Good Times Restaurants Inc. (NASDAQ:GTIM)
Q1 2016 Earnings Conference Call
February 10, 2016, 05:00 PM ET
Boyd Hoback - President and Chief Executive Officer
James Zielke - Chief Financial Officer
William Slabaugh - Stephens Inc.
Mark Rosenkranz - Craig-Hallum Capital Group
Mark Smith - Feltl and Company
Gregory McKinley - Dougherty & Company LLC
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 Investors 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 in reconciliation to comparable GAAP measures available in our earnings release. Please note that the call is being recorded.
Please note that the call is being recorded and 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 for everyone for joining us again this afternoon. With me today is Jim Zielke, our Chief Financial Officer. And again, I will 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% or $13, 838,000 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 of Bad Daddy’s exceeded our expectations for the quarter and we are very happy with that.
Our brand for fiscal 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 day and a half and in Colorado, which in comparison to a 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 15% as it was in the first quarter. and the increase of 5.1% at Bad Daddy’s which included the loss sales from the storm that hit the East coast but have also have 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 always are impacted by the deep discounting in the market share battles that the big frames employ. And our best response to it has been historically is to continue to drive our brand differentiators as deep as we can and we are maintain 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 hand crafted 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 wage 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 have been doing before.
We also have multiple new products in development in testing as well as initiatives issues 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 last October, one in early December and one in early January, we are 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 year 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 this new stores, but even our existing stores, but as we look at seasonality as best we can, the opening honeymoon sales period 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 slight 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 open has a fully enclosable rooftop bar and patio and we have one more planned for this year with the rooftop bar and patio.
We are continuing to focus on sights that are near or part of upscale lifestyle retail center 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. Approximately 90% of our sales are generated from 12:00 PM to 9:00 PM and with a significant skew towards Friday to Sundays sales.
The next three stores we have are slated to open in Colorado are all of that profile in various scale 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 also sight benefit at as 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 would like to reiterate that our return on investment goal for Bad Daddy’s continues to be to generate 40% cash-on-cash return on average sales in the store’s second full-year. We estimate our new store investment is still on that of landlord contributions averaging less than $1 million, with rooftop patio storage slightly than that. And at $2.5 million targeted sales in a store level margin in the mid-teens, the concept is proving to able to generate those returns.
As the last two stores we opened Colorado that were opened for all of calendar 2015 and ended in the quarter, we just tend to have far exceeded that return goal with first year cash-on-cash returns well and access of 50%. As our development shifts from Colorado to North Carolina and other markets that maybe on federal minimum wage dates 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 number of new products in development and tested 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 a one of the goal for this year. It creases our desert sales and impact our average check through our monthly shifts specials that we have been rolling into other store.
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. And we are also rolling out of new menu in March to all the stores that has 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 would like to highlight a few points. We continue to make good progress on lowering our cost of sales, part of that is a benefit of lower commodity costs, but it's also through better purchasing and improved systems.
We are not seeing a profit flow through on incremental Good Times sales that we would like to and that’s due almost entirely to increased labor cost 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 fully across the board. Again, Jim will provide more color and quantify that impact.
Our Ops team is focused first and form most on executing our service and product promises and doing a great job of that but we are also continue to explore ways to engineer labor out of our system including the mix hourly and salaried employees. We are 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, products specification adjustments and purchasing changes during the quarter that yielded additional gains in December and those will be for more fully capture for the balance of the fiscal year. And while our focus has been on new store openings, we are continuing to refine our training process, labor model and management structure at Bad Daddy's and we believe that will also continue to yield improve 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 margins structure, as we put a larger base of restaurants in place and move the North Carolina stores to a similar labor model. That said, the integration of the acquisition is going very well and sales from the BDI acquisition have performed our expectations.
During the first quarter, we also carried a significant amount of excess management that have been hired for new stores and a portion that is expensed into G&A. So as new stores opened here this year and we have a larger base of restaurants from which to grow and develop management both our pre-opening cost 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 margins for the balance of the fiscal year and the for the year overall.
While there are some uncertainty in the microeconomic climate, we have not seen any affect 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 last thing or that significant.
We continue to receive great customer feedback on Bad Daddy's as we open these new store 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 are obviously very excited about the last two stores we have opened particularly as well as the new ones coming in the next few months.
I would like to turn it now over to Jim to review more about 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 and our Good Times brand for the quarter. Despite lapping of two-year comp sales stack of over 25% for the first quarter, we were able to post 4.9% comps for the quarter, which exceeded our expectation of 4%. We had about 4.2% year-over-year price increasing place, the 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, bacon costs increased by approximately 76% versus last year and were up slightly per versus last quarter. Custard and egg cost also increased year-over-year, but egg did improve slightly from the previous quarter.
Total labor cost at Good Times increased to 33.1% from 31.2% last year, most of which is comprised of a rise in our average wage rate 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 $1.090 million from $1.030 million or 5.8%. Restaurant level operating margin was 15.7% compared to 15.8% last year. We continue the reimaging program of our older drive-through stores in addition to more extensive remodeling of a few stores including two stores that underwent lobbing remodels during the quarter and were opened 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 calendar months 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 and 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 cost of sales gains of 6.5% for the quarter. Seven of the twelve 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 that second will continue to yield low-single digit same-stores sale 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 we explained in the last conference call, the higher cost in North Carolina is a result of several factors.
First, higher bar costs in that state about 4% higher as a percent of sales in Colorado. Second, a higher beef costs to beef used in our burgers in North Carolina. Third, a slightly lower average menu price around 2% lower. And finally, 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 and we have rolled out a new lower cost premium check 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 results in October and November for North Carolina.
Bad Daddy’s labor costs improved to 36.9% from 39.7% last year, 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 in the entire quarter decreased 13% and sales in North Carolina decreased 3.7% versus 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 teams. 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, we had targeted annualized sales of $2.5 million in the effects of seasonality in our first two quarters. We anticipate that our restaurant level profit margin for Bad Daddy's will increase meaningfully in the back half of fiscal 2016.
Total restaurant level operating profits 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, two new Colorado Good Times restaurants and three additional Bad Daddy’s restaurant 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 expenses, primarily relating carrying excess management labor in advance of store openings as Boyd mentioned.
The results have been an increased in operational supervision and administrative positions stock-based compensation expenses, 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 expanding in several key areas.
Our net loss for the quarter was $1,124,000 million, which included $725,000 of 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 have 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, 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 would 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, and particularly as we look into the last six months of fiscal 2016 from both the additions of new restaurants and the 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 white space 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, we will be able to and begin to provide more color on our expectations for fiscal 2017s growth. Again, I appreciate your time with us today. With that operator we will open the call for questions.
Thank you. We will now begin the question-and-answer session [Operator Instructions] and our first question is from Will Slabaugh of Stephens. Please go ahead.
Hi, thanks guys. This is actually Bill on today and congrats on another good quarter. Wanted to dig in a little bit more as far as we are seeing on traffic trends on the full service side of things with the Bad Daddy’s brand. I think you spoke to this briefly already and we are obviously aware of the cautious tone that many of your peers had heading into 4Q. and I realize you have a concentrated geographical exposure, but maybe could you speak to the cadence of the comp and how that evolve throughout the quarter. Maybe elaborate on the trends you are seeing, any difference between North Carolina and the Colorado market ex-weather impact, I think that would be helpful?
Yes, Billy this is Jim. So for Q1 October to December. October is actually the weakest month of the quarter for Bad Daddy’s and then we were up about 3% and then November, December were both 8% plus. We felt like we really had a really good December for both brands for both locations especially kind of in those high retail areas, we really saw a pick, which you normally expect that again just versus last year we saw pick up as well.
So as it relates to the start of this next quarter again, as we mentioned it 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 to that though as we do have some offsetting favorable comparison with the Super Bowl being in February this year versus the end of January last year.
And Super Bowl certainly is a really down day for us and we just happen to have the two teams in the Super Bowl this year, which contribute to a really soft Super Bowl Sunday for the Bad Daddy’s brand, but generally were again seeing the traffic cold 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 constrains 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?
I think that’s maybe still to TBD Billy, we like the model a lot, they seem to be generating more volume they do require a little bit more labor to step the bar upstairs. And we are continue to really dial-in in the optimal 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 opened this third when here in Colorado, we have one more slated in 2017 and in Raleigh with the rooftop patio. It's a little different just weather wise down there just because of the summer humidity, 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 appose to just the core model, can we generate that much more sales to really make it worthwhile.
As that said, from the 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 development. So, I think we will continue to have that as a part of our model, how many we do remains a little bit yet to be the same. I think the core model of that 36, 37 square foot in 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.
Our next question is from Mark Rosenkranz of Craig-Hallum Capital Group. Please go ahead.
Hey guys thanks for taking my questions. I had a couple of questions on the Bad Daddy's opening the two recent ones turning above the average and one below, was this kind of expected given the location of these two restaurants and can you just talk a little more about what's kind of driving the strengthen those two versus the other one and if you expect those to kind a continue to trend upwards or kind of just set that more?
Well it's defiantly not expected over any stores and that has less than our average to our target, the first one was the surprise, the last two again as I mentioned in my comments, I think we have thought that first one to be more similar to the ones I mentioned in North Carolina that are adjacent to downtown. Very high day time employment at some movie theaters, some entertainment, but it just doesn’t have the big weekend pop. Where the last two are in lifestyle centers and one is at a major mall but general growth redeveloped. We have on the outside, I mentioned so both of those have come out very high from the get-go.
And the next three are in very similar lifestyle centers, one is in a very upscale center in Colorado Springs, one is on All-Foods movies theater center in Walmart and then another redevelopment of lifestyle center for town. So I think that’s going to be our sweet spot and that certainly continued learning for us. The first one we think will continue to do well and that will make money, and I think it will continue to grow.
What 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 very positive in that stores. So we think that one is going to continue to grow some of its awareness and again the dynamic for this sights are a little bit different. But we are really dialing in for these lifestyle and retail center.
Honestly our North Carolina store our highest volume store during Colorado does not have a lot of retail around it and so again we had flow this one has some of those dynamics. One of our best leading indicators since we are simply taking share, we are not expanding a food pipe, one of our best leading indicator 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 kind of buy is a little more specialty products, your all natural bacon, your beef or chicken. So maybe talk a little bit how those costs have been trending over the last three months relative to kind of the more basic means and what has kind of your outlook been in your food cost relative to your last guidance?
We continue to see really favorable commodity costs, we peg the conventional market on our all natural beef and just pay a premium against that. So we will trending exactly as a conventional beef market trends, which is down and we anticipate that continues to be favorable for the balance of the year. Really same thing on chicken, we pay a slight premium for all natural, but we paid against the conventional pricing in the market.
Bacon is really probably the biggest outlier on which we paid a 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 low our costs throughout the fiscal year.
Okay great. Thanks for taking my question and congrats your great quarters.
Our next question is from Mark Smith of Feltl and Company. Please go ahead.
Hey guys, first of Boyd can you just repeat what the January comp was for Bad Daddy's?
So again, Mark 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. And did you say Good Times was flat, was that right?
Yes, we were flat, we were comparing up 13% in the prior year so if you look at our first quarter where we're 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 years stack. But honestly just month-to-month, it's so hard to peg because its significantly impacted by weather. Again we lost full day and a half here with Good Times with the snowstorm this week at 60 degrees and we're screaming. So we kind of look at it particularly during the winter months, month-to-month is going ebb and flow, but we are still comfortable with that for the quarter and have 4% range.
Okay, perfect. And the new menu coming out in March, can you talk about any price if you have taken on that menu?
Yes. We're not really taking much in a way of absolute price increases, we've done a little bit of tweaking in engineering where we're taking off some lower margin products and putting on some better margin products in each one of the categories, but we have just taken the 2% price increase in North Carolina in December. And with the commodity cost going where they are continued improvement month-to-month, quarter-to-quarter and year-over-year and our costs of sales were not going to be very aggressive on pricing.
We try and build check through our chefs' specials and some margins through our chefs' special 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 is some opportunity. But the mid March or the late March menu changes, we're taking a couple of burgers up, putting a couple on, adding a new salad, changing an appetizer and that sort of things. 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 if you look at burger. Do you guys see pressure from the other kind of better burger guys that are better 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 the market?
Yes that's a god question and we're competing against everybody here in Colorado with Smashburger being based here Five Guys with the pretty deep presence as well as another half of dozen Fast Casual guys. We really think our business is coming from and our core competitors of the full service guys, because we do close to 20% bar mix, because we're full service, we have a $16 to $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 selections standpoint and just competitively certainly systemically compete with everyone to some degree, but from an occasion standpoint, we are really competing head-to-head I think with the Causal Theme guys. And as I mentioned, when we look at some of the new locations and we're looking at Applebee's Chillies, Red Rob and Olive Garden out back [indiscernible]. And just that feel of Casual Theme, we think and the feedback we're getting is when people - we come into the market as kind of a 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 would much rather go on somewhere with those that feel Casual Dining competitors compared to maybe those counter serve burger players?
Yes, I mean we typically see them both, we're not concerned about either price point or really occasion competing head-to-head to 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 cost, we run a little bit higher labor and that's part of our value proposition. We infuse our stores with more labor and we certainly think we have a better quality product at similar slightly higher price points. And the feedback again from the customers as they get that they will want to pay a couple of bucks more for a better quality product and more vibrant atmosphere.
Okay. Perfect. Thank you.
[Operator Instructions] Our next question is coming from Greg McKinley of Dougherty. Please go ahead.
Yes thank you. I wondered if you could talk 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 waged staff and store management for the recent Bad Daddy's store 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 of 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 host, our servers and our bar tenders are all tipped positions. And so the volume that we do and with four table stations, we are able to make a really good wage.
Back of the house we've seen a little bit of inflation but even 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 then we could even being the hiring. So again but for whatever reason we're seeing a really good flow.
Management wise I think and I've talked about this before, were 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 experience management, a lot of those systems has stopped going they are pealing positions out, they are squeezing labor, they are adding lunch times from to dinner only concepts. That's really changing the landscape from a management standpoint and so were giving some really high quality management over that are looking for growth opportunity.
So knock on a word so far so good really at all levels, we are not really feeling much in terms of pressure on the quality of employee, nor on really having the boost wages much. We try and have a pretty competitive compensation system so that based on performance on financial on a customer service metrics that they can do well and make more than they could competitively at other ones, but again on part of that is really driven by $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 could 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 will then move into the entitlement permitting process and start construction hopefully late spring. And then again we've got Bad Daddy’s opening on Monday on Longmont, we've got Colorado Spring Burger Gate opening in late March and we have Fort Collins then push back a little bit from the development standpoint again not from ours and then we've got another two beyond that that we are targeting for late summer.
Mid February, late March, early summer and then late summer we are on the last two.
Okay. Just from a planning standpoint are there landlord challenges at all that you can foresee at this point on those summer openings or do you feel like you and the Landlord and the development are for enough down the path where if you are 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. However, there are some risks or could there be certainly, we have actually killed one deal that we had in the pipeline. Again, just based on our 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 negotiations, the design period permitting and then construction. Construction we've gotten down to 75 to 80 days it's really the frontend piece that's longer to get through the process, but with where are today Greg we feel okay.
Okay, very good. Thank you guys.
[Operator Instructions] If there are no further questions, this concludes our question-and-answer session and conference call. Thank you for attending today's presentation. You may now disconnect.
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