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spk08: Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Kira Sushi USA Inc. Fiscal Third Quarter 2021 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode, and the lines will be open for your questions following the presentation. Please note that this call is being recorded. On the call today, we have Hajime Jimmy Uba, President and Chief Executive Officer, Steve Benrubi, Chief Financial Officer, and Benjamin Porton, Investor Relations Director. And now, I would like to turn the call over to Mr. Porton.
spk04: Thank you, Operator. Good afternoon, everyone, and thank you all for joining. By now, everyone should have access to our fiscal third quarter 2021 earnings release. It can be found at www.kurasushi.com in the Investor Relations section. A copy of the earnings release has also been included in an AK we submitted to the SEC. Before we begin our formal remarks, I need to remind everyone that part of our discussion today will include forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees of future performance, and therefore you should not put undue reliance on them. These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. We refer all of you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial conditions. Also during today's call, we will discuss certain non-GAAP measures which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation, nor as a substitute for results prepared in accordance with GAAP, and the reconciliations to comparable GAAP measures are available in our earnings release. With that out of the way, I would like to turn the call over to Jimmy.
spk10: Thank you, Ben, and thank you, everyone, for joining us today. Let me begin by saying how pleased I am with the rate of recovery in our restaurants. following the COVID-related operational challenges we've experienced over the past 16 months. During our fiscal third quarter, we not only saw meaningful improvement in sales, but were also able to improve our operating efficiency and restaurant-level profitability as we steadily increased our dining room capacity in accordance with state and local regulations. Let me briefly expand on this. As we mentioned on our last call, March performance improvement was largely driven by the relaxation of dining room restrictions in mid to late March, including the resumption of conveyor belt operations and limited indoor dining in our California stores, as well as increased indoor dining capacity in non-California restaurants. During the third quarter, our average available seating capacity was approximately 60% against the second quarter's available seating capacity of approximately 25%. Our sales momentum continued through April and May, terminating in third quarter revenue of $18.5 million, more than doubling the revenue we saw in our fiscal second quarter. Looking at the current quarter, our sales recovery has continued with the lifting of operating restrictions in California in mid-June, resulting in full-month June revenue of $8 million. As of July 1st, all of our restaurants system-wide were back to operating at full capacity with no restrictions in place. Guest response to the return of the full-cry experience has been terrific, and with further restriction relaxations during the third quarter, Our stronger revenues delivered were restaurant-level operating profit for the first time since entering the pandemic. We believe we are on the path to return to pre-pandemic profitability as sales normalize. Texas, which had full seating capacities for the majority of the quarter, produced positive confidence of 5% as compared to pre-pandemic fiscal 2019 levelings. Following the mid-June reopening of California, our system-wide comps began to exceed those of fiscal 2019, and our California locations are making great strides towards returning to pre-pandemic productivity levels. July is off to an even stronger start, propelled by the success of our Sanrio-Vicolapon toy collaboration. Sanrio provided sushi-style redesigns of Hello Kitty and other iconic characters for our toys and interior decorations, and consumer reaction has been strong. I'm very excited for our promotional pipeline for the coming year, which includes cooperation with properties with cross-generational appeal, such as Tetris. Now I would like to touch on our offer misses offerings. Third quarter results continue to support our belief that off-premises can be a long-term and incremental part of our business. In spite of dining room reopenings and increases in our system-wide seating capacity, our third-quarter off-premises mix held strong at 10%. As a reminder, our pre-pandemic off-premises mix was minimal at around 1%, and we are very pleased with this improvement. It's also worth noting that we were able to grow our off-premises sales with minimal paid advertising. Our primary communication channel was our rewards program, which now has over 160,000 members, representing 60% growth over the previous quarter's membership count of 100,000. Despite the tangible improvement in off-premises as compared to before the pandemic, This part of our business is still nascent, and we remain very excited about its longer-term potential. Turning to our development, I'm pleased to say that fiscal 2021 has been our busiest and possibly our most productive development year ever. During our fiscal third quarter, we opened one new restaurant in Sherman, California, and subsequent to the end of the quarter, We opened another new restaurant in Bellevue, Washington, bringing our total count to 32 restaurants. With these openings, we have completed our development plan for fiscal 2021, consisting of seven new restaurants and five new markets, a truly impressive feat by our development team, given the challenging macro environment. We continue to be pleased with the class of fiscal 2021, including our recent openings. We believe there are units from this year's vintage that have the potential to become some of the top performers in our system. For example, in June, Fortale and Bellevue were respectively our second and third strongest performers in our restaurant base. The success of our openings across new markets is a clear demonstration of the broad appeal of Kura Sushi in the US and the confirmation of the enormous opportunity we have ahead of us as we continue to expand our footprint. As we look ahead, I'm excited about how our fiscal 2022 development plan is shaping up. We are benefiting from new real estate opportunities created by the pandemic, as well as a more rigorous site selection process through our new data platform, Formal Analytics, resulting in the most exciting pipeline we've had since entering the States. To date, we have already executed eight new leases, including three new markets, Arizona, Massachusetts, and Pennsylvania. And our Sons Town Galleria location, San Francisco, is currently under construction. Fiscal 21 was a record development year for Cooler, and we expect to maintain this growth momentum by opening even more units in fiscal 2022. On that note, I'm so excited to announce the hiring of our new Chief Operating Officer, Sean Arame. Sean has extensive experience in the restaurant industry, most recently as the COO of Luna Grill, and with Umami Burger, Daphne's Griff Carpet, Arby's, and Subaru. We are tremendously excited to have Sean join our team and believe that he will be instrumental in cloud growth. In summary, we are thrilled with the sales recovery we've experienced so far, and our team is ready to capitalize on our guest pent-up demand for the full cloud experience. Of course, none of these accomplishments would have been possible without the hard work and dedication of our team members. I would like to personally thank them for their resilience during these uncertain times. With that, let me turn the call over to Steve to briefly discuss our financial results on the liquidity. Steve?
spk01: Thank you, Jimmy. For the fiscal third quarter, total sales were $18.5 million as compared to $2.8 million in the past year period. we believe measurement of comparable sales growth is most relevant versus the pre-COVID period of 2019. On that basis, comparable sales declined 19%, with California down 36% due to varying COVID operating restrictions continuing throughout the quarter, while our Texas market increased 5% as COVID restrictions were removed from that market in the third week of the quarter. Turning to cost, Food and beverage costs as a percentage of sales were 31.7% compared to 38% in the prior year quarter, reflecting largely normalized performance as sales volume improved and lower inventory spoilage. Labor and related costs as a percentage of sales decreased to 8.9% from 126.3% in the prior year quarter, primarily due to higher sales leverage and a $5.8 million employee retention credit recognized under the CARES Act extension. Excluding the credit and retention and hiring bonuses, labor and related costs would have been 36.6%, primarily due to the effect of lower sales and minimum staffing needed to operate our restaurants at reduced capacities. Occupancy and related expenses as a percentage of sales improved to 10.2% from 56.5% in the prior year quarter, primarily due to higher sales leverage. Other costs as the percentage of sales decreased to 14.7% compared to 34.3% in the prior year quarter due to fixed cost leverage as a result of the increase in sales. General and administrative expenses were $4.3 million compared to 2.9 million in the third quarter last year. Excluding the impact of the $500,000 employee retention credit recognized under the CARES Act extension and $1 million litigation accrual, general and administrative expenses would have been $3.7 million. This increase was primarily due to compensation-related expenses. As a percentage of sales, general and administrative expenses improved to 23.2% compared to 102.6% in the prior year quarter. Operating income was $900,000 compared to an operating loss of 8 million in the third quarter of 2020. Restaurant level operating profit was $1.1 million compared to restaurant level operating loss of 5.3 million in the third quarter of 2020. Adjusted EBITDA was a negative $2.6 million compared to a negative $8.2 million in the third quarter of 2020. Income tax expense was $30,000 compared to income tax expense of $1.2 million in the third quarter of 2020. The prior year included evaluation allowance on our deferred tax assets. Taking all these together, net income was $800,000, or nine cents per diluted share, compared to net loss of $9.2 million or negative $1.10 per diluted share in the third quarter of 2020. Adjusted net loss was $4.5 million or negative $0.54 per diluted share compared to adjusted net loss of $10.7 million or negative $1.29 per diluted share in the third quarter of 2020. Turning to our cash and liquidity, At the end of the fiscal third quarter, we had $4.7 million in cash and cash equivalent and $17 million in debt as we borrowed an additional $5 million on our revolver to meet our planned capital expenditures for fiscal year 2021. In terms of capital expenditures, we continue to maintain the following expectations for the remainder of the fiscal year. Weekly capex spending for Q4 will be approximately $260,000. We continue to expect our weekly G&A spend to be approximately $320,000 as we scale our organization in preparation for our new unit and growing system size. I'd like to reiterate my comments from our last earnings call where I had mentioned that we were moving from a relatively defensive strategy to a more aggressive one on the strength of our sales recovery and new unit performance. Our performance in the third quarter has only made us more confident and the investments that we're currently making in preparation for the next fiscal year are a demonstration of this confidence. Lastly, as a reminder, due to the ongoing uncertainty driven by COVID-19, we will not issue additional financial guidance for fiscal year 2021 at this time. Now, I'll turn the call back to Jimmy.
spk10: This concludes our prepared remarks. We are now happy to answer any questions you have. Operator, please open the line for questions. As a reminder, during the Q&A session, I may answer in Japanese before my response is translated into English. Please bear with us.
spk08: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad, and a confirmation tone will indicate your line is in the queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your headset before pressing the star keys. One moment, please, while we poll for questions. Our first question is from James Rutherford with Stevens, Inc. Please proceed.
spk06: All right, thank you. Good afternoon, guys. I wanted to start off on the comments around unit development. I think you noted you expect continued momentum into fiscal 2022. Just to clarify, do you mean you aim to keep a similar growth rate of units in 2022, or is it a number of units you intend to keep at a kind of a consistent level next year?
spk10: Thank you, James, for your first question. Please allow me to answer in Japanese. First of all, as I said in the prepared remarks, we expect 20% growth Hi James, this is Ben. So our comment in the prepared remarks isn't a resetting of our guidance or us providing new guidance. It's simply a reference to us having opened seven units in fiscal 21.
spk04: and our expectation to open more than seven units in the coming fiscal year.
spk10: In terms of our unit opening case,
spk04: There's always the considerations between the unit pipelines, having the management pipeline in place, potential pandemic delays, and our liquidity. And once we have greater clarity on all of those factors, we hope to provide some more granular guidance.
spk06: Okay. Well, that's helpful. I wanted to shift over to the comp side of the discussion. If I heard you correctly, You were exiting June with total company two-year comps slightly positive. Correct me if I heard that wrong, but I wanted to ask for California specifically what you're seeing. I know the recovery there seems like it's pretty robust. Where do you think that shakes out here in the near term? I think Texas is kind of settled in that mid-single-digit positive. What do you think California will look like in the near term?
spk01: Hi, James. This is Steve, and I'll speak a little bit to the June comp performance. So as I think you know, June 15th, the state of California lifted all of the remaining restrictions on indoor dining and we were able to go to 100% capacity. And we did see a change in performance that came right along with that almost immediately. For the full month of June, the total company, we were down low single digits on our comp. Texas was low double digit positive. California was a mid-teens negative as we were just starting to transition the restaurants to fuller capacity. And then for the second half of the month alone, if you just look at the period where everything in California and Texas was 100%, we were actually up 4% in those last couple of weeks of the month. California down single digit on comps, so well on our way to getting getting back to 2019 productivity levels, and continued strength in Texas, actually, in the double digits range. And that all came together to be a 4% positive for the back half of June.
spk06: That's super helpful. Thanks for all the detail, Steve. If I can squeeze one more in on labor costs, and then I'll pass it on. It sounds like 36% of sales normalizing for a few items. I know sales were still down in total for the full quarter. What do you think the post-pandemic, like normal sales level, what should we expect for labor in that environment given sort of the wage dynamic today?
spk01: Yeah, you know, we look at both, you know, cost of goods and labor pre-pandemic were historically in that low 30s range for the company. And COGS, you know, came right in there for the quarter. Labor, we were pleased with the leverage pickup that we got from about mid-40s percent of sales in Q2 to the 36.6, you know, adjusted in Q3. And we hope to be working ourselves eventually toward the same kind of pre-pandemic labor rates, you know, in that low 30s range. There are some factors, you know, just the fact that we've got with a lot of hiring to get stores back to full capacity. You know, there's a lot of green people in some of those locations, and it does take time in both new stores and newer employees to reach peak efficiencies. And so labor may run, you know, a little bit more elevated for a period of time. But eventually getting back in that low 30s neighborhood is our target. You know, there is some inflationary pressure in categories like dishwasher wages as a for instance. but we still believe that over time we can, you know, work our way to a pretty similar kind of labor leveraging, you know, both with the sales recovery and continuing improvement on efficiencies in the restaurants.
spk06: All right. I really appreciate it. Congratulations.
spk07: Thanks, James. Thank you, Dennis.
spk08: Thank you. Our next question is from Peter Salia with BTIG. Please proceed.
spk00: Great. Thanks. Jimmy, could you comment a little bit on the performance of the restaurants that are not in the comp base, especially those in some of the new markets, and how they align or match up with your expectations as you went into those markets?
spk10: Sure, Peter. I'm happy to answer this question. In terms of stores that are out of the home business, as Steve mentioned earlier, Texas is in a very good condition compared to 19. In terms of opening, when compared to Texas, there are some places where customers are a little slow, but in terms of level, it's almost at a single digit minus, so I feel the same strength of sales recovery.
spk04: In terms of sales recoveries, we're seeing similar results in Texas to the rest of the Texas comp base. It's been a very strong performer. California has been just a little bit slower to recover. I think this is a function of us having smaller scores in California, and so they tend to fill up more quickly. But again, just as Steve mentioned, even the scores outside of our comp base are well within our expectations and are relatively on track to hit pre-pandemic productivity levels. And as Jimmy mentioned in the prepared remarks, we're extremely pleased with the performance in our new scores. Fort Lee and Bellevue in particular are neck and neck for the second and third top performing spots. That's continued through July. They're great scores. The new units that we've opened in new markets have really been encouraging. And looking at these units, we're very confident that it's just a matter of time until we're able to return to the same unit level economics that we were delivering before COVID-19.
spk00: Excellent. That's great to hear. Could you just comment a little bit on the commodity environment and inflation that you guys are seeing and or expecting over the next several quarters, and what level of pricing do you anticipate you'll need to take to cover that inflation?
spk01: Sure, Peter. I'll speak a little bit to that. And just for starters, to To kind of remind on our commodity basket, we are fortunate to have a very diverse mix of proteins and other commodities in our restaurants with over 130 items on the menu. And our top five commodities are in the neighborhood of 25 to 26 percent only of our purchase mix. So it's not heavily concentrated in any particular area. But having said that, we have seen some inflationary pressure in spots across our commodity mix and hard to know how much of that's transient versus more longer term at this point. It's fortunately not a big factor, as you can see in our COGS performance for the quarter. But we're going to remain mindful of what we see develop in that arena. And if we see or feel like things are a little more sticky that way in long term, we do feel like, as we have in the past, there's opportunity to adjust pricing in an appropriate way to go along with what we're delivering in food product and, you know, not getting into any, you know, expectations or plans about the future on pricing. But, you know, suffice to say, you know, well, you know, as we've done in the past, for instance, on minimum wage increase dates, you know, there could be, you know, further pricing move that goes along with what we see in food and labor.
spk00: All right. Thank you very much. I'll pass it along.
spk07: Thank you, Peter. Thanks, Peter.
spk08: Our next question is from Andrew Strelizek with BMO Capital Markets. Please proceed.
spk03: Hey, good afternoon, everyone. My first question is on the white space opportunity. I know you've said that you thought it was greater than you thought in the past and you were going to do some work to kind of explore what that might look like. I'm curious where you are in that process and if you have any insights to share at this point.
spk10: This is Jimmy. I'm happy to answer this question.
spk04: In terms of our thinking about the white space opportunity growing as a result of the pandemic, that remains unchanged. We're very optimistic. That being said, we're still very much in early days of the pandemic winding down. And so we're waiting until things have stabilized further and things are clearly at the end to commission a white space study.
spk03: Okay, that makes sense. I think last quarter you pointed to Texas in particular and the off-premise mix there and said, you know, it hadn't really dipped below 5% at any point. I'm just curious for an update there as you've seen Texas move to, you know, positive comps and also in California as the gap is narrowing there relative to 2019. What does the off-premise mix look like as those key markets are more fully opening?
spk04: So the full June off-premises mix is 6%. So within that mid-single-digit to high-single-digit expectation that we have for post-pandemic off-premises sales, we're seeing similar results across markets. And we think this is a great demonstration for the long-term stickiness of off-premises Cucura.
spk03: Okay, great. And then just my last one here. You mentioned you still have a bunch of hiring to do. I'm just curious, how... fully staffed are you now relative to before the pandemic? And what has the experience been hiring as these markets have opened? How are you finding the environment to be for the brand? Thanks.
spk10: So obviously we knew that California would be reopening on June 15th, and so we made a very serious effort mid-May to the end of May to begin this hiring campaign.
spk04: This is particularly focused on hiring and retention bonuses. The major change that we made in terms of the hiring and referral bonuses would be that instead of having the bonuses dispersed after a month or two months or three months of staying with the company, we made this an upfront bonus. And that was tremendously effective. And as a result, we were able to fill all the positions we needed in California to operate normally. It was a tremendously successful hiring campaign.
spk07: Great. Thank you very much. Thank you, Andrew.
spk08: Thank you. As a reminder, if you'd like to ask a question, please press star 1 and a confirmation tone will indicate your line is in the queue. Our next question is from Jeremy Hamblin with Craig Hallam Capital Group. Please proceed.
spk09: Thanks and congratulations in managing through this really well. I wanted to come back to the commentary around Bellevue and Fort Lee locations. And in terms of that incredible performance you're seeing from those locations in the early days, is there something about the design of those restaurants, the size of those locations that maybe serves as a template or perhaps even where they're located of what you might do going forward um or do you i mean because these are in markets that you've never been in before um that probably don't have a lot of brand equity um but any color you can add in in terms of how uh you know those restaurants are operating so strong right out of the gate uh okay thank you for your question
spk10: In terms of, you asked about the size of the template. Fort Lee is about 3,000 square feet. Bellevue is about 4,000 square feet. So the very strong sales we're seeing is not a function simply of larger sizes or greater occupancy limits.
spk04: And so in terms of Of course, when it comes to demographics, of course, after the store, we do a lot of analysis, but especially with demographics like this, we can expect the same level of sales.
spk10: Originally, it was the center of East Coast, and for this Verve, it was the center of Seattle, Washington, and Oregon. It was opened as the first point, and it is possible that customers can get it from a wide range. After all, I think that there is such a point that the demand for the solution is strong in the region, so if you choose the same place with the same demographic alone, the next one will be at the same level.
spk04: In terms of looking at Bellevue and Fort Lee specifically, I think we might have benefited a little bit from relatively higher demand for revolving sushi in those markets as compared to the rest of the country. I think we're also benefiting from the fact that You know, Fort Lee is our first store on the East Coast. Bellevue is our first store on the West Coast. And so I think we're drawing from a larger radius than we would for a more infilled market. Just to give you an idea, when we opened our first Texas store, we had people driving three hours down from Oklahoma. And so we do draw from a very wide area. In terms of the demographics, we're not – Seeing anything truly unique to Bellevue or Fort Lee that is correlated directly to its success, but we're excited to drill down further to see what we can glean from these openings to inform future openings. I just note, we do take an unusual approach in our unit growth in that we are not hub-and-spoke model. We take a non-continuous approach, which is powered by our remote management systems, And I'd say that this is a huge competitive advantage for us. If we were operating from a more traditional hub-and-spoke model, it would have been much later in our corporate life that we would have discovered just how lucrative and attractive the Pacific Northwest and the East Coast are as markets for us.
spk09: Thanks for that, Collar. You mentioned, I think, that you have eight leases executed already. And I know you're not prepared yet to give specific unit growth guidance for fiscal 22. But typically, when you have those leases signed, would development take more than a year or less than a year? What's kind of the average timeline from lease execution to having that store open?
spk10: Basically, from lease execution, it's about a year and a half. As you know, in the first year and a half, we had a delay in the process of obtaining permits. As I said earlier, it's usually 12 months, but we don't know what will happen in the future.
spk04: Historically, it was almost always the case that we would open a store within a year after executing the lease. That being said, as we've seen over the last year and a half of the pandemic, there are externalities, construction delays, and beyond just construction, permitting delays as well as municipal governments are spread thin. And so it's harder for us to predict the construction timeline right now, but Typically, yes. With an executed lease, the store is open within a year.
spk09: Okay, great. And then just coming back to your labor model, the embedded technology that you have within your restaurants, if you think to the future of what the Kuro Sushi model is going to look like in the U.S., Do you anticipate that that model drifts a little closer towards your Kura Japan locations where, you know, potentially there's even more functions that are performed, you know, kind of through technology or are more automated than you currently have in your restaurants or even what you had in your restaurants, you know, kind of pre-pandemic?
spk10: I'll answer this question. First of all, it's very difficult to compare with CloudJapan, so I'd like to comment on that. Because the price of the plate and the human resources are very different, so it's very difficult to compare. But as for the technology part, as we have signed a shared service agreement, we are in a position to always receive the latest technology from them. So if you look at it in three months, In terms of comparisons to Japan, it's just the labor model is so fundamentally different. The plate prices are different. The commodities are different.
spk04: the rent is different. And so we're, we're very love to draw direct comparison. Um, but that being said, we do have a shared services agreement with the parent and we have a quarterly exchange of technological developments from, uh, you know, whether they're coming from the parent or our sister company in Taiwan or ourselves, we regularly exchange developments. And we're also working on our own internal stuff that the parent doesn't have, uh, to introduce our own, um, improvements. But just to add on to Jimmy's comment, you mentioned stuff that the parent is doing. One major difference would be that Japan is a more self-service culture. And so, you know, they can deliver drinks by conveyor belts, whereas that really is not part of what people expect for hospitality in the United States. And so our sort of analog for that would be the touch panel drink ordering that we're testing right now. This will allow a You know, servers won't be taking drinks. They'll be ordered through the touch panels. So the servers have, you know, their absolute labor responsibilities are reduced and they're able to focus more on hospitality. We're also working on table-side payment. And as I'm sure you know, our labor is really, our labor percentage of revenue is really a function of sales leveraging. With table-side payment, we're hoping to reduce our table turn times and increase the number of parties that we can see per day. And that would be another way to improve our restaurant-level economics.
spk09: Great. That's helpful. Last one from me. Steve, in terms of the May quarter, third-party delivery charges, off-premises, you know, swipe charges, you know, through Square, what was that as a percent of sales of your total sales?
spk01: Well, on the delivery charges, we actually don't subsidize that cost, which runs right around $8 per transaction. So the customer picks that up themselves directly. And to us, there's no net cost related to that. And the square charges are really baked into the credit card transaction fees that they charge us for processing costs. the sales themselves, you know, there's a few basis points, you know, just like any processor, a few basis points premium that they charge to what their internal cost is. But it's a pretty, you know, for us, it's a pretty transparent thing in terms of, you know, not a significant incremental cost by anything going through Square and certainly delivery is just a wash.
spk09: Great. Thanks for taking all my questions and best wishes.
spk07: Thanks, Jeremy.
spk08: Thank you. Our next question is from George Kelly with Roth Capital Partners. Please proceed.
spk05: Hi, everybody. Thanks for taking my questions. So maybe I'll start with pricing. You mentioned in response to one of the earlier questions just that you're considering managing through this inflationary environment just by taking modest pricing. At least that's what I heard. So question for you is, I know you've taken some real modest, nothing major in the past, but is there much sensitivity? And have you kind of tested the upper bounds of, you know, when that sensitivity does start to show through?
spk10: I would ask... Oh, go ahead. Thank you. Go ahead, Jimmy. Oh, okay. Well, for me, We haven't done a test to see how far our customers can go, but we are offering affordable prices. Basically, we monitor how many plates and side menus we will order, and how much we will be able to match the average spending of our colleagues at Casual Dining. That's what we monitor. We are aware of that, and we also monitor how much labor will go up, In terms of testing what the potential upper limits of pricing would be, we haven't done any tests specifically geared towards that, but when we do take pricing, the things that we're considering would be
spk04: We monitor the number of plates being eaten, the average tickets. Our goal is for our sushi to remain accessible, and so we try to keep our ticket in line with the ticket averages of our peers in the casual dining industry. That being said, in terms of sensitivity, because we take such minor pricing because of our small plates menu, it's on the order of $0.05, $0.10, $0.25, there's been pretty minimal sensitivity or pushback from our guests in the past. In terms of margin management, that remains a very robust lever, whether we're talking about labor inflation or commodity inflation, there's still room to take price.
spk05: Okay, that's helpful. And then different topic back to the trends that you've seen just in same store sales. So did you comment at all on July what you've seen? I'm just curious if you've seen continued acceleration.
spk01: Yeah, we haven't commented on July. Same store we really talked about through the end of June. Jimmy did allude to the Sanrio Hello Kitty promotion, which launched on July 1st. And like many of our other brand partnerships, we're very excited and happy about that. how that customer reception has been to that since the beginning of July, but we'll share more of that next time we talk.
spk05: Okay, great. And then last question for me is, when I look across your store base, I see wait times consistently at most of your restaurants. And I heard in response to a different question just that you don't think stores, you're pretty comfortable with the size and everything, but Why not open? Can you just, I don't know what the exact question is, but what is your largest restaurant? And why not in future units, you know, why not tweak up the size a little bit just to boost your capacity? Thank you.
spk10: Of course, we know that most of our restaurants have a long waiting time on weekends. Of course, when we look at the similarity between store size and sales, there is no guarantee that there will always be a big mistake. That's the first point. And as you know, the cost of construction is also increasing, so what kind of store size is the most profitable, not just for sales, but also for profitability, return on investment, cash on return, cash on cash return, is it appropriate or not? So we're fully aware that we have long wait times during weekends in particular. But as Jimmy mentioned earlier, actually, when we were talking about Bellevue and Fort Lee,
spk04: Larger sizes don't necessarily have a one-to-one correlation to stronger sales. Our largest store is 6,800 square feet, but Bellevue and Fort Lee are 4,000 and 3,000 square feet, respectively, and are stronger performers. And so thinking about cash-on-cash restaurant build-out costs, it's not always a matter of simply just going bigger and expecting comparable margins or comparable returns. And so this is going to be something that is part of an ongoing discussion between the executive management team at Kurosushi to continue to figure out what the most appropriate size is or whether there are different appropriate sizes for different markets.
spk05: Okay, thank you. And I guess I do have one more quick one. Texas, impressive statistics that you gave on same-store sales. Within that, I'm sure you're not going to want to get too granular, but within that, what you reported, the positive comps there and everything, is there a large range? And what I'm trying to understand is if there's a group of stores within the Texas market that still is being really negatively impacted by COVID. And that's my last question.
spk07: Thank you. Go ahead, Jimmy.
spk01: Yeah, just to reiterate, Texas as a whole has, you know, we're very happy with the rebound and the performance there. You know, you could look at maybe some markets and consumer psychology around COVID in general, you know, may be a little more cautious, for instance, in the Houston market than it might be in the Dallas market. And you would see to some degree a little difference in numbers, but on the whole, Texas is clearly doing very well as evidenced by the overall rebound that we saw very quickly and sustained since then over the last few months.
spk08: Ladies and gentlemen, there are no more further questions, and this will conclude today's conference. You may disconnect your lines at this time. Thank you very much.
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