Good afternoon, ladies and gentlemen. Welcome to the Good Times Restaurants Incorporated Fiscal 2019 Third Quarter Earnings Call. By now, everyone should have access to the company's first 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 security laws. 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 their recent SEC filings for a more detailed discussion of the risks that can impact our future operating results and financial conditions. Lastly, 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 or reconciliation to comparable GAAP measures available in our earnings release. And now, I would like to turn the conference over to Boyd Hoback. Please go ahead, sir.

Thank you, Chuck, and thanks for joining us on the call today. I'll again hit a couple of the financial highlights, and then Ryan Zink, our Chief Financial Officer, will provide more detail on the financial results for the quarter. For our third quarter, our revenue grew by 12%, and that included a 0.7% decrease in our comp sales at Bad Daddy's and a 2.8% increase in comp restaurant sales at Good Times. As you know, during our first – as you may know during our first two quarters, we are dramatically impacted by the weather here in Colorado at Good Times. As we moved to more normal weather comps to prior year, Good Times same-store sales have continued to accelerate to the mid-to-high single-digit range in the last month of the period and then subsequent to the end of the quarter as well. At Bad Daddy's, we've had some competitive intrusion at a couple of the stores during the third quarter, which we expect to moderate after the initial trial, as well as some ongoing cannibalization at 2 stores in the Raleigh market from the opening of a very high-volume store in January, that continues to be significantly above our average unit volume. We anticipate it will continue to be a high-volume store, but it will also have some cannibalization of those 2 stores. Our sales trends are positive and slightly stronger in Colorado than they are in the southeast on the whole. We're not a broadcast advertiser, so we continue to focus on growing our sales first through store-level execution and then through social and digital media. We implemented a new summer cocktail menu and continue to promote monthly chef's specials in each market for continued innovation, while our overall scores and ratings on review sites and from…

Thanks, Boyd. At Bad Daddy's, restaurant sales during the third quarter were $21.1 million, an increase of 18.5% versus $17.8 million during last year's third quarter. We had approximately 100 more store weeks this quarter versus the same quarter last year, due to an additional 6 units opened since the end of last year's fiscal third quarter, partially offset by overall lower average unit volumes. Same-store sales declined 0.7% for the quarter, below our prior guidance, with those trends generally continuing into the fourth quarter. 22 Bad Daddy's restaurants were included in the comp base during the entire quarter with two restaurants joining the comp base during the quarter. One additional restaurant will enter the comp base during our fourth quarter. Cost of sales of Bad Daddy's were 28.8% for the quarter, a decrease of approximately 40 basis points versus last year's third quarter and an increase sequentially over the previous quarter by approximately 30 basis points. We expect our cost of sales to increase slightly between now and the end of the year as the gradual decline in commodity costs, and that trend moderately changes it to the other direction. Bad Daddy's labor costs increased by approximately 100 basis points, compared to the year ago quarter, but decreased sequentially by 40 basis points to 37.2% for the quarter. This year-over-year increase is due to increasing wage inflation for back-of-the-house employees, where the wage rate was up approximately 5% on a year-over-year basis on top of the statutory front-of-house wage increases in Colorado, that coupled with the deleveraging effect of lower average unit volumes. As we look to the balance of the year, we continue to expect pressure on the back-of-the-house and slightly higher costs on a sequential basis in the fourth quarter, as compared to the third quarter. Overall,…

Thanks, Ryan. We're obviously really excited about the resurgence on Good Times sales even though that's a smaller part of our business. We certainly didn't plan to be opening 4 Bad Daddy's stores within the period of about 75 days. But unfortunately, with the developer and landlord delays and turning those over to us, that's us how it's lined up, but we've got that management team and staff ready to go. And so, we're excited about these next 4 stores. As we talk about 2020 guidance, we'll also be discussing some longer-term view, I think, for our Bad Daddy's development and particularly our capacity from an internally generated cash standpoint and where we anticipate our leverage to be as we move into 2021. With that, I'll open the call for any questions.

[Operator Instructions] The first question comes from Will Slabaugh with Stephens Incorporated. Please go ahead.

Hi, guys. This is actually Niall on for Will. You spoke about Raleigh there. And I was wondering if I get a little bit more color around new unit openings regarding Bad Daddy's? How they've been performing so far, particularly in newer markets? And how you guys feel about the upcoming openings over the next couple of quarters?

Sure. So, the last store we opened was in January of this last year in Raleigh. It's performing extremely well. It's our fourth store in the market. We've got four stores currently in Atlanta, really with one of those being an underperforming store, the other three are doing well and continue to grow. And then the ones that we've got coming up from a site standpoint, and again, I mentioned, we're continuing to refine and work on our site model, we're projecting our new store. Our target is a $2.5 million target. And we feel confident on these coming up based on the site characteristics, the additional modeling and analysis that we've been doing, competitive volumes around them. Short story is, we feel really good about them. We've got – I mentioned Colorado growing a little bit more quickly than the Southeast right now. We actually have new stores run. Three out of our top volume stores are now in Colorado, doing over $3 million or thereabouts. And so – and the last one we opened in Raleigh is also trending in that same direction. So, as we continue to dial in to say we had a couple of clunkers in 2018. One of those being in Atlanta and one of those being in Greenville, South Carolina. We think that we've learned how to avoid those. So, we think that we'll be hitting our target as we move forward, not only for these six stores that we've got in the pipeline, but for the balance of 2020 as well.

Perfect. Thank you. Just another follow-up, if I may. You mentioned delivery there, fully rolled out with DoorDash. I was hoping you could give a little bit more detail there? And what you've seen so far maybe, and how impactful you think it can be? And what your expectations are for the service going forward?

Yes. I mean we think we need to be there. Honestly, we would rather not, but that's certainly where I think – where things have gone in our business. The costs associated with it are higher with the delivery fees. We don't have the alcohol and beverage incidents on the delivery, so the overall cost structure. The good news is it doesn't have the labor component required, particularly in the front of the house, has dine-in visits. So, we think it's going to continue to grow. We anticipate it will probably be growing from little over 10% and will continue to grow as we move forward. We find when we turn it on initially, and particularly with some free delivery promotion, it spikes up very high with initial trial and then settles in. We pushed a 20% price menu. We got some pushback on that. And so, we moderated that to a 10% price increase to help mitigate some of the higher costs. Ryan, anything you want to add?

Niall, this is Ryan. I think, the only couple of things I'd add to that is, as we mentioned, we haven't quite rolled it out to Raleigh yet. And we did roll it out in stages. And what we saw throughout that is, one, that off-premise – total off-premise tended to grow faster when we rolled out delivery. But additionally, even those markets that we had not rolled out delivery, the off-premise business wasn't just growing as a percent of total, but was growing in aggregate. And so, we definitely think that that's something that customers are demanding. And as Boyd mentioned, we need to play in that segment. There are a couple of things we're working on to improve that – improve the profitability of that. One of those, and probably the primary area in which we're actively working is, right now, we sit kind of on the marketplace sites as they're called, on the DoorDash side, et cetera. And we are working on having delivery available directly through our website. And if we can convert any of those who are currently using kind of those aggregator sites, we're exclusive at DoorDash. But if we can convert them from, say, DoorDash site to a direct, we can improve our cost structure associated with that delivery order significantly.

Perfect. That’s in from me. Thank you.

Thanks, Niall.

The next question comes from Stephen Anderson with Maxim Group. Please go ahead.

Okay, that's Steve Anderson. Just I wanted to go a little bit more into Bad Daddy's. And I know on past calls, you mentioned those three underperforming locations. Have you decided at this point, you're going to close or maybe writing off those assets? Or are you still looking for ways to potentially maybe target some more sales out of those three locations? And I have a follow-up.

Yes. No, they're cash flow positive and so they're not impaired assets. And we certainly don't plan on closing those. And we still have the one challenging store that we've had from the get-go in Colorado and the Cherry Creek store. It's running up nicely in the mid-teens plus on same-store sales, so it continues to grow. That's the only one that's cash flow negative out of our entire system. And so, we don't anticipate impairing any of those stores.

I was going to say, Stephen, yes, as Boyd mentioned, I think even at the lower sales volumes of some of these recent ones that we've opened in the lower minimum wage states, we can still breakeven or be profitable at those levels. Now that said, I think we do have the opportunity to evaluate other ways for those lower-volume restaurants to be a little more profitable. And we're actively looking at that as well.

Okay. With regard to your franchise development program, you mentioned, have you received – is this something you received LOIs on those yet or there's something you'll plan to announce going into the next fiscal year? And are there any specific geographies you're going to be testing with that?

Yes. No, we don't have anything to announce on that. We will certainly announce that as we move forward into next fiscal year. And we would like from, just a distribution standpoint and some other operating efficiencies to be somewhat contiguous to where our company-owned development is. And so that means really a lot of the Midwest and Upper Midwest as we continue to develop in the Southeast and Mid-Atlantic.

Okay. And I watched this over at Good Times. I wanted to ask if there are any specific promotions that really gave you a big jump in your traffic and sales trends?

No, there wasn't. There really haven’t been any silver bullet promotions. We've been having a fair amount of good product news out there right now. We have a – we shifted our advertising from cable TV to radio. And I think that creative has done quite well and has been more cost efficient. And so, as we moved out of – we're lapping kind of flat to slightly up last year. So, we feel really good about running it up in the single to high single digits right now. And we're going to continue that radio campaign, combining not only the creative with ongoing hard product news. It's not soft brand advertising, it's specific products, but it has not been price promotion. It's just in hard product news.

Okay. And if you could remind too that this was lapping over last year when you didn't do advertising because of the political season. And I'm sure next year, you'll probably have something similar to say too. But with regard to – I mean this maybe something you'll address in future calls. But how are you thinking longer term about avoiding some of the fluctuations with regard to political advertising, your ability to break through that?

Well, the political’s weren't very meaningful, honestly, last year, Stephen. We really didn't hit that until September is when we went off-air last year. What dramatically impacted this last year was the weather. You factor out the weather, our trends were pretty stable. And we track that every day, and we track precipitation and temperature. And we can gauge pretty definitively what the impact of the weather is. So, the last – first quarter and second quarter last year were really the first negative sales trends we've done in 5 years. So, we've had good sales trends. And I think we're confident we can be able to maintain those and some of the bounce back. We've got normal weather to weather comparisons right now, and we're seeing some big bumps. So, as we lap over Q1 and Q2 here in this fall and winter, we're anticipating significant increases, again assuming that last year was extraordinarily bad weather, meaning the most in decades. And so, we anticipate weather will be better, and we anticipate that our sales will reflect that.

Okay. Finally, going back to Bad Daddy's. I mean you mentioned also like a couple of your locations, you saw some competitive intrusions. But can you say more broadly that you think this traffic is going to some of these new compares at those sites? Or you think you're seeing maybe going to more established competitors in the bar and grill space or maybe someone like the upscale space?

No, anytime we see a new competitor open around us, we feel it in the short-term, but we also – it takes typically about six months, and then we come back to our prior sales. It's pretty normal for our guests and in the trade areas for people to try a new restaurant when it opens, whether it's a direct grill and bar competitor, upscale, casual, even fast casual to some degree. But when we see a significant full-service competitor open next to us, we'll feel it for about 6 months, but then we anticipate and have experienced in the past that it bounces back. Good example is Lazy Dog here in Colorado, very good operator, good concept, kind of close to what we do, build these massive high-volume stores. We've had three of those opened, but we've come back from those and are positive on those stores now.

Alright. Thank you.

Okay. Thanks, Stephen.

[Operator Instructions] The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.