FAT Brands [FAT] Conference call transcript for 2022 q1
2022-05-08 07:42:46
Fiscal: 2022 q1
Operator: Good afternoon, ladies and gentlemen and thank you for standing by. Welcome to the FAT Brands Incorporated First Quarter Fiscal 2022 Earnings Conference Call. Please note that this conference is being recorded today, May 5, 2022. On the call today from FAT Brands are President and Chief Executive Officer, Andrew Wiederhorn; and Chief Financial Officer, Kenneth Kuick. By now, everyone should have access to the earnings release which can be found on our Investor Relations website at ir.fatbrands.com in the Press Release section. Before we begin, I need to remind everyone that part of our discussion today will include forward-looking statements. These forward-looking statements are not guarantees of future performance and therefore, undue reliance should not be placed upon them. Actual results may differ materially from those indicated by these forward-looking statements due to a number of risks and uncertainties. The statements due to a number of risks and uncertainties, the company does not undertake to update these forward-looking statements at a later date. For a more detailed discussion of the risks that could impact future operating results and financial condition, please see today's earnings press release and our recent SEC filings. During today's call, the company may discuss non-GAAP financial measures which it believes can be useful in evaluating its performance. The presentation of this additional information should not be considered in isolation nor as a substitute for results prepared in accordance with GAAP. Reconciliations to comparable GAAP measures are available in today's earnings release. I would now like to turn the call over to Andy Wiederhorn, President and Chief Executive Officer.
Andrew Wiederhorn: Thank you, operator. Good evening, everyone and thank you all for joining us on the call today. We are excited to be here on our first earnings call for fiscal 2022. This afternoon we made our first quarter 2022 financial results publicly available. Please refer to the earnings release and our earnings supplement, both of which are available in the Investors section of our website at www.fatbrands.com. Each contain additional details about the first quarter which closed on March 27. The first quarter was an excellent start to 2022 for FAT Brands and I would like to thank our whole team for their impressive execution as we continue to grow this business. FAT Brands is truly differentiated because we have a scalable platform that affords us the opportunity to synergistically incorporate new concepts with minimal incremental corporate overhead cost. We also have a long runway for organic growth, highlighted by 27 store openings in the first quarter and 34 year-to-date, on our way to well over 100 by the end of this year. In addition, we have a huge pipeline of more than 860 additional locations to be built, providing us with the potential of approximately 33% additional unit growth and 50% to 55% additional EBITDA growth. In other words, another $50 million of incremental EBITDA over the next few years. Today, I'm particularly excited to talk to you about our strong brand performance, organic growth, synergies from our acquisition strategy in 2021, potential further acquisitions in 2022 and planned balance sheet and refinancing strategies for 2022. In the first quarter, our strong momentum exiting 2021 continued as our franchise partners and company-owned restaurants continued to report impressive sales. In the first quarter, many of our restaurants produced sales that were in line or above pre-pandemic levels, despite modest headwinds from winter weather and the presence of Omnicon in January. This speaks to the strength of our portfolio of brands and the hard work and dedication of our franchise partners and employees. We believe this is just the beginning and we expect the strong performance to continue throughout the year. In addition, I would like to highlight that this quarter marks the first quarter that includes all of our acquisition activity from 2021, allowing for a better view into our revenue run rate growth. While we continue to look for tuck-in acquisitions, we primarily view 2022 as a year to absorb the M&A activity from last year and we are excited about the synergies and growth they are already delivering. Our legacy FAT Brands portfolio of brands owned for all of 2021, like Fatburger, Johnny Rockets, Hurricane Grill & Wings saw an increase in system-wide sales of 15.8% over the first quarter of 2021. If we include the brands acquired in 2021, essentially showing how our portfolio is doing, system-wide sales increased 13.5% compared to Q1 of 2021. For the first quarter of 2022, same-store sales which only includes those brands owned for all of fiscal 2021 increased 16.8% over Q1 2021, driven by an increase of 40.1% at Johnny Rockets and 9.1% at Hurricane Grill & Wings. We are pleased that international same-store sales increased 24.1% over the same period. If we include recently acquired concepts in calculating comparable same-store sales, we would have seen an increase of 11.8% for the portfolio compared to Q1 of 2021. Our top-performing acquired brands were Twin Peaks and Round Table Pizza which saw an increase in comparable same-store sales versus Q1 of 2021 of 24.4% and 7% respectively. In total, comparable same-store sales for the brands acquired in 2021 increased 10.2% versus Q1 of 2021. Most notably, Twin Peaks had outstanding performance with March marking the 14th consecutive month of positive same-store sales post COVID versus 2019. Twin Peak's same-store sales have significantly exceeded the Naptrack industry averages consistently over the last 19 months. It's also worth noting that even with the reopening of dining rooms, delivery sales are showing resilience, facilitated by the rollout of Olo, Captain which is formerly known as Hunger, both of which are online ordering providers and Chowly which is a third-party and online aggregator into our POS systems across our portfolio. Turning now to our organic growth strategy. New construction and franchise sales continue to outperform and maintain the momentum we saw in 2021. There were 27 new store openings across the portfolio in the first quarter of 2022 and 34 year-to-date with over additional 80 locations of new stores expected to open this year. We continue to build on our growing development pipeline of over 860 locations throughout the world that have signed and paid for agreements in place. So far this year, our development team has signed 44 deals, representing commitments to build 139 new locations across various brands throughout the world. As we've integrated new brands into the FAT family, we continue to see robust demand from our existing and new franchise partners to develop a variety of other brands in our portfolio as well. In addition, we are also expanding our footprint in nontraditional locations having just completed the first opening of Fatburger at the Six Flags Great Adventure in Jackson, New Jersey, as well as in the 2020 launched largest cruise ship in the world owned by Royal Caribbean, the Wonder of the Seas. Also, we have upcoming Johnny Rockets and Fatburger locations in the Las Vegas Convention Center, the Excaliber and Venetian casinos in Las Vegas, the Soaring Eagle Casino in Michigan, Louisiana State University Stadium, Reagan National Airport, Bangor Airport and the hotel in Capitol Park, Washington, D.C. as well. In addition, we have new international locations such as Paris, Mexico City, Morocco and the Democratic Republic of Congo all coming soon. Our factory in Georgia has been able to mitigate the supply chain headwinds based in recent months and reported Q1 sales of $8.2 million. The factory now supplies nearly 1,000 of our locations throughout the country and is only running at approximately 30% capacity with therefore tremendous growth opportunity. A quick comment here on the inflation and supply chain pressures our industry continues to face. We have strongly encouraged our franchisees to take price and maintain their margins in order to keep their businesses healthy. Additionally, we continue to coach our franchisees with every tool at our disposal on how to navigate the supply chain and current economic environment to continue delivering strong results. Equally important to our organic growth strategy is our second pillar of growth which is our acquisition strategy. We have a disciplined and selective approach to evaluate potential targets with a focus on brands with a proven track record of long-term, sustainable and profitable operating performance. In 2021, we were very active, acquiring 8 new restaurant concepts with 5 brands coming through the Global Franchise Group acquisition. Also in the fourth quarter we acquired 3 additional brands which include Twin Peaks, Fazoli's and Native Grill and Wings. We are capable of this activity because we have a robust management and systems platform that supports the expansion of our existing brands while enabling the accretive acquisition strategy and efficient integration of additional restaurant concepts. As I mentioned before, on the transaction front, our primary goal start this year is to digest these acquisitions and to identify and capitalize on potential synergies. That being said, there are strategic acquisition candidates we expect to capitalize on in 2022 that are additive and fit within our current operations and give us the chance to expand our factory business through tuck-in acquisitions. Moving forward, we expect to fund future acquisitions with a combination of cash on hand, proceeds from securitization vehicles and potentially tapping the equity capital markets. I want to quickly highlight 2 of our most recent acquisitions, Twin Peaks and Fazoli's, both of which closed in the fourth quarter. To date, we are very pleased with the assimilation of both brands and we are already experiencing significant synergies given our existing infrastructure and purchasing power. Twin Peaks which we acquired on October 1, 2021, is seeing record sales growth in industry-leading AUVs in the range of $5 million to $6.5 million. Also of note, Twin Peaks same-store sales are among the highest in the posh casual dining category according to the Naptrack industry benchmark. I believe we can grow this brand globally at a rapid pace and we are pleased to report that 3 new area development agreements have been signed thus far in 2022. We continue to expect Twin Peaks to contribute between $25 million and $30 million of EBITDA in 2022. On December 16, 2021, we completed the acquisition of Fazoli's which is today a 217 store brand from Sentinel Capital Partners for $130 million. The brand's performance here in 2022 has been in line with our expectations and we look forward to the increased royalties in successfully executing their new unit opening plan. Fazoli's has a 117 new store development pipeline which is part of our 860 unit overall pipeline. Diving in a bit on the synergies, we see significant opportunities to generate savings for our franchise partners given our substantial purchasing power of more than $600 million per year in food, beverage and paper costs, as well as cross-selling opportunities between our now 17 brand portfolio. On the balance sheet side of things, we are actively pursuing the rating and refinancing of our different securitization facilities, beginning with our FAT 2021 and FGFG 2021 securitization trust. We will turn our attention to the other 2 securitization trusts later in the year. In addition, we are working with our bankers on a planned redemption of $135 million of our Series B preferred stock from the sellers of Twin Peaks and Global Franchise Group over Q2 and Q3 respectively. The securitization refinancing and the preferred stock redemption will each provide substantial savings from a free cash flow perspective to the company, including a lower cost of capital and it is a top priority for us. Turning now to our outlook for FAT Brands for 2022. We are reiterating our expectations that system-wide sales at FAT will rise to over $2.2 billion. This should bring our normalized post-COVID EBITDA to an annualized run rate of between $90 million and $95 million by the end of 2022. With $15.1 million of adjusted EBITDA in Q1, a big jump from our adjusted EBITDA of $10.4 million in the fourth quarter of 2021, we are well on our way to the $22 million to $25 million quarterly run rate we expect to achieve by the end of this year. With regard to the pending government investigations, I reiterate the comments I made on our fourth quarter 2021 earnings call in March of this year regarding the investigations. There is nothing new to add at this time and I reiterate that FAT Brands has been told that it is not a target of investigation. It remains business as usual here at FAT. I look forward to putting these legal matters behind us and continuing to grow our amazing portfolio of brands. Our team of more than 20 senior management members are working tirelessly to move the needle forward and operate our brands with the wind at their back. Most recently, we added a new Chief Information Officer, Michael Chachula which will really ready us for moving forward the technology effort across our brands. With that, I would like to hand it over to Ken Kuick to talk about our financial highlights from the quarter.
Ken Kuick: Thanks, Andy. I'll provide brief comments on our capital structure and then discuss the financial highlights of the first quarter and then give some insight into our expectations for normalized performance. As a reminder, reflecting the issuances of new notes in 2021, our securitization facilities totaled $938.2 million with a weighted average stated interest rate of 6.98%. Future issuances of our Series B cumulative preferred stock and our common stock are available to us which would provide us with additional flexibility to fund potential acquisitions to further reduce our capital costs and drive shareholder value. Turning to our financial highlights. Total revenue during the first quarter increased 1,365% to $97.4 million, reflecting revenue from Global Franchise Group, Twin Peaks, Fazoli's and Native Grill & Wings, all of which were acquired during 2021. Additionally, the ongoing effort from the negative effects of COVID-19 was a meaningful contributor to the strong revenue performance in the first quarter. Costs and expenses increased to $96.9 million in the first quarter compared to $6.6 million in the year-ago quarter. Costs and expenses in the quarter include $54.8 million of company-owned restaurant and factory operating costs relating to our 2021 acquisitions. Additionally, these acquisitions contributed to higher G&A expense during the quarter. Lastly, advertising expense increased $9.1 million, reflecting advertising expenses from Global Franchise Group, Twin Peaks and Fazoli's and an increase in customer activity as the COVID recovery continues. Other expense was $19.7 million in the first quarter, primarily comprised of interest expense. GAAP net loss for the quarter was $23.8 million or $1.45 per diluted share compared to a net loss of $2.4 million or $0.20 per diluted share in the year ago quarter. On an as adjusted basis, our net loss was $18.5 million or $1.13 per diluted share compared to $2 million or $0.17 per diluted share in the prior-year quarter. Lastly, regarding full year 2022, we are reiterating our expectation of total annual run rate revenues of approximately $400 million. And in closing, 2021 was a transformational year for FAT Brands. This quarter marked the first that includes the operating results from all of our 2021 acquisitions, giving better perspective into our future performance. And we believe we are poised for strong revenue growth and EBITDA growth in 2022 and beyond. And with that, operator, please open the line for questions.
Operator: We will now take the first question from Joe Gomes from NOBLE Capital.
Joseph Gomes: So first, I want to start off and this is first quarter with everything all together here, how did it come in compared to what your expectations were for the quarter? What performed better or what underperformed to your plan in the quarter?
Andrew Wiederhorn: Well, I think that we're very happy with the step-up in adjusted EBITDA from Q4 to Q1 and we expect a further step up in Q2. So things are really on track for that. We definitely saw a little bit of weather in the Midwest during Q1, certainly had a little bit of Omnicom in Q1 that we didn't think would continue at the end of last year. So those things caused a little bit of slower sales but our top line sales exceeded our expectations to start with. It just could have been even more if we didn't have some of the weather we had to deal with. And of course, inflation is out there. We've taken price across the system and encouraged our franchisees to do the same. And we will see the results of that in Q2 for sure, if you didn't see it in Q1 already. One more thing that I would mention, one more thing I would mention there, Joe, is that our franchise sales remain very, very strong and so do the new store openings. And so that's probably exceeded our expectations as the continued demand for new development agreements and new individual agreements from our franchise community.
Joseph Gomes: Excellent. Speaking of inflation, I was reading an article this morning that one of the big wing restaurant companies were saying that wing prices were down roughly 50% year-over-year. Are there any -- are you seeing that, number one? Number two, any other commodity type prices there that meaningfully either are increasing or you're seeing some decreasing like the way they're saying these wing prices are going down?
Andrew Wiederhorn: We are definitely seeing wing prices come down. I mean they've come down significantly, tens of dollars per case from where they were, multiple times, like each quarter, they've come down. So that's been a big help. We haven't seen that really on the meat side as much as on the wing side but we've definitely seen it there.
Joseph Gomes: Okay. And when you talk about trying to do the rerating of the securitizations and hopefully some refinancing there. With rates going up here, given that the Fed moves, do you still think you're going to see significant savings on that? And if so, what gives you the belief that you will.
Andrew Wiederhorn: Yes. I mean, look, we have substantial savings to achieve by getting our bonds related. That will implicitly drop the yield quite a bit. I'm sure rates have backed up a little bit and they'll continue to back up a little bit but it also has to be tied to the maturity of the different bonds and how long they'll be outstanding. So it's not quite as severe. But we thought originally, we'd see 3% to 4% savings. We might see a little bit less than that, maybe 1% less than that. But whatever that effect is, it's still tremendously cash flow positive and beneficial to us to get these deals rated and reissued during 2022. It saves us tens of millions of dollars no matter what.
Joseph Gomes: Okay. That's excellent. And then maybe you could talk a little bit more, in the release you don't really do a whole lot there on cash flow or what cash on the balance sheet is. And kind of what do you see the capital needs here, especially if you're looking to redeem the $135 million of the B preferred for the rest of this year?
Andrew Wiederhorn: Sure. So there are really a couple of ways that, that will occur. We may tap the equity markets at some point for some additional capital for the redemption. But we believe that in the process of calling and reissuing the securitization trust, there's substantial excess equity available or capital available because of the deals have performed so well and they were originally underwritten and sold with a low leverage rate and using 2020 data, not 2021 data. So if you apply normalized sales, 2021 or even 2022 normalized sales and a normal leverage multiple, there's plenty of excess capacity in those facilities. So using those facilities to redeem the preferred is always something that was intended to do and something that we're pursuing. But that doesn't mean we're ruling out using our shelf which is available to us as well.
Operator: We will now take the next question from Greg Fortunoff , private investor.
Unidentified Analyst: So Andy, just one thing because you just said this a minute ago, that you tapped the equity markets. Can you clarify? I mean, are you thinking about selling common at these levels? Or is there a level where you would? Can you just clarify that?
Andrew Wiederhorn: I'm just saying that it's an available option to us using our shelf. We have a $480 million shelf that's effective and available should we need to supplement any refinancing of the securitization trust. There's no plan today to do anything but that's an available option to us.
Unidentified Analyst: Okay. I mean, maybe I'll ask another question. Would you sell common at $6?
Andrew Wiederhorn: So I'm not going to comment on potential transaction under the shelf. But it's something that's available to us. We love the sell stock at $100 but that's really an issue that we'll decide at the time based on the market conditions.
Unidentified Analyst: Okay. So I guess we're a month and a few days into the second quarter and you've said that you're going to have a significant ramp in EBITDA. Is it too soon to comment how the quarter is going? And I guess the numbers have to go up pretty good to get up to that $90 million, $95 million by the end of the year. So can you just elaborate on that a little bit?
Andrew Wiederhorn: Yes. We're having a very strong second quarter. We continue to think we'll see a significant ramp, something similar to what we saw in -- from Q4 to Q1. I think we'll see at least that ramp into Q2 and that will continue. Business is just building quickly. The synergies are dropping into place. We've done this before multiple times. And so we really don't see any issues adversely affecting it that are things we haven't dealt with before. And then there's also the opportunity just to grow our factory business which really adds to that and that's something that we're looking forward to doing over the next 6 to 12 months. But on the synergies themselves, the new stores that are opening, we'll go from not just 30-something new stores year-to-date but that will double or triple as we keep going here and that just adds a lot of incremental revenue.
Unidentified Analyst: Okay. Andy, what percentage of the stores are not franchised?
Andrew Wiederhorn: It's about 5%. We have about 125 company-owned stores out of 2,360 restaurants. So it's a tiny number in that context. It's a big number in terms of sales because there are approximately 30 corporate-owned Twin Peaks, 57 Fazoli's, 33 Hot Dog on a Stick and a few Round Tables and Johnny Rockets. But out of $2.2 billion in sales and there's about $300 million in sales that come from the company-owned outsourced. So it's maybe 15% of total sales system-wide that are company-owned but it's less than 5% of the unit count.
Unidentified Analyst: So as far as the inflation affecting the overall system of Fat Brands, it's not a big -- it's a factor but it's not big at all. I mean is that a fair statement? It will affect us as a franchisor much, much less than it would if we were 100% company-owned store business. Even at our company-owned stores, we've taken price, we've encouraged our franchisees to take price and maintain the margin. And obviously, we get a royalty based on gross sales. So franchisee raises price by 7% or 8%, as many of them have, to adapt for inflation and our royalties will increase accordingly. So we actually benefit at the franchisor level from that.
Unidentified Analyst: Okay. I just have a couple of more. Ken, maybe this one is for you. So even though we're EBITDA positive, we're still losing money, is there a level, like at what point does the losses turn to flat or even positive? Is it a revenue number? Is it like -- what does that look like?
Ken Kuick: Yes. Greg, thanks for the question. I think substantially it's lowering the debt service cost on the securitization. That drops a significant amount of additional income to the bottom line and cash flows.
Andrew Wiederhorn: Yes, we could be net income positive in 2023, depending on the timing and the rate of the securitization savings, if not for sure it would be in 2024 but it would be a very small loss relative to the losses before that because of the interest expense.
Unidentified Analyst: Okay. Two more quick ones. Andy, I'd just like to ask this one. I just want to ask you, is the dividend on the common and the preferred something that's safe in your mind?
Andrew Wiederhorn: Yes, we continue to expect to pay the dividend on the preferred and the common. And hope to see.
Unidentified Analyst: Do you know what prices are going to be buying back the -- I'm sorry.
Andrew Wiederhorn: And hope to see some dividend growth during the year.
Unidentified Analyst: Okay. Do you know what price you're going to be paying for the $135 million, is that a set price?
Andrew Wiederhorn: Yes. So the $135 million of Series B preferred was issued in the $22 to $23 per share range and we will redeem it at the same price that it was issued at. So it will trade at that price. So the current trading price is a significant discount to where we will redeem preferred and obviously is a bargain today.
Unidentified Analyst: Yes, clearly. Okay. Last question. So in February, we had this leaked report about investigations, et cetera, stock was trading around $11, now it trades at $6. As far as I can tell, things are only getting better. There's not one thing that you said that sounds like it went anywhere but in the positive direction since that time and since even last year. Do you have any comment about just stock price or any other reason why there hasn't been a recovery other than the possible investigation which you've said which should not affect the company?
Andrew Wiederhorn: Well, certainly, the stock price drop occurred subsequent to the news story. But if you look across the industry and look at other restaurant franchise companies out there, there's certainly been other drops in value. So I think you have to really look through those and see if we have a franchise model that is much more resilient to inflation and much more resilient to the current economy, who's going to perform better. When you look and see Shake Shack, Starbucks, Dine Brands all down 25% to 45% in the last 12 months. I think that's reflective of the industry. I don't believe the FAT Brands will be down that much but not for that newspaper story. Nonetheless, it's a great value here at these levels and the dividend yield is outstanding here. And since the dividend is solid, I think there's a ton of room for upside.
Operator: We'll take the next question from Roger Lipton from Lipton Financial Services.
Roger Lipton: Could we talk a little bit more about -- well, about Twin Peaks since you've got company-operated stores of the 30 company operated. And how many franchises are there now? How many franchised Twin Peaks are there at the moment?
Andrew Wiederhorn: About 60 that are open and a whole lot more on the way.
Roger Lipton: So it's 30 and 30, 60 franchise. 65?
Andrew Wiederhorn: No, no, 60 franchises, 30 company-owned stores.
Roger Lipton: Okay. And so of the recent opening, how many company operated Twin Peaks have opened so far this year? And how many are you planning the balance of this year? Company-operated.
Andrew Wiederhorn: Yes. We have 3 new company-owned stores under development today. And I think we've opened one new company-owned store during the year so far.
Roger Lipton: Okay. And how do you finance them? Can you get third-party financing for those? Or do you have to pay out cash to finance them?
Andrew Wiederhorn: They do require a modest investment at the -- generally, this involves acquiring the land, building the location, doing the sale leaseback and having a modest investment, maybe somewhere in the $1 million to $2 million range into the store. But those stores also generate around $1 million or more of EBITDA. So you really, you get a 40%, 50%, 60% cash-on-cash return depending on the actual build costs and the real estate cost. It's a very good use of capital. We just have to manage it carefully to make sure it doesn't use up too much liquidity. There's also other opportunities of different ways to finance that and even reduce that further.
Roger Lipton: Okay. And then the largest item on your income statement is the G&A, even bigger than the interest expense. So the G&A of $31 million. Is that -- can we expect that to stay at that level or go down in subsequent quarters? What should be our expectation there?
Andrew Wiederhorn: Well, I think that you always want to see your G&A go down and we are not done recognizing synergies of putting the businesses together. So that is our expectation. The thing that you have to keep in mind because I'm always cautious to make a broad statement like that is, obviously if we make incremental acquisitions or we open a few hundred more stores, let alone 860 more stores, you're going to see an increase in G&A to support those stores. And so it's not quite as simple as is it going to stay the same or is it going to go down, right? As the business grows, it's going to grow by some amount, although hopefully a lesser percentage. So we think there are additional G&A savings from the synergies of the acquired brands that we have not yet recognized, we think there's additional revenue growth. And of course, the new unit openings are a massive delevering effect for us by increasing our EBITDA from this $90 million to $95 million run rate we hope to hit by the end of the year by another $50 million with just organic growth dramatically delevers the company over the next few years simply by just opening more stores. So we're very focused on getting those stores open, on growing the factory business, on getting the securitizations refinanced and also redeeming the stock because that saves us quite a bit of money from the dividend rate on that stock. So I think we've got a lot of good things going on without even needing to make another acquisition. As I've said before, the scale we're at today, we do not need to make another acquisition whatsoever. We just need to build out our pipeline and build out our factory capacity in terms of more product to produce there. However, there are quite a few acquisition opportunities. I think prices have certainly come down from a year ago or longer because of the general economic environment and the rate environment. So I think that's an opportunity for us. I think you're still going to see higher prices for brands that have built-in growth that is sort of locked in. And I think that's where the premium is going to be had. And I think otherwise, I wouldn't see us trying to do a turnaround brand. We haven't done that in a long time. I don't think we do that again. So, I think there's a real opportunity for tuck-in acquisitions that give us manufacturing business that are easy to recognize synergies on. We don't need to do heavy lifting. We want to see brands where there's an opportunity to have our franchise sales team and our development team and construction team roll out new units just as quickly as they can because franchisees are ready and they have plenty of capital available despite the rate increase to get more units open.
Roger Lipton: Okay. Well, so what I was hoping to conclude is that excluding any major acquisitions, the G&A expense as a percentage of total revenues can be expected to come down over time.
Andrew Wiederhorn: Yes. I mean theoretically, Roger, you're 100% right. You're 100% right. It's just a function of if we build more company-owned stores, it might go up as a percentage of revenues. Yes, it should come down.
Roger Lipton: But in terms of leveraging the platform, it's really leveraging the platform. As a percentage you've got margin opportunity to the bottom line as the system grows. So the G&A won't grow percentage-wise as fast as the top line as well.
Andrew Wiederhorn: Absolutely right. That's right. Agree completely.
Roger Lipton: And lastly for the moment, have your franchisees been inhibited in terms of their opening pace because of these supply chain delays that we're all reading about.
Andrew Wiederhorn: So there's always a little bit of slippage when you have this kind of inflation situation where they can't get equipment, they can't get refrigerators or freezers or certain other equipment delays. It's really modest. We'll have some units that slip into Q1 of 2023 that we would have hoped to get done in Q4 of 2022. That's just something you see out there. But we're going to hit well over 100 new stores this year and we just have this huge pent-up demand and pipeline of -- I mean, it's a 33% unit count growth. So franchisees are active and we're doing everything we can to help them get open and find locations. And there's also the labor issues that you've just got to find the staff to hire and train and get these stores open. So all those things play into it. But business is really good. We're seeing very solid demand everywhere. Customers are out and coming into restaurants. There's still delivery going on. The sports bars are packed with people and packed with new openings, hitting big numbers. I mean, even though our AUVs are $5 million to $6.5 million, a lot of the new stores are well above that. And we're excited about that. Fazoli's, it's just been a blockbuster concept in the Midwest with drive-through 99% drive-through. We've taken a price increase there which I think was needed and with a very active development pipeline. And then you've got brands like Fatburger and Johnny Rockets which have 300 of the 860 units in their pipeline to build and you have these special venues coming out of the woodwork to say, hey, we want one of you guys in our location like the casinos or the cruise ships and the airports and things like that. So, I think there's a real opportunity to accelerate those brands. And those are easier to get open. I mean building a Twin Peaks is a $7.5 million enterprise, building a Fatburger or a Johnny Rockets can be $400,000 to $500,000 and be pretty quick. So that's part of the velocity, right?
Roger Lipton: Right. Relative to the Johnny Rocket's existing system, presumably there's still -- some location is still closed in Europe. How does that stand?
Andrew Wiederhorn: We have a very small number of Johnny Rockets still closed on South America in some markets, Asia in some markets. I don't think there's anything still closed in Europe. But I think we're open everywhere there but definitely South America has had some closures. But that brand, we're rolling out a 200-store partnership with Kitopi in the Middle East, involving Fatburger and Johnny Rockets. And there's a real opportunity there to get brick-and-mortar restaurants built, get additional ghost kitchens built. I think that we're excited to see Johnny Rockets. I mean it's done really well. It was a significant opportunity to buy that brand during the pandemic before there was a vaccine and add that to our portfolio. And we really haven't missed a beat with that acquisition.
Operator: Yes, it looks like there are no more questions. And I would like to turn the call back over to Mr. Andy Wiederhorn for his closing remarks.
Andrew Wiederhorn: Thank you, everyone, for joining today's call. I would encourage you to listen to my interview, the Corporate Competitor Podcast interview on Chief Executive Magazine or chiefexecutive.net. It's a really good piece explaining a lot of customer-focused mindsets and tips. I think you'll find it very interesting. Enjoy your evening, everyone. You may now disconnect your lines.
Operator: Thank you, everyone, for joining today's call. Enjoy your evening. You may now disconnect your lines.
