Q1 2024 Gen Restaurant Group Inc Earnings Call
Good afternoon.
Operator: Good afternoon, and welcome to the GEN Restaurant Group First Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your telephone keypad. To withdraw your question, please press star, then 2. Please note, this event is being recorded. I would now like to turn the conference over to Tom Kroll, the company's Chief Financial Officer. Please go ahead. Thank you.
Speaker Change: Noon and welcome to the Gen restaurant Group first quarter 2024 earnings Conference call. All participants will be in listen only mode should you need assistance. Please signal our conference specialist by pressing the star key followed by zero.
After today's presentation there'll be an opportunity to ask questions too.
To ask a question you May press Star then one on your telephone keypad.
To withdraw your question. Please press Star then two.
Please note this event is being recorded.
I would now like to turn the conference over to Tom Kroll, The company's Chief Financial Officer. Please go ahead. Thank you operator and good afternoon.
Tom Kroll: Thank you, operator, and good afternoon. By now, everyone should have access to our first quarter 2024 earnings release. If not, it can be found at www.genkoreanbbq.com in the Investor Relations section. Before we begin our formal remarks, I need to remind everyone that our discussions today will include forward-looking statements within the meaning of federal securities laws, including, but not limited to, statements regarding growth plans and potential new store openings, as well as those types of statements identified in our quarterly report on Form 10-Q for the period ending March 31st, 2024 and our subsequent reports filed with the SEC.
Tom Kroll: By now everyone should have access to our first quarter 2024 earnings release.
Tom Kroll: It can be found at Www Dot Gen Korean baby Q Dot com in the Investor Relations section.
Tom Kroll: Before we begin our formal remarks I need to remind everyone that our discussions today will include forward looking statements within the meaning of federal security laws, including but not limited to statements regarding our growth plans and potential new store openings as well as those.
Tom Kroll: These forward-looking statements are not guarantees of future performance, and therefore, you should not put undue reliance on them. These statements represent our views only as of the date of this call and are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we currently expect. We refer you to our recent SEC filings, including our quarterly report on Form 10-Q, for a more detailed discussion of the risks that can impact our future operating results and financial conditions.
Tom Kroll: The types of statements identified in our quarterly report on Form 10-Q for the period March 31, 2024, and our subsequently ports filed with the FCC.
Tom Kroll: These forward looking statements are not guarantees of future performance and therefore, you should not put undue reliance on them.
Tom Kroll: These statements represent our views only as of the date of this call and are also subject to numerous risks and uncertainties.
Tom Kroll: That could cause actual results to differ materially from what we currently expect.
Tom Kroll: We refer you to our recent SEC filings, including our quarterly report on Form 10-Q for a more detailed discussion of the risks that could impact our future operating results and financial condition.
Tom Kroll: Except as required by law, we undertake no obligation to update or revise these forward-looking statements in light of new information or future events. During today's call, we will discuss some non-GAAP financial measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are available in our press release and our SEC filing, which are available in the Investor Relations section of our website. Now, I'd like to turn it over to our board chair and co-CEO, David Kim.
Tom Kroll: Except as required by law, we undertake no obligation to update or revise these forward looking statements in light of new information or future events.
Tom Kroll: During today's call, we will discuss some non-GAAP financial measures, which we believe can be useful in evaluating our performance.
Tom Kroll: Presentation of this additional information should not be considered in isolation or.
Tom Kroll: Or as a substitute for results prepared in accordance with GAAP.
Tom Kroll: Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are available in our press release.
Tom Kroll: And our S T SEC filings.
Tom Kroll: Which are available in the Investor Relations section of our website.
Speaker Change: Now I'd like to turn it over to our board chair and co CEO David Chip.
David Kim: Thank you, Tom, and good afternoon, everyone. In the first quarter, we continued executing on our strategic growth roadmap to expand GEN's geographic coverage and overall market share. This quarter, we achieved a 16% year-over-year increase in total revenue, largely driven by the opening of two new locations, both of which have been performing at or above our expectations. Additionally, we bought out our 50% partner in Hawaii, and we can now consolidate the revenues and results of operations in our financial statements starting in the second half of February.
David Chip: Thank you Tom and good afternoon, everyone.
David Chip: In the first quarter, we continued executing on our strategic growth roadmap.
David Chip: <unk> geographic coverage and overall market share.
David Chip: This quarter, we achieved a 16% year over year increase in told our revenue largely driven by the opening of two new locations, both of which have been performing at or above our expectations.
David Chip: Suddenly we bought out our 50% partner in Hawaii and can now consolidate the revenues and results of operations in our financial statements starting in the second half of February.
David Chip: We also completed the build out of our business development infrastructure, which provides us with a much clearer view into our growth pipeline and gives us the ability to accelerate restaurant openings moving forward.
David Kim: We also completed the build out of our business development infrastructure, which provides us with a much clearer view of our growth pipeline and gives us the ability to accelerate restaurant openings moving forward. We experienced an improvement in the second half of the quarter by achieving stronger margins as a result of implementing operational efficiency, which we've also seen continue into April. As a result, I'm proud to report that our overall financial performance was in line with expectations for the quarter, and we remain on track to achieve our goals for 2024 and excited to see the positive momentum building. Before I discuss our performance in more detail,
David Chip: We experienced an improvement in the second half of the quarter by achieving stronger margins as a result of implementing operational efficiencies, which we've also seen continue into April.
David Chip: As a result, I'm proud to report that our overall financial performance was in line with expectations for the quarter and we remain on track to achieve our goals for 2024 and excited to see the positive momentum building.
David Chip: Before I discuss our performance in more detail.
David Kim: I'd like to reiterate who we are, what makes GEN Korean BBQ truly unique, and why we believe it sets the stage for sustained success going forward. GEN Korean BBQ is an all-you-can-eat, full-service, cook-it-yourself-at-your-table casual dining restaurant concept that offers consumers a variety of best-in-class proteins, including steak, pork, chicken, seafood, as well as salad alternatives across both lunch and dinner GEN is a value concept.
David Chip: I'd like to reiterate who we are what makes Gen Korean barbecue truly unique.
David Chip: And why do we believe it sets the stage for sustained successful going forward.
David Chip: Jen Korean barbecue.
David Chip: Yeah.
David Chip: All you can eat foodservice.
David Chip: Get yourself at your table casual dining restaurant concept that offers consumers.
Jen: Variety of best in class proteins, including stake.
David Chip: Org chicken seafood as well as salad alternatives across both lunch and dinner <unk>.
David Chip: All at an affordable all inclusive price.
Jen: Jen is value concept.
David Chip: Unlike other restaurant concepts.
David Kim: Unlike other restaurant concepts, Jan Karim BBQ's model allows us to minimize our kitchen space and maximize the number of tables while benefiting from the absence of costly traditional kitchen staff because we don't make anything, as all products come pre-made. Because of this, less labor is required.
Speaker Change: C N Creme barbecues model allows us to minimize our kitchen space and maximize the number of tables, while benefiting from the absence of costly traditional kitchen staff, because we don't make anything it's all products come pre meet it.
Speaker Change: Because of this less labor required.
David Kim: Thus, we can keep our prices low and provide the best value to our guests. This is incredibly important to keep in mind as we continue to navigate an uncertain consumer demand environment where value is a key component of today's consumer decision making. We've been able to replicate this model over and over again by opening new restaurants with an average unit volume of four to $5 million per year, generating $800 plus per square foot and 18 to 20% restaurant level adjusted EBITDA margin.
Speaker Change: Thus, we could keep our prices low and provide the best value to I guess this is incredibly important to keep in mind as we continue to navigate an uncertain consumer demand environment, where value becomes a key component for today's consumers decision, making.
Speaker Change: We've been able to replicate this model over and over again by opening new restaurants, with an average unit volume of $4 million to $5 million per year generating $800 plus per square feet.
Speaker Change: 18% to 20% restaurant level adjusted EBITDA margin.
David Kim: These attractive unit level economics allow us to generate, on average, a cash on cash return of 40% and a payback period of approximately two to two and a half years, which ranks among the best in the industry.
Speaker Change: These attractive unit level economics allows us to generate on average cash on cash return.
Speaker Change: 40% and a payback period of approximately two to two and a half years, which ranks amongst the best in the industry.
Speaker Change: With that background.
David Kim: I'd like to address our restaurant development. In the first quarter, we opened two new restaurants in Seattle, Washington, and Dallas, Texas. And most recently, in April, we opened a new restaurant in Jacksonville, Florida. With these three locations, plus our acquisition of the remaining ownership of our Hawaii location, and five others starting construction that are expected to open by year end, We have made significant progress towards reaching our goal of at least eight to nine new restaurants in 2024. We also have an additional 10 plus leases in various stages of negotiations in new markets as well as existing markets that we would expect to open in 2025.
Speaker Change: I'd like to address our restaurant development.
Speaker Change: In the first quarter, we opened two new restaurants in Seattle, Washington, and Dallas, Texas and most recently in April we opened a new restaurant in Jacksonville, Florida.
Speaker Change: With these three locations plus our acquisitions of the remaining ownership over a Hawaii location and five others. Starting construction that are expected to open by year end.
Speaker Change: We have made significant progress towards reaching our goal of at least eight to nine new restaurants in 2024.
Speaker Change: We also have an additional 10 plus leases in it.
Speaker Change: In various stages of negotiations in new markets as well as existing markets that we would expect to open in 2025.
Speaker Change: As we look at our broader expansion plan, we have strong forward momentum and remain highly confident in our ability to achieve our five year plan that.
David Kim: As we look at our broader expansion plan, we have strong forward momentum and remain highly confident in our ability to achieve our five-year plan that we discussed at the time we went public. In addition to the 2024 and 2025 restaurant developments I mentioned, we expect to develop 20 to 30 additional new restaurants totaling between 70 to 80 by the end of 2026. We will have more than doubled the size of the company since our IPO, and with our attractive unit level economics, we believe this positions us well to deliver notable profitable growth and expand shareholder value over the next three years. We're doing all this primarily using free cash flow with minimum debt.
Speaker Change: That we discussed at the time, we went public.
Speaker Change: In addition to the 2024 and 2025 restaurant developments I mentioned.
Speaker Change: We expect to develop 20 to 30 additional new restaurants totaling between 70 E D.
Speaker Change: End of 2026.
Speaker Change: We will have more than doubled the size of the company since our IPO.
Speaker Change: With our attractive unit level economics.
Speaker Change: We believe this positions us well to deliver notable profitable growth and expand the shareholders value over the next three years.
Speaker Change: We're doing all this program, primarily using free cash flow with minimum debt.
Speaker Change: Recently, we launched our new premium menu at all 40 locations nationwide that futures gourmet options for an additional charge per guest.
David Kim: Recently, we launched our new premium menu at all 40 locations nationwide that features gourmet options for an additional charge per guest. The new menu options helped us improve our revenues in the month of March, and it is proving to be a valuable addition to our overall consumer experience. And we believe the additional premium menu pricing will begin to increase our average customer check in the coming quarters. Additionally, we have started testing our new premium drink, and will provide more data on this program in the coming quarters.
Speaker Change: The new menu options helped us improve our revenues in the month of March.
Speaker Change: It is proving to be a valuable addition to our overall consumer experience and we believe the additional premium menu pricing will begin to increase our average customer check in the coming quarters.
Speaker Change: Additionally, we have started testing our new premium drinks will provide more data on this program in the coming quarters.
David Kim: In conclusion, we are confident about our growth prospects moving forward. We're a company that was profitable when we went public. It is still profitable and will be profitable going forward. This makes us among the best in the industry. Our culture of growing while maintaining profitability is a core principle and value of our management team. With that, I would like to turn the call over to our CFO, Tom Kroll, to discuss our quarter one financial results. Thank you.
Speaker Change: In conclusion.
Speaker Change: We are confident about our growth prospects moving forward.
Speaker Change: We're a company that was profitable when we went public.
Speaker Change: It is still profitable and it will be profitable going forward.
Speaker Change: This makes us among the best in the industry.
Speaker Change: Our cultural growing while maintaining profitability.
Speaker Change: He is a core principle and value of our management team.
Speaker Change: With that I would like.
Speaker Change: Turn the call over to our CFO, Tom Kroll to discuss our quarter one financial results. Thank.
Tom Kroll: Thank you, David. For the first quarter, revenue increased 16% to $50.8 million, compared to $43.9 million in the first quarter of 2023, driven primarily by new unit openings and the addition of our Hawaii restaurant in February. Same-store sales decreased by 1.8% in the first quarter of 2024, while estimates indicated we would have a 3% drop in the first quarter. We had a strong month of March, which continued into April and brought us back closer to last year's revenue level.
Tom Kroll: Thank you David for the first quarter revenue increased 16% to $58 million compared to $43.9 million in the first quarter of 2023.
Tom Kroll: Driven primarily by new unit openings and the addition of our Hawaii restaurant in February.
Tom Kroll: Same store sales decreased by one 8% in the first quarter of 2024.
Speaker Change: Estimates indicated we would have a 3% drop in the first quarter.
Speaker Change: We had a strong month of March which continued into April and brought us back closer to last year's revenue levels.
Speaker Change: Cost of goods sold as a percentage of company restaurant sales increased by 80 basis points to 33, 4% primarily due to the initial startup of the company's new premium menu.
Tom Kroll: Cost of goods sold as a percentage of company restaurant sales increased by 80 basis points to 33.4 percent, primarily due to the initial startup of the company's new premium menu. Table 1 Benefits as a percentage of company restaurant sales increased by 70 basis points to 31.8%. Due to increases in minimum wage rates in certain markets, primarily California, as well as short-term, higher labor costs in newly opened restaurants as the company trains staff and management. However, it's worth noting that despite the minimum year-over-year increase, we reduced payroll and benefits by 30 basis points on a sequential basis compared to the fourth quarter of 2023.
Speaker Change: Payroll and benefits as a percentage of company restaurant sales increased by 70 basis points to 31, 8% due.
Speaker Change: Due to increases in minimum wage rates in certain markets, primarily California.
Speaker Change: As well as short term.
Speaker Change: Higher labor costs and newly opened restaurants as the company trained staff and management.
Speaker Change: It's worth noting that despite the minimum year over year increase we reduced payroll and benefits by 30 basis points on a sequential basis compared to the fourth quarter of 2023.
Speaker Change: Occupancy expenses as a percentage of company restaurant sales increased by 60 basis points year over year to eight 3%.
Tom Kroll: Occupancy expenses as a percentage of company restaurant sales increased by 60 basis points year-over-year to 8.3% due to new restaurant openings over the last 12 months. Other operating expenses as a percentage of company restaurant sales increased 60 basis points year-over-year to 10%. Other operating expenses have been reduced by 112 basis points from the fourth quarter of 2023. Adjusted restaurant level EBITDA as a percentage of total revenue was 16.4% compared to 19.6% in the first quarter of 2023. The year-over-year decline was due to the previously mentioned cost increases.
Speaker Change: Due to the new restaurant openings over the last 12 months.
Speaker Change: Other operating expenses as a percentage of company restaurant sales increased 60 basis points year over year to 10%.
Speaker Change: Other operating expenses have been reduced by 112 basis points from the fourth quarter of 2023.
Speaker Change: Adjusted restaurant level EBITDA as a percentage of total revenue was 16.4% compared to 19.6% in the first quarter of 2023.
Speaker Change: The year over year decline was due to the previously mentioned cost increases.
Tom Kroll: Going forward, we anticipate our 2020 restaurant level EBITDA margin to approach the 18% range or better as we optimize our operating expenses and labor costs. It's worth noting that we had a strong month of March in this regard, which we believe not only sets us up well for continued improvement in the coming quarters but also continues to put us on a strong long-term trajectory. GNA during the first quarter was approximately $3.9 million, or 7.7% of revenue, excluding stock-based compensation, which went mostly to employees of the company and not to the founder. The year-over-year increase in GNA is primarily due to the addition of new personnel required for an increasing level of new restaurant development, along with public company costs which weren't present in the prior year period.
Speaker Change: Going forward, we anticipate our 2024 restaurant level EBITDA margin to approach, 18% range or better as we optimize our operating expenses and labor costs.
Speaker Change: It's worth noting we had a strong month of March in this regard, which we believe not only sets us up well for continued improvement in the coming quarters.
Speaker Change: But also continues to put us on a strong long term trajectory.
Speaker Change: G&A during the first quarter was approximately $3 9 million or seven 7% of revenue excluding stock based compensation.
Speaker Change: Which went mostly to employees of the company and not to the founders.
Speaker Change: The year over year increase in G&A is primarily due to the addition of new personnel required for our increasing level of new restaurant development.
Speaker Change: Along with public company costs, which weren't present in the prior year period.
Speaker Change: Adjusted EBITDA increased to $6 4 million, including Preopening costs.
Tom Kroll: Adjusted EBITDA increased to $6.4 million, including pre-opening costs. This compares to $5.8 million for the first quarter of 2023. Without pre-opening costs, adjusted EBITDA would be approximately $7.9 million. Our net income was $3.7 million, or $0.11 per diluted share, compared to net income of $4.5 million in the first quarter of 2023. The decline was largely due to increased expenses related to new restaurant development and increased general and administrative expenses associated with being a public company, partially offset by the $3.4 million gain on purchase related to the buyout of the remaining 50% of our Hawaii restaurants.
Speaker Change: This compares to $5 8 million for the first quarter of 2023.
Speaker Change: Without preopening costs, adjusted EBITDA would be approximately seven 9 million.
Speaker Change: Our net income was $3 7 million or 11 cents per diluted share compared to net income of $4 5 million in the first quarter of 2023.
Speaker Change: The decline was largely due to increased expenses related to new restaurant development and.
Speaker Change: And increased general and administrative expenses associated with being a public company.
Speaker Change: Partially offset by the $3 4 million dollar gain on purchase related to the buyout of the remaining 50% of our Hawaii restaurant.
Speaker Change: Now turning to liquidity.
Tom Kroll: Now turning to liquidity. As of March 31st, we had no long-term debt except for a minor $5 million in government-funded EIDL loans, which we had when we went public. And we still have $20 million available in our revolving line of credit, which we have not used. Additionally, we maintain a strong balance sheet with $28.1 million in cash and cash equivalents, which declined from $32 million in December due to two non-recurring
Speaker Change: As of March 31st.
Speaker Change: We had no long term debt, except for a minor 5 million in government funded E D O loans, which we had when we went public.
Speaker Change: And we still have $20 million available in our revolving line of credit, which we have not used.
Tom Kroll: The first payment was $3 million used to acquire the remaining 50% of our Hawaii location, which included the rights to participate in future GEN restaurants in the state, and the second payment was repaying $0.9 million in advance to a founding member. Without these one-time payments, our cash balance would remain relatively unchanged, as we generated strong free cash flow, allowing us to self-fund most of the $4.1 million of capital expenditures in the quarter.
Speaker Change: Additionally, we maintain a strong balance sheet with $28 1 million in cash and cash equivalents.
Speaker Change: Which declined from $32 million at December due to two nonrecurring payments.
Speaker Change: The first payment was $3 million used to acquire the remaining 50% of our Hawaii location.
Speaker Change: Which included the rights to participate in future Gen restaurants in the state.
Speaker Change: And the second payment was repaying in advance to a founding member.
Speaker Change: Point 9 million.
Speaker Change: Without these one time payments our cash balance remains relatively unchanged as we generated strong free cash flow.
Speaker Change: Allowing us to self fund most of the $4 1 million of capital expenditures in the quarter.
Speaker Change: I will say it again for.
Tom Kroll: I will say it again, the free cash flow we generated from operations paid for most of our restaurant development costs in the first quarter. GEN generates strong free cash flow and will continue to self-fund the majority of restaurant development costs throughout all of 2024. As for the outlook for 2024, we expect total revenues to range between $200 million and $205 million and to open eight to nine new restaurants.
Speaker Change: The free cash flow, we generated from operations paid for most all of our restaurant development costs in the first quarter.
Jan: Jan generates strong free cash flow and we'll continue to self fund the majority of restaurant development costs throughout all of 2024.
Jan: As for the outlook for 2024, we expect total revenues to range between 200 million and $205 million.
Jan: And to open eight to nine new restaurants.
Jan: This concludes our prepared remarks, we'd like to thank you again for joining us on the call today.
Tom Kroll: This concludes our prepared remarks. We'd like to thank you again for joining us on the call today. We are now happy to answer any questions that you may have. Operator, please open the line for questions. We will now begin the question and answer session.
Speaker Change: We are now happy to answer any questions that you may have.
Speaker Change: Operator, please open the line for questions.
Speaker Change: We will now begin the question and answer session to.
Operator: To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question today is from Todd Brooks with The Benchmark Company. Please go ahead.
Speaker Change: To ask a question you May press Star then one on your telephone keypad.
Speaker Change: If you are using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: To withdraw your question. Please press Star then two.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: Yeah.
Speaker Change: Our first question today is from Todd Brooks with the benchmark company. Please go ahead.
Todd Brooks: Hey, thanks for taking my question and congratulations, gentlemen, on really good sales performance in what was a choppy environment for us all operators in the first place. Thank you, Todd. If I could take a little bit on the premium, when did we reach the point where we were fully rolled out across the 40 units?
Hey, Thanks for taking my question and congrats gentlemen on really good sales performance.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: Thank you Todd.
Speaker Change: If I could take a little bit on the premium.
Speaker Change: When do we reach the point that we were fully rolled out across the <unk>.
Speaker Change: <unk>.
Speaker Change: [laughter].
Operator: I'm having a little bit of a hard time. There's a lot of background noise.
Speaker Change: I'm, having a little bit of a hard time.
Speaker Change: There's background noise.
Operator: David, the question was, when did we finish the rollout of the premium...
David Chip: David The question was when did we finished the rollout of the premium menu.
David Chip: I think we've completed and we weren't yet we couldn't do it all at once because our distributor and our manufacturers couldn't keep up that'll be rolled it out in segments by markets, but I think the completion of the Codell rule that was towards the end.
David Kim: I think we've completed it. We went in, we couldn't do it all at once because our distributor and our manufacturers couldn't keep up, so we rolled it out in segments by markets, but I think the completion of the total rollout was toward the end of February.
David Chip: Barry.
Speaker Change: Okay, great and any anything you can share with us David or time or around attach rates and I think at one point you were looking at making premium meats available on Ala carte basis to.
David Kim: Okay. Great. Anything you can share with us, David or Tom, around the tax rates and, I think, at one point, you were looking at making premium meats available on a la carte basis too? I'm just trying to get to the kind of calculation behind how we should think about premium meats as a driver of a higher average check going forward.
Speaker Change: Trying to get to the kind of.
Speaker Change: Calculation behind I always think about premium meats.
Speaker Change: As a driver of higher average.
David Kim: Yes, so how the premium menu works is the guest has a choice to either purchase a premium menu for an additional dollar. But if they don't want the all-you-can-eat option, they can select from each item on the menu and just purchase a la carte. They don't have to have an all-you-can-eat experience. Therefore, we have prices on the premium menu per item. So they can either choose to say, I will take all you can eat, or I'll purchase one, two, or three Ola cards.
Speaker Change: Yes.
Speaker Change: So.
Speaker Change: How the premium menu works is.
Speaker Change: Gas has a choice to either.
Speaker Change: Purchase a premium menu for an additional dollar.
Speaker Change: If they don't want.
Speaker Change: The all you can eat option.
Speaker Change: They can select from the each item on the menu and guest purchases all La Carte you don't have to have an all you can eat experience. Therefore.
Speaker Change: We have prices on the premium menu horizon. So they they can either choose to say I will take the all you can eat or I'll, just purchase one or two or three other cuts.
Speaker Change: Okay, Great. So just two final ones and then I'll hop back in Q1, if you had to take the early experience in March and apply it to a full quarter Hum.
David Kim: [inaudible] What do you think the average check impact from premium eats should be in our modeling? And then second, David, you mentioned a test of premium drinks. Any additional color you can give us on that?
Speaker Change: Maybe what do you think the average check impact from premium should be in our modeling and then second David you mentioned attached.
Speaker Change: Premium drinks.
Speaker Change: Any additional color you can give us on that end.
David Kim: And I thought at one point the table turns were so... that we didn't want to slow down transaction time. So how do we work premium drinks into the experience without slowing visit times? Thanks.
Speaker Change: At one point the table turns were so.
Speaker Change: Our strong, but we didn't want to slow down transaction time, so how do we work premium drinks into.
Speaker Change: Parents without slowing visit times. Thanks.
David Kim: I can cover the drink side first here. The premium drinks are not the drinks that perhaps one experiences going to a high-end steakhouse. These premium drinks We're working with Coca-Cola and our other vendors where there are cocktails, Korean cocktails. The premium drinks are not designed to where they are, allow it where our guests stay longer. It is more of a fun drink, so it is part of our guests spending the time while they're cooking the food so they can experience that.
Speaker Change: Sure I can I can cover the Greenside first here.
Speaker Change: Premium drinks.
Speaker Change: Is not the drinks that perhaps one experience is going to a high end Steakhouse E.
Speaker Change: These premium Green, we're working with Coca Cola and our other vendors where their cocktails Korean cocktails.
Speaker Change: The premium drinks are not.
Speaker Change: Designed to wear it.
Speaker Change: Where our guest stays longer it is a it is more of a fun drink.
Speaker Change: So it is part of our guest spending that time, while they're cooking the food that they can experience that so it won't it will not come in the drinks won't come with let's say a martini glass.
David Kim: So it won't it won't come in the drinks won't come in let's say a martini glass where it's fancy. That's not the premium drinks that we're thinking of. It's another way of creating new drink experiences that will not hinder the table trend. The second question, Tom, perhaps you can answer that.
Speaker Change: It's fancy that's not the premium screens that were thinking of it's another way of creating new drinking experience that will not hinder the table turn.
Speaker Change: The second question, Tom perhaps you can answer that.
Tom Kroll: We don't I don't think we still have clear numbers in terms of the guest check average because, [inaudible] The numbers we're getting still, we still need a lot more training to be done with our staff to suggest our premium needs. It's not consistent; a store will do very well in terms of percentage of sales. One store needs help with that, so it's still very fluid, but one thing is a fact; we're not gonna go off this premium menu. This will be a permanent offering going forward for GEN.
Speaker Change: We don't I don't think we still have a clear numbers and in terms of the guest check average because.
Speaker Change: B.
Speaker Change: The numbers, we're getting still we still need a lot more training to be done with our staff.
Speaker Change: Suggests to premium needs, it's not consistent one.
Speaker Change: Star will do very well in percentage of failed one store needs help in that so it's still.
Speaker Change: Very fluid, but one thing is the fact, we're not gonna go off this premium menu this will be a permanent offering going forward for that.
Todd Brooks: And Todd I would just add that we will have more information in the coming quarters. You know, we've really just had a month under our belt and we're building on our database.
Tom Kroll: And, Todd, I would just add that we'll have more information in the coming quarters. You know, we've really just had a month under our belts, and we're building on our database. But we are seeing an uptick, but we'll report that back in the future as we get more information.
Todd Brooks: But we are seeing an uptick, but we'll report that back in the future as we get more information.
David Kim: Okay, great. Thanks to you both.
Hello, and thanks to you both.
David Kim: Thank you. Thank you.
Speaker Change: Thank you. Thank you.
Operator: The next question is from George Kelly with Roth Capital Partners. Please go ahead.
Speaker Change: The next question is from George Kelly with Roth Capital Partners. Please go ahead.
Speaker Change: Hey, everyone. Thanks for taking my questions.
George Kelly: Hey, everyone. Thanks for taking my question. So maybe to start, hey Tom, just a quick follow-up on the last question that you guys just responded to. Tom, did you say in the prepared remarks, though, that comps, did you say, I forget, was the line that they approached breakeven or, like, could you be more specific, I guess, on what comps were in March and in April?
Tom: So be sure to start Hey, Tom just a quick follow up on the last question that you guys. Just responded to you Tom.
Tom: Tom did you say in the prepared remarks, though that comps did you say I forget was the line that they approached breakeven or like what could you be more specific I guess on what Comscore in March and in April.
Tom: Yeah.
Tom Kroll: Yeah, the comps in March and April were better than January and February. So, you know, as the whole industry has been down by much larger percentages; if you remember, in the fourth quarter, we were down 1.7 percent compared to the prior year. In the first quarter, we ended up at 1.8 percent. It was more than that in January and February, and we closed the gap in the month of March, and then we kept that closed gap in the month of April. So, you know, we've been closer to zero in the last March and April.
Tom: Yeah.
Tom: Comps in March and April were better than January and February so.
Speaker Change: You know as the whole industry has been down by.
Much larger percentages, we if you remember in the fourth quarter, we were down one 7% for the prior year in the first quarter, we ended up at one 8%.
Speaker Change: Was more than that in January and February and we closed the gap in the month of March and then we kept that to close the gap in the month of April so.
Speaker Change: You know we've been we've been close more closer to.
Speaker Change: Zero.
Speaker Change: And the last March and April.
David Kim: Okay, that's helpful. And then a couple of questions on your openings planned for this year. I think it's the five that you mentioned. I'm curious if you could fill us in on where those are and what the cadence of the openings is throughout the year. And then also, I was a little unclear, David, I think you said something about 20 to 30 by year-end 26, and I was just not quite sure, is that sort of cumulatively between now and year-end 26, or was there something about that fiscal year that you were trying to hint at?
Okay. That's helpful and then a couple of questions on your openings.
Speaker Change: Plans for this year I think it's five that you mentioned.
Speaker Change: I'm curious if you could.
Speaker Change: Silicon on where those are and what what the cadence of the openings is a threat to here and there.
Speaker Change: Then also I was a little unclear David I think you said something about 20 to 35 by year end 'twenty six and I was just not quite sure what is that sort of cumulatively between now and Youre in 'twenty six or was there something about.
Speaker Change: That fiscal year that you were trying to hit that.
David Kim: Okay, so when we announced that we would, for the year 2024, we would finish 8 to 9, correct? So we have open three right now, and we have five under construction, and if you add the one that we purchased in Hawaii, that should get us up to that nine number. We have additional, we announced additional. 10 anywhere in lease or lease negotiations.
Speaker Change: So.
Speaker Change: When we announced that we would for the year 2024, we will finish a eight to nine correct. So we are we have we have opened three right now and we have five under construction.
Speaker Change: And.
Speaker Change: The one that we purchased are in Hawaii that should get us up to that nine number.
Speaker Change: We have additional we announced additional.
10 anywhere in lease or lease negotiations, but we wanted to be conservative we actually have a lot more.
David Kim: But we wanted to be conservative. We actually have a lot more. But we did not want to press on but to execute and then tell the street that we are able to execute.
But we.
Speaker Change: Did not want to.
Speaker Change: Pressed upon.
Speaker Change: But to execute and then tell the street that we are able to execute so the addition of it is actually an additional golar going all the way to 26.
David Kim: So it is actually an additional going all the way to 26. As the quarters go by, as we close more deals and sign more deals, we'll get a better picture of how 26 is going to look. At this point, our 25s are basically filled up, and there's a lot; there's another doubling of floats we have that we think we can announce, probably next quarter or the following quarter. So the numbers are very fluid, but more in the larger numbers than what we have disclosed today.
Speaker Change: As the quarters go by as we close more deals and sign more deals, we'll get a better picture of how 26 is going to look.
Speaker Change: At this point or 20 fives are basically filled up and there was a lot in there is another doubling.
Speaker Change: Once we have that we think we can announce.
Speaker Change: Probably next quarter or in a falling quarter.
Speaker Change: The numbers are very fluid, but more in the larger number than what we have disclosed today.
Speaker Change: Okay. Thank you and maybe I'll just ask one more still on openings you commented that the two.
Operator: Okay. Thank you.
George Kelly: And maybe I'll just ask one more. Still on openings, you commented that the two or, I guess, three that you've opened so far this year have performed well versus your targets. I was just curious, what is it, is there something that you would attribute that to, whether it's maybe good locations or good marketing or anything else? And then can you quantify what a good opening is versus your targets? I was just curious if, you know, could you give us an AUV or any kind of more quantification around it. And that's all I had. Thank you.
Speaker Change: I guess three that you've opened so far this year has performed 12 versus your targets I was just curious what like what what is is there something that you would attribute that too whether it's maybe you could locations are good marketing or anything else and then.
Speaker Change: Can you quantify what a good opening is versus your targets I was just curious if you know could you given a UV years any kind of more quantification around it and that's all I had thank you.
Speaker Change: Okay.
Speaker Change:
Speaker Change: Let's try it this way.
David Kim: OK. Um... Let's try it this way. We have restaurants that opened on average versus this particular one that we opened. We don't want to disclose due to perhaps maybe competitors out there, but we had one restaurant that we opened which probably was our number two, in terms of new restaurant openings, in terms of sales. So, you know, our brand is very well-known throughout the country, and by the way, this location was a new market.
Speaker Change: We have restaurants that opened in average versus this particular, one that we opened we don't want to disclose due to perhaps maybe competitors are out there, but we had one restaurant that we opened.
Probably.
Speaker Change: Well its hard number who.
Speaker Change: In terms of our new restaurant openings in terms of sales.
Speaker Change: So you.
Speaker Change: You know our brand is very well known throughout the country.
Speaker Change: And by the way.
Speaker Change: Location, there was a new market.
David Kim: So we know that our brand crosses very well outside of our core market, which we started in California. So just prove that our younger generation customer base is able to communicate our message and our value, and our products very well, which travels in terms of how people communicate amongst themselves, promoting who we are as GEN. So it's the same promotion that we do. We still don't have a marketing department. These are all organically grown.
Speaker Change: So.
Speaker Change: We know that our brand crosses very well outside of our core market, which we started in California. So just who that are younger generation customer base are able to communicate.
Speaker Change: Our message and our.
Products, very well, which travels in terms of how people communicate amongst themselves promoting who we are as Chad.
Speaker Change: So it's the same promotion than we do we still know.
Speaker Change: We have a marketing department all organically grown.
David Kim: And we've been very fortunate and very blessed, but... it all comes down to how we execute. Execution is everything to what we do. We have a lot that we still need to improve on, but we think that our management team is doing a really good job executing the openings of these restaurants. It's a lot of pressure opening new restaurants because sometimes in new markets, we don't have the staffing; we have to send management to open these.
Speaker Change: And we we we've been very fortunate and Theyre very blessed but.
Speaker Change: All comes down to.
Speaker Change: How we execute.
Speaker Change: Execution is everything to what we do.
Speaker Change: We have a lot that we still need to improve on.
Speaker Change: We think that our management team is doing a really good job executing the openings of these restaurants, it's a lot of pressure opening new restaurants, because of sometimes the new markets. We don't have the staffing we have to spend management.
Speaker Change: They opened dean so there's a lot of moving pieces that get behind the new openings.
David Kim: So there's a lot of moving pieces that go behind the new openings. When I said it could have, it is like the number two store opening in terms of sales volume with our previous restaurants, it means that it means a lot in terms of how well we are doing.
Speaker Change: No.
Speaker Change: When I when I when I said it kind of it is like the number two store opening in terms of sales volume.
Speaker Change: With our previous restaurant it means that it means a lot in terms of how well we are doing right now.
Speaker Change: Thank you.
Speaker Change: The next question is from C. J D Polina with Craig Hallum. Please go ahead.
Operator: The next question is from C.J. DiPellino with Craig Hallam. Please go ahead.
Speaker Change: Hi, guys. It's C J on freight Jeremy Hamblin.
C.J. DiPellino: Hi guys. It's CJ on for Jeremy Hamblin tonight.
David Kim: Hello. Thanks for taking my questions. I was wondering if you guys could comment on any sort of uplift that you might be seeing from the FAST Act being implemented in California. I know a lot of other QSRs had to raise menu prices in response to the wage increases, so I would think that kind of enhances your value proposition. So I know you're still early on, but we're curious if that's resulted in better traffic.
Speaker Change: Hello, Thanks for thanks for taking my questions. Just wanted to see if you guys could comment on any sort of uplift that you might be seeing from the fast act being implemented in California, No a lot of other <unk> had to raised menu prices to in response to the wage increases. So I would think that kind of enhances your value proposition.
Speaker Change: So I know you're still early on but curious if that has resulted in better traffic.
Speaker Change: Yeah.
Speaker Change: In my opinion.
David Kim: In my opinion, not just the increase in labor costs going up, but they're headwinds with the public. So, we've always maintained our position that we are a value-driven company.
Speaker Change: Not just the increase of labor cost going up it there there are headwinds with the public so we.
Speaker Change: We've always maintained our position that we are value driven concept.
David Kim: We might raise a price here and there in different locations, but we did not raise our prices. And when we were perhaps challenged in the past to say, "How come we're not raising prices enough?", And can we sustain this margin with an increase in labor costs? Yes, we deal with those issues, but we did not raise our prices. We made better decisions on labor control, and we think we can continuously maintain it, even under the pressure of an increased labor cost, by continuously finding ways to be more efficient. And we don't want to be outpriced, uh... in the market when, in my humble opinion, consumers, because of many reasons, including inflation, they're hurt.
Speaker Change: We might raise a price here and there and location, but we.
Speaker Change: We did not raise our prices and when we were perhaps challenged in the past to say how come we're not raising prices or not.
Speaker Change: Can we sustain this.
Margin with an increase of the labor cost, yes, we deal with those issues, but we did not raise our prices we made better.
Speaker Change: On labor control.
Speaker Change: And we think we can continue to really maintain even under the pressure of increased labor costs.
Speaker Change: By continuously finding ways to be more efficient.
Speaker Change: And we don't want to be out price.
Speaker Change: In the market when we all know in.
Speaker Change: In my humble opinion that the.
Speaker Change: The consumers because of many reasons, including an equation there hurt we hear that with restaurant companies that are shutting down retail companies like 99 cents places shutting down.
David Kim: We hear that with restaurant companies that are shutting down, retail companies like 99 Cent Places shutting down. So, we just maintain that we want to continuously provide value, continuously find efficiencies to combat those external pressures that a lot of restaurant companies are experiencing, especially on the labor side.
C.J. DiPellino: Okay, got it. Thank you. That's helpful. And then one more, if you don't mind.
Speaker Change: No.
Speaker Change: We just maintain that we want to continuously provide the value.
Speaker Change: Fine.
Speaker Change: And that those external pressures that a lot of.
Speaker Change: Restaurant companies are getting especially the labor side.
Speaker Change: Okay.
Speaker Change: Okay got it. Thank you that's helpful and then not one more if you don't mind I'm sorry.
C.J. DiPellino: Sorry if I missed the beginning of the call, but I'm curious to hear about lead times for new openings. I think previously you said it takes 11 months to a year. Have you seen that come in at all, and have you seen the price of new builds come in at all as you're..., you know, progressing through the pipeline?
Speaker Change: Sorry, if I missed at the beginning of the call, but I'm curious.
Speaker Change: Do you hear about lead times for new openings.
Speaker Change: Previously you said it takes 11 months to a year have you seen that coming at all.
Speaker Change: Have you seen the price of new builds come in at all this year.
Speaker Change: Progressing through the pipeline.
David Kim: It is all over the map, depending on which state, which city. We've seen some improvements, very few improvements with cities, but we've seen improvements with our contractors, and with the build-out of the team that we have. We are shrinking the build-out time by at least a half a month, and we're finding more ways to get the cost down. So we're not just depending on whether the municipalities will change their behavior. Some have, but it's a very small number.
Speaker Change: It is all over the map, depending on which state which city.
Speaker Change: Seen some improvements.
Ray little improvements with city, but we've seen.
Speaker Change: Improvements with our contractors.
Speaker Change: With the build out of the team that we have.
Speaker Change: We are shrinking the buildout time by.
Speaker Change: By at least a half a month and we're finding more ways to get the cost down. So we're not just depending on whether the municipalities will change their behaviors are some have but it's a very small amount. So therefore.
David Kim: So therefore, we have to put a lot more locations under contract so that we're not tied to and dependent on the outcome of how the city will give us our permits. The key is this, once we get our governmental permits to start construction, we're in full control of when these restaurants can complete their construction and open.
Speaker Change: We have to put a lot more locations under contract.
Speaker Change: So with that we are not tied to and be dependent on the outcome of how the city will give us our permit.
Speaker Change: He has this once we get our governmental permits to start construction.
Speaker Change: We're in full control of when these restaurants can complete their construction and open.
C.J. DiPellino: Okay, thank you. I'll hop back in the queue. Good luck with the rest of you guys. Thank you. This concludes our question and answer session.
Speaker Change: Okay. Thank you I'll hop back in the queue. Good luck with the rest of you guys.
Speaker Change: Thank you.
Speaker Change: This concludes our question and answer session I would like to turn the conference back over to David Kim for any closing remarks.
David Kim: This concludes our question and answer session. I would like to turn the conference back over to David Kim for any closing remarks.
Speaker Change: Yeah.
Speaker Change: Michigan.
David Kim: Oh, thank you very much for being at this conference. If there's any questions, you're welcome to reach us, and thank you for believing in what we do. Thank you. The conference is now concluded.
David Kim: Oh, Thank you very much for being on this conference.
Speaker Change: If there was any question Youre welcome to reach Us and thank you for believing in what we do thank you.
Speaker Change: The conference has now concluded.
Speaker Change: Excuse me.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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