Q4 2024 Good Times Restaurants Inc Earnings Call
Good afternoon, ladies and gentlemen, and welcome to the good times restaurants, Inc. Fiscal 'twenty 'twenty four fourth quarter and year end earnings call I am periodically the Companys senior Vice President of finance and accounting.
By now everyone should have access to the company's earnings release, which is available in the investors section of the company's web site.
As a reminder, a part of today's discussion will include forward looking statements within the meaning of federal Securities laws.
These forward looking statements are not guarantees of future performance and therefore, you should not put undue reliance on them.
These statements involve known and unknown risks, which may cause the company's actual results to differ materially from results expressed or implied by the forward looking statements.
Such risks and uncertainties include among other things the market price of the Companys stock prevailing from time to time.
The nature of other investment opportunities presented to the company.
The disruption to our business from Pandemics and other public health emergencies.
The impact of staffing constraints at our restaurants.
The impact of supply chain constraints and inflation.
The uncertain nature of current restaurant development plans and the ability to implement those plans and integrate new restaurants.
Delays in developing and opening new restaurants, because of weather local permitting or other reasons.
Increased competition cost increases where ingredient shortages.
General economic and operating conditions.
Risks associated with our share repurchase program.
Risks associated with the acquisition of additional restaurants adequacy of cash flows and the cost and availability of capital or credit facility borrowings to provide liquidity.
Changes in federal state or local laws and regulations affecting our restaurants, including wage and tip credit regulations.
And other matters discussed under the risk factors section of good times annual report on Form 10-K for the fiscal year ended September 24, 2024, and other reports filed with the SEC.
During today's call, we will discuss non-GAAP 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 and reconciliation to comparable GAAP measures available in our earnings release.
Speaker Change: And now I would like to turn the call over to our Chief Executive Officer, Ryan Zink.
Ryan Zink: Thank you Carrie and thank you all for joining us today.
Ryan Zink: The fourth quarter of fiscal 2024 was an encouraging brand for bad Daddy's as we posted a strong increase in same store sales and improving margins.
Ryan Zink: Good times brand experienced some challenges is a combination of escalating beef prices and intense discounting by our competition resulted in a.
Ryan Zink: Weaker margins and our first negative same store sales quarter.
Ryan Zink: Albeit only a 10th of a percent since the second quarter of fiscal 2022.
Ryan Zink: Nevertheless, my confidence has not wavered in the good times brand throughout this call I will share the positive momentum we are building.
Ryan Zink: A year ago, we took a back to basics approach for the bad Daddy's brand and implemented a redesign some processes to improve restaurant level accountability for four wall execution.
Ryan Zink: This has included redesign standards reviews completed by the above store restaurant leaders, which beginning in fiscal 2025, we have now incorporated into the performance metrics used to determine each restaurant management teams monthly performance based compensation.
Ryan Zink: I believe these operational changes are part of the story as far improved same store sales in an environment, where only the exceptional operators have been able to report meaningfully positive sales.
Ryan Zink: Our internal mantra, that's been too indulgent excellence, reflecting the indulgent and guilty pleasure element of our brand architecture with our team's laser focus on operations excellence.
Ryan Zink: As we discussed on last quarter's call Bad Daddy's released our version of smashed Patty burgers.
Ryan Zink: At the time summer seasonal special.
Ryan Zink: The classic Slash immediately became a top five menu items as there was something completely different from the pub style second JC burgers, the bad Daddy's is otherwise known for.
Ryan Zink: After the seasonal period ended in late August the item locked merchandising that existed as a hidden item available in our restaurants until November 13th.
And the Steakhouse Smash were added to the permanent menu.
Ryan Zink: We also added the smash Patty to our create your own section of the menu and handwritten cyo pads from which our guests can choose to order from including doubles triples or even quads.
Ryan Zink: After an initial pop to number two in the mix from the pent up demand. The classic smashes again claimed its rightful place on our menu and the number four spot.
Ryan Zink: The Cys smash hit the trifecta of price cost and margin. It is a low entry price of $9 in Colorado and $8 everywhere else. It gives our guests the value without us discounting and it provides strong penny profit gives a cost of sales percentage that is lower than our average burger.
Ryan Zink: Add to that the demonstrated guest demand for this profile of Burger.
Spice continue high ranking in the sales mix.
Speaker Change: Our culinary innovation at bad Daddy's has been centered around indulgent menu items.
Speaker Change: Not intimidating Burger builds that are visually impressive on the plate and demand a hearty appetite to eat in one setting.
Speaker Change: Items feature distinct bold flavors that can give guest items, they really can't get anywhere else in casual dining.
Speaker Change: Our slash Patty platform lives up to that as the resulting fear from the aggressive smashed our arc flash supply gives the burger a flavor like no other.
Speaker Change: Further our fall and holiday promotions I've, given our guests truly unique burgers.
Speaker Change: Our fall featured Burger was bad Daddy's spill on our Bratwurst Burger that started with our house made Patty that's a combination of brought worse, Turkey at our $18 55, Angus ground beef, along with dice peppers, and onions, and then topped with our own Apple sauerkraut floor, housemate dnas and Oktoberfest beer cheese sauce.
Speaker Change: We intentionally released to build that we knew would be polarizing, but we're impressed by the sales which exceeded our expectations throughout the window that ended November 4th.
Speaker Change: Our current seasonal promotion leads with our roast beef Burger.
Speaker Change: So it starts with our classic Angus beef Patty.
Speaker Change: Resting on a bed of arugula talked with an in house created urban excused cream cheese red wine brace short rib.
Speaker Change: Handcart shoestring potatoes.
Speaker Change: This new Mommy forward Burger also debuted to strong sales and along with the handmade Bacon and brief hopper starter will continue through January 2nd.
Speaker Change: We have now built a stable strong performing <unk> Idaho.
Speaker Change: We expect our future seasonal specials will include a combination of new items and the return of proven winners.
Speaker Change: I am excited about our seasonal feature windows coming up for winter and spring, which will take us through most of the next two fiscal quarters.
Speaker Change: On our last quarter's call there were questions about development for bad Daddy's and I mentioned, we hope to have one restaurant opened during fiscal 2025.
Speaker Change: Further analysis and repeated site visits led us to reconsider that location and in the interest of only moving forward with sites in which we have great confidence.
Speaker Change: Aided to pass on that specific site.
Speaker Change: We continue to look actively for new bad Daddy's locations, but again remain committed only to those that pass our high bar of expected performance.
Speaker Change: Hi, Good times, we were understandably disappointed in the reported negative same store sales of 0.1%.
Speaker Change: And restaurant sales continue to run in the negative low single digits in the first quarter of 2025.
Speaker Change: This trend really took hold in September when large franchise competitors responded to traffic declines by going back to the well of deep discounting.
Speaker Change: If competitors are heavy franchise heavily franchised and profit based directly upon system sales not restaurant operations.
Speaker Change: They benefit by increasing sales, even if that means less profitability for their franchisees.
Speaker Change: Though we have a small number of franchisees were primarily operators and the appropriate response to these competing brands.
Speaker Change: Copying them, but rather has been formed by short and long term profitability considerations and charting our course.
Speaker Change: Our approach to value has been centered around our bambinos.
Speaker Change: Our classic Bambinos, which a slightest with American cheese, and our specialty and being a source or a great value for our guests and we've been shifting focus on social and digital media towards them.
Speaker Change: Additionally, we've been introduced on a limited time basis, Bambino, Supremos, which are a different spin on the classics with Bacon flight American cheese and traditional mail.
Speaker Change: Both the classic Bambino and the Bambino Supremo provide three hardy sliders on soft pillowy bonds at a compelling price point, considering the portion size.
Speaker Change: We also launched our take on the Dirty soda trend with three different variations available to our guests.
Speaker Change: Not been as popular as we had hoped and although it will continue to run throughout the window.
Speaker Change: We will test whether the sweet spot with our guests may really be clustered floats as we expect to re feature of those in January as they were strong performers for us in the summer.
Speaker Change: We will also continue to monitor the dirty soda trend because they've been popping up at other <unk> restaurants after our launch.
Speaker Change: We are directing our focus towards product improvement and innovation, rather than deep discounted as evidenced by our approach with the band D&O Supremo.
Coming up for the new calendar year as an iteration of our West Coast Burger, which we are calling the west slope double paying homage to the western side of the Rockies and tying into our brands, Colorado origin story.
Speaker Change: This Burger will feature the same damn D&O soft column to our classic Bambinos and current West Coast Burger.
Speaker Change: And we will replace the existing lettuce tomato onion build with two full cross sectional license of sweet yellow iron on the double.
Speaker Change: False life in the single Patty version.
Speaker Change: The goal is to create a distinct luck and flavor from our traditional good times deluxe.
Speaker Change: West Coast and deluxe builds are with the exception of the sources otherwise identical.
Speaker Change: We've got a busy during the first quarter of 2025 as we remodeled one good times and purchased two other songs by a single franchisee.
Speaker Change: We're not opposed to the franchise business model per se.
Speaker Change: Have a shared goal with bad Daddy's of operations excellence.
Speaker Change: The acquisitions, we've made have been from operators, who are subsequently retiring not going into other breast restaurant brands or businesses and.
Speaker Change: And the acquisition is now a majority of our previously franchised restaurants has not been motivated by a desire to move away from franchising altogether, but rather to ensure the continuity of good times presence in these locations.
Speaker Change: And operations by committed operators, who have continued passion for the brand.
Speaker Change: Both of the acquired units and the remodeled units, whereas northern suburbs of Denver.
Speaker Change: The remodeled location is adjacent to the major intersection of 120th in Colorado in Thornton and very similar to the Lakewood remodel we completed during fiscal 2024.
Speaker Change: Both were closed for the majority of six weeks and receive significant structural improvements.
Speaker Change: The other two restaurants in North Platte, and Brookfield were closed for a short period of re trailing after the acquisition from the franchisee.
Speaker Change: The Brookfield location only need for light remodel as the franchisee had made significant repairs similar to our six week Remodels in 2022.
Speaker Change: Although these repairs were mainly structural in nature and did not include signage or any customer facing improvements.
Speaker Change: The location in North Glenn will require a significant remodel which will likely not occur until fiscal 2026.
Speaker Change: With this acquisition our good times franchise system now includes a single Denver area restaurants, and the eastern suburb of Aurora and two locations in Gillette and Sheraton, Wyoming that are co branded with Taco Johns and operated by a sizeable Taco Johns franchisee with Cigna with extensive operating experience.
Speaker Change: With our franchisee consolidation essentially complete future investments will continue to focus on Remodels signage and opportunistic limited new unit development.
Speaker Change: Finally at good times, we have traditionally relied on audio based advertising.
The combination of terrestrial radio audio streaming and podcast, making up nearly two thirds of our annual advertising budget.
<unk> been experimenting with the removal of subs or substantial reduction of advertising through audio media and then October November removed all audio based advertising with the exception of one sports base Radio station.
Speaker Change: With features during Denver, Bronco games, and one full year campaign with a single station in a demographic that we believe continues to be a radio user.
Speaker Change: On December nine we went live again with our traditional radio buy and are measuring impact of reinstatement.
Speaker Change: We're shifting marketing spend to heavy up on digital and we're testing a partnership with two college hockey players in Denver.
Speaker Change: The extent of this partnership remains to be defined but we are beginning with an in store visit and social posts made by both players.
Speaker Change: With our brand's image modernization and the remodel initiatives underway. Our vision is to now more aggressively engage with a new generation of customers through increased digital and social initiatives.
Speaker Change: <unk> rewards continues to be a heavy part of that and we're getting traction on growing that program, both as measured through new member Activations and 3% of sales and number of transactions occurring through the program.
I'll now turn the call over to Terry for a review of our performance during the quarter and some perspective on the company's finance financial initiatives.
Terry: Thank you Ryan Let's review this quarter's results.
Terry: Total revenues increased approximately four 3% for the quarter to $35 8 million.
Terry: <unk> increased approximately 3% compared to fiscal 2023 to $142 3 million.
Terry: Our 2024 total revenues are a new all time record for the company.
Terry: Let's discuss bad Daddy's first.
Terry: Total restaurant sales increased 1 million to $25 6 million for the quarter and increased $1 3 million to $103 8 million for the full year.
Terry: The sales increase was primarily driven by additional sales from the Madison, Alabama restaurants that opened in late fiscal 2023.
Terry: Our average menu price during the quarter was five 3% higher than Q4 of 2023.
Terry: We closed the longmont restaurant during the quarter, which impacted sales, but had been a perennial underperformer in with about 15 months left on the lease as of the end of the fiscal year made the decision to close early with continued regulatory driven wage pressures.
Terry: Same store sales increased three 2% for the quarter with 38 bad Daddy's in the comp base at quarter end.
Terry: Same store sales remained strong into the first quarter of the new year.
Terry: Due to holiday shifts we have seen and we continue to expect some unfavorable comparisons.
Terry: Thanks, giving fell on the latest possible date this year, resulting in one fewer holiday shopping week this year compared to last year.
Terry: Christmas is on a Wednesday this year versus Monday last year, which was an ideal day for our restaurants to be closed.
Terry: We took a blended approximate two 5% price increase in the middle of November.
Terry: This will be offset by negative mix shift, resulting from the high level of popularity of our smash Patty burgers.
Terry: Except for certain targeted adjustments due to menu engineering, we do not expect further price increases for the foreseeable future.
Terry: As of January 1st when we roll over last year's Colorado price increase we will be sitting on approximately four 7% aggregate year over year price.
Terry: Food and beverage costs were 31, 2% for the quarter, a 60 basis point decrease from last year's quarter.
Terry: The decrease was primarily attributable to the impact of the five 3% average increase in menu pricing, partially offset by higher protein prices.
Terry: During the current quarter, we continued to experience elevated costs across the various proteins in her basket, and especially ground beef, which hit an all time high.
Terry: Although wholesale ground beef prices began to decrease in the latter part of the quarter. They remained substantially higher than the prior year quarter, and our pricing mechanisms for ground beef cause our purchase price to lag the market by approximately two months.
Terry: Because we expect input cost to continue to remain above prior year levels and because of the impact of the large number of free burgers, we give away on veterans day. Despite the aforementioned price increase we expect food and beverage costs as a percent of sales to rise sequentially and be similar to if not slightly above last year's first quarter.
Terry: Labor costs decreased by 200 basis points compared to the prior year quarter to 34, 3% for the quarter.
Terry: This decrease as a percentage of sales is primarily attributable to higher team member productivity, resulting from sales leverage and decreased restaurant level incentive compensation costs.
Terry: Although we expect continued solid labor controls on a full year basis, our first quarter labor cost will not have the same year over year improvement as the fourth quarter of 2024.
In January Colorado minimum wage increases to $14 81.
Terry: Two 7% increase in the tipped minimum wage increases to $11 79.
Terry: A three 3% increase.
Terry: Overall restaurant level operating profit a non-GAAP measure for bad Daddy's was approximately $3 5 million for the quarter or 13, 6% of sales compared to $2 6 million were 10, 6% last year, primarily due to improvements in food and beverage costs and the cost of labor.
Terry: Moving over to good times.
Terry: Total restaurant sales for company owned restaurants increased approximately <unk> 5 million to $10 million for the quarter compared to the prior year fourth quarter.
Terry: And increased 3 million to $38 million for the year compared to the 2023 fiscal year.
Terry: Same store sales decreased 1% for the quarter with 25, good times restaurants in the comp base at quarter end.
Terry: The average menu price increase for the quarter was approximately three 9% over the same prior year quarter.
We have not taken any menu price in the first quarter and currently do not have any planned menu price increase as we have assessed our relative pricing position in the market.
Terry: The last time, we increased menu prices at the start of calendar 2024, and so as we rollover into the new calendar year, we will be sitting on no price increase we expect to monitor competitive pricing in January and if warranted respond rapidly based on their actions.
Terry: Food and packaging costs were 39% for the quarter, an increase of 40 basis points compared to last year's quarter.
Terry: The increase was primarily attributable to higher purchase prices on food and paper goods, partially offset by the impact of a three 9% average increase in menu pricing.
Terry: As is the case with bad Daddy's, we expect ground beef costs to continue to decrease through the first fiscal quarter of 2025.
Terry: They will remain substantially elevated over prior year levels that based upon the insights into the commodity market. We are hopeful that continued declines will occur as we move into subsequent quarters.
Terry: Macroeconomic and political forces cloud visibility into the direction of commodities further into the future.
Terry: Total labor cost increased to 33, 9%, an 80 basis point increase from the 33, 1%. We ran during last year's quarter due to higher average wage rates, resulting from market forces and the CPI indexed minimum wage in Denver and the state of Colorado.
Terry: Occupancy costs were 9% an increase of 80 basis points from the prior year quarter.
Terry: The increase was primarily due to real property tax increases, resulting from higher property values.
Terry: Other operating costs were 13, 9% for the quarter, an increase of 190 basis points, primarily due to increased repair and maintenance and utility expenses.
Terry: Good times restaurant level operating profit decreased by <unk> 3 million for the quarter to $1 2 million.
Terry: As a percent of sales restaurant level operating profit decreased by 400 basis points versus last year to 12, 2% due to elevated cross throughout the P&L.
Terry: Combined general and administrative expenses were $2 7 million during the quarter or seven 6% of total revenues an increase of 150 basis points from the prior year quarter, primarily related to home office payroll and benefit costs associated with additional HR and training roles and additional staffing related to the in sourcing of accounting.
As well as legal costs associated with routine and certain one time activities.
Terry: We expect to run approximately 7% general and administrative costs in 2025, and some of those costs normalize and we no longer have redundant costs associated with both internal staffing per accounting and direct outsourcing costs.
Terry: Our net income to common shareholders for the quarter was <unk> 2 million or income of <unk> <unk> per share versus a net loss of <unk> 3 million two cents per share in the fourth quarter last year.
Terry: There was approximately <unk> 4 million of income tax benefit recorded during the current quarter versus <unk> 3 million in the prior year quarter.
Terry: Adjusted EBITDA for the quarter was $1 3 million compared to $1 4 million for the fourth quarter of 2023.
Terry: We finished the quarter with $3 9 million in cash and <unk> 8 million of long term debt.
Terry: We repurchased 57436 shares during the quarter under our share repurchase program.
Terry: We understand that our financial performance over the prior year has resulted in a rather stagnant share price and continue to believe that the market is not fully appreciating the value of the investments we've made in our remodels and acquisitions at good times or the operational improvements at bad Daddy's.
Terry: That repurchasing shares in the open market at current prices generates a strong return for shareholders, who choose to hold their shares.
Terry: Today, we announced an expansion of the program, providing an additional $2 million of authorized share repurchases on top of the 2 million, we had remaining under the initial $5 million authorization.
Terry: This expansion does not commit us to completing that full purchase that provides us with the flexibility to continue to purchase shares if that remains a compelling use of capital.
Terry: Share repurchases will be balanced with other capital needs.
Terry: In addition to the approximate 1% of sales budget for ongoing maintenance Capex, we have budgeted for special Capex in the current year exceeding $1 million related to good times remodels, including the extensive remodel completed earlier in this first fiscal quarter of 2025.
Speaker Change: And now I will turn the call back to Ryan.
Ryan Zink: Thank you Carrie.
Ryan Zink: We can open the call for questions at this time Christa.
Christa: Thank you and we will now begin the question and answer session. If you would like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue.
Christa: And if you would like to withdraw that question again press star one.
Christa: Pause for a moment to compile the Q&A roster.
Speaker Change: And Ryan we have no questions in our queue at this time.
Speaker Change: Okay.
Speaker Change: The future is bright for both the bad Daddy's and good towers concepts are product and promotional roadmap at both concepts is more complete than it has been at any time since the pandemic and the experiments, we're conducting with advertising and promotion activity at good times will provide learn.
Speaker Change: That we can leverage across both concepts.
Speaker Change: Further we've expanded much of our back to basics approach that we implemented last year at bad Daddy's into good times this year, which should continue to drive operating improvements translating into great guest experiences.
Speaker Change: Our leaders and team members in our restaurants, and our support center due to the hard work that creates value for our guests and ultimately our shareholders.
Speaker Change: Extend my sincere thanks to them for their passion and commitment to operations excellence to our brands and to exceptional guest experiences.
Finally.
Speaker Change: Thank you all for joining us today.
Speaker Change: And ladies and gentlemen, this does conclude today's conference call. Thank you for your participation and you may now disconnect.
Speaker Change: [music].
Speaker Change: Yeah.