Ark Restaurants Corp. (ARKR) Q3 2014 Earnings Report, Transcript and Summary

Paul Robert Stewart - President, Chief Financial Officer, Principal Accounting Officer, Treasurer and Director Michael Weinstein - Founder, Chairman and Chief Executive Officer

Greetings, and welcome to the Ark Restaurants Third Quarter and 9 Months 2014 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to Mr. Bob Stewart, Chief Financial Officer. Thank you. Mr. Stewart, you may now begin.

Thank you, operator. Good morning, and thank you for joining us on our conference call for the third quarter ended June 28, 2014. With me on the call today is Michael Weinstein, our Chairman and CEO. For those of you who have not yet obtained a copy of our press release, it was issued over the Newswire yesterday and is available on our website. To review the full text of that press release along with the associated financial tables, please go to our homepage at www.arkrestaurants.com. Before we begin, however, I'd like to read the Safe Harbor statement. I need to remind everyone that part of our discussion this afternoon will include forward-looking statements and that these statements are not guarantees of future performance, and therefore, undue reliance should not be placed on them. We refer everyone to our filings with the Securities and Exchange Commission for a more detailed discussion of the risks that may have a direct bearing on our operating results, performance and financial condition. I will now turn the call over to Michael.

Hi, everybody. This was a quarter that had a lot of stuff in it. First of, all, it was the first full quarter that we had the Rustic Inn in Florida. We own the Rustic Inn. We own the property, the buildings and the operation. And that is a very strong restaurant operation. It is more than meeting our expectations. One would have thought that given the addition of that and the strong operating profits, that we would have a better quarter. Rustic affects us in several ways: It added in the quarter a significant amount of volume, but it runs at a very, very high food cost. Typically, we have food costs here that run for the company around 28%, 29%, 30%, depending upon the quarter. Obviously, with more efficient with food costs when we have good weather and our outdoor cafe seats are in use. But Rustic runs in the high 40s. It is a high-ticket but a high-value operation, and that affects our numbers in terms of cost of goods sold dramatically. In this quarter, it added probably 1.2 -- excuse me, about 2% additional percentage points on our food costs line. Without Rustic, however, our costs are up about 1.02%, I think the number was. So we are facing price increases at the wholesale level. We have not, as of yet, raised prices to reflect them. We're waiting to see where the -- where prices settle. But there is definitely cost pressure, which was part of the story of this quarter. The other area where there's cost pressure is in payroll expense. We are under new labor laws in New York State, Washington, D.C., Las Vegas, where minimum wages have increased. As well as New York State has implemented regulations requiring us to pay sick leave…

[Operator Instructions] And gentlemen, it appears we have no questions at this time.

Okay. We look forward to speaking to everybody next quarter. Thank you.

Thank you. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time, and thank you for your participation.