Good afternoon, ladies and gentlemen. Welcome to the Good Times Restaurants Inc. Fiscal 2016 Third Quarter Earnings Call. [Operator Instructions] By now, everyone should have access to the company’s third quarter earnings release. If not, it can be found at www.goodtimesburgers.com, in the Investors section. As a reminder, a part of today’s discussion will include forward-looking statements within the meaning of federal securities laws. These statements are commonly identified by words such as anticipate, continue, plan, expect, intend, should, will and other terms with similar meanings. These forward-looking statements are not guarantees of future performance and, therefore, you should not put undue reliance on them. These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect and, therefore, investors should not place undue reliance on them, and the company undertakes no obligation to update these statements to reflect the events or circumstances that might arise after this call. The company refers you to the recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial conditions. Lastly, during today’s call, the company will discuss non-GAAP measures which they believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP and reconciliation to comparable GAAP measures available in our earnings release. Please note, this event is being recorded. And now, I would like to turn the call over to Mr. Boyd Hoback, President and CEO of Good Times. Please go ahead, sir.

Thank you, Allison and thanks everyone for joining us again this afternoon. With me today is Jim Zielke, our CFO. I will cover again a summary of our third quarter and current developments and Jim will then provide more details on our financial results, our fiscal 2016 outlook, along with additional color on our guidance for fiscal 2017. During the quarter, total revenues increased 40% to $18,066,000, with comp sales increasing 3.6% of Bad Daddy’s and we were down 2% at Good Times as we previously announced. The sales of Good Times represents a 3-year compound growth of approximately 14.6% and the 3.6% increase at Bad Daddy’s was right in line with our expectations. Given the macro, consumer and the industry environment, our plan for the balance of fiscal 2016 is for 1% to 2% same-store sales increase at Bad Daddy’s and approximately 1% to 2% decline at Good Times. That said our July sales were a bit better than that, with Bad Daddy’s up 3.3% and Good Times essentially flat. However, the competitive discount environment remains pretty intense for Good Times along with a slowing in overall restaurant sales reflected in the industry trends. Our Cherry Creek Bad Daddy’s restaurant is again being negatively impacted by some construction disruption next door with the new Marriott AC Hotel that comes right up to the edge of our building and that shifted that store from being up 8.5% during the first 7 months of the year to down 7% during the last 3 months and with our small same-store sales base that obviously impacts that as well. As discussed last quarter, we were back on TV with the new Good Times ad and we began featuring our PawBender for dogs that was augmented by a free giveaway in concert with donations…

Thanks Boyd. As it relates to the Good Times brand, for the first time in 23 quarters, we did fail to achieve the positive comp store sales for the quarter as we posted negative 2% as Boyd mentioned. We were lapping a 3-year comp sales stack of over 32% for the quarter and certainly we are not immune to the competitive discounting environment within the industry right now. As was the case last quarter, we had about a 3% year-over-year price increase in place. So traffic was down about 5% this quarter versus last year. Cost of sales at Good Times declined 72 basis points to 32.1% during the quarter from 32.9% last year. We did have a large meat [ph] credit last year to hit the third quarter which was about a 45 basis point impact on cost of sales last year. So on a more normalized basis, cost of sales actually improved about 117 basis points over last year. This decrease versus last year was primarily due to the 3% price increase I just spoke of and also about 18% decline in beef costs versus last year. But that was offset by about – over 30% increase in bacon cost versus last year. Beef cost did tick up slightly from the March quarter to the June quarter by about 9% and as a result cost of sales did increase a little bit over the March quarter by about 46 basis points. Total labor costs at Good Times increased to 31.7% from 30.6% last year, most of which is comprised of an increase in the average wage rate of about 7% as Boyd mentioned. This is due to the very competitive labor market here in Colorado as we have mentioned on the past calls. Restaurant-level operating profit at Good…

Thank you, Jim. While we have slightly lowered our guidance based on the softening in our same-store sales trends at Good Times, we are hopefully being conservative in our projections and still certainly firmly believe we can deliver 35% to 40% growth rate in our top line and greater than that in our adjusted EBITDA not only next year, but in each of the next few fiscal years which we think will continue to build significant shareholder value. We are excited about taking the Bad Daddy’s concept into new markets this next year and we have got those sites well along and in the pipeline and we are also optimistic about regaining our sales momentum at Good Times. We again appreciate your time with us today. With that, operator, we will open the call for questions.

Thank you. [Operator Instructions] And our first question will come from Will Slabaugh of Stephens. Please go ahead.

Yes, thank guys. I wanted to ask on the guidance, you are breaking down the difference between your outlook now versus where we were three months ago. I am curious how much of the lowering of that guide for ‘16 is what you would consider structural labor inflation versus how much of the slowdown you have seen in same-store sales growth. And if you talk about ‘17 in that same context, that would be helpful? Thank you.

Yes, Will, since we really haven’t – I guess, we gave a little bit of sales guidance last call, but not the EBITDA guide. So, I will probably just stick to ‘16 a little bit, maybe touch on ‘17. But for ‘16, again roughly, we are looking at about $700,000 decline in EBITDA guidance versus what we have talked about before, of the $150,000 of that we talked about being related to the change in the year end. So, that remaining $550,000, a little over $300,000 of that is just directly related to Good Times sales projections, where we were – we have given guidance of about 4% positive for the balance of Q3 and Q4 on our last call and obviously, with negative 2% comps in Q3 and then negative 1% in Q4, that – and we had 1 store just opening near the end of the year. We do have about $900,000 to $1 million of sales shortfall from the earlier guidance and again, that’s about a little over $300,000 and then another $100,000 in G&A over the previous guidance and then the balance then about $100,000 related to Bad Daddy’s. But most of the labor struggles were anticipated and were in the original guidance. So, it’s really – really, this is top-line driven. On fiscal ‘17, again, timing of some of the units were a little more back ended for fiscal ‘17 than we first anticipated as well as the Good Times comps being for the year, plus 1% to 2% versus 3% to 4% that we are anticipating earlier as well as like as Boyd mentioned, on the new units in Colorado just being – we hope being conservative on what the sales volumes of those units are, so kind of combination of all that resulted in the decline in the fiscal ‘17 sales guidance.

Okay. And then on pre-opening that number seemed a little bit elevated versus what we have seen on a per store basis lately. So, can you help us build to that $3.5 million number you have guided to for ‘17? It seems like a pretty meaningful increase there on the Bad Daddy’s side, so I am curious what’s driving that?

Yes, some of it might be just the timing of stores this year or developments for fiscal 2017 and hitting in ‘16. But basically, the build of that is about $280,000 of cash pre-opening per store. And that’s – that really is pretty consistent with what we have been experiencing what we said before. We are hoping when we stay in market to lower that number, but if we take stores out of market, some of the new development out of market, that probably will be a little bit higher. So, we are kind of using that as still kind of our baseline amount. Then we do need to throw in about another $35,000 to $40,000 of non-cash pre-opening costs related to accounting for rent on a GAAP basis. From the time period the locations turned over to when we open, we do have to record rent even though we are not paying rent. So, that’s – that gives you about $315,000 to $320,000 average. So with, let’s say, 9 to 11 stores that puts us kind of in that $3.2 million range, plus we do have a one Good Times unit that’s going to be a little over $100,000 of pre-opening, plus we are anticipating just a little bit $100,000 to $200,000 of pre-opening related to 2018 development that would be incurred in 2017.

Got it, got it. Okay, can you give us an update on what you are seeing in terms of performance of new stores in the Bad Daddy’s side in newer markets as you open up in a market that may not be as familiar with the brand and kind of contrast to that with what you have seen with some of the more core markets and how that can give you confidence going into summer markets next year?

Yes. Will, this is Boyd. We haven’t opened really in any new markets. Everything we have opened this year have been pretty much in Denver. That said we have opened in Colorado Springs. We have opened in Longmont. Colorado Springs being an hour south of Denver, there really wasn’t any awareness of the Bad Daddy’s concept and that’s been a very, very strong opening in the Briargate shopping center well above our system average. Longmont has been a little bit lower than our system average. I don’t think the dynamic is really driven by the newness of the concept as much as it is just to site specifics themselves. And so as we look into Nashville and Phoenix and Atlanta, the new markets that we are looking at, we are really focused on the trade area and the dynamics of the individual sites. I think between Charlotte, Raleigh, Denver, Greenville, South Carolina, where we are operating, it certainly proved that it can travel. It’s really, I think, trying to optimize where we put these things in each of those markets. I went through of the 9 to 11 stores we have got slated for next year, most of those are already in our existing markets of Colorado and Charlotte and Raleigh, with anticipated three to four probably in new markets towards the latter part of the year. We have one of those deals pretty well done and we are working on some new ones. We have got our operating partners hired for those markets. And so I think – I don’t think it’s again as much a function of the market as it is the individual sites.

Got it. Thanks, guys.

Our next question will come from Jeremy Hamblin of Dougherty & Company. Please go ahead.

Hi guys. I wanted to ask about your same-store sales guidance for next year and just by brand, think a little bit about how you are building into those numbers, how should we be thinking about menu pricing heading into 2017 for both Good Times and then on the Bad Daddy’s side?

It’s a good question. I think we are going to – we anticipate we will probably be a little bit more cautious given the environment and given the commodity environment on pricing in 2017 less than where we were in ‘15 and ‘16, probably more in the sub-3% range on Good Times. And then on Bad Daddy’s, we anticipate we will probably be – and on Good Times, our history is to do probably two a year and that’s what we have got slated this year, very small in this fall and then another small one mid-year, probably in tandem with these improvements and this menu reengineering that we are doing on Good Times. We will be doing some pricing reengineering as well. The net effect of that will be sub-3% on Good Times. On Bad Daddy’s we are anticipating probably less than that, in the 2% to 2.5% range on Bad Daddy’s.

And in terms of thinking about how the environment has changed a bit or maybe significantly over the last six months to nine months specific to the Good Times side, has there been thought about going for maybe more promotions to help drive traffic, do you think that some of this nice product innovation that you are doing, is it getting lost in the mix because consumers are looking for discounts and value offering?

I think certainly somewhat, that’s true somewhat. I think our challenge is that, in the midst of everybody banging on the $4 and $5 price points with our marketing budgets; one, is that going to be meaningful; two, is it somewhat antithetical to where we are positioned, we don’t appeal quite as much to that really heavy user that’s more price sensitive. We are being impacted and I can’t give you a percentage on what our consumer base, what percentage of that is comprised of those. We have lived through this in the past and each time we have gone out to try and get aggressive on pricing, while we can move the top line a little bit, it doesn’t pay for itself on the bottom line. And so we would rather focus, I think on our core brand tenets and we are really focused on this mid-year change to provide more price choice rather than discounting existing items. We really don’t have much of a low tier other than our slider combos in our Bambino’s and we are really looking to leverage those in a much, much more significant way. But that requires not just discounting existing products that we have got. On the Bad Daddy’s side, I think it’s also getting fairly priced competitive with some of the same stuff that we have seen before, unlimited appetizers and $6 lunch price points and two for $20 and all those things. Again, our strategy is not so much offering discounts as trying to hit some specific price points, particularly at lunch and targeting some ways to be able to do that with some new products on the Bad Daddy’s side, but again not discounting existing products. We are continuing to see pretty strong momentum on the Bad Daddy’s side and so continue to bang away on what we stand for there.

Okay. And then I think in the prepared remarks, I caught that North Carolina new unit productivity is about $2.6 million, what did you say it was for the non-North Carolina markets?

Thank you. The average volume…?

Yes.

Yes. But the new unit AUVs?

So that’s all stores in North Carolina, all seven. And as Boyd mentioned, the five new units for fiscal Q3 ran right about that $2.5 million mark and the other three stores in Colorado are again closer to the kind of that $2.6 million for the three. And again, they have been opened all year, so it’s a little easier to – I can’t give you a specific number on those, but the new units is one that – again, none of those have been opened even nine months yet, so it’s still kind of guesswork on where those will even out or end up.

Okay. And I wanted to make sure on the Bad Daddy’s openings for ‘17, you are looking at two in the first quarter, one in Q2 and then three to four each in Q3 and Q4, is that correct?

That’s correct. And again, the way those lay out, we have got – the first two are under development in Colorado and Fayetteville. And then we have got one here in Arvada in Denver and one in Raleigh. That will be in that second – very early third quarter. And then we have got two more in Charlotte, another two in Denver and the new market stores will be the balance for that third and fourth quarter.

Okay. Just last question on commodity costs and maybe beef prices in particular, as we look to the guidance for next year, what are you assuming in terms of commodity cost basket, up, down, flat, kind of…?

Yes. Pretty flat, I mean again, we ticked up just a bit in three versus two. And we are looking at fairly flat to maybe ticking up just slightly in four versus three. And then again we pretty much have hit our modeling pretty flat cost of sales sequentially from where we are now which would provide us about a flattish to a little bit of benefit year-over-year on cost of sales versus ‘16.

Okay, great. Thanks for taking my questions. I will hop back in the queue.

Our next question will come from Mark Rosenkranz of Craig-Hallum Capital Group. Please go ahead.

Hi, good afternoon guys. Thanks for taking my questions.

Hi Mark.

Yes. So most have been answered already, but I was wondering if you could talk a little more about the new breakfast items you just talked about in the recent press release, when you first had the breakfast menu with the extended store hours, we saw a nice boost in comps, what kind of impact are we seeing on these new items in the business and has that played any type of factor in the guidance for ‘16 and ‘17?

Sure. Last question first, no it really hasn’t impacted our guidance. It’s – we implemented two new breakfast sandwich egg sandwiches and potatoes, which were the most requested items. We have been running about in the low-8s say, and 0.25% or so of our total mix on breakfast. The sandwiches and potatoes since we have introduced them have increased to about 9.5%, so it represents about a 15% increase in our total breakfast sales which is good. We are going to go on television here in late September with those and promote those. But we really haven’t – we haven’t factored that into any real incremental improvement next year in our same-store sales.

Okay, great. Thanks for taking my questions.

Thank you.

[Operator Instructions] Our next question will come from Mark Smith of Feltl and Company. Please go ahead.

Hi, guys. First off, just can you give us any update on initiatives to improve labor costs and is there much you can do other than building new Bad Daddy’s outside of Colorado?

That’s a good question. And the answer is yes, we are working on all kinds of things. Labor on the Bad Daddy’s in terms of just its absolute effect has been lasting on Good Times just because we have so many tipped employees. But for our kitchen line and our back of the house staff, it’s a fairly labor intensive concept. And so we are looking at ways to be able to improve efficiencies in those prepped items. We are looking for improved efficiencies on the line in terms of how much volume certain man-hours take to handle on the line itself. We are looking at our management structure. We run a pretty heavy management structure on a store-by-store basis with five salaried managers in those stores that are not yet mature or that in the low-2s. We think there is some opportunity there to reduce that management structure and take non-management hours, but hours where they are just in kind of functional positions and move those to some key employee hours. So there is lots of things that we are doing. We anticipate we will be able to make some improvement next year as a result of all those. Same thing on Good Times, we continue to look at how can we get some efficiencies. Our COO on Good Times, Scott LeFever, we have got very, very defined matrix, down to almost 15-minute sales increments on how many man-hours it takes to produce a certain amount of volume. And part of the investment in new equipment on the production line is to gain some labor efficiencies through equipment that we don’t have today, everything from how we open and close the restaurants to the actual production line itself. So, we are working hard on looking at everything that we possibly can. Obviously, with the elections being hanging in the balance, but looking like it maybe heading into a certain direction, not sure what that means from a minimum wage, we still capture about 3.5 points on our labor line on stores that are non-Colorado or non – where we don’t have the higher tip credit minimum wage. So, until that changes hopefully we will be able to capture that as we move into some of these new markets.

Okay. And then just looking at Good Times comps, it looks like we have got another quarter or two here where things maybe a little more depressed still. What can you do in a tough competitive environment to turn those comps back to positive? It sounds like you have said you have been through this before as you have seen a lot of promotions and discounting from peers. Is there anything in the short-term that you guys can do to drive better traffic?

We can drive – we can do certain things to go out and discount and drive traffic certainly, that doesn’t do much for our profitability. And I don’t think we are too concerned about losing permanent share. I think certainly temporarily we go through these as this ebbs and flows from a competitive standpoint. Again, we are really trying to work and what our best defense has been in the past is to elevate our core brand tenants and really continue to focus on differentiation. That said, we are just tests that we are going into on a new burger lineup, we think is at a very attractive price point that we think will be a much bigger appeal for that value-oriented consumer. It’s not a 4 for $4 or 5 for $5 and it’s not discounting any existing items, it’s creating a new item that is very attractive both individually and in a combo that we think we will strike that cord. We think that’s our best offense. But to go out and discount heavily our core items is really painful. I don’t know what the franchisees are experiencing. I know the larger guys have moved almost to an all franchise system. And so it’s hard to see the true impact on the bottom line when you have 4 for $4, 5 for $5 and 2 for $5 and 2 for $10 combos and all the things that are going on out there. Short answer is I do not have any – we don’t have any silver bullets and believe me, we look for them.

Right. And you said that you are on TV through the rest of the year. Can you remind us if that’s the fiscal year or the calendar year? And then also on TV, how does that compare to last year? And then did you have to pay a little more with rates just being in at least what used to be a swing state in an election year?

Yes. Our levels and our weights are about the same year-to-year. We will be on – when I say the balance of this fiscal year, we will be also right back on, but we will wait till after the elections. What we have done is we have changed our mix in cable and broadcast. With the elections, we get kicked out of broadcast just because of availability and pricing. So, we are going here very shortly to a 100% cable buy and then we will shift back to pull in then some broadcast into that buy as we get after the elections, but we will still be on TV at very similar weights that we were this year as we have this year to last year, we have been on very similar weights.

Okay. And then last one from me, can you just walk through the cadence of comps at both brands? And then any additional insight you can give us into kind of what you are seeing in the competitive marketplace today?

Again in July, we actually – we maintained where we have been running on Bad Daddy’s. We ticked up a little bit to flat from down two on Good Times. And so we saw some benefit of the PawBender promotion and the traffic that that’s driving which has also been really well received on social media and getting a lot of buzz and so we saw some incremental improvement there. Jim, I think if you want to go back through May, June – April, May, June...

Yes, April, May, June, they were all about – April was a little better than negative 2%, but we did have a benefit of the timing of Easter which helped a little bit. So, kind of on a normalized basis, really April, May and June we are all about around that negative 2% on the Good Times side. On the Bad Daddy’s side, we actually had – the weakest month of the quarter was actually June, which was relatively close to flat. But then again, July was up again above 3%. So, it really – it wasn’t that choppy for Q3, it was somewhat consistent for both brands.

Excellent. Thank you.

Ladies and gentlemen, having no further questions, this will conclude the question-and-answer session and conclude the Good Times Restaurants’ third quarter earnings conference. Thank you for attending today’s presentation. You may now disconnect your lines.