Business Overview

Good Times Restaurants Inc. (NASDAQ:GTIM) is a restaurant operator that owns and franchises two distinct concepts - Bad Daddy's Burger Bar and Good Times Burgers & Frozen Custard. The company has demonstrated solid execution in recent quarters, driving improved performance across both brands.

Good Times Restaurants operates and licenses full-service restaurants under the Bad Daddy's Burger Bar brand, primarily located in Colorado and the Southeast region of the United States. The company also operates and franchises drive-thru fast-food hamburger restaurants under the Good Times Burgers & Frozen Custard brand, all of which are located in Colorado and Wyoming.

As of June 25, 2024, the company operated, franchised, or licensed a total of 41 Bad Daddy's restaurants and 31 Good Times restaurants. The Bad Daddy's concept competes in the full-service segment of the restaurant industry, while the Good Times brand operates in the quick-service segment.

Improved Execution Driving Better Performance

Good Times Restaurants has focused on improving execution across both of its brands, which has led to better financial performance. In the latest quarter ended June 25, 2024, the company reported net income of $1.4 million, compared to $977,000 in the prior year quarter. Annual net income for the fiscal year ended September 26, 2023 was $11.1 million on revenue of $138.1 million. The company generated annual operating cash flow of $8.0 million and free cash flow of $3.2 million.

At the Bad Daddy's brand, same-store sales declined 3.2% in the latest quarter, but this represented a sequential improvement from the first quarter. Management noted that Bad Daddy's performance versus the National Black Box casual dining index has improved, with the brand now often beating the benchmark compared to a mid-single-digit unfavorable gap just a few months ago. The company attributed this improvement to expanded operating hours, an enhanced focus on the bar to drive beverage sales, and a change in mindset around standards and execution that has resulted in reduced staff turnover.

The Good Times brand continued its strong performance, delivering its eighth consecutive quarter of same-store sales growth. Same-store sales increased 0.9% in the latest quarter, bringing the 2-year stack to 8.5% despite challenging weather conditions. The acquisition of two previously franchised Good Times restaurants in late fiscal 2023 also contributed to the brand's sales growth.

Liquidity and Capital Allocation

As of June 25, 2024, Good Times Restaurants had $4.8 million in cash and $1.1 million in long-term debt. The company maintains a credit facility with Cadence Bank, which provides up to $8.0 million in borrowing capacity.

The company has been actively repurchasing its shares, having bought back over 250,000 shares during the latest quarter. Management indicated that they expect to expand the existing $5.0 million share repurchase authorization prior to its completion, assuming market conditions remain favorable.

Risks and Outlook

Good Times Restaurants faces risks common to the restaurant industry, such as changes in consumer preferences, increases in food and labor costs, and competition from other restaurant concepts. The company also continues to navigate staffing challenges, with management noting that hiring quality talent remains a persistent challenge.

Looking ahead, the company expects to continue its focus on improving execution and guest experience across both brands. At Bad Daddy's, the company sees opportunities to further enhance its bar program and maintain the positive momentum in its Atlanta market. For Good Times, the company is optimistic about the acquisition of the franchised restaurant in Parker, Colorado and plans to roll out a new point-of-sale system to improve the customer experience.

Overall, Good Times Restaurants appears to be making solid progress in driving improved performance through better execution. The company's focus on enhancing the guest experience, optimizing operations, and prudent capital allocation position it well for the future.