Kura Sushi USA, Inc.

has also been included in the EAK resubmitted 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 SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition. Also during today's call, we will discuss certain non-GAAP financial measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation, nor is 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.

Thanks, Ben, and thank you to everyone for joining us today. I'm very pleased to report the ongoing strength of our business as we progress through a record fiscal year. This will go into greater detail later, but for those of you who saw our earnings release, I'm sure you noticed that we have announced further raises in guidance. It was unprecedented for us when we announced our guidance raise so early in the year with our first quarter call and being able to follow the next quarter with raises for each of our guidance items, demonstrates our incredible confidence in the business. We've opened 10 restaurants to date, putting us well on track for our new unit guidance of 13 to 14 openings this fiscal year. We leveraged G&A year-over-year by 190 basis points and grew adjusted EBITDA dollars by 23%. We've introduced big new projects and our operations teams have more than risen to the challenge of implementing them. I'm extremely proud of everyone's efforts and wanted to begin the call by acknowledging all of our team members and thanking them for creating so much great news that I get to share today. Total sales for the fiscal second quarter were $57.3 million, representing comparable sales growth of 3%. A traffic growth of 5.9% is a meaningful acceleration over the prior quarter's traffic growth of 3.3%. We are very pleased to have achieved these results in spite of the severe weather that impacted the entire industry. During our fiscal second quarter, Black Box's restaurant industry traffic index was negative 3.5%, a spread of 940 basis points. Compared to the casual dining industry, our traffic outperformance was 1,180 basis points. It's clear that our guests love Kula as much as we love them. As a reminder, 7% of the pricing fell off during the first week of December, which we offset with only 1% in January for current effective pricing of 3%. We mentioned price mix tailwinds in January, and we are very pleased to see that this continued through the quarter. This really has been a special quarter for Kula, and I'm glad that we provide the kind of guest experience that keeps guests coming back to us. During the second quarter, commodity costs continued to be right where we want them at, 29.6% of sales. Labor as a percentage of sales was 32.8% as compared to 31.5% in the prior year quarter. In addition to meaningfully higher pre-opening labor costs due to accelerated openings, we experienced the same severe weather that impacted the rest of the restaurant industry. We are confident that this increase in labor costs is not structural in nature and expect the same seasonal leveraging of labor that we've always seen. As I previously mentioned, we are aggressively executing on one of our key strategic pillars to drive overall corporate profitability, evaluating G&A. We were able to bring G&A costs down to 14.3% as a percentage of sales, as compared to last year's 16.2%. And as a result, we now expect to achieve even greater G&A leverage for the year, which Jeff will discuss later. Our support center team has done a great job in managing incremental headcount, and we expect further tailwinds in future years as we infill markets and benefit from efficiencies in regional restaurant management. In the fiscal second quarter, we opened five new restaurants, Kansas City, Missouri, Skokie, Illinois, Columbus, Ohio, and Uless and Webster in Texas. Subsequent to quarter end, we opened one more restaurant in Orlando, Florida. We also have five units currently under construction. In the fiscal year to date alone, we've opened as many restaurants as we did during the first six years of Kurasushi's operation in the US. I'm incredibly proud of what our brand has become and for us to have established our footprint as a truly national brand with restaurants in 17 states today. We are also pleased with the performance of our new rewards program. Rewards members are now responsible for approximately a third of our sales as compared to less than a quarter with our prior program. Our recent analysis on average Rewards members spend 10% more per ticket, even after factoring in discounts, and visit 1.3 times per month. For the last several calls, I've hinted at an IP collaboration that I was extremely excited about, and it's my pleasure to finally be able to share that. Our next IP partner is Dragon Ball. I think this might be our first non-American property that everybody on Discord is already familiar with. We believe Dragon Ball is the most exciting partnership we've ever had, and I'm truly looking forward to seeing the results. I have a lot of great news to share regarding our tech pipeline as well. We have completed our first in-restaurant test of our robotic dishwasher in Japan. and RD results have confirmed our expectations on how meaningful they will be for our operations. While we don't have a timeline for state-side implementation, I'm very pleased with our forward momentum. The table-side mobile ordering function implementation is going smoothly as well, and I'm happy to be able to announce a new feature for table-side mobile ordering that we are developing in parallel, the ability for guests to unbicker upon prices through side menu purchases rather than just through sushi plates. One more thing on the tech front. We have a completely new battle-tested technology from KuroJapan that we are currently getting certified for the U.S. We call it the sushi slider. It puts our rice balls directly onto our sushi plates and then takes them to each line employee via conveyor belt. During peak hours, we can have two to three employees spending half of their shift placing rice bowls onto sushi plates and handing them to the next person on the make line. So the operational upside here is obvious. Our expectation is that we'll be able to bring the sushi slider set aside for testing this summer and that we'll actually be able to retrofit some of our existing restaurants to accommodate it. As you can see, we made a lot of progress in this last quarter. Lastly, I'm pleased to announce that we were able to secure a very favorable deal with DoorDash, prompting our exclusive partnership and rapid rollout of the program. With these deal terms, we are able to keep our menu prices the same as in-store dining, and we expect DoorDash sales to be beneficial to margins. We are very pleased with our partnership with DoorDash so far, and I'm looking forward to providing quantitative color in future calls. I would like to again thank all of our team members at our restaurants and our support center. Every department can point to a remarkable achievement this quarter. Whether we are looking at the 10 restaurants that we've already opened, the incredible traffic auto performance of our restaurants, You have leveraged over 190 base points, our IP collaboration pipeline, and the success of new rewards program, the progress in technology, or the successful and rapid rollout of DoorLash. It's been an amazing quarter. Thank you, everyone. Jeff, now I'll turn it over to you to discuss our financial results and liquidity.

Thanks, Jimmy.

For the second quarter, total sales were $57.3 million as compared to $43.9 million in the prior year period. Comparable restaurant sales performance compared to the prior year period was positive 3%, with regional comps of 8.7% in our West Coast market and flat comparable sales in our Southwest market. Turning now to our costs. Food and beverage costs as a percentage of sales were 29.6%. compared to 30.1% in the prior year quarter, largely due to pricing and supply chain initiatives. Labor and related costs as a percentage of sales were 32.8% as compared to 31.5% in the prior year quarter. This increase was largely due to adverse weather conditions, increased training costs associated with new store openings, and general wage increases. Occupancy and related expenses as a percentage of sales were 6.9% compared to the prior year quarter's 7%. Depreciation and amortization expenses as a percentage of sales increased to 4.7% compared to the prior year quarter's 4%, largely due to additional newly opened units, as well as the accelerated depreciation of assets that were being replaced due to planned remodels. Other costs as a percentage of sales increased to 14.6% compared to 13.3% in the prior year quarter, due mainly to pre-opening costs associated with a greater number of store openings, as well as an increase in marketing costs, repairs and maintenance, and general cost inflation. General and administrative expenses as a percentage of sales decreased to 14.3% compared to 16.2% in the prior year quarter, due to greater sales leverage, which was partially offset by incremental public company costs and recruiting and travel costs associated with new unit openings. Operating loss was $1.7 million compared to an operating loss of $1 million in the prior year quarter, largely driven by incremental other costs associated with the greater number of unit openings and units under construction and depreciation and amortization. Income tax expense was $50,000 compared to $15,000 in the prior year quarter. Net loss was $1 million or 9 cents per diluted share compared to a net loss of $1 million or 10 cents per diluted share in the prior year quarter. Restaurant level operating profit as a percentage of sales was 19.6% compared to 20.3% in the prior year quarter. Adjusted EBITDA was $2.9 million compared to $2.3 million in the prior year quarter. Now turning to our cash and liquidity, at the end of the fiscal second quarter, we had $56.8 million in cash and cash equivalents and no debt.

And lastly, I'd like to update the following guidance for fiscal year 2024.

We now expect our total sales to be between $243 and $246 million We now expect to open between 13 and 14 new units with average net capital expenditures per unit of approximately $2.5 million. And we now expect G&A expenses as a percentage of sales to be between 14 and 14.5%.

And with that, I'd like to turn the call back over to Jimmy. Thank you, Jeff.

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.

Thank you for your attention.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. and 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 handset before pressing the star key. One moment, please, while we poll for questions. Thank you. Our first question will come from the line of Jeffrey Bernstein with Barclays. Please proceed with your question.

Great. Thank you very much. A couple of questions. The first one, just looking at the comp, I think you said 3%. Just wondering if you can talk about maybe the trends through the quarter and what you've seen in the month of March. It does seem like the industry is perhaps talking about a little bit of a slowdown in March going into April, especially on the lower-income consumers. So just trying to get your perspective on the consumer environment and what trends you've seen in recent months.

Yeah. In terms of the monthly cases,

Obviously, we saw some pressure in January with the implement weather that everybody else saw, but generally, we're very informed. We take the report by remodel, especially the promotions that we were hosting as well. One thing that we really feel tremendous pride on, 5.9% traffic that we did, which really, to have a thousand basis points correct between ourselves and the casual dining industry is tremendous.

We're incredibly pleased with how and we're just April, but we're very happy with April as well. And so it's, it's great to see that, you know,

we're maintaining positive momentum that we've seen as we've exited Q2. It's been really great.

No, that's encouraging. And then just separately on the new market you're going into from a geography standpoint, any surprises in terms of the reception from the consumer, whether positive or negative? Just curious, your learnings in your newest markets, since that's such a big opportunity for you.

In terms of geographic trends, we've seen the same trends as before in terms of new markets. Every single one of them has been a hit. So in other words, no surprises. We've expected hits and we've gotten hits, and so that's really nice.

In terms of differences in geographic performance, that would really just be associated with wherever the weather was. For us, we've got a lot of places in California, and so when it rains in California, that can have an impact on the West Coast comps.

Was pressured relative to at least street expectations on the labor line and the other line. both being well above expectation, which drove pressure on the margin. But I get the feeling those aren't necessarily structural. Sounds like the labor was because of some accelerated new unit openings. On the other costs, there were some unusual. So just wondering, as you think about the restaurant margin for the second half of fiscal 24, what your thoughts are there and maybe what line item you think has the greatest visibility versus the greatest level of uncertainty as we think about the back half of the year restaurant margin. Thank you.

Regarding the restaurant margin, we have a lot of tailwinds regarding the latter half. The first one is that the pre-opening leverage will be relatively small. We have already opened 9 stores in the first half, and the rest are 4 or 5 stores, so it's a small opening, so the margin pressure will be reduced. And of course, there are two things that require higher sales leverage in terms of seasonality. We're very confident about the restaurant-level operating profit margins for the second half of the year.

As you know, we've already opened the bulk of the units for this fiscal year, and so those pre-opening labor-related headwinds are largely behind us. The other factor is that we're going to see the same seasonality, the same sales leverage that we've seen every year. We also have a number of promotions that are in the pipeline that we could not be more excited about. As Jimmy mentioned, we've got Dragon Ball. We think that's literally the biggest promotion ever. Jimmy and I are super, super proud and pleased to have that there. And so we've got a lot of tailwinds. You know, even besides that, we've got the tech stuff. We've got DoorDash. There are a lot of things to look forward to for restaurant-level operating profit margin.

Also, Q1, Q2, they opened, right? Q3, they're going to do a profit contribution Q3. There are a lot of tailwinds, so we're really excited.

And the other would be, you know, the first month that you open a restaurant, it's typically not profitable. And we're over the hump for all those restaurants. They're operating at full capacity. So, yeah, we're really excited. And, Jeff, too, what I'll add is, as we talked about the restaurant-level margins, which we're really excited about all these new things we have in the pipeline, we also really wanted to point out the G&A reduction. and leverage that we're getting on the total adjusted EBITDA line with the G&A. I mean, we went from 15.8 in 2022 to 15 in 2023. And with our new guidance, if we hit the midpoint, that's another 80 BIPs. Basic points is something we're very proud and very excited about.

Absolutely. Thank you guys very much.

Thanks, Chuck. Thanks, Chuck.

Our next question comes from the line of John Tower with Citigroup. Please proceed with your question.

Great. Thanks for taking the questions. Maybe starting off with the comps and specifically during the period, it's great to see the traffic growth. That's awesome. But the price mix implications behind that, you guys moved into negative territory. And I know there's not a ton of history here, but I'm curious. that would seem to indicate that consumers are perhaps managing their check a little bit differently than in years past. So how is that manifesting? Are people just getting fewer plates? Are they ordering less off of the tablets and pulling more off of the belts? I'm just curious to see how it's showing up in your business.

Sure. First of all, the number of plates, the number of plates that the customer eats, has not changed from flat to 6.3. Basically, the trend is that the customer gets the last menu, or the soda, or something like that. They manage it like that. However, as a result, we have a plus of 6% traffic, so I think it's a big plus overall. I'm going to try not to pay too much attention to that. However, there is one thing that can be improved with potential in the future. It's going to be a long timeline, In terms of mix, our per-person plate consumption has stayed flat at 6.3 plates year over year, and so really no difference there.

The delta would be in side venue orders or people trading down from soft trades to water. In terms of mix, we're actually – we're very pleased. I don't know if you caught what we mentioned at ICR in January, but as of December, mix had gone from negative high single digits to negative mid single digits. And as you can see from our comp breakdown back into some traffic, that strength has helped. And so the consumer is showing greater strength. you know, in the most recent quarter relative to the last couple quarters where we mentioned mixed being negative high single digits. We're exceptionally proud, again, of the 6% traffic. If there is mixed pressure, we're very proud to have been able to offset that with, you know, incremental traffic growth. We do have a number of things that we expect in terms of opportunities for side menu ordering, namely the biggest one being guests being able to order from their phones instead of having to reach over their, their buddies sitting closer to the conveyor belt. They've got the tablet. People can just use their smartphones as their menu. But the bigger thing is that now, as a stage two for that, our guests will be able to earn prizes by ordering side menu items, which had never been a consideration before. And so we've got a lot of things to look forward to, in addition to the fact that Mix has already been improving. Got it. Thank you. I appreciate that, Culler. Maybe jumping around a little bit, Tanya, the DoorDash partnership that you've got, and I think, Jimmy, you had mentioned the idea that this is going to be margin neutral relative to in-store transactions while keeping the prices the same, if I understood that correctly. So are effectively this just getting passed along to consumers in the form of higher delivery fees? I'm just curious how you guys manage that. So our expectation is that it's going to be margin neutral to margin accretive. We're really excited about the partnership with DoorDash. And in terms of passing along cost to guests, we're actually, one of the reasons that we're partnering with DoorDash is because we can offer a better guest experience than ever before. We're on DashPass. So if you have a DashPass membership, you can now get delivery for free, where before it cost $7 or $8. And so to be able to offer the same prices as in our restaurants and give guests free delivery, and being margin accretive, it was really a no-brainer for us. But this really came down to the deal terms we were able to secure with DoorDash. And as Jimmy mentioned in the prepared remarks, if we hadn't been able to arrive at these terms, this wasn't something that we were entertaining. The fact that we got to these terms is really what triggered our decision to move forward with this. Got it. In terms of, I mean, maybe it's early days for it, but I'm curious, you know, either what you're seeing in stores that maybe it was deployed already in terms of how it's mixed in or what your internal expectations are. And then separately but related, how are you managing this within the store? Because obviously your kitchens are super busy already. You've got a lot of traffic running through. How are you handling these delivery orders versus the in-store transactions that are taking place? Yeah, the operations team has done an amazing job in terms of implementing and integrating it into their operations. We're able to throttle orders, and so if we are busy and our kitchens are at capacity, we're always going to prioritize the guests that are already in our restaurants, and so we just slow down or shut down our operations orders, and it really hasn't been an issue.

Got it. Awesome. Yeah, I'll pass it along and maybe hop back in the queue. Thank you. Thanks, John.

Our next question comes from the line of Mark Smith with Lake Street Capital. Please proceed with your question.

Hi, guys. First off, just wanted to dig into margins a little bit more on the labor expense up here. Can you break down at all how much of that was due to the higher openings here versus just kind of pure labor inflation? And then I'm also curious, any impact that you guys are seeing in California restaurants on labor with higher fast food minimum wage there?

First of all, the pre-opening cost is as announced, so this quarter is 700K higher than the quarter last year. The majority of that is labor cost, so 700K is 1.2%, so most of that is The pre-opening labor is higher than last year, so you can see how much impact it has. We also repeat that we are doing mid-single-redit labor inflation in the second quarter, so you can see that it is like this with these two mixes. One thing I would like to emphasize is that it has no effect on the profitability of existing wrestlers. So if you look at our queue, you can see that our pre-opening costs for Q2 are $700,000 higher than pre-opening costs of the prior year's Q2. And the bulk of that $700,000, which

That's about 1.2% of sales. The bulk of that $700,000 is labor. So you can see immediately just how big of an impact that the accelerated pre-opening labor did. In terms of the full year, we expect mid-single-digit labor inflation, which is what we've done in past quarters. The change in labor is really – again, it's really driven by that pre-opening labor compounded by the letter that we saw across our markets. We really – We're very pleased with the margins that we put up in spite of that. And we have zero concerns in terms of, you know, returning to normalcy as we enter Q3. As we've mentioned, we have a lot of tailwinds. And we think we know that the elevated labor from the last quarter was due to things that were either out of our control, whether, or we're pleased with, which is, you know, that we were able to open our restaurants here. And so, yeah, we're pretty happy. That's all right. Thank you.

Thank you. Thank you. Thank you. Thank you. Thank you. Of course, we haven't received any requests, but that's right. In particular, it has nothing to do with the employees' GTO, so it doesn't have any effect at all. Of course, in the long term, we hope that we will be able to do something positive in the traffic. Today, I'm here to eat fast food. After all, more than 10% of the customers are eating at Starbucks. We also have a coffee shop, so I think it's a fair win for us.

In terms of the FAST Act, as I'm sure you're aware, as the legislation stands, we're not under that umbrella. A lot of other casual dining restaurants or restaurants generally have been impacted by it, regardless of whether or not they're directly under that umbrella, just continuing to maintain competitive wages. In California, our employees in the back of the house are eligible for tips, and so they're already making very competitive wages. We just don't see a scenario where they're going to leave our heavily automated restaurants to do more work for less pay. And so this really hasn't been a wage pressure for us. We all spend a lot of time in California or live in California, and so we've seen price go up, sometimes high single business, sometimes double business, as the restaurants and cafes that we always go to. And so the fact that we're keeping pricing where we are, we think it's a strategic and meaningful advantage We think that this is an opportunity to really grow our audience when everything else seems more expensive than ever. And Cura is an affordable luxury, which is really what so many guests love about the brand. We think this is an opportunity to bring the Cura experience to tons of new people, especially when our price point just gets closer and closer and closer to QSR as they need to take greater price to make a market. And Mark, one of the things we've always said is that we thought the fast actor AB1228 came in that we thought that would increase the value proposition for Kura Sushi. And I will tell you that yesterday I ordered a salad from a chain to be unnamed, but it had chicken in it. And it was even for delivery fees or anything, it was almost $20. And you can go to Kura Sushi, have five plates of sushi and a soda for about that. Maybe just a tiny bit more than that. So our guess on what people were going to do with pricing on April 1st and how that increases our value proposition is seems to be proven true, at least in the early stages of this new act. Excellent.

Another question for me is, just looking at the opening cadence here, you guys did a good job getting restaurants open here in the first half. With five under construction, the guidance of 13 to 14, are you just being a little conservative on those openings? Or do you think you can get these five open by the end of the year?

In terms of the cadence, we just broke down, broke ground on one of them.

It's very early on in terms of the construction lifecycle. The remaining units, we expect about an even split between Q3 and Q4. We think, you know, 13 to 14 units is a reasonable expectation, which is why we gave that as guidance.

That's fair. Thank you, guys. Thanks, Mark.

Our next question comes from the line of Matt Curtis with William Blair. Please proceed with your question.

Hi, good afternoon. You guys ran a promotion for your rewards members. I think with two visits in December, you gave them a 20% coupon valid in January. I was just wondering if you could tell us about how much of a traffic benefit that wound up delivering for you, or what redemption rates were like, and then, I guess, relatedly, whether you're planning to run anything like this regularly going forward.

Yeah.

In terms of the coupon campaign, overall, we were very pleased. Obviously, with January, we had some noise from weather, which maybe resulted in less traffic than there would have been otherwise. But we still did 5.9% traffic for the quarter, or a constant 3%. We were really pleased.

So yeah, overall, we viewed it as a success.

Okay, I got it. Would you mind telling us what the weather penalty was for the quarter? I'm sorry, could you repeat that? Sorry, would you mind telling us what the weather penalty was for the quarter?

For both January and February, we had about four operating days each that were very heavily impacted. January was largely Texas, the Midwest, and some of the East Coast. California was hit during February, but yeah, about eight days.

Okay, got it. Thank you. And then, you know, you talked about Dragon Ball being the promotion that's coming this spring, I guess. You have Spy Family that's been in place in I think March 1st. Could you remind us what promotions you're lapping over this time frame and how successful they were last year?

So as we discussed earlier, we're really pleased with March results.

We think in no small part was Spy Family that's been a very successful campaign. In terms of what we've been laughing, I believe it was Jujutsu Kaisen last year for April and May. So a pretty strong one, but not the, you know, not the strongest, but we're, so we're very pleased to be talking the way that we are. Dragon Ball, again, is really, I mean, it's huge. It's just huge. It's really hard to predict what the impact is going to be, but we are super, super excited for May 1st.

Okay. Understood. Thanks very much. Thanks, Pat. Thank you, Pat.

Thank you. As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Our next question comes from the line of CJ DiPolino with Craig Hallam Capital Group. Please proceed with your question.

Hi, everyone. It's CJ on for Jeremy Hamblin. I wanted to touch on labor costs one more time and just see if you were able to give a little more color or kind of quantify the penalty from adverse weather.

So as we mentioned earlier, we had about $700,000 in incremental pre-opening costs as compared to the prior year.

The majority of those costs are in labor. And then we had about eight days of weather impact, and you can't change the schedule in real time to deal with weather. So, yeah, that would be the impact.

So eight days impacted with full payroll in there. Okay. Thank you.

And then on the other cost line item on P&L, I know you said you negotiated the DoorDash deal on really favorable terms. Are you seeing any incremental expense that's being added to that line item?

No, DoorDash launched in February on a rolling basis. And so the impact to Q2 was not super meaningful. But in either case, we do expect DoorDash to be margin neutral or actually our expectation is margin accretive. Worst case, it would be margin neutral. And the other costs, too, are impacted also by the pre-opening costs. The two biggest lines that are impacted on RP&L are labor and the other cost line. So when you look at that other cost line, whenever there's a greater number of store openings, there's travel and other costs associated with moving people around for those openings. So the other cost line is impacted as well.

Okay, right. Thank you. And then one more quick one, if you don't mind. Sorry if you just touched on it, but once you break ground at a new restaurant, how long does it take, or what's the typical time to open from that point?

It's typically about five months. It's typically about five months.

So it's been about five months historically. The last couple quarters, we've seen that tighten a little bit with inspections at the end of, you know, construction going a little smoother. And so it's been closer to four months than five months. But our base expectation is five months.

Okay. Got it. Thank you. Very helpful. Thank you. Thanks, CJ.

Our next question comes from the line of George Kelly with Ross. Please proceed with your question.

Hey, everybody. Thanks for taking my questions. So, first one is about Dragon Ball. Clearly, you guys seem super excited about that partnership. And I understand big brand. But I guess the question is, are you also, you've done so many of these now. I'm curious if your strategy around monetizing big partnerships like that, if that's changed at all. And basically, like... Are you kind of, given the history and what you've seen with these big deals before, is there sort of an ability now to be more aggressive in your monetization plan?

Yeah, so our strategy on this is always evolving. As we mentioned, one of the reasons that we're so pleased with April so far is that we just did our giveaway campaign with Spy Family, where if you cross a certain spending threshold, you got T-shirts. I was actually... I was at lunch today at Accura, and I saw lots of people trying to get those T-shirts, and so clearly it's working. This is, you know, we realize just how meaningful an opportunity it is. As you said, this is a very meaningful driver in terms of getting people into the door, and these are brands that people are very passionate about. And so we have a lot of things in the pipeline. Can't discuss them just yet. Part of them are new. enabled by the new capabilities of the rewards program. Some of them are new ideas that we have that are completely separate from that. But we're always looking for new ways to engage our guests, new ways. I mean, the brands are one of the most fun things about coming into Cura, and so we're always looking for new ways to leverage that.

Okay, understood. And then second question on the unit growth. taking your guidance up again, I guess, at the midpoint for expected openings this year. Is it all about permitting, or are there any other factors that explain you raising that a couple times now? And then the second part of that question is, if you look out beyond this year, is it fair to assume that the 20% growth target that you've put out in the past, is that still a good number to use? And those are my questions. Thank you.

In terms of forward growth, what we've said in the past and what we've achieved would be 20% is the floor, typically coming in closer to 25%.

That's what we've been doing. That's what we expect to do. Our organization has demonstrated that it's more than capable of meeting that challenge year after year. We're excited to keep delivering on that. Given that we've already opened 10 shores and we have five under construction, just looking at historical patterns in terms of permitting, how construction goes, we think that 13 to 14 is a really fair bet. Obviously, there's opportunity potential to go beyond that. But at this point, with six months left in the year, that's the 13 to 14 where we feel good about. And also to your point, George, about the question about the acceleration that you really drove that permitting did get a little bit easier. This year, obviously, compared to last year and the year before. But I think the other piece that really helped is that while our management pipeline has always been strong, one of the things that I committed to when I came to the company was to reinvest back in the company in areas where we're going to get a very good return. And one of those was recruiting. And we've invested heavily into recruiting and making sure that we have internal candidates ready to come in and external candidates out there that we can hire as well. And because of that, our management pipeline couldn't be better. And we are still able to get, like I said, if we hit the midpoint this year and G&A will still get an 80 basis point leverage, even with that reinvestment back into things like recruiting and construction and operations. So the formula and the model is working right now in terms of those things helping us get restaurants open even faster than we imagined.

Excellent. Thank you. Thanks, George. Thanks, Josh.

Thank you. We have reached the end of our question and answer session, and with that, this will conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.