Good Times Restaurants Inc (GTIM) 2016 Q1 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the Good Times Restaurants Inc. fiscal 2016 first-quarter earnings call. By now, everyone should have access to the Company's first-quarter and fiscal earnings release. If not, it can be found at www.goodtimesburgers.com in the investor section.

As a reminder, a part of today's discussion will include forward-looking statements within the meaning of federal securities laws. These statements are commonly identified by words such as anticipate, continue, plan, expect, intend, should, will, and other terms with similar meanings. These forward-looking statements are not guarantees of future performance and therefore you should not put undue reliance on them.

These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. And therefore investors should not place undue reliance on them and the Company undertakes no obligation to update these statements to reflect the events or circumstances that might arise after this call. The Company refers you to their recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial conditions.

Lastly, during today's call, the Company will discuss non-GAAP measures which they 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. Please note that the call is being recorded.

Now I would like to turn the call over to Mr. Boyd Hoback, President and CEO of Good Times. Please go ahead, sir.

Thank you, Emily. Thanks, everyone, for joining us again this afternoon. With me today is Jim Zielke, our Chief Financial Officer. And again, I'll cover a summary of our first quarter and some current developments and Jim will then provide more color and details on our financial results and the outlook for the balance of the fiscal year.

Total revenues increased 76% to $13.838 million during the quarter, with our comp sales increasing 4.8% at Good Times and 6.5% at Bad Daddy's. The 4.8% at Good Times represents a three-year compound growth rate of approximately 33%, and the 6.5% increase at Bad Daddy's exceeded our expectations for the quarter. We were very happy with that.

Our plan for 2016 continues to be low-single-digit comp sales at Bad Daddy's. Again, based on the relatively small base of stores in the comp sales group and approximately 4% comp sales increases at Good Times. Weather tends to impact our sales fairly dramatically in the winter months, both positively and negatively, and we experienced that in January in both North Carolina, with a storm that closed our stores for a day and a half and in Colorado, which had comparisons to very nice weather last year.

That resulted in flat same-store sales at Good Times in January. However we were comparing to plus-13% same-store sales in the prior year. So our two-year stack remained at about plus-13%, as it was in the first quarter. And the increase of 5.1% at Bad Daddy's, which included the lost sales from the storm that hit the East Coast, but it also has some slightly positive effect of the timing of the Super Bowl being one week later this year.

We also believe we are feeling some moderate effects from the deep discounting wars that are going on with the major QSR chains at Good Times. While we are not positioned as a value player in the segment, there are certainly a portion of our transactions that are always impacted by the deep discounting and the marketshare battles that the big brands employ. And our best response, as it has been historically, is to continue to drive our brand differentiators as deep as we can, and we are maintaining our expectations for about 4% comp sales for the year.

As I mentioned last quarter, we plan to continue to communicate the core Good Times brand tenants of fresh, all-natural handcrafted positioning. We were off air with any media advertising this January versus being on air last year. And we are off in February, as we were last year, but we come back with slightly higher media weights for the balance of this fiscal year as compared to last year. And that includes an adjustment to our media buying that significantly expands our reach in the Colorado market versus what we had been doing before.

We also have multiple new products in development and testing as well as initiatives in place to continue to improve the execution quality of our core menu items that we believe will continue to have a positive impact. And we have one new Good Times location under contract in Colorado and we expect that to open this summer.

We've opened three new Bad Daddy's restaurants so far this fiscal year, with one in late October, one in early December, and one in early January. We're on track to open our next store this coming Monday on February 15 and then another in late March, with plans for three more during the balance of fiscal 2016.

The first store opened a little bit soft, but the last two have opened very, very strong. We don't have a lot of history established yet, not only on these new stores, but even our existing stores. But as we look at seasonality as best we can, the opening honeymoon sales periods for each of the stores and the maturation cycles that we've had on our existing stores, we anticipate that two of the new stores will be at or well above the system average and one will be slightly below the system average. But with the average of all three meeting our targeted sales goal, which we think is very positive. One of the new restaurants that we opened has a fully enclosable rooftop bar and patio, and we have one more planned for this year with a rooftop bar and patio.

We were continuing to focus on sites that are near or part of upscale lifestyle retail centers and major shopping malls. We have a couple of very high-volume stores in North Carolina that are kind of outliers to that profile that are adjacent to downtown areas without a lot of retail concentration. But we think that our best opportunity is to focus on the suburban retail types of locations, as approximately 90% of our sales are generated from noon to nine p.m., and with a significant skew towards Friday through Sunday sales.

The next three stores we have are slated to open in Colorado are all of that profile, in very upscale, highly penetrated retail lifestyle centers, as well as additional sites that we have in the pipeline for later this year and deals that we have signed for fiscal 2017. So we are confident that they will also average at or above our targeted sales level. We're also -- a side benefit of that is we are developing relationships with few of the larger retail and lifestyle developers that should provide more opportunities in new markets as we look forward.

I'd like to reiterate that our return on investment goal for Bad Daddy's continues to be -- to generate a 40% cash-on-cash return on average sales in a store's second full year. We estimate our new store investment is still, net of landlord contributions, averaging less than $1 million, with rooftop patio stores slightly higher than that. And at the $2.5 million targeted sales and a store-level margin in the midteens, the concept is proving to be able to generate those returns.

The last two stores we opened in Colorado that were open for all of calendar 2015 and ended in the quarter we just ended have far exceeded that return goal, with first-year cash-on-cash returns well in excess of 50%.

As our development shifts from Colorado to North Carolina and other markets that may be in federal minimum wage states, as we look into fiscal 2017, we also anticipate picking up an additional 3% or so of additional store-level margin due to Colorado's higher tip credit minimum wage.

We have a number of new products in development and test at Bad Daddy's as well and we would like to continue to move our bar mix higher as a percentage of total sales. It's one of the goals for this year. Increase our dessert sales and impact our average check through our monthly chef specials that we been rolling in all the stores.

We are testing everything from new burger recipes, new appetizers, beer flights, new summer cocktails. And we plan to selectively roll them out throughout the year. We're also rolling out a new menu in mid-March to all the stores that has the addition and elimination and some fine-tuning of select items in each category in the menu.

Jim will provide more detail on our margins for the quarter in just a minute. But I'd like to highlight a few points. We continue to make good progress on lowering our cost of sales. Part of that is the benefit of lower commodity costs, but it's also through better purchasing and improved systems.

We're not seeing the profit flow-through on incremental Good Times sales that we would like to. And that's due almost entirely to increase labor costs, which are exaggerated in Colorado not only for us, but for other brands due to the extraordinarily low unemployment rate and the ratcheting up of the wage scale really across the board. Again, Jim will provide more color and quantify that impact.

Our ops team is focused first and foremost on executing our service and product promises and doing a great job of that. But we're also continuing to explore ways to engineer labor out of our system, including the mix of hourly and salaried employees.

We're also making good progress on Bad Daddy's, as our cost of sales margin continues to improve. And that's not fully represented in the first-quarter financial results. We made several small price adjustments, product specification adjustments, and purchasing changes during the quarter that yielded additional gains in December and those will be more fully captured for the balance of the fiscal year.

While our focus has been on new store openings, we are continuing to refine our training processes, labor model, and management structure at Bad Daddy's. And we believe that will also continue to yield improved results and expanding margins for the balance of the fiscal year.

As I mentioned last quarter, we anticipate it will take the next several months to fully normalize our longer-term labor margin structure, as we've put a larger base of restaurants in place and moved the North Carolina stores to a similar labor model. That said, the integration of the acquisition has gone very well and sales from the BDI acquisition have outperformed our expectations.

During the first quarter, we also carried a significant amount of excess management that had been hired for new stores, and a portion of that is expensed into G&A. So as new stores open here this year and we have a larger base of restaurants from which to grow and develop management, both our preopening costs and some of that related G&A expense should continue to decrease really beginning in this current quarter.

The impact of the higher volume stores coming online should also continue to improve our operating margin at Bad Daddy's. And with our first and second quarters being the lowest seasonal quarters of the year, we anticipate continued improvement in our restaurant-level operating margin for the balance of the fiscal year and for the year overall.

While there is some uncertainty in the macroeconomic climate, we have not seen any effect in our customer transaction trends at Bad Daddy's, either in North Carolina or Colorado. The rather extreme discounting in QSR creates some headwinds for Good Times in the very near term, as it has historically, but we do not expect it to be lasting or that significant.

We continue to receive great consumer feedback on Bad Daddy's as we open these new stores trade area by trade area, including very high rankings on social media and in the local press in both Colorado and in North Carolina. And we're obviously very excited about the last two stores we've opened, particularly, as well as the new ones coming in the next few months.

I'd like to turn it over now to Jim to review more of our Good Times and Bad Daddy's financial results for the quarter.

Thanks, Boyd. As Boyd mentioned, we are very pleased with our top-line results at our Good Times brand for the quarter. Despite lapping a two-year comp sales stack of over 25% for the first quarter, we were able to post 4.8% comps for the quarter, which exceeded our expectations of 4%.

We had about a 4.2% year-over-year price increase in place, so traffic was relatively flat for the quarter versus last year. Cost of sales at Good Times declined 260 basis points to 33.3% during the quarter from 35.9% last year and decreased sequentially from Q4 by 80 basis points.

These costs continued to decline during the quarter, down approximately 25% from last year and down approximately 12% from the previous quarter. However, baking costs increased by approximately 76% versus last year and were up slightly versus last quarter. Custard and egg costs also increased year over year, but eggs did improve slightly from the previous quarter.

Total labor costs at Good Times increased to 33.1% from 31.2% last year, most of which is comprised of a rise in our average wage rates, which increased approximately 8% versus last year. As Boyd mentioned, the Colorado labor market is extremely tight with very low unemployment rate as well as statutory minimum wage increases that take place each calendar year.

Restaurant-level operating profit at Good Times, as disclosed in the supplemental information in the earnings release, increased to $1.09 million from $1.03 million or 5.8%. The restaurant-level operating margin was 15.7% compared to 15.8% last year.

We continued the reimaging program of our older drive-through stores in addition to more extensive remodeling of a few stores, including two stores that underwent lobby remodels during the quarter and were open for only drive-through business for a combined nine weeks of the quarter. When a store undergoes a major remodel like these two did, they are removed from the comp base for the quarter or month -- for the calendar month affected.

In fiscal 2015, we completed the reimaging of five Company-owned and two franchise drive-through-only stores and completed one major remodel. In fiscal 2016, we completed one major remodel in Q1, have just completed another remodel in Q2, and we expect to complete one more major remodel and one minor remodel, leaving only one remaining major remodel and three lower-level refinishes for fiscal 2017.

We are also very pleased with our top line results at our Bad Daddy's restaurants, which had comp sales gains of 6.5% for the quarter. Seven of the 12 Bad Daddy's restaurants were included in the comp base, including six of the seven North Carolina units and the first Colorado unit.

As Boyd mentioned, January was impacted by severe weather in both North Carolina and Colorado. But even with that impact, we are optimistic the second quarter will continue to yield low-single-digit same-store sales growth at Bad Daddy's.

Cost of sales at Bad Daddy's improved to 32.7% of sales for the quarter compared to 32.8% in the previous quarter and 32.7% a year ago. Cost of sales at the five Colorado units were 31.4% for the quarter compared to 33.4% for the seven North Carolina units.

As explained in the last conference call, the higher costs in North Carolina is a result of several factors. First: higher bar costs in that state, about 4% higher as a percent of sales than Colorado. Second: a higher cost of beef used in our burgers in North Carolina. Third: a slightly lower average menu price, around 2% lower. And finally: a lower bar sales mix in North Carolina versus Colorado, about 14% of our total sales mix in North Carolina versus approximately 19% in Colorado.

We did normalize the pricing in North Carolina in the first quarter with an approximate 2% menu price increase in December. We have rolled out a new lower-cost premium chuck blend as of December 1 after extensive taste testing and evaluation. As a result, December cost of sales in North Carolina improved by 150 basis points as compared to the results in October and November for North Carolina.

Bad Daddy's labor costs improved to 36.9% from 39.7% last year and were up from 36.0% in the previous quarter. The increase versus last quarter was a result of the impact of deleveraging sales due to normal seasonality. Sales at the three Colorado stores opened the entire quarter decreased 13% and sales in North Carolina decreased [33].7% versus the previous quarter.

As mentioned in last quarter's call, we expected to temporarily increase North Carolina's labor as we are increasing our staffing levels there and completely cross-training the management team. We did make some progress in increasing productivity in North Carolina during the quarter, as total labor was flat versus the previous quarter at 35.4%, despite the lower sales.

Restaurant-level profit for Bad Daddy's was $974,000 for the quarter or 14.5% of sales compared to $155,000 or 12.4% last year. Based on new stores coming online at our targeted annualized sales of $2.5 million and the effect of seasonality in our first two quarters, we anticipate that a restaurant-level profit margin for Bad Daddy's will increase meaningfully in the back half of fiscal 2016.

Total restaurant-level operating profit for both brands combined for the quarter, which is again a non-GAAP measure as defined in the earnings release, increased to $2.064 million from $1.185 million last year, reflecting the acquisition of seven North Carolina Bad Daddy's and two new Colorado Good Times Restaurants and three additional Bad Daddy's restaurants in Colorado.

General and administrative expenses increased to $1.587 million during the quarter from $859,000 last year. The G&A increases consist of higher salaries expense, primarily related carrying excess management labor in advance of store openings, as Boyd mentioned. There also has been an increase in operational supervision and administrative positions, stock-based compensation expense, and legal and accounting expenses as we prepare the Company for rapid growth. We anticipate that G&A expenses will begin to decline as a percent of revenue in the latter part of fiscal 2016 and beyond as we expand our base of restaurants, even as we increase the G&A spending in several key areas.

Our net loss for the quarter was $1.124 million, which included $725,000 in preopening costs during the quarter. Our adjusted EBITDA as disclosed in the supplemental information to the release more than doubled to $245,000 compared to $117,000 last year.

As stated in the press release, we are reiterating our guidance for fiscal 2016. In addition to our projected 4% comp sales increase at Good Times and low-single-digit comp sales increase at Bad Daddy's, we expect to open one additional Good Times restaurant in fiscal 2016 and eight additional Bad Daddy's restaurants, generating total revenues of $67 million to $69 million and total adjusted EBITDA of $4.2 million to $4.5 million for the fiscal year.

This includes approximately $2.6 million to $2.7 million of preopening expense and G&A of approximately $6.1 million for the year. G&A includes approximately $800,000 of non-cash equity-based compensation expense.

We finished the quarter with $9 million in cash, so we believe that with the addition of a relatively conservative level of senior debt, we can support our growth in new Good Times, the continued remodeling of Good Times, and our planned new Bad Daddy's development well into fiscal 2017, absent any other acceleration of growth.

Now I'd like to turn the call back over to Boyd.

Thank you, Jim. We are again focused on setting the stage for significantly increasing our cash flow from operations and adjusted EBITDA, as Jim mentioned, particularly as we look into the last six months of fiscal 2016 from both the addition of the new restaurants and the other margin enhancements and then preparing our pipeline for additional really robust growth in fiscal 2017.

We feel like our longer-term growth thesis is solidly in place. Our core Good Times business continues to do well, and the Bad Daddy's concept and its unit economic model is performing very well, with significant whitespace for development as we look forward. We are very optimistic we can create significant shareholder value, even in the context of market valuations that have and certainly appear to be moving to more historic norms. As we get further into this fiscal year in 2016, I will be able to and begin to provide more color on our expectation for fiscal 2017's growth.

Again, appreciate your time with us today. With that, operator, we'll open the call for questions.

(Operator Instructions) Will Slabaugh, Stephens.

Thanks, guys. This is actually Bill on today. Congrats on another good quarter. Wanted to dig in a little bit more as far as what you are seeing on traffic trends on the full service side of things with the Bad Daddy's brand. I know you spoke to this briefly already and we're obviously aware of the cautious tone that many of your peers had heading into 4Q.

I realize you have a concentrated geographical exposure, but maybe could you speak to the cadence of the comp and how that evolved throughout the quarter? Maybe elaborate on the trends you are seeing, any difference between North Carolina and the Colorado market, ex-the weather impact. I think that would be helpful.

Billy, this is Jim. So for Q1, October through December, October is actually the weakest month of the quarter from -- for Bad Daddy's. And then we were up about 3% and then November and December were both 8%-plus up.

We felt like we really had a really good December for both brands -- or both locations, especially kind of in those high retail areas. We really saw a pickup, which you normally expect, but again, just versus last year, we saw a pickup as well.

So as it relates to the start of this next quarter, again, as we mentioned, we had some significant weather affecting January in North Carolina. Even with that, we still posted the positive results so far through January for the Bad Daddy's.

And the other piece of that, though, is we do have some offsetting favorable comparison, with the Super Bowl being in February this year versus the end of January last year from a -- and Super Bowl Sunday is a really down day for us. And we just happened to have the two teams in the Super Bowl this year, which contributed to a really soft Super Bowl Sunday for the Bad Daddy's brand. But generally, we are seeing -- again, seeing the traffic hold up fairly well and not really seeing the declines maybe some of our peers are seeing.

Thanks. That's very helpful. And then just one more, if I could. What are the biggest constraints on building out more rooftop patio stores? Should we expect to see more of those in fiscal 2017, assuming no issues with the two you guys are opening this year?

You know, I think that's maybe still TBD, Billy. We like the model a lot. They seem to be generating more volume. They do require a little bit more labor to staff the bar upstairs and we are continuing to really dial in the optimum size of the restaurants. And if we can generate an additional $0.5 million in sales, it certainly is well worth the rooftop, particularly if we can get the landlords to have a major contribution towards them.

I think as we open this third one here in Colorado; we have one more slated in 2017 in Raleigh with a rooftop patio. It's a little different just weather-wise down there, just because of the summer humidity. It's similar to the winter that we have here.

So we are really trying to see in terms of the incremental investment and the incremental labor as opposed to just the core model can we generate that much more sales to really make it worthwhile. That said, from a consumer standpoint, they are being really well received, just in terms of the coolness of the concept and the developers like them because it's unique for the developments.

So I think we'll continue to have that is a part of our model. How many we do remains a little bit yet to be seen. I think the core model -- the 3,600, 3,700-square-foot end cap, less than $1 million investment, $2.5 million in sales -- works like a charm, and so we just want to make sure that that rooftop also works as well from a return standpoint.

Great. That's helpful. Thanks, guys, and congrats again.

Mark Rosenkranz, Craig-Hallum Capital Group.

Thanks for taking my questions. I had a couple recent questions. On the Bad Daddy's openings you had, the two recent ones trending above average and one below, was this kind of expected, given the location of these three restaurants? And could you just talk a little more about what's kind of driving the strength in those two versus the other one and if you expect those to kind of continue to trend upwards or just discuss that a little more?

It's definitely not expected to open any store that does less than what we're -- our average or our target. So the first one was the surprise. The last two, again, as I mentioned in my comments, I think we're -- we had thought the first one would be more similar to the ones I mentioned in North Carolina that are adjacent to downtown. Very high daytime employment. Some movie theaters, some entertainment, but it just doesn't have the big weekend pop. Whereas the last two are in lifestyle centers and one is in a major mall that General Growth redeveloped we have, with an outside entrance. And both of those have come out very hot from the get-go.

So that's just lending us towards -- and the next three are in very similar lifestyle centers. One is in a very upscale center in Colorado Springs. One is in a Whole Foods movie theater center in Longmont and then another redevelopment of a lifestyle center for Fort Collins.

So I think that's going to be our sweet spot and that's certainly continued learning for us. The first one we think will continue to do well. It will make money and I think it will continue to grow. We are seeing continued growth in our first store that opened slower in Colorado, the Cherry Creek location, even with the demolition of an adjacent office building that's turned into a Marriott Hotel. We are still up very positive in that store.

So we think that one's going to continue to grow. Some of it is awareness. And again, the dynamics of these sites are all a little bit different, but we are really dialing in for these lifestyle and retail center. Honestly, our Northglenn store, our highest volume store here in Colorado, does not have a lot of retail around it. And so again, we had thought this one had some of those dynamics.

One of our best-leading indicators, since we are simply taking share, we're not expanding the food pie, one of our best-leading indicators is just the volume of competitors and what they are doing. So we are pegging that as closely as we can as we go into these new areas.

Okay, thank you. That's helpful. Kind of shifting gears a little bit, what you guys kind of buy is a little more specialty products. Your all-natural bacon, your beef, your chicken. Should we maybe talk a little bit how those costs have been trending over the last three months relative to kind of the more basic meats? And what's kind of your outlook been in your food costs relative to your last guidance?

We continue to see really favorable commodity costs. We peg the conventional market on our all-natural beef and then just pay a premium against that. So we will trend exactly as the conventional beef market trends, which is down. And we anticipate that continue to be favorable for the balance of the year.

Really the same thing on chicken. We pay a slight premium for all-natural, but we are pegged against the conventional pricing in the market. Bacon is really probably the biggest outlier on which we pay the biggest premium, just from a supply-and-demand standpoint. And so we've seen a bigger increase with bacon than really any of the other commodities. But generally, we are thinking that we are going to continue to see a favorable environment and lower costs throughout the fiscal year.

Okay, great. Thanks for taking my questions and congrats on a good quarter, guys.

Mark Smith, Feltl and Company.

Hey, guys. First up, Boyd, can you just repeat what the January comp was for Bad Daddy's?

5.1%.

5.1%.

5.1%. Excellent.

So, again, Mark, negatively -- severely negatively impacted by a couple days of really no sales in North Carolina. But then positively impacted by the timing of Super Bowl in January that turns around in February.

Okay. Perfect. And did you say Good Times was flat? Was that right?

Yes, we were flat. We were comparing to up 13% in the prior year. So if you look at our first quarter, where we were up 4.5% comparing to 8% last year. So we were up about 12.5% in the first quarter on a two-year stack. We kind of maintained that same two-year stack, but honestly, it's just -- month to month is so hard to peg because it's so significantly impacted by weather.

Again, we lost a full day and a half here with Good Times with a snowstorm. This week, it's 60 degrees and we are screaming. So we kind of look at it, particularly during the winter months -- month to month is going to ebb and flow. We're still comfortable with that for the quarter in that 4% range.

Okay, perfect. And the new menu coming out in March, can you talk about any price that you've taken on that menu?

Yes, we're not really taking much in the way of absolute price increases. We've done a little bit of tweaking in engineering, where we are taking off some lower margin products and putting on some better margin products in each one of the categories. But we had just taken a 2% price increase in North Carolina in December. And with the commodity costs going where they are, continued improvement month to month, quarter to quarter, and year over year in our cost of sales, we're not going to be very aggressive on pricing.

We try and build check through our chef specials and some margins through our chef specials. And our big initiative really is to continue to try and push our bar mix in both North Carolina and Colorado. And again, testing beer flights and some new summer cocktails and proprietary items. We are aligning a little more closely the North Carolina bar program with our Colorado bar program. As Jim mentioned, we are at about 19% here and 14% there. We think there's some opportunity.

But the mid-March or the late-March menu change is we're taking a couple burgers off, putting a couple on, adding a new salad, changing an appetizer and that sort of thing. So on the whole, it's not a significant price change.

Perfect. And then I think last one for me, can you just talk big picture about competition as [to like] a burger. Do you guys see pressure from the other kind of better burger guys that are -- but are more counter-service? Or do you feel like it really needs to be kind of a full-service restaurant for Bad Daddy's in particular to really put pressure on you competitively in a market?

It's a good question. We compete against everybody here in Colorado, with Smashburger being based here and Five Guys with a pretty deep presence as well as another half-a-dozen fast-casual guys. We really think our business is coming from and our core competitors are the full-service guys. Because we do close to 20% bar mix, because we are full service, we have a $16, $17 per-person check versus $10 or $11 in fast-casual. The occasion is really different.

And so as we look at from a site selection standpoint and just competitively, certainly share of stomach we compete with everyone to some degree. But from an occasion standpoint, we are really competing head-to-head I think with the casual-theme guys.

And as I mentioned, when we look at some of these new locations and we're looking at Applebee's, Chili's, Red Robin, Olive Garden, Outback, Lone Star, and just that sea of casual theme, we think and the feedback we are getting is when people -- we come into the market as kind of the new cool kid on the block and that's where our business is coming from.

Okay. So is it safe to say as you look at locations, you'd much rather go in somewhere with those -- that sea of casual dining competitors compared to maybe those counter-serve burger players?

Yes. We will typically see them both, but yes, we don't -- we're not concerned about either price point or really occasion competing head-to-head with the fast-casual guys. I think we are competing more head-to-head with the full-service.

And again, because that's been somewhat commoditized and they are focused on not so much growth and transaction growth, but really getting margin, we think that there is an opportunity for us to really step in with -- and we run a little bit higher food costs. We run a little bit higher labor and that's part of our value proposition. We infuse our stores with more labor and we have -- we certainly think we have a better quality product at similar slightly higher price points. And the feedback again from the customer is they get that and they're willing to pay a couple bucks more for a better quality product and a more vibrant atmosphere.

Okay, perfect. Thank you.

(Operator Instructions) Greg McKinley, Dougherty.

I wonder if you could talk to us a little bit about how you feel the quality of the people you've been able to put in place, both in terms of wait staff and store management, for the recent Bad Daddy's stores in Colorado. And then given I guess the tight labor market. And then how do you feel about the people you anticipate having in place for the next couple opening?

Sure. And it's interesting. When you look between Good Times and Bad Daddy's, I think we have more pressure from a labor and quality of employee on the Good Times side than we do on the Bad Daddy's side. Bad Daddy's we feel really good and fortunate about the quality of people that we've got.

Front of the house is really not so much a wage issue because it's all tipped. Our hosts, our servers, and our bartenders are all tipped positions. And so with the volume that we do and with four-table stations, they are able to make a really good wage.

Back of the house we've seen a little bit of inflation. But even with that, we tend to be able to hire a little bit higher wage in our back-of-the-house positions. So competitively, we've been able to get a good crew back there. That's, again, probably the more difficult piece of our hiring. Longmont, which is opening next week, for example, we had just way, way more applications than we could even begin to hire. So again, for whatever reason, we are seeing a really good flow.

Management-wise, I think, and I've talked about this before, we are really beginning to dial in and be able to I think see which systems as a training ground serve us the best. And so as we get other full-service experienced management, a lot of those systems have stopped growing. They are peeling positions out; they are squeezing labor. They are adding lunchtime to dinner-only concepts. That's really changing the landscape from a management standpoint and so we are getting some really high quality management over that are looking for a growth opportunity.

So knock on wood, so far so good really at all levels. We're not really feeling much in terms of pressure on the quality of employee nor on really having to boost wages much. We try and have a pretty competitive compensation system so that based on performance, on financial, and on customer service metrics that they can do well and make more than they could competitively at other ones. Again, and part of that is really driven by the $2.5 million average unit volume model out of a small box. So if that answers your question, Greg.

Yes, thank you. And then I guess the other topic is just wanted to get a sense for if you can give us some color on the remaining Bad Daddy's store openings and the remaining Good Times. So the Good Time location, did I hear correctly that we should expect that to open in the June quarter?

Yes, that's right. We have that under contract. We are in design and engineering right now. And we'll then move into the entitlement and permitting process and start construction hopefully late spring. And then, again, we've got Bad Daddy's opening on Monday in Longmont. We've got Colorado Springs Briargate opening in late March. We have Fort Collins -- been pushed back a little bit from the developer standpoint. Again, not from ours. And then we've got another two beyond that that we are targeting for late summer.

Okay. So again, mid-February -- I'm sorry. Go ahead.

I'm sorry. Yes, mid-February, late March, early summer, and then late summer on the last two.

Okay. And are there -- just from a planning standpoint, are there landlord challenges at all that you could foresee at this point on those summer openings? Or do you feel like you and the landlord and the development are far enough down the path where if you're ready to go, they will be ready to support you for that late summer opening?

With where we are today, we feel good about it. Are there some risks or could there be? Certainly. We have actually killed one deal that we had in the pipeline. Again, just based on the learning that we've had so far. But we have these other two in the works.

So I think these next 60 days are really key as we line it out in terms of lease negotiation, the design period, permitting, and then construction. Construction we've gotten down to 75 to 80 days. It's really the front-end piece that's longer to get through the process. But with where we are today, Greg, we feel okay.

Okay, very good. Thank you, guys.

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