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spk05: Good morning, everyone, and thank you for participating in today's conference call to discuss BurgerFi's financial results for the second quarter ended June 30th, 2021. Joining us today are BurgerFi's CEO, Julio Ramirez, and CFO, Mike Rabinovich. Following their remarks, we'll open the call for your questions. Before we begin today, I want to remind everyone this conference call may contain forward-looking statements as defined in the Private Securities Litigation Reform Act. of 1995, including statements relating to BurgerFi's estimates of its future business outlook, store opening plans, same-store sales, and restaurant operating margin growth plans, prospects, or financial results. Forward-looking statements generally can be identified by words such as anticipates, believes, estimates, expects, intends, plans, predicts, projects, will be, will continue will likely result in similar expressions. These forward-looking statements are based on current expectations and assumptions that are subject to risk uncertainties, which could cause actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in our annual report on Form 10-K for the year ended December 31, 2020. and those discussed in the other documents we filed with the Securities and Exchange Commission. Of subsequent written and oral forward-looking statements attributable to a BurgerFi or persons acting on BurgerFi's behalf are expressly qualified in their entirety by the cautionary statements included in this conference call. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements except as required by law. Given these risk uncertainties, listeners are cautioned not to place undue reliance on such forward-looking statements. Also, the following discussion may contain non-GAAP financial measures. For discussion and reconciliation of these non-GAAP financial measures, please see our earnings release for the second quarter 2021. I would like to remind everyone that this call will be available via telephonic replay for two weeks, starting today. A webcast replay will also be available via the link provided in today's press release, as well as on the company's website at https colon forward slash forward slash Now, I would like to turn the call over to the CEO of BurgerFi, Julio Ramirez. Julio?
spk08: Thank you, Shannon, and good morning, everyone. We're happy you can join us today. I'll start with a brief history and overview of BurgerFi and then highlight some of our second quarter activities and results. From there, I'll turn it over to Mike to walk through our financials before I close with our outlook and growth opportunities. With that, I'm going to start us off with a quick history of our business, as many of our listeners may be new to our story. The first BurgerFi restaurant opened 10 years ago just outside of Fort Lauderdale in a community called Lauderdale by the Sea, and the success was immediate. People loved our food, decor, ambiance, and the overall energy of our brand. Our mission statement of redefining the way the world eats burgers and enriching lives through the best burger experience is more relevant than ever, building on our great tasting food. We offer the highest quality ingredients and premium burger experience, an exceptionally clean, eco-friendly restaurant, prepared and served by a highly energetic and motivated team. We have grown to 119 franchise and corporate-owned restaurants in 22 states, two countries, and Puerto Rico. I'm proud to say that in our home state of Florida, We believe we are the premier better burger chain with 60 locations. Across all of our locations, we place an emphasis on design that differentiates us versus other restaurant brands. Our dining rooms feature all-natural wood walls made out of number two southern pine lumber, one of the most renewable wood sources on the planet. Similarly, our tables and chairs are made out of recycled materials. For example, our Navy 111 chairs in the restaurants are made from upcycled Coca-Cola bottles, literally 111 of them, and our parallel communal tables are made of compressed, recycled wood from shipping pallets. In addition, all of our lighting and fans are energy efficient with very low electricity usage. All these features contribute to our trendy and modern atmosphere that consumers have come to love. Just like the attention to detail in our design, we place a huge emphasis on the food we serve. We use 100% American Angus beef, naturally raised and harvested, part of the NAE program. That's no antibiotics ever. The beef is never given steroids, hormones, antibiotics, chemicals, or additives by feed or by injection. It's humanely raised, vegetarian, grass-fed, and of course, never frozen. This standard is consistent across all our meat-based burgers, from the signature BurgerFi cheeseburger to our premium Wagyu CEO burger. In addition to our beef, we offer a diversified menu that caters to nearly everyone's unique taste preferences. I firmly believe we have the best onion rings in the industry, which are cut from Spanish colossal onions, literally bracelet in size, and then hand-breaded and beer-battered. We also offer French fries that are fresh and hand-cut from Idaho Burbank potatoes in our restaurants, all natural cage-free chicken, premium frozen cutters and concretes that we believe are far superior than standard ice cream, and local craft beer and wine in select locations. Additionally, we were among the first Better Burger chains to introduce Beyond Burgers plant-based patty to our customers, and we also have a vegetarian patty option, our very own award-winning Veggie-Fi that is made up of 15 all-natural ingredients, including crispy quinoa and fresh-cut vegetables. This is truly a menu that garners awards. Recently, we were named the top Better Burger Fast Casual chain in USA Today's 2021 10 Best Readers Choice Survey, and even more importantly, the number one brand of the year in Fast Casual's top 100 movers and shakers list for 2021. The numerous awards that we have achieved are a testament to our innovation and customer engagement. Our innovation pipeline remains strong and we continue to enjoy the strong preference of our swag or spicy Wagyu Angus burger, first introduced in March of this year. Our swag burger features five spicy ingredients, a double Wagyu and brisket blend burger with charred jalapenos, candied ghost pepper bacon to pack the heat, sweet tomato relish to add a bit of sweetness, habanero pepper jack cheese, and of course, hot steak sauce. Our swag burger has doubled our premium Wagyu sales And due to its continued success, we made a decision to make it a permanent menu item beginning in July. Also, to start our third quarter, we've rolled out our new chef-inspired sauces to accompany our fresh-cut sides and cage-free fried chicken tenders. Our unique sauces include truffle aioli, bacon jalapeno ranch made with fresh jalapenos, garlic aioli, which is infused with roasted garlic, and my personal fan favorite, the ghost pepper honey. I want to thank our team for their commitment and hard work, especially during this challenging time. I'll now turn the call over to our CFO, Mike Rabinovich, who will provide additional commentary on our performance for the second quarter. Mike?
spk04: Thank you, Julio, and good morning, everyone. Our second quarter total revenue increased 65% to $11.8 million compared to $7.2 million in the year-ago quarter. New restaurant openings and same-store sales increased Supported by our Swag Burger premium burger introduction in March 21, digital channel sales showing a continued high retention rate, we continue to drive a strong improvement in system-wide sales for the second quarter. In fact, corporate-owned restaurants delivered an impressive 39% increase in same-store sales during the second quarter, with sales surpassing 2019 levels. Our franchise locations also performed very well, with same-store sales increasing 45% in the second quarter. System-wide sales in the second quarter increased 63% to $44.2 million compared to $27.1 million in the year-ago quarter, fueled by the same-store sales increase of 44%, bringing the overall system-wide performance flat with 2019. Digital channel sales were up 12% year-over-year in the second quarter, as our digital platforms drove delivery sales growth, which comprised 39% of our system-wide revenue in the second quarter of 2021, as compared to nearly half that in the comparable period. We are very pleased to retain such a high digital component of our business while the in-restaurant dining continues to recover. As Julio will discuss later, we plan to continue to invest in technology with the goal of delivering a more frictionless omnichannel experience to drive guest satisfaction and sales. Restaurant-level operating expenses for the first quarter were $8 million compared to $5 million in the year-ago quarter. Our restaurant-level operating margin was 11% compared to 10.1% in the second quarter of 2020. The margin improvement reflects tight cost controls on food and beverage costs and the leveraging of occupancy expense which more than offset a wage rate, inflation, and labor headwinds related to the current labor environment. Net income attributable to controlling interests and common shareholders in the second quarter was $9 million, which compares to net income attributable to controlling interests and common shareholders of $100,000 in the year-ago quarter. The increase was primarily attributable to the impact of the gain on change and value of warrant liability recorded during the period. Adjusted EBITDA in the first quarter was $300,000 compared to $500,000 in the year-ago quarter. The decline reflects the additional expenses associated with being a public company, along with the foundational investments to support our growth initiatives as compared to the prior year. Moving on to the balance sheet, our cash balance at June 30, 2021, was $34.8 million compared to $37.2 million on December 31, 2020. The difference reflects the repayment and termination of our revolving line of credit of $3 million during the first quarter of 2021, as well as capital investments in constructing new company-owned restaurant locations. Moving on to our outlook, we remain optimistic about our short-term and long-term prospects. We plan on opening 25 to 30 company and franchise-operated restaurants in new and existing markets for the full year 2021. During the second quarter, we opened three new company-owned locations and one franchise site, representing eight new restaurants year-to-date. Further, we have over 25 signed leases, of which 18 restaurants are currently under various stages of construction and development. Most of the new locations are in markets we currently operate in, and as a result, we're excited about continuing to build on the strength and the brand in those areas. In addition, We are encouraged by the performance of our ghost kitchens, and through our partnership with Reef and Epic Kitchens, we remain on track to hit our target of 15 to 20 new ghost kitchens by the end of 2021, many of which opened in the second and third quarter to date. In terms of restaurant-level margins, we anticipate an improvement due in part to an overall 4% price increase taken late in July. This price increase was designed to help offset ongoing labor and other cost pressures as we expect it to result in a recovery in restaurant-level margins of 300 basis points. In looking at our competitive set, we see similar price increases taken in recent periods, and we are pleased with the results we're seeing in July. In fact, our transaction trends compared to 2019 continue to be at the same level as before the price increase, and we are seeing the flow-through in average transaction value. July preliminary same-store sales are showing continued growth sequentially against 2019 levels at both corporate and franchise locations experienced in June. Given we still have seven franchise locations that are temporarily closed due to being in airports, universities, and the like, we're particularly encouraged for our franchise sales results when these locations are expected to open in the September and October periods. We're expecting company-owned restaurant-level margins to improve to a range of 14 percent to 16 percent of restaurant sales in the back half of the year as a result of the price increase, higher sales, and other store-level operating efficiency initiatives. In terms of capital outlay, we are planning capital expenditures of up to $15 million for 2021 primarily to support new restaurant construction. Now, I'll send it back to Julio to discuss our growth plans and strategic initiatives going forward. Julio?
spk08: Thank you, Mike. Now, I would like to talk about our strategic vision and the growth plans for our brand. Our first priority remains the guest experience. As dining rooms have reopened, we remain laser-focused on providing the guests with a seamless experience with fantastic tasting food. we remain focused on off-premise and digital dining as we have optimized our digital and ordering solutions so that our guests can choose where and when they want to have their BurgerFi meal. Guests can order pickup and delivery through our BurgerFi mobile app, order through our own website, or order from the largest third-party delivery providers in the marketplace. Additionally, to grow our brand in and outside of our existing markets, we have developed ecosystems in the form of delivery-only ghost kitchens in various markets across the US. We are using these kitchens to gain entrance into certain markets where we don't have a physical presence, and more importantly, as well as providing added visibility and awareness in markets where we currently are growing. This allows us to test new growth opportunities while building brand recognition and integrity without the large upfront fixed costs of opening a new restaurant. We currently have over 25 ghost kitchens operating across the US, all of which are helping us understand how we can build our brand in unique ways outside of our core strategy of company-owned and franchise restaurants. The Ghost Kitchen strategy does not require any capital or marketing investments, and we're excited to be at the forefront of this business development opportunity. Another way we're looking to improve our guest experience is through continued refinement of our omni-channel experience. With Henry Gonzalez as our new Chief Marketing Officer, and Carl Goodhue as our new Chief Technology Officer, we're working on a more consumer-focused and data-driven approach to drive engagement among our consumers and ultimately increase sales and profitability. They will be focused on building out our loyalty, mobile application and delivery features, as well as our payment capabilities. By leveraging upgraded technology and innovative multi-channel services, we're excited to provide our customers with the experience of choosing when and where they want their order. Linking upgraded technology with our refined consumer-focused marketing, we're confident that 2021 will be a year where we increase our brand recognition and further improve our customer experience. To dive deeper into our development strategy, we have a dominant presence in Florida, where we are the leader in the fast, casual, better burger category and currently have 60 locations, With Florida as our foundation, we have developed a strong presence across the southeast. Going forward, our strategies to develop and build clusters of company-owned restaurants in cities we feel we have great potential, such as Jacksonville, Tampa, Atlanta, and Nashville, and others, along with franchise restaurant expansion as well. From the southeast, we want to work our way up the eastern seaboard. We already operate in the Carolinas. the suburbs of Washington, D.C., both in Maryland and Virginia, Philadelphia and New York. So by moving up the seaboard, we can connect our southeastern restaurants to the mid-Atlantic and northeast regions, creating a strong presence all along the East Coast. Looking to other U.S. opportunities, we intend to pursue multi-unit franchise deals in markets like in the Southwest and Midwest, but only if they meet our rigorous criteria. We want potential franchise partners in these markets to be well capitalized, have restaurant or retail experience, have deep knowledge of the geography they do business in, and most importantly, be a good cultural fit for our company. Addressing our international opportunities, we already have high-performing restaurants in Puerto Rico with plans to open their third location. We also continue conversations with potential franchise partners in Latin America, where I had over 10 years of experience and believe there is great potential as we come out of COVID. Earlier this year, we signed a multi-unit deal to open six restaurants in the eastern province of the Kingdom of Saudi Arabia. The first restaurant is expected to open in the fourth quarter of this year. This truly is an exciting time at BurgerFi as our brand is truly differentiated and we see significant growth opportunities across the globe. With that, Shannon, please open up the call for questions.
spk05: Thank you, sir. To ask a question, you'll need to press star one on your telephone. To withdraw your question, press the pound key. Stand by while we compile the Q&A roster. Our first question comes from Peter Soleil with BTIG. Your line is open.
spk01: Good morning, and thanks for all the color on the call this morning. I just wanted to ask maybe first on the question Ghost Kitchens, I know you guys are expecting to open 15 to 20 of these this year, and I believe you said that many of these have already opened at least year-to-date in the third quarter. Can you talk a little bit about the expected sales volumes out of these units? I know there's no CapEx on your part, but what type of royalty rate do you garner, and is there a contribution to advertising as well?
spk04: Good morning, Peter. Thanks. From a royalty and brand contribution, our license agreement with our partners for the Ghost Kitchens don't include a brand contribution, so the marketing efforts are primarily done by them. And the license and royalty fee structure is very similar to those of our franchisees, which range between 4.5% and 5.5% of their sales. In terms of the revenue projection for Ghost Kitchens, It's still very early in our journey on this. We do have some initial estimates, but as we open them, we're seeing some with very, very high volumes, and we see others that are in development. And I think our oldest kitchen is just about a year now. So we're not at the point where we want to guide on what we think those would do by location. they are obviously going to be at a lower revenue per than a franchise location because it's a delivery-only kitchen. But we'll hope that as we get some empirical data that we'd be able to share, we would. I also want to remind you on ghost kitchens, a lot of these are in urban centers, and they rely on... a lot of it being back-to-work scenarios. And as we know, depending on what market you're in, there's a different back-to-work phenomenon happening or not happening. So we're being very patient. Having said that, we're very encouraged by the initial results that we're seeing in some of the new locations, and we think that this is going to be a very interesting strategic initiative for us.
spk08: And the only thing I would add to that is our strategically, we've shifted a bit in that about 70% of our reef kitchens are in markets where we happen to have brick and mortar. So we might have, for example, brick and mortar in some of the suburbs, but we're doing reef and epic in more urban areas where we have brick and mortar in the suburbs. The other 30% are markets where we're trying to brand out in markets where we don't have brick and mortar. So it's about 70-30 in brick and mortar areas versus not.
spk04: And then, Peter, in terms of the volume of new openings, through the period ending June, I think we only had one or two new ghosts open. Most of the volume of openings have happened here in the last 45 days. So we're in a very heavy launch period with them here in the third quarter.
spk01: Great. Very helpful. Can we just talk a little bit about restaurant-level margins? I know there was about 11% in the in the quarter, but has improved about 300 basis points with the help of pricing. First, can you talk a little bit, are franchisees taking a similar level of pricing? Are they also seeing a similar improvement in margin? And also, just to comment, I think you guys mentioned other initiatives that are helping to drive the restaurant-level margin. Can you elaborate a little bit on those?
spk04: Sure. Let me start with the margin improvement that we expect from the prices. from taking price, that is a prospective statement. The price increases happened at the very end of the second quarter. So the second quarter results would not really reflect the magnitude or flow through that we expect to see in the third quarter and going forward. So that's more of a prospective lift rather than something that's supported the current margin. On the franchise side, you know, our franchisees have the right to price according to their own markets and their own individual strategies. What we have done, though, is we've shared with them the data intelligence that we've gathered on each of their trade areas. And our team has been very actively engaged with them, showing them the opportunity that's available for them. And a majority of them have followed suit. and we expect that more will continue.
spk01: Excellent. And then just two more questions on my end, and I'll pass it along. On the loyalty program, can you give us an update on the number of customers and maybe how those customers within the loyalty program, how they behave or perform relative to traditional customers? Are they more frequent? Do they spend more? Any sort of details on the loyalty program would be helpful.
spk04: Yeah, that is a good question. I think it's an area that we're developing our KPIs on where we're at right now. I think we have a good handle on them, but we want to be able to speak thoughtfully about where they've come from versus last year and pre-COVID. So we're not ready yet to be talking about those data points, but we expect to in the future.
spk01: Understood. Okay. And then can you just help us out a little bit on international, you know, what are the licensing fees, the upfront fees that you guys typically charge for an agreement? Are you putting any corporate capital to work internationally or is this all franchise licensed agreements going forward?
spk04: Yeah, Peter, the word normal is difficult to say because we really have a couple, right? We have Saudi Arabia that was signed earlier this year. We have also a franchisee in Kuwait that was signed a couple years ago. So there isn't really a normal. It's very facts and circumstances, and a lot of it's driven by how many units they think they can open, and that drives the fee that we're charging. The royalty rate is very typical to ours. There historically has not been a brand fund contribution, but there is a local marketing requirement, but there's a much larger upfront franchise fee that's charged in the range of, I think the couple that we've seen have been several hundred thousand to more than half a million. And it really does depend on the market. Your question about capital or corporate overhead to support or any kind of corporate economics, no, we don't invest any capital and very little corporate overhead because a lot of it is supported through the reimbursement mechanisms we've set up with the franchisee.
spk08: Peter, the only thing I would add is we are having conversations. I spent over 11 years in the international business with a previous company and have great contacts, particularly in Latin America and both Western and Eastern Europe. And so we are having conversations. Many of the countries with interest are locked down because of COVID, and my basic principle 101 is we don't sign any franchise agreements until we visit the market, look at the organization we're talking to, and see the potential. But we definitely are working the relationships and the contacts to be able to hit the ground running once we move off of the great infection that we're dealing with.
spk01: All right. Thank you very much.
spk04: Thank you, Peter.
spk05: Our next question comes from Jay Yanello with Skyden Capital. Please proceed.
spk02: Good morning, guys. Just my background coming to this call is over a decade ago, I visited your Delray location with my family and daughters who are kind of burger connoisseurs, and we fell in love then, and I was asking people there, when are you going public? When are you going public? So thrilled to see you guys. public really good numbers here so I come to this from the bullish side with a large position but I have some questions can you comment at all on John Rosati sales particularly when the stock was depressed another question can you comment on Martha Stewart's contribution to date if any what she's brought to the table and then I have a few quick others after thank you okay
spk04: On the sales of any of our shareholders, it wouldn't be appropriate for us to comment or hypothesize what their individual strategies may be. And so, unfortunately, I don't have more to say there. If they're a significant shareholder, they do publicly have requirements to report what they're selling and when. But in terms of the why, that's just not something that we're engaged with. On the second question, I'll let Julio respond.
spk08: Thank you very much. First of all, we're very proud to, I'm glad you brought up Martha Stewart, we're very proud to have Martha along with our three other board members that we have and Ophir Sternberg, the chairman. I can tell you that every one of our board members, we actually had a board call yesterday, every one of our board members are very engaged with us. They all have a particular set of skills and I can tell you with Martha, we've had not one but two meetings in the topic of innovation and have had First of all, sharing with her our own strategies, what our menu looks like, stuff we've done in the past, stuff we have plans in the future, and have actually collaborated with her on a lot of the planning and thinking. And it's been a great – I would say it's a great relationship and one that we believe we're going to get fruits out of that over time. So we're very excited about her working with us.
spk02: Okay, I realize the focus isn't in the Northeast, but – and I don't know if stumbling is the right word, but there seems to have been – an early push in the northeast parts of New Jersey, New York, and then maybe a backpedaling. I don't know if it was franchise-related. Obviously, COVID didn't help. Can you give us what your medium-term to long-term strategy in the northeast is, given that you are now a public company, a much stronger organization?
spk08: Great question. And the brand, certainly before we got here, had a presence and still has a presence in the northeast. And I would say this. When we say we want to grow up the eastern seaboard, I think I mentioned that we already have a presence in places like suburbs of D.C., Philadelphia, and New York. So we are very interested in that. I think our strategy is multifaceted, but one of them is looking not only at Manhattan, where we operate today. Again, we don't have a lot there, but I think our brand has a look that would fit very well in places that surround New York City, like Long Island and the west side across the Hudson, New Jersey, White Plains, some of the boroughs of New York. So we're looking at all of the above. And we've actually recently slightly shifted some of the brokers that we use. We do not have an exclusive deal with only one group. And we are definitely looking at the area. But as you know, the Northeast is not an inexpensive place. And we want to make the right decisions, the right location with the right operator. And so we're actively looking at both company and franchise opportunities in the Northeast.
spk04: And I think our current development pipeline, including stores planned to open this year and leases signed for next year, do include more than a handful of locations throughout Connecticut, Pennsylvania, and the New York area. So there is a growth in that region.
spk02: Okay, that's good to hear because as someone with relatives in the Northeast, I can tell you your food is wildly superior to Shaq, wildly superior. Julio, real quickly, you commented about your onion rings. They are absolutely the best. I would say your French fries are among the best. Five guys, rivals on that time. I find the biggest challenge with your French fries, and it's not just with you guys, it's with others, is serving them fresh because they're not coated with that garbage that keeps them fresh. Right. What is the challenge at serving crunchy or crisp French fries? And the last question, I don't want to ramble on too long here, is going back to ghost kitchens. I know it's early in your launch of them, but what is the biggest challenge as you're seeing going forward with ghost kitchens in the operating performance of them? Thank you.
spk08: Okay, you threw a couple of two-parters there, so let me take them as I heard them. First of all, the French fry is the biggest challenge of any company. And trust me, even in my previous company, we had four different recipes of fries, everything from skin on, coated, and everything in between. One advantage that we have, if I can just reframe it a little bit, one of the things that helps us quite a bit in the French fry battle is the premium sauces that we have. And I think that's been, we're actually promoting it as we speak for the summer, because a lot of people thought you could only get the sauce with one particular product. The reality is you can put all of our sauces on all the different products that we have, including our fries. So it truly is a special thing that helps our fries. It's a constant challenge. We actually have hired a company called Profitality to work with us on efficiencies in the kitchen and improving our operations. We're in the middle of phase two of that, and one of the things they'll be looking at is exactly that, is what else can we do to provide an even better quality fry, which, again, is the biggest challenge, I think, in the industry. But, again, thanks to our world-class sauces, as you pointed out, We have a lot of fans out there that love our fries and have learned that the sauce will help quite a bit. But it is a challenge. As far as the ghost kitchens, I would say a couple of things. I think refocusing, working with Reef and Epic, but particularly Reef, which is a large player in the space, refocusing them on opening Reef kitchens in areas where we have brick and mortar. I think that's helped us, and we're seeing a little bit of sales uplift. Again, early days. in areas where we have brick and mortar because the brand is better known there. So I think that's one of the big shifts that we made. I think the second one is now with all the growth that we have is meeting top to top, but with the people that do the work both at Reef and us, meeting as a group and really tackling all of our executional issues. There are products like pizza that just almost by accident can get delivered easier. Ours is a little tougher. But we're working hard to make sure we provide a great quality product no matter what experience you have, what channel you use, sorry.
spk02: Thank you so much. I'm extremely bullish on you guys. Good luck. Thank you.
spk05: Our next question comes from Dan Chandra with LinePoint Capital. Please proceed.
spk03: Hi, it's actually Dan Chandra. Congratulations, guys. Can you speak to the number of store openings for the remainder of the year? You mentioned it was 25 to 30 stores. I guess given that you've opened eight already, so that's 17 to 22 for the second half. Can you talk more about the split between the corporate and franchise stores?
spk08: Dan, thank you. Yes, we can. Yes, there are eight open through the first two quarters. We literally have nine under construction, four corporate and five franchise as we speak. We have seven in permitting, four of which will be permitted and under construction by August 23rd. That would bring us to 21. And then we've got another four that already have leases that are in stages of about to be permitted as well. And we believe, even with the holidays, we typically build our restaurants in 70 days. With the holidays, let's add two weeks, we believe we can hit our number. We're very focused on that. The total will end up being... At the end of the day, 14 company restaurants, which let me make a side comment. In my 25 years in a previous company where I ran development both in Latin America and in the U.S., the best operators that we had, single unit operators that were growing, great performance was 14 or 15 restaurants a year. For this company to go from one restaurant a year ago company to 14 is an amazing feat. And we're very focused in this environment. With the COVID situation going on, with the challenges you have of labor, with the challenges of construction, we will hit our target of 14, and we'll open 11 franchise restaurants. And, again, every one of those have a name on them, have a team on them, and we have a good construction crew here following up on them. We're using five different construction companies to help us get there.
spk04: And, Dan, the 14 and 11 that Julio just spoke to are – It doesn't comprise the total of the 25 to 30. The 14 that the company is controlling the timing of, we have a lot of control over the execution because we're working directly with the GCs. The franchisees are the ones where they're managing their GCs and going through that process. When we have a range of 25 to 30 that range comes from the, you know, will the franchisee open in December or will they open in January? You know, it's a little bit more fluid in that regard. In terms of the total, I think that we're going to see an almost even split between company and franchisees, provided that they do get their stores open in November and December.
spk03: That's really helpful. Thank you. And then when you talk about the 18 under development and construction, I guess, based on what you just said, I think we know the answer, but Is that that's all relates to stuff that you could stories that you believe will open this year?
spk04: Yes, that would. That's correct. And then beyond that, there's additional leases signed for openings in January through April.
spk03: Great. So that was my next question. My last question. Can you speak to the pipeline for 2022? And what you're thinking?
spk04: Well, it's a little early for us to get too specific. What we're comfortable talking about right now is we do have over 25 signed leases. And so if you think about the eight we've already opened, the eight's not included in that 25. So we do have a signed lease pipeline between us and franchisees. We'll be in a better position in our next quarter to talk about what our store opening plans are for 22.
spk08: And Dan, what I would add, Dan, is that Remember, we went public in December. We got going in January. We started the company pipeline in February. And as a result, I think you've seen we have opened restaurants and are opening restaurants in the Eastern Seaboard as we messaged on our last call. The big focus for us now, and we're actually going to be adding resources on the franchise side, franchise sales, additional real estate development folks that have experience in signing multi-unit operators, et cetera. That's very much I have experience in that, so does Jim Esposito, my chief operations officer, but we are bringing in resource to help us for 2022. That's what we're focused on now, building that pipeline.
spk03: Great. That's it for me. Thank you. Best of luck. Yeah.
spk05: Our next question from Lynn Ornstein with Drexel Hamilton. Please proceed.
spk07: Hi, this is Lynn from Drexel. Thank you so much for the clarity today. And I just want to say thank you for all you're doing to help and give back to the veteran community. I have two questions. First is just on your strategic vision, how are you identifying the ghost kitchen's opportunities? Like how are those opportunities coming in? Do you have an internal sales team to vet them? And also I know ESG is so important to BurgerFi. And I've read all of that on your website. Can you touch on your plans to grow your ESG goals for 2021 and beyond and what you're doing as far as community involvement? Thank you.
spk08: Thank you very much. Great questions. First of all, let me try to address the ghost kitchen. First of all, we have been very innovative as a company with ghost kitchens. Reef I think that one almost happened based on geography, right? Reef is headquartered in South Florida. We're from South Florida. And that relationship goes back a little bit longer than a year. And we have worked at – we have specifically a couple of my folks top-to-top deal with different departments with Reef, both from a development side, from a technology side, and from a marketing side. So that's not the only ghost kitchen. I have not talked a lot about the other one, which is Epic. Epic is – Based in Atlanta, they're a little bit different. Reef is a technology company with parking lots that got into the ghost kitchen business. Epic is a restaurant company, more like a classic franchisee, that also does ghost kitchens in urban areas. So, for example, we have a restaurant with them in Chicago that's truly a ghost kitchen. Think of an urban area, Gotham City type effect. We're actually talking to them about additional stuff. I don't want to talk about what has not occurred yet, but we have plans to do stuff news at 11, and you'll hear more about that in the future. There are other people out there. We're exploring some additional people that are in, I would call them derivatives of Ghost Kitchens with other companies and other formats, and we'll be at the forefront of them, and you'll hear more about it in third quarter. As far as ESG, Mike, I don't know if you want to address some of that.
spk04: So a lot of what Julio's remarks earlier were in the sustainability that we build our restaurants in. We have an incredibly strong diversity initiative within the restaurants and also at the corporate level, never mind our board, which is a majority diverse board. And under some regards, 100% diversity, depending on how you define diversity. We continue to keep it as the forefront as part of our strategy. From a financial perspective, we also explore ways that we can profile ourselves in a more outward way, and we'll continue to explore those into next year.
spk08: It's interesting that our design of our building, even though the design is 10 years old, I would venture to say that even with a few tweaks we've done, our image can compare. There's other chains out there that have revised their image several times in the last 15 years. And even their newest version I don't think compares as cool as our energy-efficient image that we have. So we're very proud of that. And now with the project we're doing with Profitality, we'll look at some of that, if there's any tweaks we can do to it. But we're very happy with what we have, and we're happy how we've adapted to the current environment of being a little more omnichannel in everything we're doing.
spk05: Thank you so much. Thank you. As a reminder, to ask a question at the time, please press star then 1 on your touchtone telephone. Our next question comes from Lauren Silberman with Credit Suisse. Please proceed.
spk06: Hey, guys. Thanks for the question. So just on trends, is there anything that you can share on trends you're seeing across different markets? And I believe you mentioned sequential improvement in July. So what do you think is driving that improvement, if I heard that correctly? And are you seeing any signs of an impact from the Delta variant in any markets?
spk04: Lauren, those are good questions. So let me first talk about the comments I made about July. Given that we made a price increase at the, you know, call it mid to end June, we've been evaluating what impact that would have in July. And so the comment that I made was on a July versus June basis. And in looking at that, we've looked at our average Transaction value and we've looked at our number of transactions and we're comparing it to 19 because comparing to 2020 where 20 was a very volatile year with You know sales going down and then starting to recover in the end of the year We didn't want to use that as a as a benchmark. So my comment on the sequentiality improvement is that our our Transaction trends versus 19 are very similar in July versus June but our average our average transaction value continues to be strong and has gone up from June, which you would expect from the price increase. We were very sensitive to whether or not the price increase would have any impact on the number of transactions, and we have not seen that. The second part of your question was about different trends in different parts of the network. And yes, we do see different trends in different parts of the network. Several parts of our franchisee network suffered steeper and recovered slower because of where they're physically located. For a good part of the Florida network, there was a strong recovery here in the second quarter and in the first quarter, and in some parts of the franchise network, those areas weren't quite as open. We're starting to see them recover more. And then I also made a comment that we continue to have six or seven franchised and licensed venues that are still temporarily closed because they're either in airports or other themed areas. And we're very encouraged about what their coming back online will do for sales in the back part. In terms of the transaction trends, we're not seeing a lot of difference. The Swagburger really had a meaningful impact into the second quarter on a comparative basis versus the prior year across not only the company stores, but the network itself. So I think that answers those questions. Oh, the Delta variant. You know, it's a concern. It's definitely a concern. We see it in our market. We see it in the news. we haven't seen anything in our current sales that is reflective of the change in behavior.
spk08: One thing I would say, Mike, in the interest of caution, we actually moved to having our employees wearing masks in advance of much bigger chains just to be ultra-conservative, and we've implemented that a week ago. We're dealing with it. Obviously, I just heard in the news this morning that 50% of Floridians are vaccinated and that matches the U.S. number, even though Florida gets a lot of attention. But think of all the tourists that come to Florida. I think that's also part of what we're dealing with. But so far, we're navigating it. And obviously, it's a fluid process and we're dealing with it, working with it closely. So far, we've been able to navigate it.
spk04: And then, Lauren, the last point I'll make on trends is, you know, when COVID ensued, we already had a first party and a third party, first party digital business and a third party delivery business. And as COVID impacted the restaurant business and the communities, we saw a very high penetration of digital. We've enjoyed that. And the very interesting trend that we're seeing is we're actually retaining a significant digital penetration in our business. The numbers have moderated a bit, from the peak of COVID, but we're still at approximately 39% digital penetration. So we're happy to see that. It has a different cost dynamic to it, obviously, but in the end, at NED, we believe it's going to result in net revenue for us, net pickup revenue.
spk08: Then the one last piece, trends that you're talking about, from a restaurant design standpoint, number one, we're not the largest chain in the U.S., right? So we watch very closely what some of the bigger players do, because you learn from all of them, right? So we already have in our pipeline, we already have opened two drive-thru restaurants. We have in our pipeline some more drive-thru, and we're also looking at something known as a park-thru, which I think other chains have started doing that, and even just having what looks like a drive-thru window, but it's not a drive-thru. It would be only for people that order in a digital space. We're looking at all those things, and as we see them working and performing in chains that are trying them out, we'll take the best. I think we don't need to be the first one out of the box. We need to be a fast follower and go with the best strategy and adapt quickly, and I think we do that very well as we look at second-generation buildings for development that we do a lot.
spk04: Lauren?
spk06: Hi. Hello?
spk04: Yeah.
spk06: Oh, okay. Sorry. I think I was on mute. I wanted to ask about the labor environment and any necessary investments that you're thinking about in the back half of the year and how are you thinking about your current staffing levels versus what might be necessary and any additional commentary on what you're seeing would be helpful.
spk04: I'll let Julio comment on more of the operational side of the labor and the investments. We definitely have seen through this year the wage pressure, the turnover pressure, the stimulus impact on behavior at the wage level, and it's been a challenge for us, and some of that pressure has flowed through into our results. We also experience, you know, vacancy and turnover because of the labor environment, the scarcity side of it. And sometimes what that can cause is an overtime level in the store. So, you know, we're doing the best we can. It's definitely one of our top three operational challenges on a week-in and month-in basis. We're hoping that it's transient in some respect and that it will stabilize later this year when some of the stimulus, you know, is discontinued.
spk08: The only thing I would add, it is a challenge. We're going to carry some labor. Obviously, with the restaurant development we have, we have to carry labor in store while we get ready. Jim Esposito is uniquely qualified for that, having had 30 years' experience with many different companies in high-growth modes. We've got a couple of positive things working for our brand. Number one, let's face it, we have a cool brand. We have a cool brand that's very relevant for the days, and I think that that people enjoy working in a new brand that's growing. It's a very challenging environment if you have a brand that's not growing and maybe closing restaurants. And I think that's a positive. Secondly, we've made a management decision early on when I came on board that we're going to have restricted share units, not only for the leadership of the organization, but the entire organization down to our general managers and our assistant managers. And I think that's a real differentiator, and it helps in the battle, obviously, to recruit the best talent that we have. And then we have a lot of other initiatives that we have from discounts with particular suppliers for Skeechers, for example. We've got a ton of stuff that we're doing on a secondary basis. And, again, I'm very proud of our team. Jim and Tracy Copeland in our HR department has done a wonderful job with that type of thing. So you'll see some of this develop over the next few months.
spk06: Great. Thank you, guys. All very helpful.
spk05: Thank you. At this time, this concludes our question and answer session. I would now like to turn the call back over to Mr. Ramirez for closing remarks.
spk08: Hold on one second. Thank you, Shannon. I want to take a moment to thank everyone for listening to today's call. We look forward to speaking with you when we report our third quarter results in the month of November this year. Thank you for joining, and be safe.
spk05: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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