Chanticleer Holdings, Inc. (BURG) CEO Michael Pruitt on Q4 2018 Results - Earnings Call Transcript

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Chanticleer Holdings, Inc. (BURG) Q4 2018 Earnings Conference Call April 1, 2019 4:30 PM ET

Company Participants

Jason Assad - Head of Investor Relations

Michael Pruitt - Chairman and Chief Executive Officer

Patrick Harkleroad - Chief Financial Officer

Fred Glick - President

Conference Call Participants

Mark Smith - Oak Ridge Financials

Mike Grondahl - Northland Securities, Inc.

Ben Rabizadeh - Ascending Capital

Operator

Greetings, and welcome to the Chanticleer Holdings, Inc. Fourth Quarter and Year-End 2018 Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Jason Assad, Investor Relations. Please go ahead.

Jason Assad

Thank you, operator. Good afternoon, and welcome to Chanticleer Holdings’ fourth quarter year-end 2018 conference call. With us today are Mike Pruitt, Chanticleer’s Chairman and Chief Executive Officer; Fred Glick, Chanticleer’s President; and Patrick Harkleroad, Chanticleer’s Chief Financial Officer.

Before I turn the call over to management, please remember during the course of this conference call we will make certain forward-looking statements. Any statements that are not historical facts contained in this call are forward-looking statements as the term is defined under the Private Securities Litigation Reform Act of 1995 that are known as the PSLRA, which statements may be identified by words such as expects, plans, projects, will, may, anticipates, believes, should, intends, estimates and other words of similar meaning.

Such forward-looking statements are based on current expectations involve known and unknown risks, a reliance on third parties for information, transactions or orders that may be cancelled and other factors that may cause our actual results, performance or achievements or developments in our industry could differ materially from anticipated results, performance or achievements expressed or implied by such forward-looking statements.

Factors that could cause actual results to differ materially from anticipated results include risks and uncertainties related to the fluctuation of global economic conditions, the performance of management and our employees, and our ability to obtain financing or required licenses, competition, general economic conditions and other factors that are detailed in our periodic reports and on documents we file from time to time with the Securities and Exchange Commission.

The forward-looking statements contained in this press release speak only as of the date the statements were made and the company do not undertake any obligation to update forward-looking statements. We intend that all forward-looking statements to be subject to the Safe Harbor provisions of the PSLRA. In addition, certain of the financial information presented on this call references non-GAAP financial measures. The company’s earnings release which was issued this afternoon presents reconciliations to the company’s GAAP financial statements.

Finally, this conference call is being webcast. The webcast link is available on the Investor Relations section of our website at chanticleerholdings.com.

With that, I’d like to now turn the call over to Chanticleer’s CEO, Mike Pruitt. Mike?

Michael Pruitt

Thanks, Jason, and thank you, everyone, for joining us this afternoon for our fourth quarter and year-end 2018 conference call. At the beginning of this past year, I made the statement that we anticipated 2018 as a potential to be a transformational year for our company. I suggested that because of the groundwork laid in 2017. We believe 2018 would represent an inflection point for our business.

I’m pleased to say that during the last year, we’ve made substantial fundamental progress positioning our platform for the future. Ss I speak, I believe Chanticleer Holdings has never been in a stronger position than it is today. While it clearly hasn’t been easy to get at this point, it is our intention to continue building a top of recent momentum, while leveraging the increasing scale of our Better Burger brand.

It’s for exactly this reason that we recently significantly enhanced the quality of our management team, led by Fred Glick as President, Patrick Harkleroad as our CFO and Troy Shadoin as our Chief Accounting Officer. Fred is a 37-year veteran in our restaurant space, who brings to Chanticleer expertise that encompasses organizational development, managerial development, business expansion, corporate imaging and market penetration.

He has a documented track record of achieving consistently positive sales and growth – profit growth over many consecutive years through corporate cultural management and driving employee engagement. He maintains a passion for inspiring, developing and managing high-performing teams to achieve and exceed organizational objectives.

Most recently, Fred served as the VP of Brewery Restaurants for Karl Strauss Brewing Company, where he successfully executed hospitality and social media initiatives focusing on 5-star yelp experiences. During this time, the company more than doubled their 5-star average review under – from under 30% to over 62% bringing all 10 locations to a 4 star or better average.

While there, he also effectively rolled out HotSchedules and CTUIT tools to improve store level financial analysis and hourly productivity, successfully opened new flagship locations in Anaheim and Downtown Los Angeles, successfully rebranded and remodeled three locations leading to double-digit sales increases, partnered with Ken Blanchard Companies to launch Blanchard certified management development program, instilled Safe and Clean as core values to all employees and partnered with purchasing professionals to save hundred of thousands of dollars in the first year efficiencies.

Prior to that, he served five years as VP of Operations for Phil’s Barbeque, one of Southern California’s highest volume barbeque restaurants and served 15 years as President and COO of a $70 million, 25 store Hooters restaurant franchise he grew from a grass field in Omaha, Nebraska.

Fred is here for one reason and one reason only, to grow top line results, maximize profitability and position us to be a relevant player in the restaurant space. His goals are directly aligned with those of our shareholders with a compensation package that involves an equity incentive program, where he participates in the creation of shareholder value.

In addition, one of the first thing Fred did after joining the company was make an insider purchase of shares in the open market. Now that I’ve gotten to know Fred and the two months of recruiting him and the four months working side-by-side, I was honored to recently nominate him for the top 100 best casual Movers & Shakers. Fred will be updating you in the recent operational progress later on this call.

Our new management team also has been further complemented by the addition of our new CFO, Patrick Harkleroad; and our new Chief Accounting Officer, Troy Shadoin. Patrick came to Chanticleer with over 15 years of CFO, M&A and capital raising experience.

During that time, he was a CFO consultant with the Business Enhancement Group of Carolina Financial Group, which focuses on providing financial and operational consulting to CFG’s portfolio and client companies. Patrick served as Chief Financial for one of the CFG’s portfolio companies, Trinity Frozen Foods, LLC.

At Trinity, Patrick oversaw all financial and accounting functions, while also being integral in bringing operational best practices to the company. He was hired to turnaround cash flow as the company was in a challenging financial position. He created processes for inventory management, developed standard operating procedures, integrated customer sales cycles, and worked with operations to streamline production.

He was also responsible for managing all operating funds, closing the books on a monthly basis, reconciling accounts and presenting monthly financial reports in an accurate and timely manner to Trinity’s Board. Through his efforts, Trinity’s cash flow position improved significantly, and was acquired by a private investor group within nine months of him leading its turnaround.

Troy Shadoin was recently named our Chief Accounting Officer. Troy has a seasoned certified public accountant, who brings to Chanticleer strong track record of analyzing accounting issues, financial reporting, project planning, schedules – scheduling presentation, internal control improvement, collaboration and team leadership, in addition to possessing a management style that is focused analytical and results-oriented.

Prior to joining Chanticleer, Troy was Corporate Controller for NASDAQ listed Air T, where he was responsible for financial reporting and accounting for the consolidated group of companies. Duties included preparation and review of quarterly and annual financial reports Form 10-Q and 10-K, consolidation of 15-plus subsidiaries and handling all complex accounting matters. Prior to his role at Air T, he was a Senior Manager at Cherry Bekaert LLP.

With the recent additions of Fred, Patrick and Troy, I believe we have put together an outstanding executive team capable of stewarding the company’s future growth, both operationally and financially. Our new team will allow us not only to reach much greater scale, but also to manage it with the absence of considerable increases in SG&A.

I would like to thank all three for the substantial value they have already brought to Chanticleer. They have already proven themselves as highly complimentary to our existing team. I can without hesitation say that never in the history of Chanticleer, have I personally felt better about our executive team and the value I believe we have the potential to create together.

I’d like to now briefly address something that I know remains on all of our minds. Despite what most we consider to be tangible fundamental progress of our business, the value of our stock, has by all accounts underperformed. As someone who has invested a sizable amount personally years ago and has continue to buy as recent as an open market and at both 350 and 375 is evidenced by our public filing, along with other members of our Board, we share your disappointment.

It’s worth noting that we paid $20 million all in equity three years ago not including for just fresh, the capital invested in Hooters South Africa and our minority stake in the Hooters parent company, where the EBITDA has doubled since our purchase. In the case of LBB, we acquired eight units and today, the brand has 20 operating.

All of us at Chanticleer continue to believe that there has never been a more sizable disconnect between the fundamental value of our asset and our current share price. With this in mind, we are continuing to explore options with respect of best unlocking the value in certain holdings, including our minority stake in the Hooters parent company.

While we can never control the short-term price of our stock, we intend to continue building, working to build the fundamental underlying value. I believe that the best day for Chanticleer are ahead of us. I look forward to continuing to work in concert with my fellow members of our management team and Board of Directors, all on behalf of our employees and our shareholders.

I’d like to now turn the call over to our CFO, Patrick Harkleroad, for a look at Q4 and 2018 year-end financial results.

Patrick Harkleroad

Thanks, Mike. Good afternoon, everyone. Following on Mike’s comments, 2018 was a foundational year for Chanticleer Holdings. Not only do the company experienced strong unit growth with the addition of four new Little Big Burger locations, one new BGR location and the acquisition of two other BGR locations that were previously franchises. But the company was able to extend a maturity of its previously issued $6 million debentures with strategic investors from December 31, 2018 to March 31, 2020.

This extension was crucial to allow our new management team the runway needed to continue to make the cultural, operational and financial changes needed to build the Chanticleer platform. While still early in my tenure with the company, I’m very pleased with our progress to date on the accounting and finance front. I’ve been working closely with Fred to create a culture of accountability and ownership across the Board, both from an operational and accounting standpoint.

Additionally, Troy Shadoin, our Chief Accounting Officer is leading the 10-K audit and SEC reporting and already improving the year-end and audit process significantly. I’m pleased to announce that we were able to fully remediate the material weaknesses that were reported in the company’s 10-K in 2017. This remediation was a strategic focus of the company throughout the year and to Troy’s efforts we were able to have a positive outcome.

I believe this type of positive news demonstrates the direction of the accounting and finance function going into 2019. Certainly, I’m focused on streamlining and enhancing our financial procedures and processes to allow the management team to have the data and analytics to better manage our current base of stores and allow us to make better decisions as we focus our efforts and resources on the Better Burger segment for growth.

As an example, we as a management team, are in the process of developing a weekly dashboard that will support our partners in the field to provide them more robust real-time financial information to manage each of their businesses more effectively.

In addition to the ongoing improvement in financial management, we are evaluating options currently of divesting non-core assets that would include our international and non-burger-related businesses to create a more focused platform for growth, as well as a way to generate cash to pay down our debt obligations as required under the debt extension and improved the balance sheet.

Looking to the operating results for the year, revenues were $40.6 million, compared with $41.4 million in 2017, with $1.7 million of that revenue being generated from 70 stores added in 2018. In quarter four, revenue – revenues were $10.1 million versus $10.1 million from the prior year.

Looking ahead, we are continuing new store growth as we have opened one new Little Big Burger in 2019 and have two more opening in Q2 2019 as well. We have also signed a new lease for a new store expected to open in Q3 2019. Through these new store openings and the market segmentation study that Fred will discuss later, we are expecting revenue to increase on a year-over-year basis as we move into 2019.

Cost of sales as a percentage of restaurant sales improved to 33.5% in 2018, compared to 33.8% in 2017. This improvement is attributable, in part to favorable movements in commodity prices, as well as the expansion of the Little Burger brand.

Operating expenses increased to 59.4% for the year from 57% in 2017. Those increases were driven by the 70 stores opened in 2018, as new stores typically take six months to season, as well as negative operating leverage that resulted from underperforming stores that were closed, as well as same-store sales, which are being addressed to the market segmentation study I mentioned.

General and administrative expenses as a percent of total revenue remain consistent at 11.3%, compared to 11% in 2017. As mentioned previously, one of our primary objectives is to continue to evaluate all our financial and operational processes determine where there are efficiencies, so that we can build a financial and operational platform that will be scalable as we continue to focus on growth.

Operating loss from continuing operations was $5.4 million in 2018, as compared to $5.2 million in 2017. Excluding the non-cash impairment charge, operating loss was $3.4 million, compared to $2.8 million in 2017.

Our restaurant EBITDA, a non-GAAP measure was $3.7 million for the year, compared to $4.2 million in 2017. Non-GAAP adjusted EBITDA was a loss of $376,000, compared to a profit of $234,000 in 2017. However, cash provided from operating activities was $575,000 in 2018, compared to a negative use of cash of $725,000 in 2017.

Looking ahead, our key strategic objectives for 2018 include strengthening the balance sheet to provide the foundation needed to support accelerated growth. We are also focused on streamlining our business model to focus on the domestic burger business. We will continue to pursue exiting non-core operations to generate cash, refinancing our current debt obligations and strengthening our balance sheet to improve liquidity and provide working capital and financial flexibility going forward.

We expect to open four to six new burger locations annually through a combination of company-owned and partner-funded company stores. Additionally, we are evaluating acquisition opportunities in the Better Burger segment, as we are building a platform for growth that will allow for add-on and tuck-in acquisitions to drive top line growth, growth in restaurant-level EBITDA and significant improve overall company cash flow.

I believe that in the short time, the joined I’ve been at Chanticleer, we’re taking the right steps to move towards the goal of building an institutional level accounting and finance department that will be a resource to allow Chanticleer to leverage the platform we have built to drive better decisions with the appropriate data analytics, improved operations and ultimately drive stronger cash flow growth.

I’ll now turn the call over to Fred Glick, our President.

Fred Glick

Thank you, Patrick. I’m very pleased with our progress since I joined the team approximately four months ago. I indicated when I joined that my intention was to immediately hit the ground running and that’s exactly what I’ve done. It’s been a busy, but very exciting and rewarding four months here at Chanticleer Holdings. I believe this early groundwork sets the stage for anticipated tangible and measurable results for our shareholders.

An important part of this strong foundation for the future included two new additions to our team in the accounting arena. I simply could not be happier with our additions of both Patrick and Troy. I’m confident they will contribute to elevated financial processes and accurate and timely financial statements, which should enable our operations team to elevate Chanticleer’s profitability targets.

Currently, we are deep in the process of updating our entire people process, including recruiting, selecting, onboarding, career pathing, training, ongoing development, retaining and engaging team members at all levels with the ultimate goal of building loyal guests, sales and profits.

We updated our organizational chart and are currently finalizing all job descriptions at every level of this company. In addition, we completed an in-depth employee engagement survey where we received 321 responses from team members at all levels. Listening to our teams’ needs is the start of our better managing guest count trend. We’ve identified specific improvements from this survey, including improving onboarding and training, and development, as well as improved benefits, rewards and recognition systems.

As for the strategic process, my first 30 days were spent visiting over 50 Chanticleer locations across the country and listening to as many of our shareholders and stakeholders as possible.

During the next 30 days, we held town hall meetings for each brand we own with over 100 of our most important team members, our unit level general managers and above store leadership to determine the why, how and what of our business models, as well as discussing the shared values and behaviors that will be critical to build operation.

Also, during the last quarter, 18 of our top leaders and corporate support teams read, thought and learned, The 7 Habits of Highly Effective People as we all shared ground rules for personal accountability, how to lead a principle centered life, servant leadership and common language around best-in-class communications strategy. Again, we are starting with the heart and are now attacking head, as our team dives into Jim Sullivan’s multi-unit leadership book.

Finally, I’m very pleased to announce that we formally launched our guests segmentation study for all three of our Burger brands, including our franchisees in the last month.

To date, we have received over 5,000 responses. The key insights we gain from our guests will be the building blocks for our core ideology, strategic planning and marketing strategies for each brand. We plan to hold two-day strategy sessions regarding our strategic plans April and May, intending to roll operational tactics live in time for summer.

For operations, the biggest opportunity I see to build sales and profits currently for our brands is a coherent strategy for the growing delivery and take out marketplace, as well as building a best-in-class loyalty platform. I believe the biggest consumer trend driving change for our industry is the rapid evolution from dining in to take out and delivery.

Brands in all segments, from QuickServe to Fine dining must carefully navigate how to get consumers their products, how they want it, when they want it, and now where they want it. This demand affects our entire operation. New kitchen designs and expo areas with pick up cubbies, timing standards for delivery, point-of-sale integration for the many delivery companies, delivery driver access, short-term parking, and delivery-specific menus are now table stakes.

Substantial costs like reworking existing kitchens, up to 30% delivery fees, delivery to POS integration, phone app and website development and loyalty programs all must be synergized to develop a successful program. Brands must choose how to meet the growing offside demand and evolve or face eroding sales as guests choose new options.

For our brands, the good news is that we already partnered with Toast Point of Sale, which has an open API and allows us to plug and play technology accelerators. We are evaluating best-in-class loyalty platforms like Thanx, Punchh and Paytronix that will help us craft targeting marketing campaigns and build frequency and loyalty. We are also analyzing platforms like Olo and Restaurant Revolution to integrate those programs with delivery partners and our point-of-sale.

We have partnered exclusively with DoorDash in order to help minimize the onerous costs associated with delivery by personally the external deliver companies simply as a marketing tactic that allows new guests to try our products with their platform. It will be our focus to transfer those guests to our own loyalty platform to maintain our critical customer information and further reduce our expenses to deliver our product.

Delivery is just one component of our strategy as we get closer to choosing and launching loyalty and multi-channel personalized marketing for our customer later this year. We will add new mobile applications, feature and rewards, the IP tiers and in-app ordering. This all in one customer engagement platform will help us leap forward with targeted e-mail marketing and integrated customer feedback tools without buying and implementing multiple different technologies.

While we have a lot of work ahead of us, we are making very measurable and positive progress. I expect tangible results will be present in future earnings releases throughout the balance of the year. I’m very excited to be here and look forward to working with Mike and our team members to accomplish our collective goals.

That concludes my prepared remarks. Operator, you may now open the call for questions.

Question-and-Answer Session

Operator

Thank you. At this time, we’ll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Mark Smith with Oak Ridge Financials. Please proceed with your question.

Mark Smith

Hi, guys. First off, can you walk us through a little more in-depth the restaurant operating expenses during the quarter? The jump there just caught us a little off-guard?

Patrick Harkleroad

Sure. This is Pat. I think as far as one of the increases in their operating expenses, we had – as we mentioned, we opened 70 stores to the year. And as restaurant stores are seasoning, there’s a little bit higher operating costs that are going as you see it in our stores. So the breakdown of stores from an operating expense standpoint are driven by the new store openings in sort of in the initial part of their seating and – as well as through that we had some increases in labor as well that sort of – was being driven by fair market conditions throughout each of our markets.

Mark Smith

And you guys are called out in footnotes on adjusted EBITDA, the additional non-cash expenses impact in operating results, can you walk us through $400,000 something can you kind of walk us through what that was?

Michael Pruitt

Sure, absolutely. So we’ve had some accruals that were in that previous three quarters that we need to do true ups at the end of the year that were related to some deferred [indiscernible] payroll taxes, and those non-cash items were basically true up at the year-end for an under accrual for the first three quarters.

Mark Smith

Okay. And then looking at your new unit guidance four to six, and I just want to clarify, the four to six are all company-operated or some franchised openings built into that four to six?

Michael Pruitt

The franchise opening built into the four to six, but there are some still remaining joint venture opportunities that we’re considering in that four to six.

Mark Smith

Okay. So that’s company [Multiple Speakers]

Michael Pruitt

We’ll treat that as core.

Mark Smith

Okay. Any franchise openings that we should expect as we look into the remainder of this year?

Michael Pruitt

There’s a couple of things that are potential, but nothing firmed up that we disclose that.

Mark Smith

Okay. And then similarly, any visibility on closures, either on the company side or franchise side as we look out for the next few months or quarters?

Michael Pruitt

But we did – we had one profitable location in the American Burger chain and we had an opportunity to sell the location, which we did in Q1 in the K as of subsequent event. So it was a win-win. We got out of a store that was losing about 100 grand a year and actually paid to buy out at least to get out of the store. So that, that will be a Q1 event disclosure.

And then on the – as it relates to BGR, we’ve said a number of times that we have two units there that are layovers, I mean carryovers from the original purchase that we’re not profitable and one of those we can close towards the end of this year. So we will close it in the Q – later Q3, early Q4.

Mark Smith

Okay, great. Thank you.

Operator

Our next question comes from the line of Mike Grondahl with Northland Securities. Please proceed with your question.

Mike Grondahl

Yes, thanks. Hey, the first question is just for Fred. Fred, on the order online seek out opportunity, what do you think is the range of revenue that can generate on the existing footprint? If you could execute on that, not necessarily in 2019, but over the next couple of years?

Fred Glick

Yes. So our Little Big Burger brand in Portland is not even participating currently in delivery. Our other brands have a number of different tactics. They’re currently using and they include many different delivery companies with 25% to 30% delivery fees. So we were able to negotiate an exclusive with DoorDash to substantially reduce the fees we pay in their marketplace, as well as have them sort of be our delivery partner or orders placed through our app. I think that diving into this, we’ll see an increase somewhere in the 3% to 5% range on top line overall for the company.

Mike Grondahl

And would you expect to see that in the second-half of 2019, or how does that kind of layer in?

Fred Glick

Yes. we’ve had several strategic calls with DoorDash, and I see that layering in starting in Q2. And then really as we start promoting it through our loyalty platform and sort of transitioning them over into our consumer, then I see that really Q3 and Q4 going stronger.

Mike Grondahl

Got it. Okay, Mike, maybe for you. Any other update on disposition, whether that is the UK or South Africa or some of the Hooters you own, sort of what’s the updated thinking there?

Michael Pruitt

Well, I mean the thinking hasn’t changed at all. Unfortunately, there’s not a waiting list of buyers for Hooters-related locations. I mean, the one that we are closest to executing on is South Africa.

We have a non-binding letter of intent. We’re waiting on some clarification on a couple of things that we thought we would have had long by now as it relates to the South African government with some things that we need to get comfort on in order to execute and make the sale, including the gaining that we announced as to how that would go forward.

So we think that’s fairly imminent. When I say imminent, I think it’s a Q2 event that will have a clarification and some means to execute there. As it relates to [indiscernible], we’ve got no comfort that the guy has not sold any of his commercial real estate. We stay in constant contact in order for that to occur.

And then the two in the Pacific Northwest, we’ve had some discussions with a party of late, but nothing that we’re comfortable that is going to close. In our gaming revenue, profitability from the gaming revenue, it was another really good year. So it would be very difficult. We had to do something unless we got a fair price for.

Patrick Harkleroad

By the way, we’ve had some conversations with Hooters that I don’t know how closely you follow the Hooters, but they have created a fast casual version of the brand called Hoots with great success in Chicago, where they did a test market and it’s actually knock the socks off. And they are committed now to open two more in Chicago and three in Atlanta.

And one of the conversations we’ve had with them is potentially converting our Hooters and Jensen Beach to a fast casual version of that and then taking our second gaming license there and creating a standalone second location in lieu of a closet inside of Hooters.

So, that’s – if we can’t sell it, that’s an avenue that we’re pursuing, because we think that would significantly enhance the profitability, given we could basically wouldn’t necessarily double the gaming. But when we look at gaming in the one location there with the freestanding location separated versus the gaming revenue in the closet inside of Hooters, it’s about 2 to 1. So I think, if we could do that, it was the win-win-win. So we’re exploring that with the Hooters Corporate as we speak.

Mike Grondahl

Got it. And then maybe last question, and Mike and Fred, maybe both can give your opinion. But I’m curious how many more restaurants do you think you guys need to open to kind of get to that scale? You have this platform. It’s been about achieving scale. You opened up a bunch in 2018, it sounds like you got four to six-plus planned in 2019. But how many more after 2019, do you think you need to you kind of achieve that scale in a consistently adjusted EBITDA positive?

Patrick Harkleroad

Well, I think it’s two pieces, Mike. I think one is, if we can consistently open four to six-plus stores and they perform really well, then obviously that goes a long way. And I think that – it’s been one of the focuses of many of Fred since he’s been here and that is putting this distance in place to make sure that the locations that we pick going forward are locations that we have a high degree of belief that they’re actually going to work based on what we’re doing.

As Fred mentioned, his first step was to interviewer our people about our brand. The second step which we just put in the process of completing as interviewing our customers about our brand. And actually in two weeks, he’ll be delivering the results of the over 5,000 responses we got from our customers as to what their view of our brand is.

And with our marketing team that we’re bringing onboard, they come up with the strategy for going forward, not only from a marketing standpoint, but also taking that information and working with the real estate firm to say, “Okay, these are the locations where those customers live that, that love our brand and these characteristics of our brand”.

So, we’ve scaled back a little bit in terms of what our guidance was for new stores this year to make sure that the ones that we opened, we get it right and we feel really good about the one we announced already that we’re opening in Portland right next to the Apple store in Downtown Portland. We feel amazingly good about the Capitol Hill store in Seattle. We feel good about Green Lake.

As Fred said this morning at a breakfast meeting that we had with our joint venture partner there, who’s in visiting us in Charlotte is, we’re really going to focus on Seattle and make sure everything that we’ve learned in all this, that’s the place that we feel we have the most chance to make an impact and really make those locations work.

So it’s a work in progress. We – if we can take these existing locations from $750,000, $800,000 and get a more attractive $1 million and opened four to six good stores a year. We’re not far away from that, and that’s the whole mission of the team here as we’ve put it together. And so I think over the next two to three weeks, you’re going to start seeing news coming out of the partners that we’ve chosen to execute with. And then as Fred said, by Q3, you’ll start seeing meaningful impact in the results and that meaningful impact will continue as we go forward.

Mike Grondahl

Got it. Maybe I just ask one more kind of direct to Fred. Fred, how many underperforming restaurants you think you have? And if you could get all of those up to par or a little better, what’s the incremental revenue?

Fred Glick

It’s a great question. One of the things in doing these brand segmentation studies is to raise the entire brand, not just particular units. And to do that, we have to identify our unique selling proposition. And really what we do better and different than everybody else. What’s our differentiated factors, and why people visit our brands.

So we’re going to be doing those breakouts with our marketing company and our loyalty partner, I guess, engagement partner to actually hit the ground running on those things. I think we have taken action on a number of the underperforming units over the last 12 months. And there’s probably a handful more, maybe five that I’d like to see rise.

But to me, we don’t have any specific plans to close any more locations at this time, we’re going to try and lift all of the brands together. So whether it’s a Little Big Burger initiative or just fresh, or BGR, we will try and lift the entire brand, including our franchise partners really part of this process.

Michael Pruitt

Because we did, Mike. We did get buy in from the franchise partners as part of their segmentation study as well. So they wanted to hear the results and from their customers just as much as we did. So we feel good about the entire brand as we move forward.

Mike Grondahl

Got it. Okay, hey, well, it will be interesting to see how are our 2019 goals and good luck.

Fred Glick

Thanks, Mike.

Michael Pruitt

Thank you very much.

Operator

[Operator Instructions] Our next question comes from the line of Ben Rab with Ascending Capital. Please proceed with your question.

Ben Rabizadeh

Hey, guys, how are you doing? So looking at the guidance of four to six stores annually, that’s down from 10 to 12 in the last quarter. I personally pulled back a little bit and kind of characterize what phase the company is in? Then 2018 previously indicated this is the growth phase and it was really a question there. And it looks like, we set back that a little bit. If you can kind of speak to that change in strategy and really what’s the goal is in 2019 and maybe talk about 2020, 2021 a little bit?

Fred Glick

Yes, Ben, this is Fred. I probably put the brakes on a little bit when I got here, and then we transitioned out as we look into who is on the team. Did we have the right people in the right seats of the bus. We made some big changes on the financial side. And I really wanted to dig in and do the hard work on the brands themselves before we went out and growing more stores.

We had opened some locations that were not performing to the average unit levels that I would have liked to see. And so I’ve sort of said, let’s slowdown a little, let’s get this information, so that when we do go out into the marketplace and go, we have a well thought out strategy for where we’re putting them, who we’re talking to the messaging and how to drive top line sales.

So, again, Mike mentioned it earlier, I believe there’s a play to bring all these stores up closer to $1 million unit average volumes. And the incremental dollars in restaurants are where the money is. And once you sort of go down in negative guest counts and sales, these get very painful to run.

So we want to take the whole brands increase them And once we solve that problem, then we can accelerate back into those metrics again, where we’re growing at a quicker rate.

Ben Rabizadeh

Okay. So the four to six tied in, it set annually, but are you really indicating here that, that’s really just for 2019 at this point and we’re going to try to increase that going forward?

Fred Glick

Yes, that would be my inclination, which would be, we turn the tide on negative guest count trends through this the initiatives we have. We build loyalty and frequency and drive some bottom line results and then we accelerate the growth from there.

Ben Rabizadeh

Okay. And Fred, can you give me a little color on how you’re thinking of Little Big Burger? Do you see that as just one of many brands you’re going to be operating, or do you have bigger goals for that brand?

Fred Glick

I think, we have big goals for most of our brands. I do think there are regional players that will stay regional, but I do – Little Big Burger has the unique selling propositions that we have not been able to take advantage of and properly educate our consumers on. And I think that some of our signature items like the truffle fries are unique in what we do and I think they will play well across the country.

Ben Rabizadeh

Okay, just a couple of quick more. This four to six plan in 2019, is that’s taken into account the current cash position or could you kind of scale back a little bit? Because you’re trying not to do a capital raise there. Can you just give me your thinking on your cash position and actually you need capital to execute on your plans?

Michael Pruitt

Well, I can say this, Ben. First of all, we’re going to discuss what’s been publicly discussed. But the four to six scale back was not capital reflective. It was reflective of figuring out what Fred has mentioned as the best path go forward and making sure when the best place did not make any – we’re not saying at this point that we’ve made mistakes with the PCL [ph] in Charlotte. But what we’re saying is those units to date have not lived up to the expectations that we’ve seen in Portland and the first step is to figure out those units and make those units were before we go aggressively trying to expand on the business model at hand.

Ben Rabizadeh

Yes. Okay, I got that. I don’t want to put you in a quotient here, but if you can just comment what the current plan is on 2019 for the plan that you have with these four to six? Do you envision that meetings with capital rather than what you have available?

Michael Pruitt

Ben, we have joint venture partners that have three left on their current commitment of 10. We have Denny Hamlin left, it has some capital commitment for up to nine more. So at this point, we’re evaluating those options, as I mentioned earlier. Ryan as well was in town today looking at his stores and having those discussions about moving forward. And will – as we have those plans, we’ll share them with the public.

Ben Rabizadeh

Okay, great. Mike, last question for you. Are you able to give us an update on our HOA, the sales process?

Michael Pruitt

Yep. Again, I’m on the Board. I’m under strict confidentiality, and I’m not prepared to discuss it.

Ben Rabizadeh

Got it. All right. Thank you, guys. Good luck.

Fred Glick

Thank you, Ben.

Michael Pruitt

Thank you.

Operator

Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to turn the call back to Mike Pruitt, CEO, for closing remarks.

Michael Pruitt

Thank you. I’d like to thank, everyone, for joining us today and more importantly for your continued support. We are clearly optimistic about the future at Chanticleer. We have the right team now in place in the platform capable of achieving far greater scale in the future.

We expect many of the actions undertaken in recent months than being taken as we speak, they start resulting in meaningful and measurable results going forward throughout the year.

Lastly, I’d like to congratulate our Little Big Burger partner, Denny Hamlin for his win at 2019 O’Reilly Auto Parts 500 in Texas yesterday. As part of – when Denny wins, we all win promotion. We are offering free truffle fries to the first 1,100 guests. And with the purchase of a burger at all three of our Chanticleer Little Big Burger location. We look forward to speaking with you again during our Q1 2019 conference call.

Operator

This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.

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