10-K: Good Times Restaurants Inc. Reports Fiscal Year 2024 Results, Announces Share Repurchase Expansion

Good Times Restaurants Inc. saw a revenue increase of 3.0% in fiscal year 2024, driven by strategic acquisitions and same-store sales growth in the Good Times brand, while also expanding its share repurchase program.

Summary

• Good Times Restaurants Inc. reported a 3.0% increase in net revenues for fiscal year 2024, reaching $142.315 million, up from $138.160 million in fiscal 2023.
• The revenue growth was primarily attributed to a late fiscal 2023 Bad Daddys restaurant opening, the acquisition of two Good Times restaurants from franchisees in late fiscal 2023, and the purchase of one Good Times restaurant from a franchisee in fiscal 2024.
• Same-store sales decreased by 1.2% at Bad Daddys but increased by 2.9% at Good Times during fiscal 2024.
• The company ended fiscal 2024 with $3.9 million in cash and $0.8 million in long-term debt.
• A $2.0 million expansion to the share repurchase program was announced, bringing the total authorization to $7.0 million.
• The company repurchased 1,670,718 shares under the existing plan at an aggregate cost of approximately $4.65 million as of September 24, 2024.
• The company maintains a credit facility with Cadence Bank, with up to $8 million available, and had $500,000 in borrowings against the facility as of September 24, 2024.
• The company also has an outstanding promissory note of $373,000 related to the purchase of a Good Times restaurant, with annual principal maturities of approximately $35,000 over the next five years.

Sentiment

Score: 5

Explanation: The document presents a mixed picture with positive revenue growth and share repurchase expansion, but also negative same-store sales in one brand, increased costs, and a working capital deficit. The sentiment is neutral to slightly negative due to the mixed results and potential risks.

Positives

• The company experienced overall revenue growth of 3.0% in fiscal 2024.
• Good Times brand showed a positive same-store sales growth of 2.9%.
• The company successfully acquired a previously franchised Good Times restaurant.
• The share repurchase program was expanded, indicating confidence in the company's financial position.
• The company maintains a strong cash position with $3.9 million in cash and low long-term debt of $0.8 million.

Negatives

• Bad Daddys same-store sales decreased by 1.2% in fiscal 2024.
• The company has a working capital deficit of $9.13 million.
• The company has accumulated losses of $17.622 million.
• The company is subject to fluctuations in commodity prices, particularly beef and bacon.

Risks

• The company is susceptible to changes in food costs and availability, which could affect profitability.
• Macroeconomic conditions and inflation could negatively impact operating results.
• Labor shortages and increasing wage costs could slow growth and harm the business.
• The company faces competition in both the quick-service and full-service restaurant segments.
• The company is subject to extensive government regulations that may hinder expansion.
• Food safety concerns and food-borne illnesses could reduce customer traffic and lead to litigation.
• The company relies on key management employees, and their loss could adversely affect operations.
• Security breaches of customer information could lead to financial and reputational damage.
• The company's ability to utilize tax loss and credit carryforwards could be limited by future ownership changes.
• The company's stock price may fluctuate significantly due to various factors.

Future Outlook

The company plans to continue growing same-store sales and profitability of the Good Times concept while pursuing disciplined unit growth of the Bad Daddys Burger Bar concept in domestic markets. They expect that growth in company-owned restaurants will remain more modest than it has been in the past and will stem from operating cash flow rather than through the use of significant debt financing to drive more rapid growth. The company expects to have adequate cash from operations and credit facility borrowings to meet all future debt service, capital expenditure and working capital requirements in fiscal 2025.

Management Comments

• The company believes that both of its brands are well positioned to take advantage of consumers changing demands for restaurants.
• The company is focused on continuing to grow same store sales and profitability of the Good Times concept while continuing targeted unit growth of the Bad Daddys Burger Bar concept in domestic markets.
• The company expects that growth in company-owned restaurants will remain more modest than it has been in the past and will stem from operating cash flow rather than through the use of significant debt financing to drive more rapid growth.

Industry Context

The restaurant industry is highly competitive, with both limited-service and full-service segments facing challenges from local, regional, and national chains. The company is navigating a landscape where consumer preferences are shifting, and competitors are aggressively discounting to address pricing concerns. The company is also facing increased competition from fast casual burger restaurants that are adding drive-thru ordering and pickup as part of their operating model.

Comparison to Industry Standards

• The company's same-store sales growth of 2.9% for Good Times is a positive result, especially when compared to the general weakness in the casual dining sector.
• The 1.2% decrease in same-store sales for Bad Daddys is a concern, as it indicates a potential struggle to maintain customer traffic in the full-service segment.
• The company's focus on all-natural ingredients and unique menu items positions it well against traditional quick-service burger chains, but it faces competition from fast-casual concepts that are also emphasizing quality.
• The company's average sales per week for Bad Daddys at $49,900 and average annual unit volume for Good Times at $1,538,000 are metrics that can be compared to other similar restaurant chains to assess performance.
• The company's reliance on a single distribution company for most of its food and paper supplies is a risk that should be compared to industry best practices for supply chain management.

Legal Proceedings

• The company was involved in a lawsuit with White Winston Select Asset Funds, LLC and GT Acquisition Group, Inc., which was initially dismissed, but the company's counterclaim was remanded to the trial court for further consideration.

Stakeholder Impact

• Shareholders may benefit from the share repurchase program and potential future growth.
• Employees may be affected by potential labor shortages and wage increases.
• Customers may experience changes in menu prices and restaurant offerings.
• Suppliers may be affected by changes in purchasing practices and supply chain issues.
• Creditors may be affected by the company's debt levels and financial performance.

Next Steps

• The company plans to continue to periodically re-image and remodel its restaurants.
• The company plans to maintain a relevant menu with a laser focus on speed and accuracy in execution.
• The company plans to communicate its brand story to maintain same store sales growth.
• The company intends to follow a disciplined strategy of unit growth that may include both company-owned and franchisee-owned units.
• The company expects to complete the implementation of a new cloud-based point of sale system at all traditional Bad Daddys restaurants in the next eighteen months.

Key Dates

Keywords

restaurant, same-store sales, revenue, share repurchase, credit facility, Bad Daddys, Good Times, franchise, inflation, debt