Q3 2024 The ONE Group Hospitality Inc Earnings Call
H.M. We'll.
There is no segment that could beat this volume of music. There is only one Canadiancık. It's all over the place.
This film was made possible by a grant from the American Academy of Motion Picture Arts and Sciences. This film was made possible by a grant from the American Academy of Motion Picture Arts and Sciences.
Gene Israel We Love You
Speaker Change: Greetings and welcome to the One Group Third Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star, then zero on your telephone keypad.
Speaker Change: A brief question and answers session will follow the formal presentation. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2. As a reminder, this conference is being recorded. I would now like to turn the conference over to Tyler Loy.
Tyler Loy: Chief Financial Officer, The One Group Hospitality, Inc. Please go ahead.
Tyler Loy: Thank you, Operator, and hello, everyone. Before we begin our formal remarks, let me remind you that part of our discussion today will include four looking statements.
Tyler Loy: These forward-looking statements are not guarantees of future performance and you should not place undue reliance on them.
Tyler Loy: These statements are also subject to numerous risk and uncertainty that could cause actual results to differ materially from what we expect.
Tyler Loy: Please also know that these forward-looking statements reflect our opinion only as of the date of this call. We undertake no obligation to revise or publicly release any revisions of these forward-looking statements in light of new information or future events.
Tyler Loy: We refer you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating and financial conditions.
Tyler Loy: During today's call, we will discuss certain non-GAAP financial measures which we believe can be useful in evaluating our performance.
Tyler Loy: However, the presentation of these measures or other information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP.
Tyler Loy: For reconciliations of these measures, such as adjusted EBITDA, adjusted net income, restaurant operating profit, comparable sales, and total food and beverage sales at owned and managed licensed and franchised units, the GAAP measures.
Speaker Change: Along with a discussion of why we consider these measures useful, police care earns the least issue today. With that, I'd like to turn the call over to Manny Hilario.
Manny Hilario: Thank you, Tyler, and hello everyone. Thank you all for joining us today and for your continued interest in the One Group.
Let me begin by recognizing our amazing team members.
their unwavering commitment to our mission.
Manny Hilario: creating great guest memories through exceptional and unforgettable experiences to every guest every time is what gives me confidence in our vision of becoming the global leader in vibe dining.
This is the first call we've been able to report.
Manny Hilario: A full quarter's results for our recent acquisition of Benihana and Rasushi.
Manny Hilario: And we are excited by the combined potential of our platform of exciting vibe and experiential-centric dining brands.
Manny Hilario: Let me start by sharing some highlights for the third quarter.
Manny Hilario: First, with a full quarter of Benihana and Rasushi, we increased our revenues by $117 million, or 152%, to a record $194 million.
Manny Hilario: Secondly, and equally important, we increased our restaurant operating profit by 90 basis points, driven by robust restaurant level margins of 17% at Benihana.
Manny Hilario: which improved 20 basis points versus their proforma prior performance and tight cost management at our pre-existing businesses.
Manny Hilario: Next, during the second quarter update we discussed the nine million dollars in run rate savings related to duplicate support costs.
Manny Hilario: Since then, we have implemented an additional $10 million in annualized run rate synergies, and we've already begun to see their impact on the Benihana or Western level margins.
Manny Hilario: And finally, we finished the third quarter with over $70 million in resources between cash on hand, short-term credit receivables, and revolver availability, which is currently undrawn.
Manny Hilario: Looking ahead, our key strategic priorities for the balance of the year remain. First.
Manny Hilario: A focus on driving sales at all of our brands through the execution of our strategic pillars.
Manny Hilario: Like others in the fine dining category, we're experiencing a dynamic environment driven by macro headwinds and consumer uncertainty.
Manny Hilario: As you look around the restaurant landscape, from all-you-can-eat to all-day happy hours, the industry is chasing traffic through deep discounting and promotional activity.
Manny Hilario: Yes, our mission continues to be to create great guest experiences and memories by operating the best restaurants in all of our markets and delivering exceptional and unforgettable guest experiences to every guest every time.
Manny Hilario: We do that through our focus on our three strategic pillars of operations, marketing and culinary.
Manny Hilario: We continue to see robust demand on Fridays and Saturdays across all of our brands.
Manny Hilario: And we are focused on maximizing reservations, turn times, and throughput during our peak days and peak hours.
Manny Hilario: In addition, we continue to emphasize local store outreach to ensure we are top of mind with concierges.
Hotels and businesses in the four block radius.
Manny Hilario: around each of our restaurants to drive business dinners, happy hours, borrow lunches, weekend brunches, and late-night visits across our portfolio brands.
Manny Hilario: We know we're executing at a high level as we continue to see some of the highest gas satisfaction metrics across all of our restaurants.
Manny Hilario: From a marketing perspective, we are leveraging our digital marketing capabilities.
Manny Hilario: an ever-growing digital database to drive one of our many everyday value messages such as $3
Manny Hilario: $6 and $9 happy hour, which has also been launched at Benihana and Rasushi.
Manny Hilario: Customer loyalty continues to be a key focus of ours and in the coming quarters we will roll out a loyalty program across all brands with a special emphasis on birthday celebrations and personalized rewards for all our guests special occasions.
Manny Hilario: This enhanced approach to customer appreciation marks a significant evolution in our retention strategy as we know our guests love to celebrate with our brands.
Manny Hilario: And we plan to convert those guests who may come to our restaurants once or twice a year to more frequent visitors.
Manny Hilario: Moving on to culinary, we continue to be extremely focused on culinary innovation and enhancing the guest experience.
Manny Hilario: For example, at Benihana Restaurants, we rolled out our Waigoo program for guests seeking a premium offering and the early read is very positive.
Manny Hilario: We believe there is tremendous upside for many innovations at Nihana, and we have only just begun.
Manny Hilario: We are excited about our exceptional lineup of holiday and seasonal menu offerings as our venues truly come alive during the holiday season.
Manny Hilario: Our second key priority is the successful integration of Benihana and Rasushi and delivering on our cost initiatives.
Manny Hilario: We've made significant strides in achieving our post-acquisition synergies target, and we begin to see the impact this quarter on the Benihana restaurant-level margins.
Manny Hilario: We are nearing $19 million in run rate synergies across both restaurant level and support costs by eliminating duplicate costs and achieving improved pricing through contract consolidations.
Manny Hilario: areas we've seen significant progress and plan to deliver at least twenty million dollars in annual synergies
Manny Hilario: Eliminate duplicate headcounts. Eliminate duplicate professional services. Capturing insurance synergies. Leverage broad line purchasing and improve commodities and operating supply costs.
Manny Hilario: As part of the Kona Grill and RAS Sushi integration, we have evaluated our portfolio of existing restaurants with the goal to optimize overall performance.
Manny Hilario: After careful consideration, in October, we closed four raw sushi locations, three of which are in markets with existing Kona grills.
Manny Hilario: We expect to retain a substantial amount of the delivery and takeout business for these restaurants generated through our nearby Guna Grove locations, supporting improved margins in our growth concepts.
Manny Hilario: In addition to the closures, we are working on a number of sales driving and operating efficiency initiatives at Kona Grow.
Manny Hilario: For example, we are testing Benihana virtual takeout and delivery in markets where Benihana is currently not present.
And the early results are very encouraging.
Manny Hilario: We're also streamlining hours of operations in order to maximize staffing or revenue during our peak hours and reduce shoulder period hours in order to capture labor efficiencies.
Manny Hilario: Above and beyond cost savings, we have overlaid our strategic pillars of operations, marketing, and culinary to the Benihana and Raw Sushi brands.
Manny Hilario: We are leveraging our logistics, reservations, digital marketing, and culinary core competencies to drive sales and performance at Benihana and Rasushi.
Manny Hilario: In addition, from a restaurant support perspective, we have integrated human resources, payroll, financial reporting, development, and many other internal systems and processes.
Manny Hilario: Thirdly, we are focused on our next phase of growth, balancing company-owned development and asset-led growth.
Manny Hilario: We plan to open six new venues by the end of 2024, consisting of five company-owned restaurants, two SDKs, one point of grill, one raw sushi, and one soft-to-water social. In addition, we also plan to open one managed SDK.
Manny Hilario: In September, we opened our first Corner Brewery in Oregon in the City of Tigard at Bridgeport Village.
Manny Hilario: Then in October, we opened an SDK in Aventura, our third SDK in the state of Florida.
Manny Hilario: Today we open our new concept, Southwater Social in Denver, Colorado, within the Cherry Creek neighborhood.
Manny Hilario: With Self Water Social, we are combining the best-in-class experience and a matched atmosphere of SDK in a refreshed setting that places a focus on the delectable cream and seafood offerings.
Manny Hilario: Moving forward, we plan to open five to six company-owned restaurants annually, and we'll balance this with asset-wide growth of managed and licensed SDKs on the growth and franchise Benihana's.
Manny Hilario: In addition, we will continue to explore opportunities for Benihana and stadium concessions, where we have five locations, and we plan to grow the retail grocery business.
Manny Hilario: We finished the quarter with over $70 million in liquid resources when combining our cash on hand, short-term credit card receivables, and the availability under the revolving credit facility, which remains undrawn.
Manny Hilario: Under the current conditions, a term loan is not subject to any financial covenant.
Manny Hilario: This quarter, we returned approximately $2.3 million to shareholders through share repurchases, and we will continue to evaluate opportunistic share repurchases under our Ready Board Authorized Program.
Manny Hilario: We are laser-focused on our balance sheet and are prioritizing cash flow generation, balance sheet flexibility, and maximizing shareholder returns.
Manny Hilario: Our strong free cash flow generation combined with our disciplined pipeline of new locations, proven unit economics, and our asset-light strategies provide us with multiple avenues for growth.
Manny Hilario: We are excited for the future and we will remain focused on executing our strategy and creating long-term shareholder value.
I will now turn the call over to Tyler.
Tyler Loy: Thank you, Manny. Let me start by discussing our third quarter financials in greater detail.
Tyler Loy: Please note the prior quarter includes any contribution from the recent acquisition of Benihana, which closed on May 1, 2024. The third quarter of 2024 has three months of contributions from Benihana and Raw Sushi.
Tyler Loy: Total consolidated GAAP revenues were $194 million, increasing 152.3% from the $76.9 million for the same quarter of last year.
Tyler Loy: Included in our total revenues is our own restaurant net revenue of $190.6 million, which increased 158.6% from $73.7 million for the same quarter last year.
Tyler Loy: The increase was due primarily to $119.4 million in contributions from Benihana and Roth's issue.
Tyler Loy: The increase was also attributable to the opening of six SBK and Cone Grill restaurants since October 2023.
Tyler Loy: Comparable sales decreased 4.2% at Benihana, 11.1% at SBK, and 70% at Arboreal Concepts.
Tyler Loy: Management license and incentive fee revenues increased 6.4% to $3.4 million for the three months of September 30th, 2024, from $3.2 million for the three months of September 30th, 2023.
Tyler Loy: Benihana Franchise Restaurants contributed $0.7 million in revenues during the third quarter of 2024.
Tyler Loy: Owned restaurant cost of sales as a percentage of owned restaurant net revenue increased 380 basis points to 20.9% in the third quarter of 2024 compared to 24.7% in the prior year.
Tyler Loy: This was primarily due to operational cost reduction initiatives, product mix management, and pricing that was partially offset by cost inflation.
Tyler Loy: Owned restaurant operating expenses as a percentage of owned restaurant net revenue increased 300 basis points to 65.9%.
Tyler Loy: In the third quarter of 2024, from 62.9% in the third quarter of 2023, due to cost inflation and fixed operating costs, partially offset by the Operational Cost Reduction Initiative and pricing at S&P and Kona Groves.
Tyler Loy: This also includes the addition of Benihana and Rasushi, which contributed positively to operating expenses as a percentage of revenue.
Tyler Loy: Restaurant operating profit increased 90 basis points to 13.2% for the third quarter of 2024 compared to 12.3% in the third quarter of 2023. This includes restaurant operating profit of 70% at any time.
Tyler Loy: On a total reported basis, general administrative costs increased $5.5 million, or 75.6%, to $12.8 million in the third quarter of 2024, from $7.3 million in the third quarter of 2023.
Tyler Loy: When adjusting for stock-based compensation, adjusted general and administrative expenses were $11.2 million and $6 million in the third quarter of 2024 and 2023, respectively.
Tyler Loy: As a percentage of revenues, adjusted general and administrative costs improved 210 basis points to 5.8% compared to 7.9%.
Tyler Loy: The improvement is due to the sales leverage realized with the Benihana acquisition.
Tyler Loy: Depreciation and amortization expense was $9.4 million in the third quarter of 2024 compared to $3.7 million in the third quarter of 2023.
Tyler Loy: The increase was primarily related to depreciation and amortization for the Benihana and Ross issue restaurant depreciation associated with the opening of six new owned venues since October 2023
Tyler Loy: and Capital Expenditures to Maintain and Enhance the Guest Experience in Our Restaurants.
Tyler Loy: Pre-opening expenses were $2.1 million compared to $3.1 million in the prior year.
Tyler Loy: We incurred non-recurring costs totaling $7.1 million in the third quarter of 2024, consisting of transaction and exit costs of $0.9 million and transition and integration costs of $6.3 million, both related to the acquisition of Benihana.
Tyler Loy: Interest expense was $10.7 million in the third quarter of 2024 compared to $1.7 million in the third quarter of 2023.
Tyler Loy: Benefit in the provision for income taxes was $4.6 million in the third quarter of 2024, compared to a benefit of $375,000 in the third quarter of 2023.
Tyler Loy: Net loss available to common stockholders was $16 million or $0.52 net loss per share.
Tyler Loy: compared to net loss available to common stockholders of $3.1 million in the third quarter of 2023.
Tyler Loy: Adjusted net loss available to common stockholders was $9.4 million or $0.30 adjusted net loss per share compared to an adjusted net loss available in common stockholders of $3 million in the third quarter of 2023 or $0.09 adjusted net loss per share.
Tyler Loy: Adjusted EBITDA for the third quarter attributable to One Group Hospitality Inc. was $14.9 million compared to $3.1 million in the third quarter of 2023.
Tyler Loy: Please note, in the third quarter, we have updated our definition of adjusted EBITDA to no longer adjust for pre-opening expenses.
Tyler Loy: Under the previous definition, Adjustment Visa Debt would have been $17 million versus $6.2 million in the third quarter of the prior year.
Tyler Loy: We've included a reconciliation of adjusted EBITDA, historical adjusted EBITDA, and adjusted net income in the tables in our third quarter 2024 earnings release.
Tyler Loy: During the third quarter, we spent $2.3 million on a purchase of 0.6 million shares.
Tyler Loy: Turning to liquidity, we finished the quarter with $36.2 million in cash and short-term credit card receivables, and $34.1 million available under our revolving credit facility, which remains undrawn.
Tyler Loy: Under the current conditions, our term loan does not have any financial covenants.
Tyler Loy: Now I would like to provide some forward-looking commentary regarding our business.
Tyler Loy: This commentary is subject to risk and uncertainty associated with forward-looking statements, as discussed in our SEC filing.
Tyler Loy: We, as always, remind our investors the actual number and timing of new restaurant openings for any given period.
Tyler Loy: It's up to a number of factors outside the company's control including macroeconomic conditions
Tyler Loy: weather, and factors under the control of landlords, contractors, licensees, and regulatory and licensing authorities. As we entered the back half of the year, we anticipated improving same store sales trends for the third and fourth quarter based on previous year's comparison and less consumer uncertainty.
Tyler Loy: Based on our third quarter results, the information available now, and the expectations as of today, we are updating our 2024 target.
Tyler Loy: The targets include projections for Benihana from May 1st, the date of the acquisition.
Tyler Loy: Until the end of the year, excluding discussions regarding run rate performance. For calculations of run rate measures, please refer back to our press release that was issued today.
Tyler Loy: Beginning with revenues, we project total GAAP revenues of between $660M and $680M.
Tyler Loy: which reflects our anticipation of consolidated same-store sales for the fourth quarter of minus four to minus eight percent.
Tyler Loy: On a run rate basis, we project total gap revenues of $845 to $865 million.
Tyler Loy: Total owned operating expenses as a percentage of owned restaurant net revenue of 83% to 83.6%.
total gna excluding stock-based compensation of approximately 39 million
Adjusted EBITDA of between $71 and $76 million.
Tyler Loy: On a run rate basis, we project total adjusted EBITDA of $111 to $116 million.
Justin Ibida excluding pre-opening expenses between $80 and $85 million.
Speaker Change: On a run rate basis, we project total adjusted feedback excluding pre-opening of $120 million to $125 million.
Speaker Change: Restaurant pre-opening expenses of between $8 and $9 million, an effective income tax rate of approximately 30%.
Speaker Change: Total capital expenditures, net of allowances received from landlords of between $50 to $60 million.
Speaker Change: And finally, we plan to add six new venues in 2024. I will now turn the call back to Manny.
Manny Hilario: Thank you, Tyler, and thank you all for your time today and interest in the one group.
Manny Hilario: While we are facing macro headwinds in the short term, we remain confident in our solid portfolio of high-volume iconic brands and long-term vision to be the undisputed global leader in vibe dining.
Manny Hilario: We are entering an exciting phase in our company's journey, and we appreciate your continued support.
Speaker Change: Tyler and I would be happy to answer any questions that you may have, operator.
Speaker Change: We will now begin the question and answer session. To ask a question you may press star then 1 on your telephone keypad.
Speaker Change: If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster.
Speaker Change: The first question comes from Mark Smith with Lake Street Capital. Please go ahead.
Mark Smith: Hi guys, I wanted to hit first just update on the industry, kind of how things are going and kind of how to battle these.
these negative comp trends.
Mark Smith: Yeah, thanks Mark. So, I mean more direct competitors. We're seeing all-day happy hour. I think that's become a big
Speaker Change: promotion for some of our competitors they're offering you know highly you know discount items all day so that's been one of them on the casual dine it seems to be everything we got you know you know a lot of endless pasta bowls and we have the burgers at Chili
We have a lot of price point competition there.
Speaker Change: So I think that's kind of what we've been seeing. And of course then as you go lower on the scale of QSR and everything else, obviously you guys know about all the super heavy discounting there. So everybody is putting out their very hot price points.
Speaker Change: Our response to it has been, we obviously do happy hour, we've always done happy hour, so we're competing with happy hour doing the regular hours, you know, three to six.
Speaker Change: And so that's been one of the things that we've been competing with. The second thing that we've been competing with has been, you know, we offer $39 dinners at Kona Grill and we offer $69 dinners.
Speaker Change: at SDK every day and those come with beverage so we think that's a pretty compelling price point but we've been doing that on an ongoing basis now for a while so that's our
Speaker Change: Hock Price there, if you will, in terms of there and then we've also
Speaker Change: Launched at Kona Grill, all we can eat sushi on Sunday nights, and that's a pretty compelling promotion.
Speaker Change: and we're starting to see some traction on that as well right now. So those are the majority of what we've been doing. And then, of course, as we discussed in our.
Speaker Change: prepared statements. We're looking at loyalty. We think loyalty is a big play right now. I think if you look at Cheesecake Factory, for instance, that's an example of someone who's
Speaker Change: I've been going heavy on the loyalty side. So our job here is to stay in the value sector, but not getting to the heavy discounting sector because
Speaker Change: One of your other questions is what we're seeing on the economy. I think we've started to see
Speaker Change: a little bit of a bottom of the trends. We're starting to see a stabilization on that. And then if you look at some of our concepts, I think Tyler quoted this on there. We're actually doing very well on traffic.
Speaker Change: with our Everyday Value Strategy. So again, I think, you know, a little bit of that, you know, the trend now, I think it's starting to bottom out. As a matter of fact, you probably saw that on our guidance. We guided to minus 8 to minus 4 for the fourth quarter. We're coming out of a negative 8-8.
Speaker Change: I think our guidance kind of implies that we're starting to see a bottom on the trends.
Speaker Change: Okay, and then on the development front, it seems like we've had some delays. Can you just talk about kind of permitting the construction process, anything that may be causing some delays as you try to get some of these restaurants open?
Speaker Change: Yeah, I mean, I think right now the timing on development is really more controlled.
Speaker Change: by the fact, as we mentioned on our prepared statements, you know, we want to get more to the asset-wide growth side of development. And so we're keeping pace with, you know, company-owned restaurants. I think we mentioned six in our—
Speaker Change: in our communication, so we're keeping it at that pace. As a matter of fact, we have opened three restaurants.
Speaker Change: In the last 60 days, so you know, so it's really more about pacing them
Speaker Change: At a pace that we feel comfortable with and and and again, we've been spending a lot more time
Speaker Change: Excel app and then we're also opening up our next management
Speaker Change: contract in Niagara Falls so we've been working there and we have a couple of airport deals that we're actively
Speaker Change: working on right now and then we also have some casino opportunities that we've been looking for SDK as well and more recently we've also started working on some potential license and management opportunities for
for
Speaker Change: and we really haven't seen a significant change from three to six months ago. Obviously, we've already reported that the cycles are pretty long, but we haven't seen any meaningful change from within the last 90 days.
Speaker Change: Okay and just the last one for me we had the foreclosures of raw sushi. Do you anticipate or do you see any others you know throughout your system?
Speaker Change: you may be at the end of a lease term or any potential closures on the horizon.
Speaker Change: Yeah, I mean, I think as we said on our prepared statements, I think one of the synergies and one of the benefits of having done our acquisition is that
Speaker Change: It gives us flexibility in managing the portfolio, and in this case, you know, we did have three rods that were significantly close to Kona Groyle's.
Speaker Change: the extension and if it makes sense for us to stick around. Obviously, as you know, our commitment has always been and continues to be, we do not...
Speaker Change: do negative cash flow locations, so that plays a big role into our decision and we really want to build a very successful portfolio of high volume, high margin restaurants.
So, if there's Russians that just don't meet our profitability...
Speaker Change: and our sales screens, we obviously will move on. And we also have a very robust pipeline so we do have the flexibility that we can always replace, you know, lower quality real estate with really high quality real estate. So it's just part of our ongoing.
Strategy of Managing a Portfolio Restaurant
Thank you
Speaker Change: The next question comes from Jim Solera with Stevens Inc. Please go ahead.
Speaker Change: Hey guys, good afternoon, thanks for taking our question. I wanted to maybe ask first about the sequencing throughout the the quarter because it seems like when we talked with other restaurant operators, you know, July was kind of the worst and then
Speaker Change: step up into August and then step down into September, but still kind of higher than July. So if it's possible, if you could give us like the the monthly comp breakdown and then the exit rate into 4Q.
Speaker Change: Yeah, I mean that's a great question and then I'll let Tyler add some more color on this as well, but I think the sequencing that we've been seeing is that
Speaker Change: Typically, the first month in any kind of calendar quarter has been the softest of going back to the beginning of this year. So we have seen a softening in the first month of every quarter. And then it gets progressively better by second and third month of the quarter. So we've seen a rhythm there. And then the other thing that we've seen...
Speaker Change: and probably a little bit more predominantly is that the first...
Speaker Change: of every calendar month seems to be softer than week two, three, and four. So there's a progression where.
Speaker Change: We're seeing softer than getting to better. Obviously, we think that's part of it. It has to do with the fact that people pay rent, and there's a lot of things that are due at the end of the month, and I think Tyler can add some color on that. Tyler, why don't you do a little bit more on that? What do you think you're seeing there?
Tyler Loy: Yeah, Jim, so I think that the commentary that you had on the cadence...
Tyler Loy: throughout the third quarter I think that we saw exactly the same trend which was a pretty choppy July followed by an August that was
Tyler Loy: You know, I think much better in terms of trend and then a little bit worse in September. So.
Tyler Loy: So, you know, nothing different from our end there. And I think in terms of the exit out of the quarter, you know, our, our guidance and kind of, you know, implying on the 4th quarter, kind of that negative eight to negative four.
Tyler Loy: We finished at, you know, minus 8.8 for the third quarter and was guided.
Emanuel Hilario, Tyler Loy
Tyler Loy: and just in general how we've seen the progression in the last couple weeks in terms of same-store sales. So we think that you know as our guidance implies once again in the fourth quarter we think that we'll be better than we were in the third and then we'll see what goes from thereafter.
Okay, great. And, Tyler, I think you gave...
Speaker Change: I wasn't sure if that was just for STK or if that was the combined total company, but if you could...
Speaker Change: This gives kind of the composition for the 8-8 number, you know, traffic, price, and mix. And then just any trends you guys are seeing in mix as it relates to, you know, Manny talked about some of these value offerings and kind of the all-day happy hours, and just so any mixed trends you can speak to.
Speaker Change: For FTK, which is what we talked about on the call, that was negative 47 for traffic. And so mix was actually.
Speaker Change: or average chest there would have been minus six three and I got across if you blend everything together I would say that
Speaker Change: You know, probably blended traffic is in line with same source sales when you have all three of those together. So you've got average check kind of offsetting any kind of price or product mix kind of offsetting any kind of pricing.
Speaker Change: but on the average we're running about five points on on pricing right yeah for the for the brand so so the check is
Speaker Change: You know, we're getting trade downs of about exactly the same amount as the price increases. Yeah.
Speaker Change: Okay, and then maybe if I could ask one more maybe high-level question.
Speaker Change: What do you think the opportunity is for the unit growth for the non-company owned stores? just as we think about kind of a
Speaker Change: ignoring the near-term and in a more normalized environment given that you have a couple different concepts that I think play to different consumers. How do you think about the potential growth rate of the non-company-owned stores?
Speaker Change: I mean I think if we look back at our general business plan for SDK going back to how we evaluate the market we've always thought that you know over 50% of the SDK units would be owned by someone else or management or license deal so I think our addressable mark is about 200 for SDK so we think that's about you know call it you know
just for conversation purposes now.
Speaker Change: if not more there. So I think that that's how you'll see the mix.
Speaker Change: in there, so probably to make skewing more towards management license for SDK.
and kind of and the franchise growing for.
Speaker Change: For Benihana, in fairness, we are early with Benihana, so we're trying to...
Speaker Change: understand how deep that market is. We're starting to go out and
Speaker Change: and talking to people at conferences and just in general talking to
Speaker Change: People in the franchise side of the business, so we think there's an opportunity there.
Speaker Change: and some of the things that we're doing with the brand in terms of manual engineering. We'll definitely line it up so that we can have.
You know some opportunities there. We also look at the
Hibachi Teppanyaki market is very fragmented by small operators.
Speaker Change: So we think there's an opportunity there to reach out to some of the smaller operators.
Speaker Change: and bringing the power of the brand of Benihana and start utilizing that as an opportunity to drive franchising business. So, Tyler and I are super excited about that. I think we also have sports venues. We're at Yankee Stadium and we're in Phoenix and some other stadiums. And we've gotten a lot more inbound.
Speaker Change: Benihana. They are very successful in the stadiums. We also have some very strong franchisees currently in Latin America who are excited about what we're doing with the brand, so there's been a lot of interest.
Speaker Change: and more Latin America franchising. So again, as we said on our prepared comments.
You'll see us going more towards the...
Speaker Change: towards asset lights, opportunities, and frankly, a company owned will still play a big role or play a role in our development because it allows us to...
Speaker Change: Take opportunity of incredible high-quality real estate and not have to wait and give up on great real estate So it does kind of fill in whatever we can't do with that's a light
Speaker Change: I appreciate all the context guys. I'll back in the queue.
Thank you, sir.
Speaker Change: The next question comes from Nick Setian with Wedbush Securities. Please go ahead.
Thank you.
Speaker Change: It's good to see the transmedia stabilized and obviously the Q4 implied guide.
Speaker Change: is indicating potentially a little bit of an uptick. So maybe we have seen a drop in Q3. And as we kind of look out to 2025, how should we think about maybe the four-well margins across the brands? Or I guess maybe a better way to ask is, where are your targets that you're shooting for in terms of the four-well margins for the various brands?
Speaker Change: Nick, a great question. I think in 2025, as we look at it, the margins...
Speaker Change: right now we're looking at a consolidated 17 for for the company that's kind of how we've guided since somewhere around 17 we actually think there's a significant amount of upside on that one of the things that we have found out for the acquisition is just the synergies have been very clear and obvious to us so there's a lot of areas what we've picked up
Speaker Change: significant savings in operating costs and costs of goods. So I think, you know, over time, we'll see our margins climbing closer to 18 and so forth. Remembering that.
Speaker Change: We were able to improve Benihana margins on a down-sales scenario, so that tells you that we do have a really good margin.
Speaker Change: if you will, growth opportunity within the portfolio. So I think it will start seeing us getting closer to that 18 range on the consolidated margins. Obviously, which we're also doing with the grilled which is
Speaker Change: We'll have the margins because we're trying to work on the...
on the restaurant base that
Frankly, it doesn't help the overall profile of our margins.
Speaker Change: So they'll be another plus and I think generally for 2025, obviously, we don't have the crystal ball that is perfect for that. But as I said earlier.
with the stabilization a little bit of
Speaker Change: of what we see in the market is very encouraging and positive. And we also think that interest rates coming off is also a nice catalyst for our business, considering that we do cater to customers in the 75,000 household income and less. So I think that those interest rates get better and maybe credit card fees and everything else starts to.
Speaker Change: Pull back and mortgage rights. I think that really bodes a while going into 2025
Thank you very much.
Speaker Change: This concludes our question and answer session. I would like to turn the conference back over to Manny Hilario for any closing remarks.
Manny Hilario: of our teammates who work in this business. So I'm very appreciative. We're all very appreciative of that, and I look forward to seeing you all in our restrooms in the fourth quarter, and I wish you all a great holiday season. Thank you.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.