10-Q: Good Times Restaurants Inc. Reports Q2 2025 Results: Revenue Declines Amidst Inflationary Pressures

Good Times Restaurants Inc. reports a decrease in net revenues for the quarter ended April 1, 2025, driven by reduced customer traffic and inflationary pressures, despite menu price increases.

Summary

• Good Times Restaurants Inc. reported a decrease in net revenues for the quarter ended April 1, 2025, falling to $34.279 million from $35.448 million in the same period last year.
• The Bad Daddys concept experienced a revenue decrease of $1.592 million, while Good Times concept revenues increased by $423,000.
• Same-store sales decreased by 3.7% for Bad Daddys and 3.6% for Good Times, primarily due to reduced customer traffic.
• The company reported a net loss of $627,000 for the quarter, compared to a net income of $680,000 in the prior year's quarter.
• For the six months ended April 1, 2025, net revenues increased by 2.9% to $70.612 million, driven by growth in both Bad Daddys and Good Times concepts.
• The company incurred $494,000 in impairment charges related to lease right-of-use assets.
• Adjusted EBITDA for the quarter was $1.021 million, compared to $1.458 million in the prior year's quarter.
• The company believes it has sufficient capital to meet its working capital and recurring capital expenditure needs in fiscal 2025, funded by existing cash or future borrowings against the Cadence Credit Facility.

Sentiment

Score: 4

Explanation: The sentiment is slightly negative due to decreased revenues, a net loss, and declining same-store sales, offset by some growth initiatives and a favorable legal ruling.

Positives

• Good Times restaurant sales increased $506,000 to $9,323,000 for the quarter ended April 1, 2025 from $8,817,000 for the quarter ended March 26, 2024.
• For the six months ended April 1, 2025, net revenues increased by 2.9% to $70.612 million, driven by growth in both Bad Daddys and Good Times concepts.
• The court of appeals affirmed the trial courts dismissal of the plaintiffs claims and reversed the trial courts previous dismissal of Good Times own claim for the plaintiffs breach of their covenant not to sue Good Times.

Negatives

• Net revenues for the quarter ended April 1, 2025 decreased $1,169,000 or 3.3% to $34,279,000 from $35,448,000 for the quarter ended March 26, 2024.
• Bad Daddys concept revenues decreased $1,592,000 while our Good Times concept revenues increased $423,000 compared to the same prior year quarter.
• Same store sales for our brands are calculated using all Company-owned units open for at least eighteen full fiscal months and use the comparable operating weeks from the prior year to the current year quarters operating weeks.
• Bad Daddys same store restaurant sales decreased 3.7% during the quarter ended April 1, 2025 compared to the same thirteen-week period ended March 26, 2024, primarily driven by reduced customer traffic as measured compared to the prior year, most significantly during January and February, partially offset by menu price increases.
• Good Times same store restaurant sales decreased 3.6% during the fiscal quarter ended April 1, 2025 compared to the same thirteen-week period ended March 26, 2024, primarily due to reduced customer traffic driven by significantly unfavorable weather during the quarter compared to the same prior year quarter.
• Loss from operations was $514,000 in the quarter ended April 1, 2025 compared to income from operations of $644,000 in the quarter ended March 26, 2024.
• Net loss was $627,000 for the quarter ended April 1, 2025, compared to net income of $680,000 in the quarter ended March 26, 2024.

Risks

• The company faces competition from well-established competitors with greater financial resources.
• Same-store sales declines could negatively impact the company's performance.
• The company may be unable to pass on increased costs from inflation to customers through menu price increases.
• Changes in consumer tastes away from red meat and fried foods could negatively impact the company.
• Increases in the cost of food, paper, labor, health care, workers compensation, or energy could negatively impact the company.
• The company is subject to seasonal fluctuations in revenues based on weather conditions.

Future Outlook

The company believes there are significant opportunities to grow customer traffic and increase awareness of its brands, leading to organic sales growth, and unit growth opportunities for both concepts with increased scrutiny surrounding real estate selection and a more conservative approach to leverage.

Management Comments

• We believe there are significant opportunities to grow customer traffic and increase awareness of our brands, leading to organic sales growth.
• We also believe there are unit growth opportunities for both of our concepts though we continue to execute unit growth with increased scrutiny surrounding real estate selection and a more conservative approach to leverage than we previously took, in light of the higher costs and volatile inflation present in the current operating environment.

Industry Context

The restaurant industry is facing challenges related to increased competition, changing consumer preferences, and inflationary pressures on food and labor costs. Good Times Restaurants Inc. is navigating these challenges by focusing on organic sales growth, unit growth, and managing costs through menu price increases and operational efficiencies.

Comparison to Industry Standards

• The report does not provide enough information to make a detailed comparison to industry standards.
• To assess the company's performance relative to its peers, we would need to compare its same-store sales growth, profit margins, and other key metrics to those of similar restaurant chains such as Wendy's, McDonald's, and Restaurant Brands International (Burger King, Tim Hortons, Popeyes).
• Additionally, analyzing the company's performance against industry benchmarks for food and labor costs would provide valuable insights.

Legal Proceedings

• The Company was the defendant in a lawsuit styled as White Winston Select Asset Funds, LLC and GT Acquisition Group, Inc. v. Good Times Restaurants, Inc., arising from the failed negotiations between plaintiffs and the Company for the sale of the Good Times Drive Thru subsidiary to plaintiffs.
• On April 11, 2025 the Court-appointed special master issued a recommendation that Good Times recover damages in the amount of $3.826 million plus preand post-judgment interest.
• White Winston has indicated it will object to this recommendation.
• The Court has not yet entered a final judgment concerning Good Times damages.

Stakeholder Impact

• Shareholders may be concerned about the decrease in net revenues and the net loss reported for the quarter.
• Employees may be affected by potential cost-cutting measures or changes in staffing levels.
• Customers may experience menu price increases as the company attempts to offset inflationary pressures.
• Franchisees may be impacted by changes in royalty fees or advertising fund contributions.

Next Steps

• The trial court will now consider the issue of White Winstons liability to Good Times.
• Good Times plans to vigorously pursue this remaining claim to conclusion.

Key Dates

Keywords

restaurants, sales, Good Times, Bad Daddys, revenue, EBITDA, financial results