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spk01: Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the FAT Brands Incorporated First Quarter Fiscal 2022 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode. Please note that this conference is being recorded today, May 5, 2022. On the call today from FAT Brands are President and Chief Executive Officer Andy Riederhorn and Chief Financial Officer Ken Craig. By now, everyone should have access to the earnings release, which can be found on our investor relations website at ir.fatbrands.com in the press release section. Before we begin, I need to remind everyone that part of our discussion today will include forward-looking statements. These forward-looking statements are not guarantees of future performance and therefore, undue reliance should not be placed upon them. Actual results may differ materially from those indicated by this forward-looking statement due to a number of risks and uncertainties. The statement is due to a number of risks and uncertainties. The company does not undertake to update this forward-looking statement at a later date. For a more detailed discussion of the risks that could impact future operating results and financial conditions, please see today's Earnings Press release and our recent SEC filings. During today's call, the company may discuss non-GAAP financial measures, which it believes can be useful in evaluating its performance. The presentation of this additional information should not be considered in isolation nor as a substitute for results prepared in accordance with GAAP. Reconcilations to comparable GAAP measures are available in today's earnings release. I would now like to turn the call over to Andy Wiederhorn, President and Chief Executive Officer.
spk02: Thank you, operator. Good evening, everyone. Thank you all for joining us on the call today.
spk03: We are excited to be here on our first earnings call for fiscal 2022. This afternoon, we made our first quarter 2022 financial results publicly available. Please refer to the earnings release and our earnings supplement, both of which are available in the investor section of our website at www.fatbrands.com. Each contained additional details about the first quarter, which closed on March 27th. The first quarter was an excellent start to 2022 for Fat Brands, and I would like to thank our whole team for their impressive execution as we continue to grow this business. Fat Brands is truly differentiated because we have a scalable platform that affords us the opportunity to synergistically incorporate new concepts with minimal incremental corporate overhead costs. We also have a long runway for organic growth, highlighted by 27 store openings in the first quarter and 34 year-to-date on our way to well over 100 by the end of this year. In addition, we have a huge pipeline of more than 860 additional locations to be built, providing us with the potential of approximately 33% additional unit growth and 50 to 55% additional EBITDA growth. In other words, another $50 million of incremental EBITDA over the next few years. Today, I am particularly excited to talk to you about our strong brand performance, organic growth, synergies from our acquisition strategy in 2021, potential further acquisitions in 2022, and planned balance sheet and refinancing strategies for 2022. In the first quarter, our strong momentum exiting 2021 continued as our franchise partners and company-owned restaurants continued to report impressive sales. In the first quarter, many of our restaurants produced sales that were in line or above pre-pandemic levels, despite modest headwinds from winter weather and the presence of Omicron in January. This speaks to the strength of our portfolio of brands and the hard work and dedication of our franchise partners and employees. We believe this is just the beginning, and we expect a strong performance to continue throughout the year. In addition, I would like to highlight that this quarter marks the first quarter that includes all of our acquisition activities from 2021, allowing for a better view into our revenue run rate growth. While we continue to look for tuck-in acquisitions, we primarily view 2022 as a year to absorb the M&A activity from last year, and we are excited about the synergies and growth they are already delivering. Our legacy Fat Brands portfolio of brands owned for all of 2021, like Fatburger, Johnny Rockets, Hurricane Grill, and Wings, saw an increase in system-wide sales of 15.8% over the first quarter of 2021. If we include the brands acquired in 2021, essentially showing how our portfolio is doing, system-wide sales increased 13.5% compared to Q1 of 2021. For the first quarter of 2022, same-store sales, which only includes those brands owned for all of fiscal 2021, increased 16.8% over Q1 2021, driven by an increase of 40.1% at Johnny Rockets and 9.1% at Hurricane Girl and Wings. We are pleased that international same-store sales increased 24.1% over the same period. If we include recently acquired concepts in calculating comparable same-store sales, we would have seen an increase of 11.8% for the portfolio compared to Q1 of 2021. Our top-performing acquired brands were Twin Peaks and Roundtable Pizza, which saw an increase in comparable same-store sales versus Q1 of 2021 of 24.4% and 7% respectively. In total, comparable same-store sales for the brands acquired in 2021 increased 10.2% versus Q1 of 2021. Most notably, Twin Peaks had outstanding performance with March marking the 14th consecutive month of positive same-store sales post-COVID versus 2019. Twin Peaks same-store sales have significantly exceeded the NAPTRAC industry averages consistently over the last 19 months. It's also worth noting that even with the reopening of dining rooms, Delivery sales are showing resilience facilitated by the rollout of Ollo, Captain, which is formerly known as Hunger, both of which are online ordering providers, and Chow Lee, which is a third party and online aggregator into our POS systems across our portfolio. Turning now to our organic growth strategy, new construction and franchise sales continue to outperform and maintain the momentum we saw in 2021. There were 27 new store openings across the portfolio in the first quarter of 2022, and 34th year to date, with over additional 80 locations of new stores expected to open this year. We continue to build on our growing development pipeline of over 860 locations throughout the world that have signed and paid for agreements in place. So far this year, our development team has signed 44 deals representing commitments to build 139 new locations across various brands throughout the world. As we've integrated new brands into the Phat family, we continue to see robust demand from our existing and new franchise partners to develop a variety of other brands in our portfolio as well. In addition, we are also expanding our footprint in non-traditional locations, having just completed the first opening of Phat Burger at the Six Flags Great Adventure in Jackson, New Jersey, as well as in the 2020 launched largest cruise ship in the world owned by Royal Caribbean, the Wonder of the Seas. Also, we have upcoming Johnny Rockets and Fatburger locations in the Las Vegas Convention Center, the Excalibur and Venetian Casinos in Las Vegas, the Soaring Eagle Casino in Michigan, the Louisiana State University Stadium, Reagan National Airport, Bangalore Airport, and the hotel in Capitol Park, Washington, D.C. as well. In addition, we have new international locations such as Paris, Mexico City, Morocco, and the Democratic Republic of Congo all coming soon. Our factory in Georgia has been able to mitigate the supply chain headwinds faced in recent months and reported Q1 sales of $8.2 million. The factory now supplies nearly 1,000 of our locations throughout the country and is only running at approximately 30% capacity, with therefore tremendous growth opportunity. A quick comment here on the inflation and supply chain pressures our industry continues to face. We have strongly encouraged our franchisees to take price and maintain their margins in order to keep the businesses healthy. Additionally, we continue to coach our franchisees with every tool at our disposal on how to navigate the supply chain and current economic environment to continue delivering strong results. Equally important to our organic growth strategy is our second pillar of growth, which is our acquisition strategy. We have a disciplined and selective approach to evaluate potential targets with a focus on brands with a proven track record of long-term sustainable and profitable operating performance. In 2021, we were very active acquiring eight new restaurant concepts with five brands coming through the global franchise group acquisition. Also in the fourth quarter, we acquired three additional brands, which include Twin Peaks, Fazoli's and Native Grill and Wings. We are capable of this activity because we have a robust management and systems platform that supports the expansion of our existing brands while enabling the creative acquisition strategy and efficient integration of additional restaurant concepts. As I mentioned before on the transaction front, our primary goal to start this year is to digest these acquisitions and to identify and capitalize on potential synergies. That being said, there are strategic acquisition candidates we expect to capitalize on in 2022 that are additive and fit within our current operations and give us the chance to expand our factory business through tuck-in acquisitions. Moving forward, we expect to fund future acquisitions with a combination of cash on hand proceeds from securitization vehicles, and potentially tapping the equity capital markets. I want to quickly highlight two of our most recent acquisitions, Twin Peaks and Fazoli's, both of which closed in the fourth quarter. Today, we are very pleased with the assimilation of both brands, and we are already experiencing significant synergies given our existing infrastructure and purchasing power. Twin Peaks, which we acquired on October 1 of 2021, is seeing record sales growth and industry-leading AUVs in the range of $5 to $6.5 million. Also of note, Twin Peaks same-store sales are among the highest in the polished casual dining category according to the NAPTRAC industry benchmark. I believe we can grow this brand globally at a rapid pace, and we are pleased to report that three new area development agreements have been signed thus far in 2022. We continue to expect Twin Peaks to contribute between $25 and $30 million of EBITDA in 2022. On December 16, 2021, we completed the acquisition of Fazoli's, which is today a 217 store brand from Sentinel Capital Partners for $130 million. The brand's performance here in 2022 has been in line with our expectations, and we look forward to the increased royalties in successfully executing their new unit opening plan. Bozzoli's has a 117 new store development pipeline, which is part of our 860 unit overall pipeline. Diving in, a bit on the synergies. We see significant opportunities to generate savings for our franchise partners, given our substantial purchasing power of more than $600 million per year in food, beverage, and paper costs, as well as cross-selling opportunities between our now 17-brand portfolio. On the balance sheet side of things, we are actively pursuing the rating and refinancing of our different securitization facilities, beginning with our FAT 2021 and FGFG 2021 securitization trusts. We will turn our attention to the other two securitization trusts later in the year. In addition, we are working with our bankers on the planned redemption of $135 million of our Series B preferred stock from the sellers of Twin Peaks and Global Franchise Group over Q2 and Q3, respectively. The securitization refinancing and the preferred stock redemption will each provide substantial savings from a free cash flow perspective to the company, including a lower cost of capital, and it is a top priority for us. Turning now to our outlook for fat brands for 2022, we are reiterating our expectations that system-wide sales in fat will rise to over 2.2 billion. This should bring our normalized post-COVID EBITDA to an annualized run rate of between 90 and $95 million by the end of 2022. With 15.1 million of adjusted EBITDA in Q1, a big jump from our adjusted EBITDA of 10.4 million in the fourth quarter of 2021. We are well on our way to the $22 to $25 million quarterly runway we expect to achieve by the end of this year. With regard to the pending government investigations, I reiterate the comments I made on our fourth quarter 2021 earnings call in March of this year regarding the investigations. There is nothing new to add at this time, and I reiterate that FAT Brands has been told that it is not a target of the investigation. It remains business as usual here at FAT. I look forward to putting these legal matters behind us and continuing to grow our amazing portfolio of brands. Our team of more than 20 senior managing members are working tirelessly to move the needle forward and operate our brands with wind at their back. Most recently, we added a new chief information officer, Michael Chichua, which will really ready us for moving forward the technology effort across our brands. With that, I would like to hand it over to Ken Kiewik to talk about our financial highlights from the quarter.
spk06: Thanks, Andy. I'll provide brief comments on our capital structure and then discuss the financial highlights of the first quarter and then give some insight into our expectations for normalized performance. As a reminder, reflecting the issuances of new notes in 2021, our securitization facilities total $938.2 million with a weighted average stated interest rate of 6.98%. Future issuances of our Series B cumulative preferred stock and our common stock are available to us, which would provide us with additional flexibility to fund potential acquisitions, further reduce our capital costs, and drive shareholder value. Turning to our financial highlights, total revenue during the first quarter increased 1,365% to $97.4 million, reflecting revenue from Global Franchise Group, Twin Peaks, Fazoli's, and Native Grill & Wings, all of which were required during 2021. Additionally, the ongoing effort from the negative effects of COVID-19 was a meaningful contributor to the strong revenue performance in the first quarter. Costs and expenses increased to $96.9 million in the first quarter compared to $6.6 million in the year-ago quarter. Costs and expenses in the quarter include $54.8 million of company-owned restaurant and factory operating costs relating to our 2021 acquisitions. Additionally, these acquisitions contributed to higher G&A expense during the quarter. Lastly, advertising expense increased $9.1 million, reflecting advertising expenses from Global Franchise Group, Twin Peaks, and Fazoli's, and an increase in customer activity as the COVID recovery continues. Other expense was $19.7 million in the first quarter, primarily comprised of interest expense. GAAP net loss for the quarter was $23.8 million, or $1.45 per diluted share, compared to a net loss of $2.4 million, or 20 cents per diluted share in the year-ago quarter. On an as-adjusted basis, our net loss was $18.5 million, or $1.13 per diluted share, compared to $2 million, or 17 cents per diluted share in the prior year quarter. Lastly, regarding full year 2022, we are reiterating our expectation of total annual run rate revenues of approximately $400 million. And in closing, 2021 was a transformational year for FAP brands. This quarter marked the first that includes the operating results from all of our 2021 acquisitions, giving better perspective into our future performance. And we believe we are poised for strong revenue growth and EBITDA growth in 2022 and beyond. And with that, Operator, please open the line for questions.
spk01: Thank you, Mr. Kewik. Ladies and gentlemen, if you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach other equipment. We'll pause for just a moment to allow everyone an opportunity to signal for questions. We will now take the first question from Joe Gomez from Noble Capital.
spk08: Your line is open. Please go ahead.
spk02: Good evening, Andy and Ken, and thanks for taking the questions. Hi, Joe.
spk05: So the first one to start off, since this is the first quarter with everything all together here, how did it come in compared to what your expectations were for the quarter? What performed better or what underperformed to your plan in the quarter?
spk03: Well, I think that we're very happy with the step up in adjusted EBITDA from Q4 to Q1, and we expect a further step up in Q2. So things are really on track for that. We definitely saw a little bit of weather in the Midwest during Q1, certainly had a little bit of Omicron in Q1 that we didn't think would continue at the end of last year. So those things caused a little bit of slower sales, but our top line sales exceeded our expectations to start with. It just could have been even more if we didn't have some of the weather that we had to deal with. And of course, inflation is out there. We've taken price across the system and encouraged our franchisees to do the same.
spk02: And we will see the results of that in Q2 for sure if we didn't see it in Q1 already.
spk03: One more thing I would mention there, Joe, is that our franchise sales remain very, very strong, and so do the new store openings. And so that's probably exceeded our expectations, just the continued demand for new development agreements and new individual agreements from our franchise community.
spk02: Excellent.
spk05: Speaking of inflation, I was reading an article this morning that one of the big wing restaurant companies were saying that wing prices were down roughly 50% year over year. Are you seeing that, number one? Number two, any other commodity-type prices there that meaningfully either are increasing or you're seeing some decreasing like the way they're saying these wing prices are going down?
spk03: We are definitely seeing wing prices come down. I mean, they've come down significantly, you know, tens of dollars per case from where they were, you know, multiple times like each quarter they've come down. So that's been a big help.
spk02: We haven't seen that really on the meat side as much as on the wing side, but we've definitely seen it there. Okay.
spk05: And when you talk about, you know, trying to, pardon me, the re-rating of the securitizations, you know, and hopefully some refinancing there, with rates going up here, given the Fed moves, you know, do you still think you're going to see significant savings on that? And if so, you know, what gives you the the belief that you will.
spk03: Yeah, I mean, look, we have substantial savings to achieve by getting our bonds rated. That'll implicitly drop the yield quite a bit. I'm sure rates have backed up a little bit and they'll continue to back up a little bit, but it also has to be tied to the maturity of the different bonds and how long they'll be outstanding. So it's not quite as severe, but we thought originally we'd see three to four percent savings we might see you know a little bit less than that maybe a percent less than that but whatever that effect is it's still tremendously cash flow positive and beneficial to us to get these deals rated and reissued during 2022 it saves us tens of millions of dollars no matter what okay that's excellent and then
spk05: Maybe you could talk a little bit more in the release. You don't really do a whole lot there on cash flow or what cash on the balance sheet is and kind of what do you see the capital needs here, especially if you're looking to redeem the $135 million of the B preferred for the rest of this year. Thanks.
spk02: Sure.
spk03: So there are really a couple of ways that that will occur. We may tap the equity markets at some point for cash some additional capital for the redemption. But we believe that in the process of calling and reissuing the securitization trust, there's substantial excess equity available or capital available because the deals have performed so well and they were originally underwritten and sold with a low leverage rate and using 2020 data, not 2021 data. So if you apply normalized sales 2021 or even 2022 normalized sales and a normal leverage multiple. There's plenty of excess capacity in those facilities. So using those facilities to redeem the preferred is always something that was intended to do and something that we're pursuing, but that doesn't mean we're ruling out using our shelf, which is available to us as well.
spk02: Okay, great. Thanks for taking the questions, Andy. I'll get back and cue it. Someone else asked some questions. Thank you, Joe.
spk01: We will now take the next question from Greg Fortunoff, private investor. Your line is open. Please go ahead.
spk07: Hey, Andy. Hey, Ken. How are you guys? I agree. Okay. So, Andy, just one thing because you just said this a minute ago that you tap the equity markets. Can you clarify? I mean, are you thinking about selling common at these levels or is there a level where you would? Can you just clarify that?
spk03: I'm just saying that it's an available option to us using our shelf. We have a $480 million shelf that's effective and available should we need to supplement any refinancing of the Securitization Trust. There is no plan today to do anything, but that's an available option to us.
spk07: Okay. I mean, maybe I'll ask another question. Would you sell Common at $6?
spk03: So I'm not going to comment on potential transaction under the shelf, but it's something that's available to us. We'd love to sell stock at $100, but that's really an issue that we'll decide at the time based on the market conditions.
spk07: Okay. So I guess we're a month and a few days into the second quarter, and you've said that you're going to have a significant ramp in EBITDA. Is it too soon to comment how the quarter's going? And I guess the numbers have to go pretty good to get up to that 90, 95 million by the end of the year. So can you just elaborate on that a little bit?
spk03: Yeah, we're having a very strong second quarter. We continue to think we'll see a significant ramp, something similar to what we saw from Q4 to Q1. I think we'll see at least that ramp into Q2, and that will continue. The business is just building quickly. The synergies are dropping into place. We've done this before multiple times, and so we really don't see any issues adversely affecting it that are things we haven't dealt with before. And then there's also the opportunity just to grow our factory business, which really adds to that, and that's something we're looking forward to doing over the next six to 12 months. But The synergies themselves and new stores that are opening will go from not just 30-something new stores year-to-date, but that will double or triple as we keep going here, and that just adds a lot of incremental revenue.
spk07: Okay. Andy, what percentage of the stores are not franchised?
spk03: It's about 5%. We have about 125 company-owned stores out of 2,360 restaurants, so it's a tiny number. In that context, it's a big number in terms of sales because there are approximately 30 corporate-owned Twin Peaks, 57 Frizzolis, 33 Hot Dog on the Sticks, and a few roundtables and Johnny Rockets. But, you know, out of 2.2 billion in sales, and there's about 300 million in sales that come from the company-owned source, it's maybe 15% of total sales system-wide that are company-owned, but it's less than 5% of the unit count.
spk07: So as far as inflation affecting... the overall system of, of fat brands. It's, it's not a big, it's, it's a factor, but it's not big at all. I mean, is that a fair statement?
spk03: It will affect us as a franchise or much, much less than it would if we were, you know, a hundred percent company owned store business. Even at our company owned stores, we've taken price. We've encouraged our franchisees to take price and maintain the margin. And obviously we, get a royalty based on gross sales. So if a franchisee raises price by 7% or 8%, as many of them have, to adapt for inflation, then our royalties will increase accordingly. So we actually benefit at the franchisor level from that.
spk07: Okay. I just have a couple more. Ken, maybe this one's for you. So even though we're EBITDA positive, we're still losing money. Is there a level – like at what point does the losses – turn to flat or even positive? Is it a revenue number? What does that look like?
spk06: Yeah, I think, Greg, thanks for the question. I think substantially it's lowering the debt service costs on the securitizations. That drops the significant amount of additional income to the bottom line and cash flows.
spk02: Yeah, we could be net income positive in
spk03: 2023, depending on the timing and the rate of the securitization savings. If not, we're sure it would be in 2024, but it would be a very small loss relative to the losses before that because of the interest expense.
spk07: Okay, two more quick ones. Andy, I'd just like to ask this one. I just want to ask you, is the dividend on the common and the preferred something that's safe in your mind?
spk03: Yes, we continue to expect to pay the dividend on the preferred and the common.
spk07: Do you know what price you're going to be buying back the – I'm sorry?
spk03: And hope to see some dividend growth in the year.
spk07: Okay. Do you know what price you're going to be paying for the $135 million? Is that a set price?
spk03: Yeah. So the $135 million of Series B Preferred was issued in the $22 to $23 per share range, and we will redeem it at the same price that it was issued at. So it will trade at that price of it. Current trading prices is significant discount to where we will redeem preferred and obviously is a bargain today.
spk07: Yeah, clearly. Okay, last question. So in February, we had this leaked report about investigations, et cetera. Stock was trading around 11. Now it trades at 6. As far as I can tell, things are only getting better. There's not one thing that you said that sounds like it went anywhere but in the positive direction since. that time and since even last year. Do you have any comment about just stock price or, you know, any other reason why there hasn't been a recovery other than the possible investigation which you've said should not affect the company?
spk02: Well, you know, certainly the stock price drop occurred subsequent to the news story.
spk03: But, you know, if you look across the industry and look at, you know, Other restaurant franchise companies out there, there's certainly been other drops in value. So I think you have to really look through those and see if we have a franchise model that is much more resilient to inflation and much more resilient to the current economy, who's going to perform better? When you look and see Shake Shack, Starbucks, Dime Brands all down 25% to 45% in the last 12 months, I think that's reflective of the industry. I don't believe that FapRent would be down that much, but not for that newspaper story. Nonetheless, it's a great value here at these levels, and the dividend yield is outstanding here. And since the dividend is solid, I think there's a ton of room for upside.
spk07: Okay. Thanks, guys. Keep up the good work. I'm going to step off. Thank you, Greg.
spk01: Ladies and gentlemen, once again, please press star 1 to ask a question. We'll take the next question from Roger Lipton from Lipsion Financial Services. Your line is open. Please go ahead.
spk04: Yes, thanks so much, Jess. Hi, Andy. Hi, Ken. Can we talk a little bit more about Twin Peaks since you've got company-operated stores? Of the 30 company-operated, and how many franchises are there now? How many franchise Twin Peaks are there at the moment?
spk03: About 60 that are open and a whole lot more on the way.
spk04: So it's 30 and 30, or 60 franchises?
spk03: No, no. 60 franchises, 30 company-owned stores. Okay.
spk04: And so of the recent open, how many company-operated Twin Peaks have opened so far this year, and how many are you planning the balance of this year, company-operated?
spk03: Yeah, we have three new company-owned stores under development today, and I think we've opened one new company-owned store during the year so far.
spk00: Okay.
spk04: And how do you finance them? Can you get third-party financing for those, or do you have to lay out cash to finance them?
spk03: They do require a modest investment. at the generally, you know, this involves acquiring the land, building the location, doing a sale lease back and having a modest investment, maybe somewhere in the one to $2 million range into the store. But those stores also generate around a million dollars or more of EBITDA. So you really, you know, you've got a 40, 50, 60% cash on cash return, depending on the actual build costs and the real estate costs. It's a, very good use of capital. We just have to manage it carefully to make sure it doesn't use up too much liquidity. There's also other opportunities of different ways to finance that and even reduce that further.
spk04: Okay. And the largest item on your income statement is the G&A, even bigger than the interest expense. So the G&A of $31 million, can we expect that to stay at that level or go down? in subsequent quarters? What should be our expectation there?
spk03: Well, I think that you always want to see your G&A go down, and we're not done recognizing synergies of putting the businesses together. So that is our expectation. The thing that you have to keep in mind, because I'm always cautious to make a broad statement like that, is obviously if we make incremental acquisitions or we open... a few hundred more stores, let alone 860 more stores, you're going to see an increase in G&A to support those stores. And so it's not quite as simple as is it going to stay the same or is it going to go down, right? As the business grows, it's going to grow by some amount, although hopefully a lesser percentage. So we think there are additional G&A savings from the synergies of the acquired brands that we have not yet recognized. We think there's additional revenue growth, and, of course, the new unit openings are a massive de-levering effect for us by increasing our EBITDA from this $90 million to $95 million run rate we hope to hit by the end of the year by another $50 million with just organic growth dramatically de-levers the company over the next few years simply by just opening more stores. So we're very focused on getting those stores open, on growing the factory business, on getting the securitizations refinanced, and also redeeming the stock because that saves us quite a bit of money from the dividend rate on that stock. So I think we've got a lot of good things going on without even needing to make another acquisition. As I've said before, at the scale we're at today, we do not need to make another acquisition whatsoever. We just need to build out our pipeline and build out our factory capacity in terms of more product to produce there. However, there are quite a few acquisition opportunities. I think prices have certainly come down from a year ago or longer because of the general economic environment and the rate environment, so I think that's an opportunity for us. I think you're still going to see higher prices for brands that have built-in growth that is sort of locked in, and I think that's where the premium is going to be had, and I think otherwise I wouldn't see us trying to do a turnaround brand. We haven't done that in a long time. I don't think we'd do that again. So I think there's a real opportunity for tuck-in acquisitions that give us manufacturing business that are easy to recognize synergies on. We don't need to do heavy lifting. We want to see brands where there's an opportunity to have our franchise sales team and our development team and construction team roll out new units just as quickly as they can because the franchisees are ready and they have plenty of capital available despite the rate increase to get more units open.
spk04: Okay, well, so what I was hoping to conclude is that excluding any major acquisitions, the G&A expense as a percentage of total revenues can be expected to come down over time. Yeah, I mean, theoretically, Roger, you're 100% right.
spk03: You're 100% right. It's just a function of if we build more company-owned stores, it might... you know, go up as a percentage of revenues, yeah, it should come down.
spk04: But in terms of leveraging the platform, presumably leveraging the platform as a percentage, you've got margin opportunity for the bottom line as the system grows. The G&A won't grow percentage-wise as fast as the top line.
spk03: Absolutely right. That's right.
spk04: Agreed. And lastly, for the moment, have your franchisees been inhibited in terms of their opening pace because of this supply chain delays that we're all reading about?
spk03: So there's always a little bit of slippage when you have this kind of inflation situation where they can't get equipment, they can't get refrigerators or freezers or certain other equipment, there's delays. It's really modest. We'll have some units that slip into Q1 of 2023 that we would have hoped to get done in Q4 of 2022. That's just something you see out there, but we're going to hit well over 100 new stores this year, and we just have this huge pent-up demand and, you know, pipeline of 800. I mean, it's 33%, you know, unit count growth. So franchises are active, and we're doing everything we can to help them get open and find locations. And, you know, there's also the labor issues of you've just got to find the staff to hire and train and get the stores open. So all those things play into it. But business is really good. We're seeing, you know, very solid demand everywhere. Customers are out and coming into restaurants. There's still delivery going on. You know, the sports bars are packed with people and packed with new openings hitting, you know, big numbers. I mean, even though our AUVs are five to six and a half million, a lot of the new stores are well above that. And, you know, we're excited about that. Frizzoli's has just been a blockbuster concept in the Midwest with drive-through, 99% drive-through. We've taken a price increase there, which I think was needed, and there's a very active development pipeline. And then you've got Brands like Fapriger and Johnny Rockets, which have 300 of the 860 units in their pipeline to build, and you have these special venues coming out of the woodwork to say, hey, we want one of you guys in our location, like the casinos or the cruise ships and the airports and things like that. So I think there's a real opportunity to accelerate those brands. And those are easier to get open. I mean, building a Twin Peaks is a $7.5 million enterprise. Building a Fapriger or Johnny Rockets can be $400,000 to $500,000 and be pretty quick. So That's part of the velocity, right? Right.
spk04: Relative to the Johnny Rockets existing system, presumably there are still some locations still closed in Europe. How does that stand?
spk03: We have a very small number of Johnny Rockets still closed in South America, in some markets, Asia, in some markets. I don't think there's anything still closed in Europe, but I think we're open everywhere there, but definitely South America has had some closures, but That brand, you know, we're rolling out a 200-store partnership with Kotopi in the Middle East involving Faburger and Johnny Rockets. And there's a real opportunity, you know, there to get brick-and-mortar restaurants built, get additional ghost kitchens built. I think that, you know, we're excited to see Johnny Rockets. I mean, it's done really well. It was a significant opportunity to buy that brand during the pandemic before there was a vaccine and, you know, add that to our portfolio and really haven't missed a beat with that acquisition.
spk02: All right, thanks very much. Thank you, Roger.
spk08: Ladies and gentlemen, once again, if you have any questions, please press star 1. Once again, ladies and gentlemen, please press star 1.
spk01: Yeah, it looks like there are no more questions, and I would like to turn the call back over to Mr. Andy Wiederhorn for his closing remarks.
spk03: Thank you, everyone, for joining today's call. I would encourage you to listen to my interview, the Corporate Competitor Podcast interview on Chief Executive Magazine or chiefexecutive.net. It's a really good piece explaining a lot of customer-focused mindsets and tips. I think you'll find it very interesting. Enjoy your evening, everyone. You may now disconnect your lines.
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