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Good Times chain considers further store closings as revenues slip

By   – Reporter, Denver Business Journal
Aug 10, 2018

After closing two Good Times locations over the past six months, leaders of the Lakewood-based restaurant chain said Thursday that they will continue to examine whether to cease operations at other stores that are not profitable.

The statement, made during the Good Times Restaurants Inc. (Nasdaq: GTIM) third-quarter earnings call, came despite the fact that the company’s Good Times Burgers & Frozen Custard brand recorded positive same-store sales for the sixth quarter in a row, while its full-service Bad Daddy’s Burger Bar brand increased comparable sales for the 13th quarter in a row. After struggling at times with its profitability — so much so that two board members quit late last year before the company reached a deal to bring them back to their positions — Good Times also recorded a diluted income of two cents per share in the fiscal quarter that ended on June 26, up from a 2-cent-per-share loss during the third quarter of 2017.

But even with those big-picture successes, CFO Ryan Zink noted that the company shut down an Aurora store during the second quarter of this fiscal year and then shuttered a Denver location in the recently ended quarter, both of which Good Times intends to sublease to other businesses for amounts that are equal or greater than the income that the stores were generating. And he said officials will examine other Good Times stores that are struggling with profitability to see if those locations also would prove better to the company’s bottom line with a similar closing strategy.

“We have a very small number of slightly unprofitable or marginally unprofitable Good Times locations,” Zink emphasized.

Overall, quarterly same-store sales at Good Times’ 36 locations increased 3.8 percent year-over-year, while comparable sales at Bad Daddy’s rose 0.5 percent for the quarter. Combined net quarterly revenues jumped 20 percent year-over to $26.2 million.

Bad Daddy’s, which has opened six new units in the past year as it continues to break into new markets in the southeastern United States, recorded a 37 percent jump in revenue as compared to the third quarter of 2017, bringing in $17.8 million at its 31 locations. President and CEO Boyd Hoback said that the class of five 2018 restaurants the brand has opened has been “very strong on average” and that those stores should settle into a post-honeymoon sales trend “at or above our system average.”

“We are now open in seven different metropolitan areas and are on track to enter three or four additional new areas in fiscal 2019 as we continue our expansion focused primarily on the Southeast,” Hoback said.

The Good Times brand, however, recorded a sales drop of $321,000 to roughly $8.2 million for the quarter, even as it increased menu pricing by 4.4 percent, Zink said. He attributed the losses to the two closed stores and to reduced year-over-year sales in Greeley, offset by the same-store sales increase at other sites.

The company-wide menu-price increases actually were slightly higher in Colorado than in other states because of the Centennial State’s “unfavorable statutory minimum wage” on top of rising prices for ingredients like bacon and beef, Zink said. Colorado is in the midst of a four-year, voter-approved raise in the minimum wage that has moved the floor pay level up to $10.20 per hour this year, with it scheduled to reach $12 an hour in 2020.


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