Q4 2023 Chuy's Holdings Inc Earnings Call
Operator: Good day, everyone, and welcome to the Chuy's Holdings 4th Quarter 2023 Earnings Conference Call. Today's call is being recorded. At this time, all participants have been placed in listen-only mode.
Good day, everyone and welcome to Julie's holding fourth quarter 2023 earnings conference call.
Today's call is being recorded.
At this time, all participants have been placed in a listen only mode and the lines will be open to questions. Following the prepared remarks.
Operator: The lines will be open to questions following the prepared remarks. On today's call, we have Steve Hislop, President and Chief Executive Officer, and Jon Howie, Vice President and Chief Financial Officer, of Chuy's Holdings Inc. At this time, I will now turn the conference over to Mr. Howie. Please go ahead, sir.
Jon W. Howie: Thank you, operator. And good afternoon. By now, everyone should have access to our fourth quarter 2023 earnings release. If not, it can be found on our website at chuys.com in the investor section. Before we begin our formal remarks, I need to remind everyone that part of our discussions today will include forward-looking statements. These forward-looking statements are not guarantees of future performance, and therefore, you should not put undue reliance on them. These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect.
Jon W. Howie: We refer all of you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial conditions. Looking ahead, we plan to release our first quarter 2024 results on Thursday, May 9th, at 2:00 p.m., after the market close. With that out of the way, I'd like to turn the call over to Chuy's President and CEO, Steve. Thank you, Jon.
First quarter of 2024 on Thursday may 9th at 2024 after the market close with that all the way I'd like to turn the call over to choose President and CEO Steve.
Steven J. Hislop: Good afternoon, everyone, and thank you for joining us on the call today. I am proud of what Chuy's accomplished in 2023. We grew revenues by almost 9.3 percent, driven by comparable restaurant sales of approximately 3.3 percent. Our team's ability to effectively execute on our four-wall operations resulted in a 200-basis point expansion of restaurant-level margins to over 20 percent, representing our best result in over a decade, excluding the COVID impact of 2021, and among the best in the industry. And finally, we returned approximately $28.9 million to our shareholders through share repurchases, enabled by the ongoing strength of our operating model. As we look ahead, we will continue to do what we do best, to provide our guests with fresh, made-from-scratch food and drinks at incredible values.
Steve: John Good afternoon, everyone and thank you for joining us on the call today I am proud of what choose accomplished during 2023, we grew revenues almost nine 3% driven by comparable restaurant sales of approximately three 3% our team's ability to effectively execute on our full wall operation resulted in a 200.
Steve: Basis point expansion of restaurant level margins drove a 20% representing our best result in over a decade, excluding the COVID-19 impacted 2021, and among the best in the industry and finally, we returned approximately $28 $9 million to our shareholders to share repurchases enabled by.
Steve: Ongoing strength of our operating model.
As we look ahead, we will continue to do what we do best to provide our guests with fresh made from scratch food and drinks at an incredible value despite weather issues across the country that has impacted the restaurant industry. In January we believe the initiatives, we put in place to drive long term sustainable top line growth and profitability as <unk>.
Steven J. Hislop: Despite weather issues across the country that have impacted the restaurant industry in January, we believe the initiatives we've put in place to drive long-term, sustainable top-line growth and profitability have positioned us well to weather these near-term challenges. With that, let me provide some updates on our growth drivers, starting with menu innovation. As we mentioned on our last call, we introduced our first barbell approach to the CKO platform during the fourth quarter, and we were very pleased with how well it was received by our guests. In fact, this was our second most successful Chuy's Knockout campaign to date.
Steve: <unk> as well as to whether these near term challenges.
Speaker Change: With that let me provide some update on our growth drivers starting with menu innovation as we mentioned on our last call. We introduced our first barbell approach to the sea Kale platform during the fourth quarter and we're very pleased with how well. It was received by our guests. In fact this was our second most successful choose knockout campaign to date following.
Steven J. Hislop: Following this success, we were thrilled to introduce to our guests the next CKO iteration in late January with shrimp and crab enchiladas with lobster bisque sauce as a higher priced CKO menu item, along with macho nachos and the cheesy pig burrito. Again, early feedback continues to be positive as our CKOs are responding well with both new and returning guests. Alongside our exciting CKO offering, we've recently added several new menu items to our permanent menu, including reintroducing the appetizer plate and adding burrito bowls. If you recall, burrito bowls were part of our CKO platform during the second and third quarter of 2023, and this menu addition is a reflection of how well our burrito bowls performed last year and the high demand from our guests to bring them back to a Chuy's Knockouts is not only a platform that we created to introduce our guests to exciting new menu innovations but also a tool to help us optimize our regular menu to further drive traffic to our restaurants.
Speaker Change: The success, we were thrilled to introduce to our guests. The next TKO iteration in late January with shrimp, and crab enchiladas with lobster bisque sauce, as a higher price TKO menu item, along with macho nachos and the cheesy pig Burrito again early feedback continues to be positives as a C. K O R.
Speaker Change: Resonating well with both new and returning guests.
Speaker Change: Along side are exciting CK offering recently added several new menu items to our permanent menu <unk>.
Speaker Change: Including reintroducing, the appetizer plate and adding the burrito bowls, if you recall burrito balls were part of our sea Kale platform during the second and third quarter of 2023 and this menu addition is a reflection of how well our burrito, both perform last year and the high demand from our guests to bring them back to a permanent menu chewy.
Speaker Change: Knockouts is not is not the only a platform that we created to introduce our guest too exciting new menu innovations, but also a tool to help us optimize our regular menu to further drive traffic to our restaurants.
Steven J. Hislop: We also delivered another strong off-premise performance during the quarter, mixing at approximately 31%, with our delivery channel continuing to perform well, mixing at approximately 12%, a 160 basis point increase from last year. In terms of catering, we continue to roll out the Easy Cater platform to our restaurants and are on track to complete this rollout by the end of the first quarter. Our catering channel is currently mixing at approximately 4.8% for the quarter. Going forward, we continue to believe our off-premise channel will be at least 25% of our sales, with catering contributing between 4% and 6% of total sales. While the fourth quarter is typically our highest mixing quarter for catering, we are encouraged by the growth we continue to see in the channel and believe we can achieve our long-term catering targets over the next 24 months.
We also delivered another strong off premise performance during the quarter mixing at approximately 31% within our delivery channel continuing to perform well at at and mixing at approximately 12% a 160 basis point increase from last year in terms of catering we continue to roll out the easy Katie platform.
Speaker Change: Or restaurants and are on track to complete this rule out by the end of the first quarter or channel or catering channel is currently mixing at approximately 4.8% for the quarter going forward. We continue to believe are off premise channel will be at least 25% of our sales with kading catering contributing between four and 6% of <unk>.
Speaker Change: <unk> sales, while the fourth quarter is typically our highest mixing quarter for catering. We are encouraged by the growth. We continue to see in the channel and believe we can achieve our longterm catering targets over the next 24 months.
Steven J. Hislop: In terms of marketing initiatives, we believe our current approach to marketing has been effective in communicating our defining differences from our made-from-scratch food and drink offered at incredible values to our unique CKO offerings and the unique overall experience at every Chuy's restaurant. To that end, we will continue to put heavy emphasis on digital media and optimize our campaigns through the use of Google, TikTok, Instagram, and Facebook, including organic influencer content, YouTube video advertising, and promotional advertising with DoorDash and Uber. In addition, we will include some spots on programmatic connected TV targeting live sports events during March Madness.
Speaker Change: In terms of marketing initiatives, we believe our current approach to marketing has been effective in communicating our defining differences from are made from scratch food and drink offered at an incredible value. So are unique CK offerings and the unique overall experience at every choose restaurants to that and we will continue to put heavy emphasis on digital media and <unk>.
Speaker Change: Optimize our campaigns through the use of Google Tictoc, Instagram and Facebook, including organic Influencer content Youtube video advertising and promotional advertising with Doordash an Uber. In addition, we will include some spot on progress programmatic connected television targeting lives.
Speaker Change: Sure it's events during March madness.
Steven J. Hislop: Lastly, let me update you on our development plan. During the fourth quarter, we successfully opened one new restaurant in Terrell, Texas, bringing our total restaurant count to 101 as of the end of fiscal 2023, with four new restaurants opening this year. As we look into 2024, we continue to have a robust pipeline with a goal to open between six to eight new restaurants focused primarily in core markets where our concept is already proven with high AUVs and brand awareness. We expect to open two restaurants in the first half of the year, including our first location of the year in New Bronzeville, Texas, which opened this week.
Speaker Change: Lastly, let me update you on a development plan during the fourth quarter, we successfully open one new restaurant in Terrell, Texas, bringing out a total restaurant count to 101 as of the end of fiscal 2023 with four new restaurants opening open during this year as we look into 2024, we continue to have a robust.
Speaker Change: <unk> with a goal to open between six to eight new restaurants focused primarily in coal markets or a concept has already proven with higher <unk> and brand awareness, we expect to open two restaurants in the first half of the year, including our first location of the year and New Brownsville, Texas, which opened this week with that I will now turn the <unk>.
Jon W. Howie: With that, I'll now turn the call over to our CFO, Jon Howie, to discuss our fourth quarter results in greater detail. Thanks, Steve. Revenues for the fourth quarter increased 11.8 percent to $116.3 million, compared to $104.1 million in the same quarter last year. As a reminder, our fourth quarter of 2023 included 14 weeks compared to 13 weeks in fiscal 2022, with the extra operating week contributing about $8.7 million of revenue. In addition to the extra operating week, the increase was driven by growth in comparable restaurant sales, as well as an additional 62 operating weeks from new restaurants opened subsequent to the fourth quarter of 2022. In total, we had approximately 1,403 operating weeks during the fourth quarter of 2023, and off-premise sales were approximately 31 percent of total revenue as compared to 29 percent a year ago. Comparable restaurant sales in the fourth quarter increased 0.3 percent versus last year on a 13-week comparable basis, primarily driven by a 3.4 percent increase in average check, partially offset by a 3.1 percent decrease in average weekly customer.
CFO, John: Call over to our CFO, John how it is discuss our fourth quarter results in greater detail.
John: Thanks, Steve revenues for the fourth quarter increased 11.8% to $116 $3 million compared to $104.1 million in the same quarter last year. As a reminder, our fourth quarter of 2023 included 14 weeks compared to 13 weeks in fiscal 2022 with the.
John: Extra operating week contributing about $8.7 million of revenue. In addition to the extra operating waste increase was driven by growth in a comparable restaurant sells as well as additional 62 operating weeks from new restaurants opened subsequent to the fourth quarter of 2022 and.
John: In total we had approximately.
John: 1400, three operating weeks during the fourth quarter of 2023, an off premise cells, where approximately 31% of total revenue as compared to 29% a year ago comparable restaurants sales in the fourth quarter increased 0.3% versus last year on a 13 week comparable basis, primarily driven by a.
John: Three 4% increase in average check partially offset by 3.1% decrease in average weekly customers effective pricing for the quarter was approximately 3% <unk>.
Jon W. Howie: Effective pricing for the quarter was approximately 3 percent. Turning to expenses, cost of sales as a percentage of revenue decreased 240 basis points to 25.1, driven by overall commodity deflation of approximately 8% compared to last year, as well as leverage on our mini prices taken subsequent to the fourth quarter of last year. Looking into 2024, we currently expect commodity inflation in the low single digits for the year. Labor costs as a percentage of revenue increased 30 basis points to 30.8%, primarily due to hourly labor inflation of approximately 4% at comparable restaurants, as well as incremental improvement in our hourly labor staffing levels.
John: Turning to expenses cost of sales as a percentage of revenue decreased 240 basis points to $25, 1% driven by overall commodity deflation of approximately 8% compared to last year as well as leverage on our menu prices taken subsequent to the fourth quarter of last year.
John: Into 2024, we currently expect commodity inflation in the low single digits for the year.
John: Labour cost as a percentage of revenue increased 30 basis points to 38%, primarily due to hourly labor inflation of approximately 4% at comparable restaurants, as well as incremental improvement in our alber.
John: Hourly labor staffing levels.
Jon W. Howie: This was partially offset by a mini-price increase taken subsequent to the fourth quarter last year. We are currently expecting labor inflation of mid-single digits for fiscal 2024. Operating costs as a percentage of revenue increased 10 basis points to 16.7%, driven by higher delivery service charges from an increase in delivery sales, an increase in restaurant repair and maintenance, and higher insurance costs, partially offset by lower utility costs as compared to last year. General and administrative expenses increased to $8.1 million in the fourth quarter from $6.5 million in the same period last year, driven mainly by higher performance-based bonuses and management salaries.
John: This was partially offset by many price increase taken subsequent to the fourth quarter of last year. We are currently expecting labor inflation of mid single digits for fiscal 2024.
John: Operating costs as a percentage of revenue increased 10 basis points to 16.7% driven by higher delivery service charges from an increase in delivery sales an increase in restaurant repair and maintenance and higher insurance costs.
John: Partially offset by lower utility cost as compared to last year.
John: General and administrative expenses increase to $8 $1 million in the fourth quarter from $6.5 million in the same period last year, driven mainly by higher performance based bonuses and management salaries as a percentage of revenue G&A increased to $6, 90% from 6.2% during the same period flash.
Jon W. Howie: As a percentage of revenue, G&A increased to 6.9% from 6.2% during the same period last year. In summary, net income for the fourth quarter of 2023 was $5.5 million, or $0.31 per diluted share, compared to $2.5 million, or $0.14 per diluted share, during the same period last year. During the fourth quarter of 2023, we incurred $3.1 million, or $0.14 per diluted share, compared to $2.5 million. In summary, net income for the fourth quarter of 2023 was $3.1 million, or $0.14 per diluted share, compared to $2.5 million, or $0.15 per diluted share, in the same period last year. For impairment, closed restaurant, and other costs, compared to $3.2 million, or $0.14 per Taking that into account, adjusted net income for the fourth quarter of 2023 was $7.9 million, or $0.45 per diluted share, compared to $5 million, or $0.27 per diluted share, for the same period last year. Moving to our liquidity and balance sheet as of the end of the quarter, we had $67.8 million in cash and cash equivalents, no debt outstanding, and $25 million available under our revolving credit facility. We also purchased 167,535 shares of our common stock during the quarter for a total of approximately $5.9 million.
John: Here.
John: In summary, net income for the fourth quarter of 2023 was $5.5 million or 31 cents per diluted share compared to $2.5 million or 14 cents per diluted share in the same period last year.
John: During the fourth quarter of 2023, we incurred $3 $1 million or 14 cents per diluted share.
John: Impairment closer restaurant, and other costs compared to $3.2 million or 14 cents per diluted share in the same period last year, taking that into account adjusted net income for the fourth quarter of 2023 $479 million or 45 cents per diluted share compared to $5 million or 27 cents per diluted.
John: Sure in the same period last year.
John: Moving to our liquidity and balance sheet as of the end of the quarter, We had 67 $8 million in cash and cash equivalents, no dead outstanding and $25 million available under a revolving credit facility.
John: We also purchase 167535 shares of common stock during the quarter for a total of approximately five 9 million for.
John: For the full year of 2023, we purchased a total of 789963 shares of common stock for a total of approximately $28 $9 million.
John: As of December 31, 2023, we had $21.1 million remaining under $50 million repurchase program, which will expire on December 31 2024.
John: With that we will not provide you with the following outlook for 2024. We are currently expecting adjusted EPS of $1.82 to $1.87 for 2024 as compared to adjusted ETS of $1 87, after adjusting up to 53rd week of 2000 2033.
Jon W. Howie: For the full year of 2023, we purchased a total of 789,963 shares of our common stock for a total of approximately $28.9 million. As of December 31, 2023, we had $21.1 million remaining under our $50 million repurchase program, which will expire on December 31, 2024. With that, we will now provide you with the following outlook for 2024. We are currently expecting adjusted EPS of $1.82 to $1.87 for 2024, as compared to adjusted EPS of $1.87 after adjusting out the 53rd week of 2023. This is based, in part, on the following annual assumption: GINA expenses of $30 to $31 million. 6-8 New Restaurant, Net capital expenditures of approximately $41 to $46 million, restaurant pre-opening expenses of approximately $2.7 to $3.2 million, and an effective annual tax rate of approximately 13 to 14 percent. An annual weighted diluted share is outstanding of about $17.4 million.
John: This is based in part on the following annual assumptions G&A expenses of 30% to $31 million.
John: Six to eight new restaurants.
John: Net capital expenditures of approximately 41% to 46 million rush.
John: Restaurant Preopening expenses of approximately 2.7 to 3.2 million affair.
John: Effective annual tax rate of approximately 13% to 14%.
John: An annual waited diluted shares outstanding of about $17.4 million with that I'll turn the call back over to Steve. Thanks, John We believe are rough results demonstrate that our focus on our fall operational excellence continue to resonate well with our guests combined with thoughtful capital allocation and excellent pipeline of unit growth.
Steve: We are well positioned to capitalize on our positive momentum and the long term growth opportunities ahead of us with a goal to maximize shareholder value in 2000, 2024 and beyond in closing I'd like to thank every choose team member for their hard work and dedication to earning the dollar every single day without whom none of these accomplishments would it have been possible what's.
Speaker Change: We're happy to answer any questions operated please open the line for questions.
Speaker Change: Thank you Sir.
Speaker Change: This time available we will be conducting a question and answer session.
Steven J. Hislop: Thanks, Jon. We believe our results demonstrate that our focus on our four-wall operational excellence continues to resonate well with our guests. Combined with thoughtful capital allocation and an excellent pipeline of unit growth, we are well positioned to capitalize on our positive momentum and the long-term growth opportunities ahead of us, with a goal to maximize shareholder value in 2024 and beyond. In closing, I'd like to thank every Chuy's team member for their hard work and dedication to earning the dollar every single day, without whom none of these accomplishments would have been possible.
Speaker Change: If you would like to ask a question. Please press start and then one on your telephone keypad.
Speaker Change: Confirmation, telling four indicate your line is in question Q you.
Speaker Change: <unk> and then too if you would like to move your question stomach Q.
Speaker Change: Four participants using C K equipment may be necessary to pick up your pants extra for picking the stocky.
Speaker Change: The first question that we have comes from David <unk>. Please go ahead Sir.
David: Hi, good afternoon.
Speaker Change: I forgot I forgot a couple of questions I'll start.
David: With with a question on kind of what you are seeing from from a cough perspective in the first quarter.
David: Steve you mentioned some challenges.
David: I know, we've seen that elsewhere, but if you could maybe give us an update on on how you are running in the first quarter and then I have a follow up related to that.
Operator: With that, we're happy to answer any questions. Operator, please open the line for questions. Thank you, Sal. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star and then 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press the star and then 2 if you would like to remove your question from the queue.
David: Yeah.
David: Obviously period one.
David: Up against an enormous match up but we also had a little bit whether that would probably cost us about a full percent.
David: Sales.
David: <unk> started off the year in a row tough situations and that's 6% to 7% down approximately right around there and not not like.
David: Better than that enrolling into the second period.
Speaker Change: Got it and then.
David: I guess.
Speaker Change: The real question I have is just on the the guidance for the year.
Speaker Change: Came a bit below what we were expecting and I just wanted to maybe unpack.
David E. Tarantino: For participants using speaker equipment, it may be necessary to pick up your handsets before pressing the star key. The first question that we have comes from David Tarantino from VOD. Please go ahead, sir. Hi, good afternoon. I've got a couple of questions. I'll start with a question on kind of what you're seeing from a comp perspective in the first quarter. I know, Steve, you mentioned some challenges, and I know we've seen that elsewhere. Maybe you could give us an update on how you're doing in the first quarter, and then I have a follow-up related to that.
Speaker Change: Some of the factors that are weighing on the earnings performance for this year and then in particular, John if you could maybe give some perspective on.
Speaker Change: What.
Speaker Change: Sales are same store sales assumption.
Speaker Change: It is embedded in your earnings guidance.
John: Sure like Steve said, the first period was rather challenging around that 7% in the second period.
Speaker Change: We're.
Speaker Change: About half to three fourths of that.
Speaker Change: So when you're looking at the sales down we've got a lot to make up to get up to four.
Speaker Change: Flat so right now based upon that and kind of what we're expecting especially the rollover Hoover that we've been talking about.
Steven J. Hislop: Yeah, obviously, period one, we're up against an enormous match-up, but we also had a little bit of weather that probably cost us about a full percent of sales. But we started off the year in a little tough situation, in that 6 to 7 percent down, approximately, right around there, and it's better than not rolling into the second period. Got it. And then
Speaker Change: That comprised about.
Speaker Change: 350 basis points last year of total sales and so we're going to we're going to start rolling over that full implementation by the end of this quarter and so we're looking at kind of flat to up 1% for the year.
Speaker Change: In total.
Jon W. Howie: I guess the real question I had is just on the guidance for the year coming in a bit below what we were expecting. I just wanted to maybe unpack some of the factors that are weighing on the earnings performance for this year. And then, in particular, Jon, if you could maybe give some perspective on what the sales or same-store sales assumption is. You bet it, and you're earning it.
Speaker Change: Same store sales now obviously with.
Speaker Change: Pricing in that of approximately 3% just shy of 3%.
Speaker Change: We're going to have.
Speaker Change: 2% negative traffic and that 1% to 2% negative traffic into that.
Speaker Change: So with that being said some of the the changes if I go through.
Jon W. Howie: Sure. Like Steve said, the first period was rather challenging, around that 7%, and the second period, you know, we're about half to three-fourths of that. So when you're looking at the sales down, we've got a lot to make up to get up to, you know, flat. So right now, based upon that and kind of what we're expecting, especially the rollover of Uber that we've been talking about, that comprised about 350 basis points last year of total sales. And so we're going to start rolling out that full implementation by the end of this quarter.
Speaker Change: Get a walk forward from the EPS this year to next year.
Speaker Change: The big items in that is obviously 10 cents on that extra week that immediately takes it down from about 97% a buck 87 right.
Speaker Change: We won't have that extra week and this year also we were getting fully staffed by the end of last year as far as our staffing is concerned and so that is now ruled that extra cost is rolling over into the current year.
Speaker Change: And so we will have not only inflation of 4% to 5% in labor, but.
Jon W. Howie: And so we're looking at kind of flat to up 1% for the year in total sales. Same store sales, now obviously with our pricing in that of approximately 3%, just shy of 3%, we're going to have about 2% negative traffic in that, 1-2% negative traffic in that. So, with that being said, some of the changes if I go through and get a walk forward from the EPS this year to next year. The big items in that are obviously $0.10 on that extra week. That immediately takes it down from $1.97 to $1.87, right? We won't have that extra week this year.
Speaker Change: But now fully staffed so that's going to attribute too.
Speaker Change: We're from probably 30% to 60 basis points.
Speaker Change: The last of margin there and then if you flow through the changes look into 53 impact that we talked about.
Speaker Change: The new store openings, we're trying to ramp up this new store openings versus four last year. So you are added cost and openings and preopening cost as well as the inefficiencies.
Speaker Change: Is going to be.
Speaker Change: Larger portion of that as well as the decrease in investment balance we were getting a sizable amount in interest income as well. So we expect that to be down about six or seven cents in and of itself with the decrease balance.
Jon W. Howie: Also, we were fully staffed by the end of last year as far as our staffing is concerned. And so that's now rolled, and that extra cost is rolling over into the current year. And so we'll have not only inflation of 4 to 5% in labor, but now fully staffed. So that's going to attribute to, you know, anywhere from probably 30 to 60 basis points of the loss of margin there. And then if you flow through kind of the changes, look at the 53 impact that we talked about, the new store openings. We're trying to ramp up the new store openings versus four last year. Your added cost in openings and pre-opening costs, as well as inefficiencies, is going to be a larger portion of that as well as the decrease in investment balance. We were getting a sizable amount in interest income as well.
Speaker Change: And the new store openings is probably another 670.
Speaker Change: So those are the big big items.
Speaker Change: That's that's very helpful. Thanks, John.
Speaker Change: Hmm.
Speaker Change: Thank you Sir.
Speaker Change: Next question me half comes from N D badge Jeffrey Please go ahead.
Speaker Change: He could even guys.
Jeffrey: Yeah can you.
Jeffrey: Address just the occupancy cost that number really stepped down from.
Jeffrey: Kind of what's been 7% for awhile or is that just sort of getting out of bed.
Jeffrey: Releasing some leases now and things like that from cleaning up the system over the last few years.
Jeffrey: Are you talking in the fourth quarter Andy.
Jon W. Howie: So we expect that to be down about 6 or 7 cents in and of itself with the decreased balance. And the new store openings are probably another 6 or 7 cents. So those are the big, big items. Yep, that's very helpful, thanks.
Andy: Yeah well.
Jeffrey: Well that is a lot of that Andy is the extra week.
Andy: Order, that's totally leveraging that occupancy.
Andy: Okay, No no fundamental change that bill somewhere in that six.
Andy: Five 7% range down to forward yes.
Andrew Marc Barish: Thank you. So, the next question we have comes from Andy Barish of Jefferies. Please go ahead.
Andy: Yes.
Andy: Okay and then.
Andy: Secondly, any updates I mean, it hasn't been a lot of data points, but obviously the.
Steven J. Hislop: Good evening, guys. John, can you address just the occupancy costs? That number really stepped down from, you know, kind of what's been 7% for a while. Is that just sort of getting out of and releasing some leases now and things like that from cleaning up the system over the last few years? Are you talking about the fourth quarter, Andy?
Andy: The development strategy has been fine tuned in a home with each sites and you know anything we should be thinking about you know as you kind of think about sort of first year volumes with the stores and your core markets and then I think.
Andrew Marc Barish: I am, yeah. Well, that is, a lot of that, Andy, is the extra week in the quarter that's totally leveraging that occupancy. Okay. No, no fundamental change. That's still somewhere in the six and a half, seven percent range going forward.
Andy:
Andy: New Broncos is it still the Austin area. So you don't have it.
Speaker Change: I haven't thought about it in a while but.
Speaker Change: Any impact or sales transfer that you are expanding expecting from Austin openings and I think you have one more may be this year as well.
Steven J. Hislop: Okay, and then... Just secondly, any updates? I mean, there haven't been a lot of data points, but obviously, the development strategy has been fine-tuned and honed with eSites and, you know, anything we should be thinking about as you kind of think about, you know, sort of first year volumes with these stores in your core markets. And then I think, New Broncos is still in the Austin area, so haven't thought about it in a while, but any impact or sales transfer that you're expecting from Austin openings, and I think you have one more maybe this year as well. Yeah, Andy, when we looked at that, we looked at it with the east side to make sure and kind of look at it that would look at anything that has under 5% cannibal And actually, any ones that we did in the last couple of years have been much better than expected. New Bronzeville is in the South, you know; it's halfway between here and San Antone as going down south.
Speaker Change: Yeah, Andy when we looked at that's how we looked at and what the side to make sure and kind of look at it that would look at anything that has under 5% cannibalization and actually anyone's that we did in the last couple of years, it's been much better than that on the expectation.
Andy: New Bronxville is unsolved halfway.
Andy: Halfway between here and San Anton How's it going down South So we don't extend that's in between our Salma store, which is in the San Anton in San Marcus Stuart's about 18 miles from either one of them. So it's going to be very very minimal and we're pretty excited about it and we're real excited obviously, what we think we're gonna do.
Andy: Obviously, when you're looking at about where we are going to be opening stores definitely this year and then over the next three to four years.
Andy: Opening as we mentioned in roughly.
Steven J. Hislop: So we don't accept that in between, you know, our Selma store, which is in the San Antone and our San Marcos store, it's about 18 miles from either one of them. So it's going to be very, very minimal. And we're pretty excited about it. And we're real excited, obviously, what we think we're going to do there, obviously, when you're looking at where we're going to be opening stores, definitely this year and over the next three to four years, you know, we're opening them, as we mentioned, in roughly five states that we have good AUVs, strong, strong AUVs that are that are a lot higher than our system wide AUV, which is currently at 4.5 million, you'll probably see a pickup of 10 to 15 million in the five states, I mean, 10 to 15% in the states that we're looking at.
Andy: Roughly five states that we have good au vs. Strong strong <unk> that are that are a lot higher than our system <unk>, which is currently at $12.5 million, you'll probably see a pick up a 10% to $15 million.
Andy: Five states will I mean, 10% to 15% in the states that we're looking at so we feel real comfortable about our growth over the next three to four to five years.
Andy: God, it's good to hear and then one one final just an easy cater in catering is that.
Andy: Primarily the lunch stay part that's kind of where I've seen easy cater, but I may I may be not fully aware of how you're using it.
Speaker Change: Yeah, I think that's that's right Andy we expect.
Speaker Change: Larger percentage of that coming from lunch.
Steven J. Hislop: So we feel real comfortable about our growth over the next three to four to five years. Got it. Good to hear. And then one, one final, um, just on easy cater and catering is that, primarily the lunch day part. That's kind of where I've seen Easy Cater, but I may not be fully aware of how you're using it.
Andy: As we as you know we've got about 72 stores on that right now, we're hoping to get the rest of them by the end of Q1.
Andy: Just to give you an indication last year, we did about $2.5 million in that platform.
Andy: Just shy of under.
Andy: A thousand a week per store.
Steven J. Hislop: Yeah, I think that that's right, Andy; we expect a larger percentage that coming from lunch. As you know, we've got about 72 stores on that right now. We're hoping to get the rest of them by the end of Q1.
Andy: And so we're looking to get that up and running in the first quarter, Yeah, and we're excited about that actually as people continue to go back to their offices.
Speaker Change: Great. Thanks, guys.
Speaker Change: Andy.
Speaker Change: Thank you Sir the next question <unk> <unk> from Raymond James. Please go ahead.
Jon W. Howie: Just to give you an indication, last year, we did about 2.5 million on that platform, just shy of under about 1000 a week per store. And so, you know, we're looking to get that up and running in the first quarter. Yeah, and we're excited about that, actually, as people continue to go back to their offices. Great. Thanks, guys. Thanks Andy.
Speaker Change: Hi, Thanks, and good evening is just.
Speaker Change: Just on the corner today and it might be a tough ask but as you parse through the weather impact do you think you've seen a change in your underlying demand trends or any changes in behavior order patterns that you've noted in recent months compared to the prior a couple of quarters.
Brian Lucaro: Thank you. So the next question we have comes from Brian Lucaro from Raymond James. Please go ahead.
Jon W. Howie: Hi, thanks, and good evening, guys. Just on the quarter to date, and it might be a tough ask, but as you parse through the weather impact, do you think you've seen a change in your underlying demand trends or any changes in behavior or order patterns that you've noted in recent months compared to the prior couple of quarters? Not really, Brian.
Speaker Change: Mmm not really Brian I mean, we continue to see kind of lower attachment rates in the bar area, we are seeing a little higher attachments in.
Speaker Change: Appetizers and that's really due to what we're doing during the the happy hour.
Jon W. Howie: I mean, we continue to see kind of lower attachment rates in the bar area. We are seeing a little higher attachment in the appetizers, and that's really due to what we do during the happy hour timeframe with our chips and dips kind of program. So we are seeing that come back a little bit, but that is a discounted program, and so the dollars are slightly better, but the attachment rates are definitely better. And we're still seeing, you know, the similar mix over the last, even through COVID, and back to even pre-COVID with, you know, a 40-60 mix at lunch to dinner, and those are staying very, very consistent.
Speaker Change: Timeframe with our chips and dips kind of program. So we are seeing that come back a little bit but that is a discounted program and so the dollars are slightly better but the attachment rates are definitely better and we're still seeing that you know that a similar mix over the last even through Covid Becker even got it.
Speaker Change: <unk>.
Speaker Change: A 40 60 mix at lunch to dinner and those are staying very very consistent and really that to go as we said earlier the off premises still stay in fairly consistent from a percentage.
Jon W. Howie: And really, the to-go, as we said earlier, the off-premises still staying fairly consistent from a percentage point of view. Okay, okay. And Jon, I think you made a comment about February.
Speaker Change: Okay, Okay, and John I think you've made a comment on on February you said.
John: Klein of around half of the down seven in January So I just wanted to make sure I understood that <unk> yeah. So it was February down the <unk> yeah.
Jon W. Howie: You said a decline of around half of the down seven in January. So I just wanted to make sure I understood that. Yeah, was February down the mid-threes or not?
Speaker Change: Yes, yes, yes.
Speaker Change: Okay again.
Speaker Change: <unk>, therefore us is rolling over that the implementation of October.
Jon W. Howie: Yeah, yeah, yeah. And again, the key number there for us is rolling over the implementation of Uber. Right, right, understood. Okay. And then, Jon, on margins, I want to just ask on the commodity side, the deflation that you saw in the fourth quarter, I think, was much more significant than you kind of expected. Could you just provide some color on what drove that favorability?
Speaker Change: Right right understood. Okay, and then John on margins I wanted to just ask on the commodity side you know the deflation that you saw on the fourth quarter I think was much more significant than than than you kind of expected could you just provide some color on what drove that Favre billety.
John: Yeah, a lot of it was.
Speaker Change: Continuing just one second here is continuing and.
Jon W. Howie: Yeah, a lot of it was continuing, just one second here, it's continuing in.., up here. Yeah, the big items, if I look at it, were continuing chicken and produce were the big items, and dairy and cheese. Those things came down a lot more than we were expecting. Okay, and I think you said low single digits for the year 2024. Is there any year-on-year lumpiness or differentials we should be mindful of, thinking about the quarters or relatively stable through the year?
John: Let me pull it up here.
John: Yeah, the big items, if I look at it was continuing chicken and produce where the big items and dairy and cheese.
John: Those things came down a lot more than we were expecting.
John: Okay, and I think he said low single digits for the year in 2024 is there any any you're on year, lumpiness or or differentials, we should be mindful of thinking about the quarters or relatively stable.
John: Yeah.
Jon W. Howie: Yeah, if we're looking at that, I would say it's relatively flat, going to be flat in the first quarter, and then start growing with our highest quarter probably in the third and fourth quarter. Okay, thank you. I'll pass it along.
Speaker Change: Yeah, we're looking at that I mean, I would say, it's relatively flat gonna be flat in the first quarter and then start growing with our highest quarter probably in the in the third and fourth quarters.
Speaker Change: Okay. Thank you I'll pass it along.
Jon W. Howie: Thank you. Thank you, Sal. Ladies and gentlemen, just a reminder, if you would like to ask a question, please press star and then 1 now. The next question we have comes from Aisling Gruningham. Hi, good afternoon, guys. Please go ahead, Salmon.
Speaker Change: Thank you.
Speaker Change: Thank you Sir at ease and gentlemen, just a reminder, if you would like to ask a question.
Speaker Change: And then one now the.
Speaker Change: The next question <unk>, <unk> <unk> <unk> <unk> <unk>.
Speaker Change: Hi, good at finding guys. Please go ahead Sir.
Steven J. Hislop: Hi. Good afternoon, guys. You mentioned in the last earnings call that you were going to increase ad spend during the 4Q time period. I'm just wondering if you saw an increase in traffic or any other measurable points from the ad spend that would just influence your decision on how much you're going to spend going into 2024. Yeah. We didn't know so much to increase the ad spend.
Speaker Change: Hi, good afternoon guys.
Speaker Change: You mentioned the last earnings call that you were going to increase AD spend during the Fork you time period I'm. Just wondering if you saw an increase in traffic or any other measurable points from the AD spend that would influence you just influence your decision on how much you're gonna spend going into 2024.
Speaker Change: Yeah.
Speaker Change: We we didn't know so much increase your husband, we just reallocated it a little bit <unk> normal cash spend percentage wise on marketing is roughly in that 1.451, 0.5% range and we're anticipating that throughout the 2024, but we did reallocated.
Steven J. Hislop: We just reallocated it a little bit because our normal cash spend percentage-wise on marketing is roughly in that 1.45, 1.5% range, and we're anticipating that throughout 2024. But we did reallocate it a lot. And as I mentioned in the call, it will mostly be a lot of social with Google, YouTube, Programmatic TV, Yelp, and so forth, and what I mentioned earlier. But it will be just a reallocation of resources to what we really were excited about in 2023 and do more of that and less of the things we weren't excited about. But it will still stay on those major channels, and the spend will be very consistent from a year ago.
Speaker Change: And as you know as I mentioned in the call will mostly be about a social with Google Youtube programmatic television.
Speaker Change: And y'all and so forth on what I mentioned earlier, but it was just a reallocation for what we really were excited about in 2023 and do more of that and less of the things we weren't excited about but will still stay on those major channels and spend will be very consistent from a year ago.
Steven J. Hislop: That's, that's great. Um, you mentioned to me at ICR that you were confident in your ability to return to 10% unit growth in 2025. Just what have you seen or done so far this year to support this goal and just the confidence in reaching that? Yeah, we're very confident as far as what we're doing on the ground with our master broker system. And so we've got that. But I probably have a pipeline as good with sites over the next couple of years as it's ever been.
Speaker Change: That's that's great Uhm, you mentioned I know it ICR that you were confident in your ability to return to 10 per cent unit crest. In 2025, just what have you seen or your real estate team done so far this year to support this call and just the confidence in reaching that.
Speaker Change: Yeah, we're very confident as far as what we're doing on the ground with our with.
Speaker Change: With our master broker system, and so we got that Bob probably a pipeline is as good with sites over the next couple of years that it's ever been.
Steven J. Hislop: So we're pretty, pretty excited about that. The thing we're not excited about is the cost. You know, they're up 35 to 40%. They've moderated, but they have not started coming down yet.
Speaker Change: So we're pretty pretty excited about that sort of thing we're not excited about is the cost thereof.
Speaker Change: 35% to 40%.
Speaker Change: Moderated, but they have not calm it started coming down yet also the developers aren't doing any more of the site costs, which is a million dollars on top of that development costs. So that's the thing that we're working on our hardest without without people on also on a daily basis going in to make sure we're value engineering everything we're doing inside our four walls and go on.
Steven J. Hislop: Also, the developers aren't doing any more of the site costs, which is a million dollars on top of that development cost. So that's the thing that we're working the hardest with our people on. Also, on a daily basis, going in and making sure we're value engineering everything we're doing inside our four walls. But that's the disappointment thing.
Speaker Change: But that's the disappointment thing and when you're looking at your cash on cash you gotta be looking at that dollars 40 per cent increase.
Steven J. Hislop: When you're looking at your cash on cash, you've got to be looking at that dollars and 40% increase. Thank you. That's very helpful. I'll pass it on.
Speaker Change: Thank you that's very helpful <unk>.
Speaker Change: <unk>.
Speaker Change: Thank you ma'am.
Speaker Change: Question, we have come <unk> come with Bush Securitas. Please go ahead.
Jon W. Howie: Thank you. Thank you, ma'am. The next question we have comes from Nick Setyan from Wedbush Securities. Please go ahead. Hey, thanks, Jens. So just kind of the margin, I guess, trajectory, you know, given the sort of the context you already gave us, sounds like COGS, you know, 10, 20 bits of leverage, maybe slightly more, you know, labor, maybe 70 to 80 bits of deleverage and operating the deleverage as well. Is that kind of the right way to think about the various pockets?
Bush Securitas: Hey, Thanks, <unk>. So it just kind of drug the margin Uhm, I guess trajectory given the sort of the <unk> contact you already gave us.
Bush Securitas:
Speaker Change: Sounds like <unk> you know.
Speaker Change: <unk>, 20th <unk> of leverage maybe slightly more <unk>.
Speaker Change: Labour, maybe 70 to 80 bits of deleverage an operating the deleverage as well as that kind of the right.
Speaker Change: Right way to think about the various <unk>.
Speaker Change: Buckets.
Jon W. Howie: Yeah, I think the only thing I would add is we're probably looking at flat from a cost to sell standpoint, as far as, you know, being kind of in the low single digits, which we're thinking 2 to 3%, and so basically, our pricing would cover that. So probably not much leverage there, but the other items that you said as far as operating expenses deleveraging and the labor deleveraging, yes. Okay. And then, you know, I mean, understanding sort of the period one, period two challenges, you know, we do have to kind of come over to Uber Lyft. Um, maybe just walk us through some of the other comp drivers for the rest of the year.
Speaker Change: Yeah, I think the only thing I would add is we're looking at probably flat from the cost of sales standpoint, as far as you know being kind of that low single digits, which are with our which were thinking 2% to 3% and so basically our pricing would cover that so probably not much leverage there, but the <unk>.
Speaker Change: Other items that you said as far as operating expenses deleveraging and the Labour deleveraging yes.
Speaker Change: Okay.
Speaker Change: And then underscore.
Speaker Change: Understanding sort of the period warm period two challenges you know, we we do have to kind of come forward Uber Lyft, maybe just walk us through some of the other comp drivers for the rest of the year.
Bush Securitas: Yeah, the comp drive this for US is again, a already mentioned the marketing and it says you know the one thing that we're pushing on everything that we have out there as our value within our menu I mean, I know you've been out there, saying a lot of our competitive set are going back to the 2019 ways of doing all their promotions and their price offs and and obviously they haven't done that for three.
Steven J. Hislop: Yeah, the comp drivers for us are, again, I've already mentioned the marketing, and it's the, you know, the one thing that we're pushing on everything that we have out there is our value within our menu. I mean, I know you've been out there seeing a lot of our competitors that are going back to the 2019 ways of doing all their promotions and their price cuts, and obviously, they haven't done that for three years, so when they pop back into the market, you know, in the third and fourth quarter of last year, you know, people are trying that out. We don't think we need to do that, obviously, because you can eat on our menu all day long for $20, so we're pretty excited about really pushing our value message again.
Bush Securitas: So when I pop back in the market and the third and fourth quarter of last year. You know people are trying that out.
Bush Securitas: We don't we don't think we need to do that obviously, because you can eat in our menu all day long for 20 Bucks. So we're pretty excited about really pushing not value message again, and then also increases and what we're doing with our C. K O as in keeping things, new and fresh and as I mentioned earlier that we had.
Bush Securitas: A little bit.
Bush Securitas: We added a few different items back on the menu, whether it be the burrito balls and so forth.
Bush Securitas: And the key the key for off everything that we do.
Bush Securitas: We're turtles, and what we approach and and what we Wanna do right. Now is this this is when we want to tuck inside our four walls and execute execute every single day every single shift every single hour and that's the thing that we believe while everybody's out there looking for a silver bullet. We believe that's what's really going to drive demand into our restaurants short and long term.
Steven J. Hislop: And then also the increases in what we're doing with our CKOs and keeping things new and fresh, and as I mentioned earlier, we had a little bit, you know; we added a few different items back to the menu, whether it be the burrito bowls and so forth. And the key for everything that we do is that we're turtles in what we approach. And what we want to do right now is this is when we want to tuck inside our four walls and execute, execute every single day, every single shift, every single hour. And that's the thing that we believe, while everybody's out there looking for a silver bullet.
Speaker Change: And on that Nick I might add we look at the sentiment scores that we get from some black box and you don't necessarily compare it with others, but we can start with ourselves and make sure. Those are increasingly we've seen a significant betterment of those those cinnamon scores over the last six months. So I think you know those will turn into.
Steven J. Hislop: We believe that's what's really going to drive demand into our restaurants short and long term. And on that, Nick, I might add, you know, we look at the sentiment scores that we get from BlackBox, and you don't necessarily compare them with others, but we compare them with ourselves and make sure those are increasing. We've seen a significant improvement in those sentiment scores over the last six months. So I think, you know, those will turn into sales as we continue to increase our sentiment scores towards the back half of the year. Perfect. Thank you very much.
Steven J. Hislop: Two sales as we continue to increase in the cinnamon scores towards the back half a year.
Speaker Change: Perfect. Thank you very much.
Speaker Change: Thanks snack.
Speaker Change: Thank you. The next question we have comes from Chris Okay from Stifle. Please go ahead.
Chris Okay: Thanks for taking the question again.
Chris: Mm good afternoon now.
Chris: Steve.
Chris Okay: Given the recent traffic performance I'm, just curious if the company debated whether to spend more on advertising this year and maybe even use more paid media in markets, where you have good density and it could help maybe improve top of mind awareness.
Jon W. Howie: Thank you. The next question we have comes from Chris Ockel from Stifle. Please go ahead. Thanks for taking the question, guys. Good afternoon.
Speaker Change: Yeah, Chris what we're looking at that currently and that's always going to we're very nimble on that approach within our marketing budget and will look at that and continue and and as you know the one thing about you know a lot of digital as you can pay for it on a dime. So we're constantly looking at that and will continue to look at that as we're going on right now.
Steven J. Hislop: Hey, just given the recent traffic performance, I'm just curious if the company debated whether to spend more on advertising this year and maybe even use more paid media in markets where you have good density and it could help maybe improve top-of-mind awareness. Yeah, Chris, we're looking at that currently. And that's always gone.
Chris: Would you consider things like broadcast my T V in certain markets.
Chris: Certain ones that out right now as you heard me talk about programmatic.
Steven J. Hislop: We're very nimble with that approach within our marketing budgets, and we'll look at that continuing. And as you know, the one thing about a lot of digital is that you can pivot on a dime.
Chris: Television currently right now we're doing a lot on ESPN and and a lot of stuff around the sports, especially as we were mentioned into your on the call about looking at it more cell and as we get into March madness, and so forth, but we'll definitely looking probably more on programmatic side of it probably not major media.
Steven J. Hislop: So we're constantly looking at that. And we'll continue to look at that as we go on right now. Would you consider things like broadcast, like TV, in certain markets?
Speaker Change: Okay, and then John can you describe the visibility you have into that low single digit commodity inflation for this year.
Steven J. Hislop: And certain ones, but right now, as you heard me talk about programmatic TV currently, right now, we're doing a lot on ESPN and and a lot of stuff around sports, especially as we were mentioning to you on the call about looking at it more so as we get into March Madness and so forth, but we'll definitely look in, probably more on the programmatic side of it, probably not major media. Okay, and then Jon, can you describe the visibility you have into that low single-digit commodity inflation for this year? Sure, so I mean the biggest component would be... or Beef.
Jon: Sure. So I mean, the biggest component would be our beef.
Jon: Our beef we've got locked in through the third quarter of this year as far as the heat of beef those are at.
Jon: Increased prices as well as our ground beef, we only have locked in through the Q1, we expect when we start buying that after Q1 that'll be elevated compared to the prices of this year and so those are the two big drivers as well as some of the <unk>.
Jon W. Howie: Our beef, we've got locked in through the third quarter of this year as far as the heat of beef is concerned. Those are at, you know, increased prices. As well as our ground beef, we only have it locked in through Q1. We expect when we start buying that after Q1, it'll be elevated compared to, you know, the prices of this year. And so those are the two big drivers, as well as, you know, some of the, maybe the chicken coming back a little bit as well since we had it, since it was down so much last year.
Jon W. Howie: Maybe the chicken coming back a little bit as well since we had it since it was down so much last year.
Speaker Change: Okay, great. Thanks, guys Mmm, Thanks crest.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, just a final reminder, if you would like to ask a question. Please press down and then one now.
Jon W. Howie: Okay, great. Thanks, guys. Thanks, Chris.
Speaker Change: The next question comes from <unk>, Todd broke off the bench My company. Please go ahead.
Chris Ockel: Thank you. Ladies and gentlemen, just a final reminder, if you would like to ask a question, please press star and then 1 now. The next question we have comes from Todd Brooks of the Benchmark Company. Please go ahead. Hey, thanks for squeezing me in. I only have a couple left here.
Todd Brooks: Alright, Thanks for squeezing me and I only have a couple of left here. When I was just wondering can we get an update on the stores that were kind of mothballed during the.
Todd Brooks: Started the pandemic how many of those are you still kind of carrying and the costs that we saw for.
Jon W. Howie: One, I was just wondering, can we get an update on the stores that were kind of mothballed during the start of the pandemic? How many of those are you still kind of carrying? And the costs that we saw for, just the underperforming discontinued performance in the quarter? Is that against those stores fully? Or are you looking at anything in the base that you impaired?
Todd Brooks: Just the the underperforming discontinued performance in the quarter is that against those stores fully or or are you looking at anything in the base that you impaired and do we need to think about any closures against the openings plans for this year.
Speaker Change: Well I mean as you know the impairment is is a fundamental kind of exercise from an accounting standpoint, so that particular impairment was.
Jon W. Howie: And do we need to think about any closures against the openings planned for this year? Well, I mean, as you know, the impairment is a fundamental kind of exercise from an accounting standpoint. So that particular impairment was one of our stores in the Denver area. We don't plan on closing anyone anytime soon. But, but that is, you know, a challenge store.
Jon W. Howie: One of our stores in Denver area.
Jon W. Howie: We don't plan on closing anyone anytime soon but but that is a challenge tour. So we will continue to look at that store.
Jon W. Howie: As far as the ones that we mothballed, we've gotten rid of most of them I think we're still working on.
Jon W. Howie: So we'll continue to look at that store. As far as the ones that we mothballed, we've gotten rid of most of them. I think we're still working on three of them, and we're pretty close to getting those out of here. And so then that will just go back to, I think there are like three of them that are currently on subleases, and there's a little difference in the sublease. But other than that, we almost have them all done. Great. And then Steve, just a question.
Jon W. Howie: Three of them.
Jon W. Howie: And we're pretty close to.
Jon W. Howie: Getting getting those out of here.
Jon W. Howie: And so then that will just go back to I think there's like three of them that are currently on sub leases.
Speaker Change: That there's a little differential in in the sublease, but other than that we almost have molden.
Jon W. Howie: Great.
Jon W. Howie: Steve just a question I.
Steven J. Hislop: I know we're working our way back to 10% unit growth. In the past, you've talked about that being related to what you're seeing in terms of traffic trends and the strength of your customers. With what you're seeing now, is this the right time to accelerate from kind of the six to eight this year, or do you need to see a pickup in the consumer, or just with the challenges of getting the real estate you want in your market? And the fact that you're doing infills, are you comfortable with the 10% growth in 2025? Yeah, I'm comfortable for this year in that 68 range because, as I mentioned to you before, or I mentioned earlier, it's just the initial cost of getting into this.
Steve: I know, we're working our way back to the 10% unit growth in the past you've talked about that being related to what you're seeing and kind of traffic trends in the strength of your customer.
Steven J. Hislop: With what you're seeing now is this is this the right time to accelerate from kind of the six to eight this year or do you need to see a pick up in the consumer or just with the the challenges and giving the real estate you want in your markets and the fact that you're doing instills are you comfortable with the 10% growth in 25.
Steven J. Hislop: I'm uncomfortable for this year and that 68 range cause I've as I mentioned to you before I mentioned earlier is just the initial cost of of getting into these and and while we're re tooling our building or even again.
Steven J. Hislop: And while we're retooling our building, even again, it's at 40%. That's huge. And then you add the site cost on top of that.
Steven J. Hislop: It's at 40% that and that's S. Huge and then put the site site costs on top of that so that's the big thing hopefully we'll see some.
Steven J. Hislop: So that's the big thing. We'll see some reasonableness happen throughout 2024 on that, that gets it where it makes sense from a capital side to get to that 10% growth. But right now, for this year, I'm comfortable in that 68 range.
Steven J. Hislop: Reasonable and this happened throughout <unk> 24 on that that makes sense.
Steven J. Hislop: From.
Steven J. Hislop: Capital side to get to that 10% growth, but right now for this year I'm comfortable in that six to eight ranch.
Steven J. Hislop: Okay, great. Thank you both. Thanks, guys. Thank you, Phil. The last question we have comes from Andrew Wolfe of C.R. King & Associates.
Speaker Change: Okay, great. Thank you both.
Steven J. Hislop: Hi.
Andrew Wolfe: Thank you Sir and last question, we have comes from Andrew Bolt, let's see I'll King and associates. Please go ahead.
Todd Brooks: Please go ahead. Okay, thank you. I just have a couple follow-ups. First, on development. You know, I mean, recently, you've talked about targeting, you know, a 30% cash on cash return. But you're still, do you know what I mean?
Andrew Wolfe: Okay. Thank you I just have a couple of follow ups first is on development.
Andrew Wolfe: You know I mean recently you've talked about.
Andrew Wolfe: Are getting you know a 30% cash on cash return.
Andrew Wolfe: But you still you know, what I mean and called out.
Jon W. Howie: called out how expensive it is to build a building. And you've kind of talked about buying the land and doing an eventual sale and lease back. So could you just unpack?
Jon W. Howie: Oh expensive it is to build the buildings and.
Jon W. Howie: And you've kind of talked about.
Jon W. Howie: And you know buying the land and doing an eventual soon <unk> could you just had packed.
Jon W. Howie: For me, one is that 30% cash-in-cash return. ®MD-BO ®MD-BO Um, is that going to change? And if you're going to keep it, is it predicated on doing an eventual sale and lease back? Based on, you know, market rates to build out a restaurant? Well, there's a lot to unpack there. So, yes, I mean, our ultimate target is 30% cash-on-cash return with the costs the way they are, and that's why we're trying to do a lot of value engineering that we spoke of. We've actually hired two additional architects to kind of go through our whole current building and our prototype and all the layers that we have in it and suggest different ways to build it, different ways to design it, different layers and different alternative materials for the layers that we have in the restaurants, as well as even look at the equipment package that we have.
Jon W. Howie: For me as one does that 30 per cent cash on cash return.
Jon W. Howie: Which is a strong returns still realistic or is it.
Jon W. Howie:
Jon W. Howie: Is that gonna change and if you're gonna keep it as it predicated on doing an eventual sale and leaseback.
Jon W. Howie: Just based on you know market rates to build build at a restaurant.
Jon W. Howie: Well, there's a lotta unpack there so yes, I mean, our ultimate target is 30% cash on cash return with the cost of the way. They are and that's why we're trying to do a lot of value engineering that we spoke we've actually hired two additional architects to kind of go through our whole current.
Jon W. Howie: Building in our prototype and all the layers that we have in it and suggest different ways to build it.
Jon W. Howie: Different ways to design it.
Jon W. Howie: Different layers and different alternative.
Jon W. Howie: <unk> on the layers that we have in the restaurants as well as even looking at the at the equipment package that we have and totally so we're doing a soup to nuts. If you will of kind of value engineering right. Now now initially where we're getting some fairly good results. Obviously, we don't have one of the new ones in the ground.
Jon W. Howie: And totally, so we're doing a soup to nuts, if you will, of kind of value engineering right now. Now, initially, we're getting some fairly good results. Obviously, we don't have one of the new ones in the ground, but some of the plans coming back we like. But currently, I would say those targeted cash-on-cash returns are more in the way of about 25% versus 30%, but our ultimate target is 30%
Jon W. Howie: But some of the plans coming back where liking.
Jon W. Howie: But currently I would say those targeted cash on cash returns or more in the way of about 25 per cent versus 30, but our ultimate target is 30% and does it really we look at the purchase in when we're doing the pro forma so if that makes sense and if we can do a purchase.
Jon W. Howie: And that really, we look at the purchase when we're doing the performance. So, if it makes sense, and if we can do a purchase, looking at that sales leaseback and seeing what we get back from the sales leaseback to actually boost those returns on cash-on-cash returns. But all that goes into the decision of whether to buy or to lease and then, ultimately, this value engineering.
Jon W. Howie: Looking at that sells leaseback and seeing what we get back from the sales leaseback to to actually boost those returns on cash on cash return, but all that goes into the decision.
Jon W. Howie: Of whether to to buy or to lease and then ultimately this value engineering. Currently today, we have about seven properties that we own.
Jon W. Howie: Currently, to date, we have about seven properties that we own. There are about two or three other properties that we're looking at right now to buy. And the development in the current year, we do not have any properties that we have purchased.
Jon W. Howie: There's about two or three other properties that we're looking at right now to buy <unk>.
Jon W. Howie: And the <unk> the development in the current year, we do not have any properties that we have purchased they will fall into 2025.
Jon W. Howie: They will fall into 2025, but hopefully, I have answered all of your questions there. Yeah, very much. I really appreciate the detail. Thank you. Can I just ask another question? Just on the Uber Eats comparison... So it sounds like it's 350 bips. This quarter is a headwind, and I guess you've got another quarter or two of that. And then I must ease into the fourth quarter, which is sort of the other way of asking how much it was, and how much Uber Eats was. headwind in the quarter you just reported, last year's fourth quarter. Well, yeah, if you look at it, so basically Uber Eats was about 2.1% of our sales in the fourth quarter of 2022 when we implemented it, and that grew and kept growing in the first quarter. It was about 2.8% of sales until, eventually, for all of 2023, it was about 3.5%.
Jon W. Howie: Uhm.
Speaker Change: But hopefully I answered all your questions or.
Speaker Change: Yeah, very much I really appreciate the detail.
Speaker Change: Thank you.
Speaker Change: Can I just ask another follow up but just somebody overeats comparisons.
Speaker Change: So it sounds like it's 350 <unk>.
Jon W. Howie: This quarter is a headwind.
Jon W. Howie: And I guess, you've got another quarter or two of that.
Jon W. Howie: And then it must he's in the fourth quarter, which is sort of the other way of asking how much was it how much was the uber each headwind and according you just reported the fourth ward last year's fourth quarter.
Jon W. Howie: Twenty-three well yeah. If you look at it so basically <unk> was about 2.1% of ourselves in the fourth quarter of 2022, when we implemented it and that grew kept growing in the first quarter. It was about 2.8% of sales until eventually for all of 2023. It was about three.
Jon W. Howie: So you're looking at, you know, 300 to 400 basis points that we're rolling over, which is a little challenging. Okay, got it. All right. Thank you.
Jon W. Howie: 5%, so you're you're looking at you know 333 hundred to 400 basis points that were rolling over which is a little challenging.
Speaker Change: Okay got it alright, thank you.
Steven J. Hislop: Thank you, sir. Ladies and gentlemen, we have reached the end of the question-and-answer session, and I would like to turn the call back to Steven Hislop for closing remarks. Please go ahead, sir. Thank you. Thank you so much. Jon and I appreciate your continued interest in Chuy's and are available to answer any and all questions. Again, thank you, and have a good evening. Thank you. Ladies and gentlemen, that concludes today's conference. Thank you for joining us. You may now disconnect your lines.
Speaker Change: Mmm Mmm.
Steven J. Hislop: Thank you Sir.
Steven J. Hislop: And gentlemen, we have reached the end up a question and answer session and I would like to tell them a call back.
Steven J. Hislop: <unk> how closing remarks. Please go ahead sir.
Steven J. Hislop: Thank you. Thank you so much John and I. Appreciate your continued interest in choosing are available to answer any and all questions again, Thank you and have a good evening.
Steven J. Hislop: Thank you ladies and gentlemen that concludes today's conference. Thank you for joining us <unk> disconnect your lines.
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