BurgerFi International Inc

Good morning, everyone, and thank you for participating in today's conference call to discuss BurgerFi International's financial results for the third quarter ended October 3rd, 2023. Joining us today are Carl Bachman, CEO, and Chris Jones, CFO. Following their remarks, we'll open the lines for your questions. Before we begin, I want to remind everyone this conference call may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be related to BurgerFi's estimates of its future business outlook, liquidity, store opening plans, same-store sales, and restaurant operating margin growth plans, prospects, or financial results, including projected sales, restaurant EBITDA. 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, and similar expressions. These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which could cause the company's 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 the annual report on Form 10-K, the year ended January 2, 2023, and those disclosed in other documents that the company files with the Securities and Exchange Commission. All subsequent written and oral forward-looking statements attributable to BurgerFi or persons acting on BurgerFi's behalf are expressly qualified in their entirety by the cautionary statements included in this conference call. The company undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these statements and uncertainties, listeners are cautioned not to place undue reliance on such forward-looking statements. Also, the following discussion will contain non-GAAP financial measures. For discussion and reconciliation of these non-GAAP financial measures, please see the earnings release for the third quarter 2023. I would also 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 www.verterfi.com. Now I'd like to turn the floor over to BurgerFi CEO, Carl Bachman.

Carl, you may go ahead.

Thank you for joining us today. And we appreciate your interest in BurgerFi. Let me begin by thanking our entire team, franchisees and employees for their dedication and hard work in this challenging environment. Our third quarter performance is clearly unacceptable and certainly not reflective of what we believe these brands and the people at this organization can accomplish. Having arrived at the company only 10 days into the quarter, these results are in no way indicative of the work we are doing or where we intend to take the business. As mentioned on our last quarterly earnings call, we are implementing strategic priorities that we believe are setting the company up for long-term profitable growth. And as we embed these positive changes into our operating model, we highlight our early and ongoing wins as part of this journey so as to gain your confidence in our vision and ability to build shareholder value from current levels. Positive initial trends in the third quarter succumbed to softer performance later in the quarter, as we lapped last year's 20th anniversary celebration in Anthony's, coupled with the impact of reduced marketing spend initiated prior to our arrival. Similar to others in the industry, we also were impacted by softer performance in South Florida, one of our key markets. We believe this was due to seasonality as the region returned to norm more normalized trends. Importantly, the challenges of third quarter are behind us now, with many of the initial initiatives we put in place taking hold, including the expanded menus at BurgerFi and Anthony's. Most recently, we successfully executed the biggest enhancement of the BurgerFi menu in the company's history, adding wings and salad bowls, and the response has been resounding. This is only the beginning, as further menu refinement, including new chicken sandwiches, will hit company stores by the end of the month. So it's official, BurgerFi has entered the chicken wars and we're only getting started. These updates are critical to the brand's turnaround as they eliminate the veto vote, expanding our high quality offering to an even larger segment of the market. BurgerFi is also accelerating the adoption of technology to drive food costs down, which are now approaching industry benchmark levels. Looking forward with the combination of new unit growth and improving same store sales trends driven by our expanded offering, and overall more effective marketing messages, we anticipate BurgerFi returning to positive comps in early 2024 and positive EBITDA by the second half of 2024. Additionally, we're equally confident in the return to positive comps at Anthony's, driven by similar initiatives, including menu modification and aggressive focus on food costs and the benefits from an updated POS platform. Perhaps most importantly, we're setting the stage for franchising company-owned Anthony's So we're starting as early as the first quarter of 2024. But more on that later. To give you a sense of why we are confident that we can reach these goals in 2024, I'm going to follow the form from last quarter and provide a detailed update on our five strategic priorities. Step one is infrastructure. It starts with employees. I believe we must have the best team on the field to play and the need to develop and train them properly. In just a few months, we've already been able to decrease turnover at both brands that significantly reduced the training labor needed at the restaurant level. These efforts have resulted in higher consumer satisfaction scores as well as faster throughput and ticket times. While these encouraging metrics are not reflected in our financial performance, they are leading indicators that we are on the right path towards higher sales and margins. We plan to build upon this during the remainder of the year and expect to see an improvement in the labor line at Burger Pie and Anthony's over the next year. As noted above, we are also upgrading our POS system across both brands, so they are on one system to allow for better inventory control. At Anthony's, we are evaluating outfitting our servers with handheld tablets that allow them to beam orders directly to the kitchen, which will help drive efficiencies. Step two, taste and quality, which are paramount to everything we do, and why we're going to make sure we continue to have the best products and most innovative LTOs. In October, Anthony's launched new classic menu items, including a chicken alfredo and artichoke pizza, and two pasta dishes, spaghetti and meatballs, and Italian fettuccine alfredo. Guest feedback has been encouraging so far. At BurgerFi, when reading guest comments, we noticed a lot of criticism around the French fries, with taste loss due to prior cost-cutting procedures. Upon receiving this feedback, we immediately changed the process to prepare the fries in a crisper way, and so it bounced back in taste satisfaction. Additionally, we also right-sized the menu at BurgerFi, removing less popular and process-intense items that slowed down throughput and ticket times. And on November 1st, we launched all new menu items at BurgerFi, including three flavors of chicken wings and four types of BurgerFi bowls. Additionally, we are launching a chicken sandwich option that will come sous vide, making it easy and efficient for our employees to prepare. Until now, we haven't really offered a compelling crispy chicken sandwich. We spent the last few months perfecting this crispy chicken sandwich as well as a new grilled chicken sandwich to close our menu gap. A fast casual burger brand should have a 10% to 15% chicken mix, and until now we had virtually none. This will allow us to open a whole new audience of chicken fans. To add to the menu innovation, BurgerFi will also launch a seasonal white chocolate peppermint shake for a limited time only. This shake features vanilla frozen custard mixed with white chocolate and peppermint, topped with whipped cream and crushed peppermint pieces. Step three is gold standards. Gold standards is a term that defines our pride in product, process, and facility and creates brand promises. We're executing at a higher level than before, listening to employee and guest feedback and moving them in the right direction to drive long-term sales growth. As I began getting a feel for the business through my store tours at Anthony's, I realized that neither employees nor customers were happy with our AI phone answering bot named Becky. As you might recall, Anthony's added the AI bot to its 60 corporate locations last December to handle the roughly 500,000 phone orders that come in every year. The goal of this rollout was to drive labor savings and higher check averages. However, Becky wasn't doing a very good job. The system had too many prompts and too many steps, which frustrated customers. Team members also expressed that they missed interacting with guests. As a result, one of my first acts as CEO was to go back to having employees answer the phones. Removing Becky now allows employees to put a human touch back into their many hundreds of thousands of annual phone transactions. Every interaction with the guests is a moment of truth and hospitality can start first on the phone. Additionally, we expect to see some savings from dropping this costly system. And I've already started seeing a boost in call orders and check average as alienated customers have returned. Step four is telling the world about our brands through intentional marketing efforts. In September, we launched the KidZ Pre-Program for BurgerFi. Every Monday, kids 12 and under can enjoy a free kid's meal with a purchase of an adult meal. This is for our dining customers only. We continue to have some fun around the holidays. On National Cheeseburger Day, we celebrated with a $3 cheeseburger for the purchase of a beverage. On National Cheese Pizza Day, we offered a $10 16-inch cheese pizza. We're also focusing our efforts on driving digital engagement and our rewards programs. Finally, I will end with step five, defining the portfolio, which is about both store development and optimization. It's not lost on us that while we make positive headway in products, labor, and marketing, the most important part of driving profitability and cash flow is cycling out underperforming ones and opening new stores. Over the last three months, we've been closely reviewing our existing portfolio in addition to our pipeline. Do the DMAs our restaurants are located in have the demographics to support our brands? We need to understand where we're successful and where we're struggling from a real estate, regional, or market perspective. We're currently working on right-sizing our portfolio and closing underperforming restaurants. Our growth going forward will be focused on infilling the Eastern seaboard within existing markets where we already have a strong brand awareness from corporate and franchise locations and fortress around those core markets. We will also grow what we view as promising markets. As of October 2nd, our portfolio consisted of 110 BurgerFi restaurants, 26 corporate-owned, and 84 franchised, and 59 corporate-owned Anthony's. During the third quarter, we closed one underperforming company-owned and three franchise BurgerFi restaurants as we continue to right-size our portfolio. Additionally, we closed one underperforming company-owned Anthony's. For the full year, we now expect new store openings to come in at 12 to 15 new restaurants. all of which will be franchised, with the exception of our flagship New York City location. Turning to the fourth quarter, we acquired two franchise burger fives in South Florida to solidify our presence and help accelerate growth in this core market. These restaurants are located in Hallandale Beach and Miami Beach, two high-traffic, popular tourist spots, and represent, in the brand's evolution, a commitment to continuing development in primary markets across the country. We believe these restaurants to be high volume and margin accretive as we fortress South Florida. In December, BurgerFi will be returning to New York City with the grand reopening of our flagship company-owned BurgerFi restaurant and Better Burger Lab on the Upper East Side of Manhattan. Being a born and raised New Yorker, reopening our Manhattan location is a passion point for me. There's no better market for us than New York City. It's the epicenter of food, entertainment, fashion, and culture. and having a flagship restaurant there is excellent for brand awareness beyond the immediate geography. In addition to our standard menu, this location will offer an exclusive lineup of limited edition offerings not available at our other locations, and a late night menu with a variety of alcoholic beverages. This restaurant will also serve as a venue for special events. South Florida, our home market, is a top destination for New Yorkers, and now our guests can discover BurgerFi in South Florida and go back and enjoy it year-round in Manhattan. This is a win-win for both guests and the brand. We are also still on track to open our first-ever co-branded BurgerFi in Anthony's location in December with our franchisee, NDM Hospitality Services. As a reminder, our agreement with them calls for three franchisee Anthony's locations in Florida over the next two years. The second and third Anthony's locations through the NDM agreement are expected to be both of the smaller Anthony's prototype. The first of these smaller restaurants is slated to open in the Miami World Center development near the Miami Brightline Station. We're also expanding our footprint through non-traditional spaces. We entered into a binding license agreement with Apple Cinemas to operate a BurgerFi franchise location within its Pittsburgh Plaza Apple Cinema in Rochester, New York. The location will also provide pickup and third-party delivery service capabilities for non-theater customers. This location marks a new and exciting venture for BurgerFi. Non-traditional venues provide opportunities that wouldn't normally be available for restaurants and greatly increase our awareness and visibility of our brands. In my experience, the best way to accelerate growth and evolution is through these non-traditional avenues. We're aggressively seeking new development opportunities, and our pipeline is growing. We continue to seek unique ways to connect our brand to customers where they are in life. And finally, one of my main priorities is finding well-capitalized franchisees with restaurant, retail, and hospitality experience. Bringing these operators into our system will result in more disciplined and profitable growth over the long term. We have already begun negotiations with several interested parties for multi-unit Anthony's franchise deals, including the sale of a handful of Anthony's locations. I look forward to sharing more in the coming quarters. In closing, my first 90 days on job have been very productive and more confident than ever that I made the right decision to join the company. Sales and margin improvement will not happen overnight, but we are laying the foundation to grow upon. We believe they will come, and these improvements will begin to become evident to you, our stakeholders. We're making very educated, smart decisions using a very simple formula. We must win for our guests, win for the team members, and win for the shareholders and franchisees. With that, I will now turn the call over to our CFO, Chris Jones, who will provide commentary on our third quarter 2023 performance and update our guidance. Go ahead, Chris.