touch back into their many hundreds of thousands of annual phone transactions.

Removing Becky now allows employees to put a human touch back into their many hundreds of thousands of annual phone transactions.

Speaker 2: Every interaction with the guest is a moment of truth. In hospitality, you can start first on the phone.

Every interaction with the guest is a moment of truth and hospitality can start first on the phone.

Speaker 2: Additionally, we expect to see some savings from dropping this costly system, and I've already started seeing a boost in call orders and check average as alienated customers have returned.

Additionally, we expect to see some savings from dropping just coffee system and have already started seeing a boosted call orders and check average at the alienated customers have returned.

Speaker 2: Step four is telling the world about our brands through intentional marketing efforts.

Step four.

It's telling the world about our brands through intentional marketing efforts in September we launched the kids eat free program Burger Pie every Monday kids 12, and under can enjoy a free kids meal with a purchase of an adult meal. This is for our dining customers only.

Speaker 2: In September , we launched the Kids E pre-program for BurgerFi. Every Monday, kids 12 and under can enjoy a free kids meal with a purchase of an adult meal. This idea is breakthrough and involves encouraging family member to meet the menu card number

Speaker 2: We continue to have some fun around holidays. On National Cheeseburger Day, we celebrate with a $3 cheeseburger in the purchase of a beverage. On National Cheese Pizza Day, we offered a $10 16-inch cheese pizza. We're also focusing our efforts on driving digital engagement and our rewards.

We continue to have some fun around holidays, a national Cheeseburger day, we celebrate with a $3 cheeseburger with a purchase of a beverage a national cheese Pizza day, we offered at $10 60, Hg's Pizza. We're also focusing our efforts on driving digital engagement and our rewards program.

Speaker 2: Finally, I went to step five, defining the portfolio.

Finally, I wanted to step by defining the portfolio.

Speaker 2: about both store development and optimization. It's not lost on us that while we make positive headway in products, labor and market.

Is about both store development and optimization, it's not lost on us that while we make positive headway in products labor and marketing the most important part of driving profitability and cash flow is cycling out underperforming ones and opening new stores over the last three months, we've been close to review our existing portfolio. In addition to our pipeline.

Speaker 2: The most important part of driving profitability in Cashflow is cycling out underperforming ones and opening new stores. Over the last three months we have been closely reviewing our existing portfolio in addition to our pipeline.

Speaker 2: Do the DMAs our restaurants are located in have the demographics to support our brands? We need to understand where we're successful and where we're struggling from a real estate, regional or market perspective.

Do the DMA as our restaurants are located in and have the demographics support our brands.

Just to understand where we're successful and where were struggling from a real estate regional or market perspective were currently working on right sizing our portfolio closing underperforming restaurants.

Speaker 2: We are currently working on right-sizing our portfolio and closing underperforming restaurants.

Speaker 2: Our growth going forward will be focused on infilling the Eastern Seaboard within existing markets, where we already have a strong brand awareness from corporate and franchise locations, and scorcherous around those corn markets. We will also grow what we...

Our growth going forward will be focused on in filling the eastern seaboard within existing markets, where we already have a strong brand awareness from corporate and franchise locations and scorches around those core markets.

We will also grow what we view as promising markets.

Speaker 2: As of October 2nd, our portfolio consisted of 110 BurgerFi restaurants, 26 corporate-owned, and 84 franchises, and 59 corporate-owned answers.

As of October 2nd our portfolio consisted of 110 Burger by restaurants, twenty-six corporate owned and 84 franchised and 59 corporate owned Dampens.

Speaker 2: During the third quarter, we closed one underperforming company owned at three franchise BurgerFi restaurants as we continue to right size our portfolio.

During the third quarter, we closed one underperforming company owned and three franchise Burger probably restaurants, as we continue to rightsize our portfolio. Additionally.

Speaker 2: Additionally, we closed one underperforming company-owned ant...

Additionally, we closed one underperforming company owned Anthonys for the full year, we now expect new store openings coming in at 12 to 15, new restaurants, all of which will be franchise with the exception of our flagship New York City location.

Speaker 2: For the full year, we now expect new store openings to come in at 12 to 15 new restaurants.

Speaker 2: all of which will be franchised with the exception of our flagship New York City location.

Speaker 2: According to the fourth quarter, we acquired two franchise birdifies in South Florida to solidify our presence and help accelerate growth in this core market.

Turning to the fourth quarter, we acquired two franchise Burton South, Florida to solidify our presence and help accelerate growth in this core market.

Speaker 2: These restaurants are located in Hallandale Beach and Miami Beach to high traffic, popular tourist spots, and represent in the brand's evolution.

These restaurants are located in Hallandale Beach in Miami Beach to high traffic popular tourist spots and represented in the brand's evolution.

Speaker 2: commitment to continued development in primary markets across the country.

Our commitment to continue to develop it in primary markets across the country.

Speaker 2: We believe these restaurants to be high volume and margin accretive as we fortress South Florida.

We believe these restaurants to be high volume and margin accretive as we portrait South Florida.

Speaker 2: In December , BurgerFi will be returning to New York City with the grand reopening of our flagship company-owned BurgerFi restaurant and Better Burger Lab on the Upper East Side of Manhattan. Being a born and raised New Yorker, reopening our Manhattan location is a passion point for me. There's no better market for us than New York City. It's the epicenter of food, entertainment, fashion and culture.

In December <unk> would be returning to New York City with the Grand reopening of our flagship company owned verify restaurant and better Burger lab on the upper east side of Manhattan.

Being a born and raised New Yorker reopening our Manhattan location is a passion point for me Theres no better market for Us in New York City is the epicenter of food entertainment fashion and culture.

Speaker 2: And having a flagship restaurant there is excellent for brand awareness beyond the immediate yokst.

And having a flagship restaurant there is excellent for brand awareness beyond the immediate geography.

Speaker 2: In addition to our standard menu, this location will offer an exclusive lineup of limited edition offerings not available in our other locations and a late night menu with a variety of alcoholic beverages. This restaurant will also serve as a menu.

In addition to our standard menu dislocation will offer an exclusive lineup of limited edition offerings not available at our other locations and our late night menu with a variety of alcoholic beverages.

This restaurant will also serve as a venue for special events.

Speaker 2: South Florida, our home market, is a top destination for New Yorkers. And now our guests can discover BurgerFi in South Florida and go back and enjoy it year round in Manhattan. This is a win-win for both guests and the brand.

South, Florida, our home market as a top destination for new Yorkers, and now where guests can discover burger finding south, Florida and go back and enjoy it year round in Manhattan. This is a win win for both guests and the brands.

Speaker 2: We are also still on track to open our first ever co-branded BurgerFi in Anthony's location in December with our franchisee NDM Hospitality Service.

We are also still on track to open our first ever co branded Burger pie and Afg's location in December with our franchisee MDM hospitality services as a reminder, our agreement with them calls for three franchise locations in Florida over the next two years, the second or third anthonys locations through the MTF agreement are expected to be both of the smaller anthonys Proto.

Speaker 2: As a reminder, our agreement with them calls for three franchise Anthony's locations in Florida over the next two years. The second and third Anthony's locations through the MDM agreement are expected to be both of the smaller Anthony's prototype. The first of these smaller restaurants is slated to open in the Miami World Center development near the Miami Brightline Center.

Right.

The first of these smaller restaurants are slated to open in the Miami World Center development near the Miami Bright like station.

Speaker 2: We're also expanding our footprint through non-traditional spaces. We entered into a binding license agreement with Apple Cinemas to operate a BurgerFi franchise location to the Pittsburgh Plaza Apple Cinema in Rochester, New York.

We're also expanding our footprint through non traditional spaces, we entered into a binding license agreement with Apple cinemas operated Burton five franchise location in Pittsburgh Plaza, Apple Cinema in Rochester, New York.

Speaker 2: The location will also provide pickup and third party delivery service capabilities for non-theater customers.

The location was to provide pickup and third party delivery service capabilities for non theater customers. This.

Speaker 2: This location marks a new and exciting venture for BurgerFi. Non-traditional venues provide opportunities that wouldn't normally be available for restaurants and greatly increase our awareness and visibility of our brand.

This location marks a new and exciting venture for Burger five non traditional venues provide opportunities it would normally be available for restaurants and greatly increase our awareness and visibility of our brands and.

Speaker 2: In my experience, the best way to accelerate growth and evolution is through these non-traditional avenues. We are aggressively seeking new development opportunities and our pipeline is growing. We continue to seek unique ways to connect our brand to customers where they are in the industry.

In my experience the best way to accelerate growth and evolution is through these non traditional avenues, we're aggressively seeking new development opportunities and our pipeline is growing we continue to see unique ways to connect up Randy customers, where they are in light.

Speaker 2: And finally, one of my main priorities is buying well-capitalized franchisees.

Finally, one of my main priorities buying well capitalized franchisees with restaurant retail and hospitality experience, bringing these operators can drive system resulted more disciplined and profitable growth over the long term.

Speaker 2: with restaurant, retail, and hospitality experience. Bringing these operators into our system will result in more discipline and profitable growth over the long term.

Speaker 2: We have already begun negotiations with several interested parties for multi-unit Anthony's franchise deals, including the sale of a handful of Anthony's locations. I look forward to sharing more resources.

We have already begun negotiations with several interested parties for multi unit Anthony its franchise deals, including the sale of a handful of Anthony broke agents I look forward to sharing more in the coming quarters.

Speaker 2: In closing, my first 90 days on job have been very productive and more confident than ever that I made the right decision to join the company. Sales and margin improvement will not happen overnight, but we are laying the foundation to grow.

In closing my first 90 days of job they've been very productive and more confident than ever that I made the right decision to join the company.

And margin improvement will not happen overnight, but we are laying the foundation to grow upon.

Speaker 2: We believe they will come and these improvements will begin to become evident to you, our stakeholders.

We believe they will come and these improvements will begin to become evident to you our stakeholders.

Speaker 2: We're making very educated, smart decisions using a very simple formula.

We're making very educated smart decisions using a very simple formula we've.

Speaker 2: We must win for our guests, win for the team members, and win for the shareholders and franchisees.

We must win for our guests win for the team members and win for the shareholders and franchisees with that I will now turn the call over to our CFO, Chris Jones, who will provide commentary on our third quarter 2023 performance and update our guidance go ahead Chris.

Speaker 2: With that, I will now turn the call over to our CFO , Chris Jones, who will provide commentary on our third quarter 2023 performance and update our guidance. Go ahead.

Speaker 3: Thank you, Carl, and good morning, everyone. While not evident yet in our financials, please know that this new management team is working hard every day executing a sound strategy that will increase sales and improve margins over time.

Thank you Carl and good morning, everyone, while not evident yet in our financials. Please note that this new management team is working hard every day executing a sound strategy that will increase sales and improve margins over time.

Speaker 3: While top line sales office pressured margins, that didn't stop the company from continuing to drive labor and cost efficiencies, as evidenced by the continued declines in payroll and corporate expense dollars.

Well topline sales office pressured margins that didn't stop the company continued continuing to drive labor and cost efficiencies as evidenced by the continued declines in payroll and corporate expense dollars.

Speaker 3: The bottom line is that the more work we do, driving efficiency today, the greater margin expansion opportunity as we come out of the recovery. I'll briefly look at.

The bottom line is that the more work, we do drive inefficiency today with greater margin expansion opportunity as we come out of the recovery.

Briefly looking at key highlights for the third quarter.

Speaker 3: Third quarter total revenues were 39.5 million, decreasing 9% from 43.3 million from the same quarter last year. Anthony's contributed 29.5 million to revenues in the current period. The decrease in revenue is a result of a decrease in...

Third quarter total revenues were $39 5 million decreasing 9% from $43 3 million from the same quarter last year.

Anthony has contributed $29 5 million to revenues in the current period.

<unk> revenue was the result of the decrease.

Speaker 3: 15% same-store sales at BurgerFi company stores, and a 5% decrease in same-store sales at Anthony's.

15% same store sales of Burger five company stores in the 5% decrease in same store sales of Anthonys.

Speaker 3: As Carl noted earlier, Anthony's face an especially challenging comparison with the prior year due to aggressive promotional activity in the third quarter last year as part of the company's 20th anniversary.

As Carl noted earlier, Anthony space, and especially challenging comparison versus the prior year due to aggressive promotional activity in the third quarter last year as part of the company's 20th anniversary.

Speaker 3: This was compounded by sequentially lower marketing spend in the quarter at the hand of prior management.

This was compounded by sequentially lower marketing spend in the quarter at the hand of prior management.

Speaker 3: All of this was compounded by the fact that 3Q is Anthony's slowest quarter. And like some of our peers, trends in the South, specifically in the Miami-Fort Lauderdale region, are returning to more pre-COVID trends.

All of this was compounded by the fact that <unk> is Anthony slowest quarter. Unlike some of our peers trends in itself specifically in the Miami Fort Lauderdale region are returning to more pre COVID-19 trends.

Speaker 3: Importantly, the company has returned to a more normalized marketing program with an increased focus on driving awareness and ultimately traffic, which is already driving improved results.

Importantly, the company has returned to a more normalized marketing program with an increased focus on driving awareness and ultimately traffic, which is already driving improved results.

Speaker 3: restaurant level profit margin came in at 11.8% down 100 basic points year over year.

Restaurant level profit margin came in at 11, 8% down 100 basis points year over year.

Speaker 3: Similar to last quarter, during the quarter, we saw a positive improvement in food, beverage, and paper, a trend that should continue. As you have probably heard from others in the industry, inflation has waned on all commodities except for beef, and new contracts are yielding lower forward prices.

Similar to last quarter during the quarter, we saw a positive improvement in food beverage and paper a trend that should continue.

Probably heard from others in the industry inflation, that's weighing on all commodities, except for beef and new contracts or you'll be lower forward pricing.

Speaker 3: These positive trends were more than offset by higher labor and other expenses, largely due to lower sales volume in the period.

Positive trends were more than offset by higher labor and other expenses largely due to lower sales volume in the period.

Speaker 3: Shifting to our individual brand results, the BurgerFi corporate owned restaurant sales decreased 12% to $7.8 million, reflecting a decrease in same-source sales. System-wide sales for BurgerFi in the third quarter decreased 9% to $35.7 million compared to $39.1 million in the year-ago quarter.

Shifting to our individual brand results. The Burger five corporate owned restaurants sales decreased 12% to seven 8 million, reflecting a decrease in same store sales.

System wide sales for Burger find third quarter decreased 9% to $35 7 million compared to $39 1 million in the year ago quarter.

Speaker 3: primarily due to declines in same-store sales coupled with the closure of underperforming company stores.

Primarily due to declines in same store sales coupled with the closure of underperforming company stores.

Speaker 3: Verify system-wide same-source sales increased 11% for the third quarter compared to the same period in 2022.

Burger by system wide same store sales increased 11% for the third quarter compared to the same period in 2022.

Speaker 3: For corporate on burger fries, same source sales decreased 15% and franchise restaurants same source sales decreased 9%

For corporate <unk> same store sales decreased 15% and franchise restaurants same store sales decreased 9%.

Speaker 3: BurgerFi's restaurant level operating margin increased 440 basis points to 2.2 for the quarter compared to 6.6 in the prior year third quarter due to loss of leverage on fixed costs due to same-store sales decline.

Berger pies restaurant level operating margin increased 440 basis points or 2.2 for the quarter compared to $6 six in the prior year third quarter due to loss of leverage on fixed costs due to same store sales declines as mentioned earlier food and paper margins continue to be a positive story. It's running we expect to continue despite the continued pressure on beef prices.

Speaker 3: As mentioned earlier, food and paper margins continue to be a positive story. The trend we expect to continue despite the continued pressure on beef prices.

Speaker 3: While we are not immune to these increases, we don't expect to see the same global increases that others have seen. Additionally, we are well into discussion with a secondary supplier that should allow us to insulate ourselves from any volatility in beef prices in 2024 and beyond.

While we were not immune to these increases we don't expect to see the same level increases that others have seen. Additionally, we were willing to discussion with a secondary supplier that should allow us to insulate ourselves from any volatility in beef prices in 'twenty 'twenty four and beyond.

Speaker 3: We are confident that we will continue to see improvements in food and paper margins due to these benefits and the positive impact inventory management and procurement systems that continue to yield improvements.

We're confident.

You'll continue to see improvements in food and paper margins due to these benefits and the positive impact of inventory management and procurement systems continued to yield improvements.

Speaker 3: Looking into 2024, we believe that a combination of menu enhancements, improved marketing, and a contribution of new stores, we will return to positive total growth at BurgerFi. At which point, we believe operating leverage of the BurgerFi business will start to emerge in a very compelling way.

And then the 'twenty 'twenty four we believe the combination of advancements group marketing and the contribution of new stores, we will return to positive total growth a burger player.

At which point, we believe operating leverage of the Burger five business will start to emerge in a very compelling way.

Speaker 3: According to Anthony's, restaurant sales were $29.5 million in the third quarter compared to $31.5 million in the prior year.

Turning to Anthonys restaurant sales were $29 5 million in the third quarter compared to $31 5 million in the prior year.

Speaker 3: A decrease was driven by a 5% decrease in savings or sales when compared to the third quarter of 2022.

The decrease was driven by a 5% decrease in same store sales when compared to the third quarter of 2022.

Speaker 3: staying with Anthony's on the restaurant profitability, restaurant level operating margins decreased 20 basis points to 14.3% for the quarter compared to 14.5 in the prior year's third quarter.

Well they have the needs on our restaurant profitability restaurant level operating margins decreased 20 basis points to 14, 3% for the quarter compared to $14 five in the prior year third quarter.

Speaker 3: This was due to loss of leverage on fixed costs because of the same-store sales decline.

This was due to losses.

On fixed cost because of the same store sales decline.

Speaker 3: Food and paper margins declined modestly in the quarter despite dramatically higher coal costs and somewhat higher wind prices.

The paper margins declined modestly in the quarter, despite dramatically higher coal costs and somewhat higher wing prices.

Speaker 3: Importantly, we expect to see improvements in Anthony's fourth quarter of 2023 and then meaningful improvements in 2024 as inventory management and procurement systems currently positively impacting Vertify today start to take hold of Anthony.

Importantly, we expect to see improvements in Anthonys fourth quarter 'twenty, three and then meaningful improvements in 2020 for inventory management and procurement systems currently positively impacting Burger Fi today start to take hold of entities.

Speaker 3: Additionally, we expect to start rolling out a new POS platform at Anthony's and expect all 59 stores to be converted by the second half of 2024. The system is a significant upgrade to the 20-year-old plus platform in stores today, employing handheld devices and advanced KDS technology to drive greater efficiency and customer engagement in the stores. Note that Anthony's will also see its first franchise location open this quarter with an expectation for more in 2024.

Additionally, we expect to start rolling out a new Pos platform, but Anthony you can expect all 59 stores to be converted by the second half of 'twenty 'twenty four.

This is a significant upgrade to the 20 year old plus platform in stores today important handheld devices in advanced <unk> technology to drive greater efficiency and customer engagement in the stores broke that Anthony we'll also see its first franchise location opened this quarter this expectation for more in 2024.

Speaker 3: After consolidated results, we reported a net loss of $5 million in the third quarter, compared to a net loss of $3.3 million in the year-ago quarter.

Dr. Consolidated results, we reported a net loss of $5 million in the third quarter compared to a net loss of $3 3 million a year ago quarter.

This year's net loss is primarily due do.

Speaker 3: decrease in same-source sales and reduce gains on employment retention credits compared to the prior year period. Partially offset by lower depreciation amortization

Decrease in same store sales and reduced gains unemployment retention credits compared to the prior year period, partially offset by lower depreciation and amortization expenses, what was share based compensation expense and gain on change in value in warranty liability.

Speaker 3: lower share-based compensation expense, and gain on changing value and warranty liability.

Speaker 3: Adjusted EBITDA was $813,000 in third quarter compared to $1.6 million in the prior year third quarter. The decline in EBITDA was especially evident in Vertified Business as the company saw lower royalty income in the quarter due to lower franchise sales volumes compounded by a challenging year-over-year comparison that included the benefit of significant franchise termination fees.

Adjusted EBITDA was 813000 in the third quarter compared to 1.6 million in the prior.

For your third quarter the decline in EBITDA was especially evident at Burger five business because the company saw lower royalty income in the quarter due to lower franchise sales Williams compounded by a challenging year over year comparisons that include the benefit of significant franchise termination fees.

In the prior quarter.

Speaker 3: Looking forward, as we look to top-line sales volume, we expect to see royalties to do the same and expect to benefit from new restaurant openings over the next several quarters.

Looking forward.

As we look to topline sales volume, we expect to see royalties to do the same and expect to benefit from new restaurant openings over the next several quarters.

Speaker 3: Moving on to the balance sheet, our cash balance on October 3rd, 2023 was 9.7 million compared to 11.9 on January 2nd, 2023.

Moving onto the balance sheet, our cash balance in October three 2023 was $9 7 million compared to 11.9 on January <unk> 2023.

Speaker 3: When considering our available but undrawn 4 million line of credit, we had 13.7 million of liquidity at the end of the quarter. The decrease in cash of 2.2 million was primarily due to decrease in cash from operating activities of 3.2 million and investing activities of 1.5 million, partially offset by cash provided by financing activities of 1.5 million.

When considering our available, but Undrawn 4 million line of credit we had $13 7 million of liquidity at the end of the quarter.

A decrease in cash of $2 2 million was primarily due to the decrease in cash from operating activities of $3 2 million in investing activities was <unk> 5 million, partially offset by cash provided by financing activities of $1 5 billion.

Speaker 3: Cash used in operating activities included severance payments due to restructuring, professional services related to obtaining financing under the credit agreement, legal settlements, integration costs, and a decline in EBITDA partially offset by receipts of the employee retention credit.

Cash used in operating activities included severance payments due to restructuring professional services related to obtaining financing under the credit agreement legal settlements integration costs and as you can.

Climbing EBITDA, partially offset by receipts of employee retention credits.

Speaker 3: Cash outflows from investing activities was $500,000 due to capital expenditures offset by proceeds from the sale of an asset.

Outflows from investing activities was 500000 due to capital expenditures offset by proceeds from the sale of an asset.

Speaker 3: Cash provided by financing activities of 1 million due to proceeds from issuance of common stock and proceeds from related party note payable partially offset by term loans in line of credit repayment.

Cash provided by financing activities of 1 million due to proceeds from issuance of common stock proceeds from related party notes payable, partially offset by term loans and line of credit repayments.

Speaker 3: Looking forward, as we stabilize top-line volumes and resolve non-recurring cash events, we continue to refocus on use of cash for EBITDA growth.

Looking forward as we stabilize top line volumes and resolved nonrecurring cash events, we continue to refocus on use of cash for EBITDA growth.

Speaker 3: Now turning to our fiscal 2023 outlook, as a result of our year to date performance, we were updating our 2023 guidance. We now expect total revenues of 160 to 170 million, which assumes a low single digit decline in same store sales for corporate owned locations, and the addition of 12 to 15 new franchise restaurants, including one new Anthony's and our new

Now turning to our fiscal 2023 outlook as a result of our year to date performance. We are updating our 2023 guidance. We now expect total revenues of $160 million to $170 million, which assumes a low single digit decline in same store sales for corporate owned location and.

The addition of 12 to 15, new franchise restaurants, including one would have to meet.

No new <unk>.

Burger pie.

Speaker 3: flagship in New York City. Adjusted EBITDA of $68 million and we're expecting capital expenditures to be approximately $2 million for the full year.

Flagship in New York City adjusted.

Adjusted EBITDA of 68 million and we are expecting capital expenditures to be approximately 2 million for the full year.

Speaker 3: With that, Operator, please open up the call for questions. Thank you.

With that operator, please open up the call for questions. Thank you.

Speaker 1: Ladies and gentlemen, at this time, we'll begin the question and answer session. To ask a question, you may press star and then one using a touch-tone telephone.

Ladies and gentlemen at this time, we will begin the question and answer session to ask a question you May Press Star and then one using a touchtone telephone.

Speaker 1: To withdraw your questions, you may press star and two. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the numbers to ensure the best sound quality.

Withdraw your questions you May press star two.

If you are using a speaker phone, we do ask that you. Please pick up the handset prior depressing the numbers to ensure the best sound quality.

Speaker 1: Once again, that is star and then one to join the question queue.

Once again that is star and then one enjoying the question queue.

We will pause momentarily to assemble the roster.

Speaker 1: Our first question today comes from Peter Saleh from BTIG. Please go ahead with your question.

Our first question today comes from Peter Saleh from <unk>. Please go ahead with your question.

Speaker 4: Great, thanks and thanks for taking the question. I did want to ask maybe just on BurgerFi, there's about a 600 basis point gap between corporate performance and franchise performance. Can you just guys talk a little bit about why that gap and why so wide? Is there pricing differential? Is it more regional? I guess just my first question on the comp there.

Great. Thanks, and thanks for taking the question I did want to ask maybe just on Burger Fi.

It was about 600 basis point gap between corporate performance in franchise performance.

Can you just talk a little bit about why that gap and what why it's so wide is there a pricing differential or is it more regional I guess just my first question on on the commentary.

Speaker 2: Yeah, Peter, it's Carl. I think you answered your question. So I think it is a combination of both, different pricing strategies. Also, the franchise business is highly leveraged, I guess, in a positive way through the non-traditional space. So they do much higher volumes, obviously. So your airports, et cetera. I think that's probably the biggest difference. And then there's some regional performance too. We saw,

Yeah, Peter It's Carl I think I think you answered your question. So I think it is a combination of both.

Pricing strategies also the franchise business is highly leveraged.

Leveraged I guess in a positive way through the non traditional space.

So they do much higher volumes, obviously, so your airports et cetera, I think that's that's probably.

The biggest difference and then there's some regional performance to you know we saw.

Speaker 2: kind of a back to pre-COVID normalcy of trend that we haven't seen in Florida in the last few years. And the corporate restaurants are heavily, matter of fact, all but one are in Florida. So I think that's the difference.

Kind of back to pre Covid normalcy of trend.

That we haven't seen in Florida last few years and the corporate restaurants are heavily a matter of fact, all but one are in Florida. So I think that's the difference.

Speaker 4: Great, and then just on the I think you guys mentioned you're assessing. You know, the system and closing some underperforming units. Any thoughts on when this assessment will be complete, how many units you plan to close and just regionality? If you can offer that.

Great and then just on the I think you guys mentioned you're assessing.

The system in closing some underperforming units.

Any thoughts on that.

This assessment will be complete how many units do you plan to close and just Regionalisation. If if you can.

The offer that.

Speaker 2: Sure, so we've already assessed and we'll continue to do that through the end of the year.

Sure. So we've we've already assessed and will continue to do that through the end of the year.

Speaker 2: We're probably in the low single digits of looking at what's left in our portfolio. So we've already made some closures, both on corporate and franchise side. So we're in a much better place today. So I think by the end of the year, we'll have a very good idea. It's been a full good amount of time to assess.

We're probably in the low single digits of looking at what's left in our portfolio. So we've already made some closures both on corporate and franchise side.

So we're we're in a much better place today, so I think by the end of the year well have a very good idea.

And Ah Ah full good amount of time to assess.

Speaker 4: Got it. And then just, you know, Carl, you mentioned a healthy, fast, casual brand should have, you know, 10 to 15% chicken mix. You guys are launching the new chicken sandwich. You're not really involved in that category right now. How do you plan to get the word out on this to kind of drive that mix higher, which in essence really should be incremental?

Got it and then just you know Carl you mentioned.

Healthy fast casual brands should have 10% to 15% chicken mix you guys are launching the new chicken sandwich I'm not really involved in that category right now how do you plan to get the word out on this to kind of drive that mix higher which in essence really it should be.

Mental.

Speaker 2: Absolutely. Well, first of all, November 1st, we launched the first leg of that with our new chicken wing.

Yes.

Absolutely well first of all November 1st we launched the first leg of that with our new chicken wings and it's been extremely successful we loved the fall.

Speaker 2: It's been extremely successful. We love the fall, you know, football, wings, comfort food.

Football wings comfort food and.

Speaker 2: And we have a great product there. We've had great results as a matter of fact the chicken wings for the highest reviewed

And we have a great product there and we've had great results as a matter of fact I'm. The chicken wings were the highest reviewed new L. T O in over four years at Burger Fi are the highest reviews, we've gotten on any product line. So that was step one so that's already started and really being able to share that digitally and social media.

Speaker 2: new LTO in over four years at BurgerFi, the highest reviews we've gotten on any product line. So that was step one. We've already started.

Speaker 2: And really being able to share that digitally in social media, tying it into the seasonality of football and wings.

Tying it into the seasonality of our football and wings. So we really think that was kind of a starting point and then when you think about comfort food in chicken sandwiches and playing into chicken wars.

Speaker 2: So we really think that was kind of the starting point. And then when you think about comfort food and chicken sandwiches and playing in the chicken wars, that's kind of our next step. And we're getting ready to launch our new approved crispy chicken and our grilled chicken offerings. We'll be testing in our corporate restaurants at the end of this month. So that's really where we're starting with our launch..

That's kind of our next step and.

And we're getting ready to launch our new approved crispy chicken and our grilled chicken offerings, we will be testing in our corporate restaurants at the end of this month, so that's really where we're starting with our launch.

Great. Thanks, I'll pass it along.

Speaker 1: Once again, if you would like to ask a question, please press star and then 1. Our next question comes from Mike Albanese from EF Hutton. Please go ahead with your question.

Once again, if you would like to ask a question. Please press Star and then one our next question comes from Mike Albany's from E. F. Hutton. Please go ahead with your question.

Speaker 5: Yeah, hey, good morning, guys. Thanks for taking my question. Just one regarding kind of the store optimization and, you know, kind of what you're seeing regarding comp sales, maybe the divergence between, you know, your highest performing stores and your lowest performing stores. You know, probably excluding the non traditional mix. Any insight into kind of that divergence would be helpful.

Yeah, Hey, good morning, guys. Thanks for taking my question, just one regarding kind of the the store optimization.

You know kind of what you're seeing regarding comp sales maybe the divergence between you know your high performing stores and your lowest performing stores.

You know probably excluding the non traditional mix any insight into kind of that divergence there would be helpful.

Speaker 6: I mean, I think for our perspective, I think what Carl talked about, this is Chris, Mike, is, you know, we certainly are seeing better trends as it relates to more recently as, you know, post this launch.

I mean, I think for our perspective, I think what Karl talked about who this is Chris Mike.

As you know, we certainly are seeing better trends as it relates to more recently as you know post the swatch. So you know trends was really within the Burger five business has really picked up from a traffic perspective.

Speaker 6: So, you know, trends and certainly within the burger five business is really picked up from a traffic perspective. So we feel certainly good about that. As you know, as you mentioned in terms of overall location.

So we feel certainly good about that.

As you mentioned in terms of overall location.

Speaker 6: We are we are returning to a more seasonalized routine. Uh, so we have seen sort of that Miami Fort Lauderdale area. Uh, you know, we were more challenging September than we are expecting, but as trends of this already pick up into the late in October , November , certainly seen improving trends there as well. And I don't think we're alone. Looking at some of our competitors after seeing a similar kind of trend there as well. So.

We are we are returning to a more seasonal wise regime. So we have seen a slowdown in Miami Fort Lauderdale area.

We will have more challenge in September than we were expecting but as you know trends have been sort of pick up in sort of late in the October November has certainly seen improving trends there as well and I don't think we're alone since looking at some of our competitors out there we've seen a similar kind of trends are there as well so I'm not sure you would get.

There's a sort of reach analogy other than that.

And any other sort of high gas sort of high low performance, but specific to one area.

Got it that's that's helpful. I guess, just maybe to be more direct I mean are you seeing stores or some of your locations and you know.

Positive comps versus you know you have underperforming stores. The other thing you know very negative comp sales right because the number that we can do is kind of a mix of everything I'm just curious what.

Kind of the spread between the two are.

Yeah, we have a I think the the thing we did when we first started here as we realigned our operational team.

Burger Fries and the corporate side is broken into three regions.

In those three regions there are some diversion between the three.

But the the first leader that we've put in place has had the most time in place and you're seeing positive comps in his region. So I think that's a big part of that securing operations. So there is.

Sure this.

Bifurcation, if you will of stores that are high performers as well as stores that are not but I think a lot of it was about solidifying our operational leadership team and since we've done that well a couple of things have happened our throughput has gotten better our ticket times have gotten better our turnovers significantly better both hourly and management does really.

That piece of operational focus has helped us and that's really kind of created that bifurcation.

And it's kind of early into the third quarter. We then added a some more strength to our operational team and now we're starting to see positive you know green shoots if you will in those two markets as well so I think that's probably the best.

This separation as opposed to a regional separation if that makes sense.

Thank you very much that's helpful.

That's it from my end guys. Thank you very much.

Thank you and ladies and gentlemen, with that we will be concluding today's question and answer session I'd like to turn the floor back over to Carl Bachmann for any closing remarks.

Thank you I just wanted to say thank you for your time and questions are Chris and myself and the entire team are really excited about our new direction and our recent momentum I look forward to share our continued improvements on our next call as we progress on this journey have a great day. Thank you.

Yeah.

Ladies and gentlemen, with that we'll conclude today's conference call and presentation. We thank you for joining you may now disconnect your lines.