10-Q: Good Times Restaurants Q2 2026 Financial Update

Good Times Restaurants Inc. reported a net income of $159,000 for the fiscal quarter ended March 31, 2026, a significant improvement from a net loss of $627,000 in the prior year period.

Summary

• Good Times Restaurants Inc. reported a net income of $159,000 for the fiscal quarter ended March 31, 2026, compared to a net loss of $627,000 for the same period in the prior year.
• Total net revenues for the quarter decreased by 3.1% to $33.2 million, primarily due to decreases in restaurant sales for both the Bad Daddys and Good Times concepts.
• Restaurant-level operating profit increased to $4.4 million from $4.3 million in the prior year quarter.
• Food and packaging costs as a percentage of restaurant sales decreased for both concepts.
• Payroll and other employee benefit costs as a percentage of restaurant sales also decreased for both concepts.
• General and administrative costs decreased significantly by $382,000 for the quarter.
• The company ended the quarter with $2.7 million in cash and cash equivalents.
• Same store sales for both Bad Daddys and Good Times decreased by 0.8% for the quarter.

Sentiment

Score: 6

Explanation: StockSavvy.ai views this as a cautiously optimistic report. While the return to profitability and improved cost controls are positive, the decline in net revenues and same-store sales indicate ongoing challenges.

Positives

• Turnaround from net loss to net income: The company reported a net income of $159,000 for the quarter ended March 31, 2026, a substantial improvement from a net loss of $627,000 in the prior year quarter.
• Improved restaurant-level operating profit: Restaurant-level operating profit increased to $4.4 million from $4.3 million in the prior year quarter.
• Reduced food and packaging costs: Food and packaging costs as a percentage of restaurant sales decreased for both Bad Daddys (29.6% vs 30.7%) and Good Times (29.7% vs 30.7%).
• Reduced payroll costs: Payroll and other employee benefit costs as a percentage of restaurant sales decreased for both Bad Daddys (34.1% vs 34.3%) and Good Times (35.0% vs 35.6%).
• Significant decrease in G&A expenses: General and administrative costs decreased by $382,000, improving the overall profitability.
• Increased cash from operations: Net cash provided by operating activities increased significantly to $1.9 million for the year-to-date period, up from $196,000 in the prior year.

Negatives

• Decreased net revenues: Total net revenues for the quarter decreased by 3.1% to $33.2 million, driven by lower restaurant sales in both concepts.
• Declining same-store sales: Both Bad Daddys and Good Times experienced a 0.8% decrease in same-store sales for the quarter.
• Temporary restaurant closures: The decrease in revenues was partly due to the closure of one Bad Daddys restaurant in the current quarter and one in the prior fiscal quarter, and one Good Times restaurant temporarily closed.
• Increased advertising costs for Good Times: Good Times advertising costs increased significantly to 5.3% of total revenues from 4.5% in the prior year quarter.
• Working capital deficit: The company reported a working capital deficit of $8.9 million as of March 31, 2026.

Risks

• Competition from well-established competitors with greater financial resources.
• Potential negative impact from same-store sales declines.
• Inability to pass on increased input costs (food, labor, energy) to customers without negatively impacting demand.
• Uncertainty regarding tariffs and their potential to increase costs for sourced products.
• Changes in consumer tastes away from red meat and fried foods.
• Shortage of qualified workers and upward pressure on wages.
• Seasonal fluctuations in revenue, particularly in Colorado during winter months.
• Potential for future impairments of long-lived assets.
• The company's ability to manage its debt obligations and maintain financial ratios under its credit facility.

Future Outlook

The company believes there are significant opportunities for organic sales growth through increased customer traffic and brand awareness. Unit growth opportunities exist for both concepts, with a continued focus on careful real estate selection and a conservative approach to leverage due to current economic conditions.

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, considering the higher costs and volatile inflation present in the current operating environment.

Industry Context

StockSavvy.ai notes that Good Times Restaurants Inc. is navigating a challenging restaurant industry landscape characterized by fluctuating consumer demand, inflationary pressures on input costs, and intense competition. The company's focus on both quick-service (Good Times) and full-service (Bad Daddys) segments provides some diversification, but the overall industry trend towards value and convenience continues to influence performance.

Comparison to Industry Standards

• The reported same-store sales decrease of 0.8% for both Bad Daddys and Good Times is slightly concerning, as many larger casual dining and fast-casual chains have reported flat to positive same-store sales growth in recent periods, driven by menu innovation and targeted promotions.
• The improvement in restaurant-level operating profit margin, despite declining revenues, suggests effective cost management, particularly in food and labor, which is a positive sign compared to industry peers who may be struggling with margin compression.
• The company's G&A expense reduction is a positive step, as controlling overhead is crucial for profitability in the restaurant sector, especially when top-line growth is challenged.

Legal Proceedings

• There may be various claims in process, matters in litigation, and other contingencies brought against the Company by employees, vendors, customers, franchisees, or other parties. Management believes any reasonably possible losses associated with such contingencies have been adequately accrued or would be immaterial to the financial statements.

Stakeholder Impact

• Shareholders: The return to profitability and improved operational efficiency are positive for shareholders, though revenue declines and same-store sales decreases present ongoing concerns.
• Employees: Increased wage rates are noted as a pressure, but improved labor efficiency and reduced payroll costs as a percentage of sales may offer some offset.
• Customers: Menu price increases are being implemented, which could impact customer frequency if not managed carefully.
• Suppliers: The company is experiencing elevated beef prices, which could impact supplier relationships and procurement strategies.

Next Steps

• Continue to focus on organic sales growth through customer traffic and brand awareness.
• Execute unit growth strategies with increased scrutiny on real estate selection and leverage.
• Manage input cost inflation, particularly beef prices, and assess the ability to offset with menu price increases.
• Monitor and adapt to changing consumer tastes and labor market dynamics.

Key Dates

Recommendation

The company has demonstrated a return to profitability and effective cost management, which are positive signs. However, the continued decline in net revenues and same-store sales, coupled with ongoing inflationary pressures and competitive challenges, warrant a cautious approach. A 'hold' recommendation reflects the balance between these positive operational improvements and the persistent top-line headwinds.

Keywords

Good Times Restaurants, Bad Daddys Burger Bar, Form 10-Q, Quarterly Report, Restaurant Industry, Financial Results, Net Income, Revenue, Same Store Sales, Operating Costs, SEC Filing