Cosi's (COSI) CEO R.J. Dourney on Q2 2014 Results - Earnings Call Transcript

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 |  About: Cosi, Inc. (COSI)
by: SA Transcripts

Operator

Good day, ladies and gentlemen, and welcome to the Second Quarter 2014 Così Incorporated Earnings Conference Call. My name is Denise and I’ll be the operator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

I would now turn the conference over to Mr. Scott Carlock, Chief Financial Officer. Please proceed.

Scott Carlock

Thank you, Denise. Good afternoon. My name is Scott Carlock and I’m Così’s new Chief Financial Officer. I’m excited to be a part of the Così family and to be on today’s call. I’m very confident in our team and this brand, and I look forward to a great future. I’d like to welcome you to Così’s 2014 second quarter results conference call. Joining me on the call today is R.J. Dourney, Così’s President and Chief Executive Officer.

Così’s earnings release was issued today at market close and is available in the Investor Information section of our website at www.getcosi.com. During the call, we will be referencing supplemental materials, which are also available in the Investor Information section of our website. If you’ve not already done so, please access the supplemental material at this time. As we always do, we’ll address our regulatory housekeeping matters before we begin.

During our introductory comments and in responses to your questions, certain items may be discussed which are not based on historical facts. Any such items, including expected results, and any details related to expected performance should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All such forward-looking statements involve risks and uncertainties that could cause our future performance and financial results to differ materially, and therefore, you should not place undue reliance on these forward-looking statements. We refer all of you to our filings with the Securities and Exchange Commission for a more detailed discussion of the risks and uncertainties that may have a direct bearing on our operating results, our performance, and our financial condition.

For the call today, I will begin with a brief review of results for the second quarter; R.J. will then share an update on the strategies in place and certain business initiative going forward. We will then open the call for your questions. Pages four and five of the supplemental information will guide you as I review our financial and operating performance for the second quarter.

Get started, we reported a net loss of $4.8 million or $0.27 per share in the second quarter, this compared with the 2013 second quarter net loss of $2.1 million or $0.12 per share. It is important to note during the 2014 second quarter, we reported approximately $2.1 million of one-time cost or $0.12 per share resulting from lease terminations related to six store closures, as well as the closure of the corporate office in Deerfield, Illinois, and relocation, training and other cost related to relocating the corporate offices to Boston, Massachusetts. The 2013 second quarter included asset impairment charges of $355,000 or $0.02 per share related to three underperforming locations.

Let’s look now at revenue performance which was the main driver of our financial performance. Total revenues for the second quarter including franchise fees and royalties decreased $2.7 million or 11.7% to $20.7 million, as compared to $23.4 million in the 2013 second quarter. Restaurant net sales for the quarter decreased $2.6 million or 11.7% to $20 million, as compared to $22.7 million in the 2013 second quarter. The decrease driven primarily by the company owned comparable stores sales declined of 7.5% which was primarily due to 9.2% decrease in traffic, partially offset by 1.7% increase in average check. Additionally, there was $1.5 million sales decline from the 11 restaurants closed during and subsequent to the 2013 second quarter, this was partially offset by $500,000 of additional sales from the two franchise stores converted to company owned from the 2014 first quarter.

The contribution of franchise fees and royalties in the 2014 second quarter declined by $89,000 to $663,000 compared to $752,000 in the prior year quarter, largely due to the impact of franchise locations closed and converted during and subsequent to the 2013 second quarter. Comparable net sales were essentially flat for the quarter. At the end of the quarter there were 113 Così Restaurants of which 47 were franchise and 66 were company-owned, compared to 124 Così Restaurants at the end of the 2013 second quarter of which 50 were franchise and 74 were company-owned.

As announced our system-wide comparable restaurant sales in the second quarter decreased 4.7%, as measured for restaurants in operations for more than 15 months. Although we continue to see comparable net sales increases at non-traditional locations, primarily airports and international locations, these increases were offset by sales declines at traditional locations.

Turning now to costs, which are set forth of Slide 4. Cost of food and beverage as a percentage of sales was 25.6% for the 2014 second quarter and 24.4% for the 2013 second quarter. The 120 basis point increase in the cost of food and beverage was largely due to a shift in sales mix to products with higher food cost, as well as higher year-over-year cost of certain commodities including poultry and dairy products. Labor and related benefits expense increased as a percentage of restaurant net sales by 90 basis points to 37.1% as compared to 36.2% in the prior year quarter. The increase was due primarily to the unfavorable impact on the fixed portion of labor from the decrease in our comparable net restaurant sales.

Other restaurant operating expenses increased in the 2014 second quarter by 60 basis points to 14% as compared to 13.4% in the prior year quarter, due in large part to the decreased and comparable net restaurant sales, as well as higher cost for repairs and maintenance of existing company-owned restaurants. Occupancy cost increased in the 2014 second quarter, 160 basis points to 21.4%, as compared to 19.8% in the prior year quarter, due primarily to the impact on the fixed portion of occupancy costs from the decrease in comparable net restaurant sales, as well as year-over-year increase in utility costs.

Total restaurant cash flow for the 2014 second quarter was approximately $375,000 compared to cash flow of approximately $1.4 million in the 2013 second quarter. The decrease was primarily driven by the decrease in revenues. General and administrative expense increased by $544,000 or 17.3% to $3.7 million in the 2014 second quarter, as compared to $3.1 million in the prior year quarter. The increase was due to one-time termination fee related to exiting the Deerfield corporate office, as well as other expenses related to the closure of that office and the relocation of the corporate offices to Boston. Excluding these one-time cost, general and administrative expense for the quarter actually decreased $290,000 or 9.2% as compared to the prior year quarter.

Cash, cash equivalents and short-term investments were approximately $6.1 million as of June 30, 2014. During the 2014 second quarter, and as previously announced, the company secured $7.5 million of additional liquidity through the issuance of two senior secured promissory notes. Capital expenditures for the second quarter of 2014 were approximately $307,000 and were primarily related to the cost for replacement and upgrades at existing company restaurants. Subsequent to the end of the second quarter we closed four underperforming locations in July of 2014.

On Slide 5, we have provided a reconciliation of the non-GAAP measures from Slide 4 to our reported quarterly results.

I would now like to turn the call over to R.J.

R.J. Dourney

Thank you, Scott. I mentioned in our earnings release Così management took an aggressive action in Q2 that we believe will lead Così to the long-term financial health and profitability. Candidly, this is not the time to dabble in the turnaround, allow me to provide some color.

Scott advised you that comps were down for the quarter, 7.5%. I’m going to share with you the momentum that we are seeing. In April we were down 10%, May down 6.8%, June and July we were down between 4% and 5%, and currently in August, we’re seeing positive trends. It’s very important that we all understand what is driving this momentum. The first, we’ve assembled a tremendous team. We’ve recruited from best-in-the-class Company such as Yum and Applebee’s. The senior team is in place, and I want everyone to be aware of something, consistently they are undercompensated in cash and heavily incentivized with stock as the company does well, this team will do well. We have a strong engaged Board of Directors, the operations team is now in place and everyone is fully engaged.

Next I mentioned to you last quarter that we engaged Hilco, which is arguably the best real estate workout company in The United States. We engaged them for two projects, the first was to help us remove ourselves from 10 leases that were causing us sizeable losses, that project is complete. We’ve removed ourselves from these 10 leases, shuttered the locations and bought out. Those restaurants lost in excess of $1.8 million in trailing 12. The second project that they are involved with is renegotiating the balance of our leases in our portfolio for two purposes there, where we have some outstanding leases they are negotiating term, and where we have some situation where we believe we’re overpaying, they’ve been able to negotiate the cost.

Deploying the successful operating system that we have here in Boston is well underway. We’re leveraging a system that drives throughput and ensures hospitality, quality of food, and cleanliness. What we’re seeing system wide is this, all boats don’t rise in a high tide; while we’re seeing multiple markets where we’re seeing significant increases in comps, we haven’t seen it everywhere but we know we’re heading in the right direction. We shared with you that we have moved the plant to relocate the office from Deerfield, Illinois to Boston, that project is complete. The support centre here in Boston is laid to 7,000 square foot office with some very great passionate individuals.

So in short, the calling is complete. SG&A as Scott mentioned has been right sized, and we are ready to move forward, and let’s talk about how we’re going to do that.

Regarding franchising, we now have five units that are either under construction or about to break ground in our franchise system, including one here in Boston. The focus of this team specific to our franchisees is very simple, we need to ensure that they are profitable, so we are passionately working with our franchises to make sure that they can leverage what we know works in a Così restaurant. We also want to make sure that each of our franchisees is in, that they are engaged, in one case we knew that the franchisee didn’t want to be part of our system and they are no longer part of our system, we did takeover one franchised restaurant in the last 30 days. We know we have a replicatable economic model, and we are – we have had this dialogue with many franchisees and prospects about buying some of our company stores, but I want everyone to be very clear about something, I’m not going to give them away. We are in dialogue with existing franchisees about certain markets, individual restaurants, which if it’s good for the company, we’ll consider selling those restaurants.

Regarding our company operations, we do have one unit under construction in the Chicago market, and as I mentioned before, we are seeing significant comp gains with the markets where we have – what I’ll call early adapters. There were four key strategic initiatives that are in play right now.

The first is the continued deployment of that operating system I referenced, we know what resonates with our guest, and we’re further refining that system and it’s been deployed. The second is that we are right sizing our menu, there are a number of initiatives that I won’t go into great length about here but know that collinearly we’re focused on three areas; we’re leveraging the healthy halo of Così, we’ll continue to see some great new products that leveraged that healthy halo, as well as the culinary forward position that we have as a brand. I mentioned last quarter that we have a menu board strategy in place that we’ve engaged King-Casey, and that project is well underway. The third area is physical plan, we know that a lot of the restaurants within our portfolio need attention, and we’ve deployed a refresh strategy across the system that we’ll continue to advise you on updates as the year progresses. The fourth is a marketing strategy that we’ve had in test now for 60 days that we’re seeing significant gains where we’ve tested, that will continue to deploy specifically in our suburban restaurants as the year continues.

As I begin to wrap this up, I offer this; Così is a tremendous brand, we are doing everything possible to fully realize the untapped potential of this brand. Specifically, everything we do is strategic in nature; we invested a sizeable amount of money last quarter to ensure that this is a healthy, viable, passionate concept. The results that we see continually are improving, I’m enthused by the trend line that we see, and I hope you are as well.

And operator, I’d ask now that we’d open this up to questions.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from Fred Sandal [ph], please proceed.

Unidentified Analyst

I have about five helpful hints that I know would be very successful for Così, yet there isn’t anyone I can give these hints to. For example, your sign says Così, passing by in a street a lot of people or most people don’t know what Così means. It should say Così flamed roasted sandwiches, something that has to do with food so they know it’s not a boutique but a food store. I have four others, and I’m not sure if I can give it to you now?

R.J. Dourney

Fred?

Unidentified Analyst

Yes.

R.J. Dourney

Fred, I’d love to talk to you about it. You can go to our website, click on talk to us, enter your email, and I’ll be sure to call you back.

Unidentified Analyst

Okay, will you because I – alright, I did that once.

R.J. Dourney

I promise I will Fred.

Unidentified Analyst

Okay.

R.J. Dourney

Thank you.

Unidentified Analyst

I will send you an email and I spoke to you, okay. Thank you.

R.J. Dourney

Thanks, Fred.

Operator

Our next question comes from Alec Jeselo with Midsound Partners [ph], please proceed.

Unidentified Analyst

Hey, Alec here, thanks for taking my questions. Could you talk about the two franchises you converted, what type of setting as suburban, urban or mix? And then also maybe, the mix or suburban urban for the 11 stores that you closed?

R.J. Dourney

So Alec, on the franchise restaurants that we acquired, they were suburban locations. On the 10 locations that we shuttered, they were predominantly suburban locations. And in all candor, I would tell you across the board, there were locations that we just never should have gone into.

Unidentified Analyst

Okay. And do you – most of the improving trends, did you find there were any specific products, any favorable menu items that – during the turnaround or do you think it’s more about service or just sounds like you’re getting on that?

R.J. Dourney

Alec, I’ll tell you three things. First, the operations team I think has done a spectacular job focusing on throughput during our two hours, two and a half hours of lunch, so the greatest game that we’ve seen is leveraging kind of that operating system I keep talking about here in Boston, and we’re seeing significant gains during lunch. And by the way, that’s probably the area where we saw the greatest decrease historically. The second area where we’ve seen gains, I’m very encouraged by the reaction that we’re seeing by the new product launches that we’ve had; we introduced the Peruvian Palm Salad, now about 60 days ago; the Newport Chicken Sandwich, we introduced an All-Natural Chicken during the quarter, so all of the culinary drivers are exciting us. And the third is, I think we right sized a lot of the hours of operations, there were a number of situations where I don’t think that the hours were the correct hours, so where it was appropriate we extended hours and we’re seeing it rise as a result of that as well.

Unidentified Analyst

Okay, that’s really helpful. I’d just, maybe on the suburban – I would be curious about that the throughput as you think that’s the most important thing, the focus on there, have you had any other strategy ideas? [Cross-talk]

R.J. Dourney

Yes, great question. So to state the obvious, when you’re in the city and you’ve got your greatest opportunity for life during your two, two and a half hours of lunch, in the suburbs it’s a different creature right, it’s longer hours in dinners is a much bigger deal. So doing initiatives that are attractive to families, that are attractive to the dinner hour, so when I mentioned at the end that there were marketing initiatives, that’s what I was talking about, almost all of our marketing initiatives are going to be suburban centric versus urban centric.

Unidentified Analyst

Okay, that’s really helpful. Thanks for taking my questions.

R.J. Dourney

Thank you.

Operator

And next question comes from James Klan with Bernheimer [ph], please proceed.

James Kahn – Oppenheimer

That’s actually James Kahn from Oppenheimer. Hi, R.J.

R.J. Dourney

Jim, how are you?

James Kahn – Oppenheimer

Fine. Okay, so the $6 million in cash and cash equivalents, does that include the $7 million credit that you accessed?

R.J. Dourney

It does.

James Kahn – Oppenheimer

Okay. So, how much cash burn do you expect in the present quarter and how much time before you run out of that cash?

R.J. Dourney

Jim, I know I could count on you to get to that question, thank you.

James Kahn – Oppenheimer

I’ve got other one too.

R.J. Dourney

Yes, yes. We knew that we’ve had to make a sizeable investment in Q2 to get this thing heading in the right direction. We’re still burning cash, I view this more now as an investment and less about just sustaining operating losses. As I’ve said before, we will appropriately deal a capital raise as the business needs it. I’m not going to get so specific that I’ll tell you that I think we have enough cash till January, February, March, whenever but we do know that we’re going to need to be additive to the balance sheet in order to finish this project.

James Kahn – Oppenheimer

Okay, I understand.

R.J. Dourney

Right.

James Kahn – Oppenheimer

Looking at fact that you had 124 restaurants last year and now you have 106, I guess you said 110 but four are gone since then, so 106 now?

Scott Carlock

This is Scott, we have 113 restaurants in total.

James Kahn – Oppenheimer

Okay. I guess you’ve added some then. Is it – or, I’m a little bit confused?

Scott Carlock

So a few things happened, and we did shutter the 10 underperforming company stores, we did have a couple of shift from franchise to company, and we have also opened locations since last year, so that’s maybe what’s throwing off account a little bit.

James Kahn – Oppenheimer

Okay. So the once you’ve opened all this you talked about five units that are under construction, is this going to be an expense or is that coming out of the franchisees pocket?

Scott Carlock

That’s right out of the franchisees pocket.

R.J. Dourney

We do have one location Jim that’s about to break ground, it’s a company location, at least it’s been signed, it predates me, that’s a down town Chicago location that I’m encouraged by but that will break ground very shortly and that will be an expense to the company.

James Kahn – Oppenheimer

But the other ones are expenses just to the franchisee, so hopefully they will lead to profits and there won’t be any cash drain as a result for them?

R.J. Dourney

Exactly, exactly. We get to enjoy the benefits of royalties from those new franchise locations, yes.

James Kahn – Oppenheimer

Alright. I understand that the direction that you’re going and if you need to capital raise by debt instead of equity, I know a number of people who might be interested in offering debt. And I’d love to hear more about cutting cost, stemming losses, closing underperforming stores, and things that lead the profit, and other than that, I’m glad to hear that you think things are going in the right direction and I trust that they are…

R.J. Dourney

Yes, Jim, thank you for all that. I will tell you that I’m probably not inclined to add more debt to the balance sheet.

James Kahn – Oppenheimer

Okay.

R.J. Dourney

I think there is other ways that we can raise capital, number one. Number two, I want everybody on the call to be really clear about something, we worked tirelessly in the second quarter to wrap up two initiatives; one was to make sure that if we had underperforming restaurants that we knew we couldn’t turnaround, we had to get them out of the portfolio quickly, I wasn’t going to wait a year or two years or hoped that maybe we could get it done, we got it done it very quickly. So the underperforming stores had been taken out of the mix. And as far as cutting costs, we took a sizeable step in reducing SG&A, right sizing SG&A and we moved out of 27,000 square foot office in Deerfield into 7,000 square feet here in Boston. I mean that alone was a sizeable savings, we reduced headcount at the corporate level, this support centre is running on the balls of their feet right now, appropriately which is the right thing to do but when you’re in a turnaround, nobody should be eating bonbons [ph], but now I think the focus appropriately is, lets drive the top line, we’ve got our cost in line, one of the things that Così has a model historically is very, very good at is leveraging comp store sales. So as this thing starts to traject into positive comps territory, the incremental sales are very profitable dollars and I’m excited about seeing what happens to the bottom line as we do that.

James Kahn – Oppenheimer

Okay. Can I have one more?

R.J. Dourney

Sure, one more, go ahead.

James Kahn – Oppenheimer

Thanks. Let’s say I applaud your cost cutting, I’d love to see even more than that, for instance, you hired BDO there, one of the most well-known firms, you know you’re only a $20 million market capital, you could have hired somebody cheaper, but that’s okay, that’s done. I guess that’s it, keep cutting cost and showing us some profits, and I’m sure that we’ll go in the right direction.

R.J. Dourney

Thanks, Jim.

Operator

(Operator Instructions) Our next question comes from Clayton Reed [ph], a private investor. Please proceed.

Unidentified Analyst

Hey guys, thanks for taking my call.

R.J. Dourney

Hi.

Unidentified Analyst

Just on the traffic decline, you know this is pretty disappointing, I thought on a four year account of stock basis, we’re looking at a chemo traffic line of about 18.5%. What’s going on there?

R.J. Dourney

Clayton, I think there – I think historically there have been a lot of mistakes made. I’ve tried to be pretty transparent about what we’re working on. I think we’ve made a tremendous impact on our quality of operations, we’ve been very specific on doing the things for the guest that we know will drive and tend to return, and I don’t think we were doing a good job of that six months or a year ago, we are now. We know that we needed to reinvest in the properties, that hadn’t happened, I mean collinearly we’re working on the right stuff, that’s not a shot to anybody in the past, I think we’re just working on the things that we know resonate with the consumer, and we know that because we see the traffic that it’s driving. So I wish I could tell you that comps went positive ten minutes after I took over but they didn’t, I think we’ve got the right team in place though to move this forward.

Unidentified Analyst

Right. And R.J., I know – one of the things, one of the opportunities that you’ve mentioned even today was right sizing the kitchen throughput, process engineering, backhouse, on the house to increase AUVs but I guess my concern is, is the company having issues even getting customers into the four walls?

R.J. Dourney

Not at all Clayton, not at all. When we do it right Clayton, we see tremendous gains in traffic, there is not a bone in my body that’s concerned about driving guess into Così.

Unidentified Analyst

Okay, thanks.

R.J. Dourney

[Indiscernible].

Operator

Our next question comes from Sean Godin [ph], a private investor. Please proceed.

Unidentified Analyst

Hey R.J., great job focusing on cost cutting and aligning things to the future and where you see the business moving, big welcome [ph]. My question is just regarding the path of profitability, I know you expect the outcome – and you said they are starting to neutralize in the credit month of August, and allocation time to grow from there but on a profitability standpoint, can you give us more clarity to between closing the 10 stores, moving the corporate office, what does the expense – what are the expenses going forward? I mean at least you had clear path of profitability standpoint, even if same-store sales stayed flat.

R.J. Dourney

Sean, thank you. So we’re working off of the model that, it’s an 18 month model. The key assumptions that we built in, obviously are SG&A, cost reduction with – at a support center level, as well as that in the field. But the key function – once we got our cost in line with what we know are appropriate for an organization this size, the driver has to be comp store sales. You don’t get your occupancy cost into a decent range by doing anything other than driving comp sales. Now one of the components to this that we’re leveraging is the fact that we know the performance of these restaurants, somebody else may have brought the point before about the declining in comp sales and in guest counts over the last four years. I’ve got to tell you I look at that as a positive because when I look at, what’s happened here in Boston, where we’ve seen continual increase in comp store sales; so we know the brand resonates when we do it right, but we also know in the other restaurants where we’ve not performed, where we’ve seen those declines, we know that the opportunity is there to regain that. So, I hope that answers your question.

Unidentified Analyst

I guess, not perfectly, but I know you’re going. I guess from the cost cutting perspective, 75% – I’ll do this right, I mean 75% through with it or is there other ratio which comes from going at that kind of a statement?

R.J. Dourney

So, on the cost cutting side I would tell you that where we are currently is where we’re going to be, I don’t foresee us doing anymore to reduce cost. I think all of our focus needs to be on continuing that trend line in cost. Look, here is what we know, we know when we do it right, that it resonates with the consumer, we know that we are literally at the bull’s-eye of the number one growth category in the industry, right. So the restaurant segment, the number one category is fast casual, and the subset of that is everything with a healthy halo, and that’s Così. So let’s get other operations right, let’s get the brand position right, let’s give the guest exactly what they are asking for and we’re going to see an uptick.

Unidentified Analyst

Fair enough, again, great progress to date on right sizing the organization with a total premium as far as [ph] example.

R.J. Dourney

Thank you.

Operator

Our next question comes from Robert Routh with National Alliance Capital Markets. Please proceed.

Robert Routh – National Alliance Capital Markets

Yes, thanks for taking my questions. Just two quick questions, first given that you’ve done all these cost cutting and right sized the organization, now moving forward, obviously, you have the new store in Chicago you’re thinking of doing but let’s thinking longer term, how big do you think Così should be, what’s the optimal size to leverage the infrastructure that you have in the brand name, given how well it’s known in areas like New York and Boston, but in other states it’s not even – people aren’t aware of who you are, what you’re doing, you would think it’s easily be transferable to many other locations in The United States where currently there is no Così presence? And then as kind of a follow-up question, given your equity cap now of $20 million or something, and the losses the company sustained for several years, it looks to me like the cash value of your NOLs is worth more than your equity, which doesn’t make any sense given where the equity is, so once you are profitable, you’re not going to be a tax payer anytime soon. I’m wondering if you could give us some kind of an update as to what the cash value is of those NOLs, be there on the balance sheet or reversed or not? Given what you’re doing, I would think at some point, you’ll be using those.

R.J. Dourney

Robert, I like the way you think. So here is what – let’s talk about how big can it be? So when we do a comparative analysis, when we look at brands that we know that we can compete with, right. So I’m going to go back here to New England for just a minute. We know that we compete head-to-head with Panera, and we know that we like to be in the same trade areas with Chipotle, and we believe that they like to be in a trade area with us. If I look at size of the portfolio, both of those brands, there is application for Così in just about every one of those trade areas. I will tell you that we need to be very disciplined about how we exercise that, so staying where we are at core markets, pushing out from those markets, and being very strategic as we move this forward. But can Così be 500 units, 1000 units, 1500 units; if we’re disciplined about it I think the sky is the limit. On the NOLs, you hit it. I mean Robert, there is $260 million worth NOLs on the books here, that’s a beautiful thing. That means that when this thing turns profitable, there is an awful lot of money that we can make before we have to pay any taxes.

Robert Routh – National Alliance Capital Markets

Okay, great. That’s exactly what I thought but I just wanted to double check on that one. And just one last question, given what you just said about who you compete with and also who you’re in a way are complimentary to, would you consider a strategic investment from Chipotle or a McDonalds if they were interested in doing that, similar to what McDonalds did with Chipotle years ago. What course you’d be – would entertain that?

R.J. Dourney

Yes, that’s a great question. But I think I’d be crazy not to sit down at the table with Steve Ells or anybody from McDonalds, I certainly would have a conversation. I’d tell you our experience here in Boston has been – we like to begin a trade area with Chipotle and I think they’d like to be with us. I think they view it as they rather see us across the street and we rather see then versus Panera. I think there is synergy, we experienced what we call the bright light syndrome when we’re both in a trade area, where our sales go up because we actually have the right competitor across the street, so all good. Thanks, Robert.

Robert Routh – National Alliance Capital Markets

Right, that’s what I thought. Thank you.

R.J. Dourney

Operator?

Operator

Yes, we have no further questions. I will now turn the call back over to management for closing remarks. Please proceed.

R.J. Dourney

I just want to thank all of you for joining us on today’s call, and we look forward to continuing to update you on our progress. And thank you for participating in today’s call.

Operator

This concludes today’s conference. You may now disconnect. Have a great day.

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