Good Times(GTIM) - 2023 Q4 - Annual Report

Financial Performance - Fiscal 2023 net revenues decreased by $78,000 (0.1%) to $138,122,000 from $138,200,000 in fiscal 2022, primarily due to the closure of one Good Times restaurant and one Bad Daddy's restaurant[19] - The company ended fiscal 2023 with $4.2 million in cash and $0.8 million in long-term debt[19] - Total interest expense on notes payable was $31,000 for fiscal 2023, up from $20,000 in fiscal 2022[29] - As of September 26, 2023, the company had an accumulated deficit of $19,235,000, despite recognizing net income in fiscal 2023[117] - High rates of inflation have resulted in increased commodity, labor, and energy costs, which could adversely impact business operations[18] Sales Performance - Same store sales increased by 0.1% at Bad Daddy's and 3.7% at Good Times during fiscal 2023[19] - Same store sales increased by 3.7% in fiscal 2023, with a compound annual growth rate of 5.0% from fiscal 2014 to 2023[42] - Off-premises sales accounted for approximately 27% of all system-wide sales in fiscal 2023[35] - The average sales per transaction at Bad Daddy's is approximately $36, with lunch representing 35% and dinner 65% of sales[35] - Sales of Bad Daddy's restaurants open for at least 18 months averaged $2.6 million for fiscal 2023[53] - The average per person check at Good Times is approximately $13.04, which is higher than national quick-service restaurants but lower than fast casual hamburger concepts[40] Expansion and Growth Strategy - The company plans to pursue disciplined unit growth of Bad Daddy's, focusing on urban and suburban areas with median household incomes over $70,000[56] - The company acquired non-controlling interests in subsidiaries owning five Bad Daddy's restaurants and two previously franchised Good Times restaurants during fiscal 2023[19] - The company acquired two Good Times restaurants in Colorado during fiscal 2023, enhancing its market presence[62] - The expansion strategy for Bad Daddy's includes utilizing specialized software for sales forecasting at new locations[57] - Good Times is assessing potential future growth strategies, including the development of franchised restaurants, although it is not actively soliciting new franchisees at this time[84] Operational Efficiency - The company utilizes a cloud-based back-office solution for real-time sales, labor, and cash data collection, enhancing operational efficiency[88] - The average transaction time at Good Times drive-thru is less than three minutes, emphasizing speed of service as a critical success factor[41] - The company has implemented extensive training programs for restaurant managers to ensure high standards in service and food preparation[81] Market Position and Competition - Good Times maintains a competitive advantage in product quality compared to traditional quick-service hamburger chains[94] - Bad Daddy's Burger Bar competes with both local and national gourmet burger concepts, emphasizing premium quality ingredients and customization[92] - The hamburger restaurant market is highly competitive, with significant competition from established chains like McDonald's and Burger King, which may adversely affect revenues and profitability[123] Financial Management - The Cadence Credit Facility allows for loans up to $8,000,000, with an interest rate of 8.42% as of September 26, 2023[23][26] - The company maintains compliance with various financial condition ratios under the Cadence Credit Facility[25] - The company maintains deposits with banks in excess of FDIC insured limits, which could pose a risk to financial stability in case of bank failures[115] - The company may implement price increases on selected menu items to offset recurring operating expenses, which could impact customer visits[122] Employee and Labor Considerations - The company employs approximately 2,245 active employees, with 2,016 being hourly team members and 229 salaried managers or professional staff[91] - Labor shortages have been reported, with an extreme shortage of qualified workers in fiscal 2023, impacting growth and operational efficiency[111] - Rising employee healthcare costs may not be fully passed on to employees, potentially increasing operating expenses[142] Regulatory and Economic Environment - The company is subject to various federal and state regulations, including the Fair Labor Standards Act and the Americans with Disabilities Act, which could affect operations[101] - The company is subject to extensive government regulations that could impact its ability to expand and develop restaurants, including food safety and licensing requirements[130] - Macroeconomic conditions and inflation have negatively impacted labor and product input costs, potentially affecting future sales[121] Brand and Marketing Strategy - The marketing strategy emphasizes local store marketing and social media engagement, with a focus on building word-of-mouth reputation[73] - Good Times Burgers & Frozen Custard focuses on fresh, all-natural beef and chicken, differentiating itself in the crowded quick-service restaurant segment[70]