BT Brands, Inc. (NASDAQ: BTBD) is a multi-concept restaurant operator that has established a diverse portfolio of dining experiences across the eastern two-thirds of the United States. With a focus on innovation and adapting to changing consumer preferences, the company has strategically expanded its footprint, positioning itself as a key player in the dynamic restaurant industry.
Business Overview and Chronology Incorporated on January 19, 2016 as Hartmax of NY Inc., the company underwent a transformative acquisition on July 30, 2018, acquiring 100% of BTND, LLC. This move marked the beginning of BT Brands' foray into the restaurant sector, as BTND operated a network of Burger Time fast-food establishments in the North Central region of the U.S.
In 2020, BT Brands received equity ownership in NGI Corporation as consideration for a loan. The company continued to invest in NGI over the next two years, including purchasing Series A1 convertible preferred stock. This diversification into other business interests demonstrated the company's strategic approach to growth and risk management.
In 2022, the company made a significant move to diversify its offerings by acquiring a 41.2% stake in Bagger Dave's Burger Tavern, a casual dining concept with six locations in Michigan, Ohio, and Indiana. This strategic investment broadened BT Brands' reach and exposure to a wider range of customer preferences, reducing its dependency on the financial performance of its Burger Time restaurants.
More recently, in May 2024, BT Brands expanded its portfolio further with the acquisition of Schnitzel Haus, a German-themed restaurant in Hobe Sound, Florida. This addition not only diversified the company's culinary offerings but also provided a foothold in a new geographical market.
Throughout its history, BT Brands has faced various challenges, including the impact of the COVID-19 pandemic, difficulties in attracting and retaining food service workers, and rapid inflation in the cost of input items. The company has actively worked to address these issues through operational enhancements, equipment advances, and strategic acquisitions to strengthen and diversify its business.
Financial Performance and Ratios As of the company's latest 10-Q filing on November 13, 2024, BT Brands reported total revenue of $11.65 million for the 39-week period ending September 29, 2024, representing a 5.2% increase compared to the same period in the prior year. However, the company's net income for the same period was a loss of $735,130, compared to a loss of $379,010 in the previous year.
The company's return on assets and return on equity for the 39-week period were -9.85% and -15.31%, respectively, reflecting the challenges faced during the period.
For the most recent fiscal year (2023), BT Brands reported annual revenue of $14.08 million, with a net loss of $887,368. The company's annual operating cash flow was negative $258,787, and free cash flow was negative $747,175.
In the most recent quarter (Q3 2024), the company reported revenue of $4.35 million, a 7.8% increase year-over-year, primarily due to improved sales performance at Burger Time, including the opening of a new location in Ham Lake. However, the company recorded a net loss of $219,479 for the quarter, attributable to higher labor and occupancy costs.
Liquidity The company's liquidity position remains sound, with a current ratio of 4.66 and a quick ratio of 4.58 as of September 29, 2024. BT Brands' debt-to-equity ratio stood at 0.48, indicating a moderate level of leverage. The company reported $5.30 million in cash and cash equivalents, with net working capital of $4.3 million, a decrease of $1.4 million from the end of the prior fiscal year.
Operational Highlights and Diversification BT Brands' strategic focus on diversification has been a key driver of its growth and resilience. The company now owns and operates 18 restaurants under various brands, including:
1. Burger Time: Eight fast-food restaurants located in the North Central region of the United States, offering a variety of burgers, affordable foods, sides, and soft drinks. Burger Time unit sales for the 39-week period ranged from approximately $437,000 to $925,000, with average sales per unit of $716,000, an increase of $95,000 from the same period in the prior year.
2. Keegan's Seafood Grille: A dine-in restaurant located in Florida, operating for over 35 years and offering traditional fresh seafood items for lunch and dinner, along with beer and wine.
3. Pie In The Sky Coffee and Bakery: A casual dining coffee shop and bakery located in Woods Hole, Massachusetts, featuring fresh baked goods, sandwiches, and locally roasted coffee. Sales at Pie for the nine-month period increased approximately 10% over the prior year.
4. Schnitzel Haus: A German-themed restaurant and bar located in Hobe Sound, Florida, acquired in May 2024, featuring a German-themed menu with specialty imported European beers.
5. Village Bier Garten: A German-themed restaurant, bar, and entertainment venue in Cocoa, Florida.
Additionally, BT Brands owns approximately 40% of Bagger Dave's Burger Tavern, Inc., which operates six restaurants in Michigan, Ohio, and Indiana. The Bagger Dave's concept offers burgers, hand-cut fries, locally crafted beers on draft, milkshakes, salads, chili, and pizza.
This diversification across dining concepts and geographic regions has helped the company mitigate risks and adapt to changing market conditions.
Challenges and Risks BT Brands, like many other restaurant operators, has faced challenges in the form of labor shortages and inflationary pressures on food and commodity costs. The company has worked to address these issues through measures such as investing in employee training, implementing operational enhancements, and adjusting menu prices to maintain profitability.
The highly competitive nature of the restaurant industry also poses a risk to BT Brands, as the company must continuously adapt to evolving customer preferences and maintain a differentiated offering. The company's ability to identify and successfully integrate new concepts into its portfolio will be crucial in navigating this competitive landscape.
Industry Trends The restaurant industry has faced significant challenges in recent years, including difficulties in attracting and retaining staff, and rapid inflation in food and other input costs. Competitors have been aggressively adopting technology and delivery capabilities to compete for customers. These trends are expected to continue, requiring BT Brands to remain agile and innovative in its approach to operations and customer service.
Performance by Geographic Markets BT Brands operates primarily in the eastern two-thirds of the United States. Its Burger Time locations are concentrated in the North Central region, while other concepts such as Keegan's Seafood Grille and Schnitzel Haus are located in Florida. The company also has a presence in Massachusetts through Pie In The Sky Coffee and Bakery. The 40% owned affiliate, Bagger Dave's Burger Tavern, extends the company's reach to Michigan, Ohio, and Indiana.
Outlook and Guidance In the company's most recent earnings report, BT Brands provided a cautiously optimistic outlook for the remainder of fiscal 2024. Management highlighted the progress made in operational efficiency and cost control measures, which they believe will help mitigate the impact of ongoing inflationary pressures.
While the company has not provided specific financial guidance, BT Brands expressed confidence in its ability to leverage its diversified portfolio and strategic initiatives to drive improved performance in the coming quarters. The company's focus on expanding its footprint, enhancing operational excellence, and adapting to market demands is expected to be instrumental in navigating the evolving restaurant industry.
Conclusion BT Brands' journey as a multi-concept restaurant operator has been marked by strategic acquisitions, diversification, and a commitment to adapting to changing market dynamics. The company's diversified portfolio, which includes fast-food, casual dining, and specialty dining concepts, has provided a degree of resilience in the face of industry challenges.
As BT Brands continues to navigate the evolving restaurant landscape, its ability to identify and successfully integrate new concepts, optimize operations, and address labor and cost pressures will be crucial in driving long-term growth and value for its shareholders. The company's recent financial performance, while showing some positive trends in revenue growth, also highlights the ongoing challenges in profitability. Moving forward, BT Brands will need to focus on improving its bottom line while continuing to execute its diversification strategy to position itself for sustainable success in the competitive restaurant industry.