The ONE Group Hospitality, Inc.

Q4 2022 Earnings Conference Call

3/9/2023

spk00: And welcome to the one group fourth quarter 2022 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, You may press star then one on a touchstone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Manny Hilario, the CEO. Please, Manny, go ahead.
spk02: Thank you, Operator, and hello, everyone. Before we begin our formal remarks, let me remind you that part of our discussion today will include forward-looking statements. These forward-looking statements are not guarantees of future performance, and you should not place 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. Please also note that these forward-looking statements reflect our opinion only as the date of the call. We undertake no obligation to revise or publicly release any revisions of these forward-looking statements in light of new information or future events. We refer you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial conditions. During today's call, we will discuss certain non-GAAP financial measures which we believe can be useful in evaluating our performance. However, the presentation of these measures or other information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. For reconciliations of these measures, such as adjusted EBITDA, adjusted net income, restaurant operating profit, comparable sales, and total food and beverage sales in owned and managed and licensed units to GAAP measures, along with a discussion of why we consider these measures useful, please see our earnings release issued today. With that, I'd like to turn the call over to Manny Hilario. Manny?
spk01: Thank you, Tyler, and hello, everyone. We sincerely appreciate you joining us today and for your interest in the one group. Let me begin by thanking all of our team members for their hard work providing world-class operations across all of our restaurants. Our team members help to bring our mission to life every day which is to be the best restaurant in every market that we operate, by delivering exceptional and unforgettable guest experiences to every guest every time. It is because of our teams that we have been able to strengthen our leadership position in Vibe Dining, both high-end and upscale casual, and that we can have great confidence moving forward. 2022 was undoubtedly a good year for the one group. We increased revenue 14.2% to $316.6 million, which included a 10.8% increase in comparable store sales. Our focus on diversifying our customer base to include more social occasions has paid off, as demonstrated by our ability to own the holidays and date nights. For the fourth quarter, while we were negatively impacted by the weather, and subsequent travel delays in December, we're overall very pleased with our holiday performance, resulting in $13 million in adjusted EBITDA for the quarter, driven by store-level margins of almost 19%. In addition, we are starting to see the return of the business clientele as people are returning to work offices in the urban areas where our restaurants are located, and there has been an increase in demand for our corporate and off-site events. Additionally, we are noticing more convention activity, especially in cities like Orlando, Scottsdale, and Las Vegas, and we have deployed our sales force to aggressively pursue these opportunities. Maybe most importantly in 2022, we built an incredible pipeline of development that we expect will deliver double-digit revenue and adjusted EBITDA growth going forward. This past year, we saw that pipeline begin to materialize as we opened two company-owned SDKs in San Francisco and Dallas and one managed SDK in Stratford, our third in London, and a virtual reef kitchen located in Austin, Texas. Since opening, our two new company-owned SDKs, San Francisco and Dallas, have averaged approximately $350,000 in sales per week. This is significantly above our SDK investment model of roughly $154,000 per week. On the average, we expect to have less than a one-year payback for these locations. We have continued this momentum into 2023 with the opening of a new design Kona Grill in Columbus, Ohio and the Eastern Town Center in January. This is the first new Kona Grill we have opened since acquiring the brand and it is a big step in what we expect will be a large expansion for Kona Grill. This restaurant has opened averaging approximately $115,000 per week, again, facing ahead of our investment model, despite opening in what is typically our slowest part of the year. Additionally, we recently opened a new rooftop at the SDK in Scottsdale, Arizona, ahead of the Super Bowl, which was held in Phoenix last month. This is the fourth significant domestic SDK rooftop in our portfolio and features both the patio and fireplace, along with a great view of the canal. The vast size and open floor plan make the space extremely versatile and capable of being transformed to accommodate a wide array of events. We are encouraged by the incredible start for this new rooftop. Lastly, we have recently opened two additional Reef Kitchen locations in Austin, bringing to a total of three vessels as we evaluate future expansion. As we look forward to the rest of 2023, we have an incredible pipeline of high-quality real estate, the best in the history of the company. Despite a challenging construction environment, 2023 will be an extremely busy year as our intention is to open eight to 12 new venues. For the remainder of the year, we plan to open two to four additional corner grills in the following cities, Riverton, Utah, Phoenix, Arizona, Henderson, Nevada, and Tigard, Oregon, and three to five new company-owned SDKs in the following cities, Charlotte, North Carolina, Boston, Massachusetts, Washington, D.C., Aventura, Florida, and Philadelphia, Pennsylvania. Finally, we plan to open one managed or licensed SDK. When factoring in our 2022 and 2023 openings, along with our immediate pipeline thereafter, including asset by development, we anticipate a significant increase in run rate revenues and run rate adjusted EBITDA by the end of 2023. As we have long stated, our growth story has just begun. We foresee a total addressable market of at least 400 restaurants, including 200 SDK restaurants globally, and at least 200 corner grills domestically. Over the long term, the target is five to six new SDKs, three to five new corner grills, and one F&B venue per year. This will be a blend of owned units and managed and licensed units. which requires lower capital investment and produces high margin royalty, management, and incentive fee streams. To conclude, I'm pleased with our 2022 results, despite a very challenging restaurant environment, and our team is doing a fantastic job. Now, I'll turn the call back to Tyler.
spk02: Thank you, Manny. Let me start by discussing our fourth quarter financials in greater detail. Total gap revenues were $88.3 million, increasing 5% from $84.1 million for the same quarter last year. Included in our total revenues is our own restaurant net revenues of $83.9 million, which increased 5.6% from $79.4 million for the same quarter last year. The increase in revenue is primarily attributable to the opening of SDK San Francisco in August of 2022 and SDK Dallas that opened in November of 2022. Domestic consolidated comparable sales decreased 3.1% for the quarter compared to 2021. For SDK, comparable sales were flat versus 2021, and Kona Grill comparable sales decreased 7.6% versus 2021. As a reminder, we're laughing at incredibly strong comparable sales in 2021 relative to 2020 and 2019. Compared to 2019, our pre-pandemic base year, domestic consolidated comparable sales increased 46.2%, SDK comparable sales increased 62.6%, and cone and grill comparable sales increased 27.7%, which shows that our differentiated biodining experience continues to resonate with our guests. Management license and incentive revenues were $4.4 million, decreasing 4.5% from $4.6 million in the fourth quarter of 2021. This decrease is primarily the result of decreased revenues in our existing managed properties in London, England, partially offset by the opening of SDK Stratford in November of 2022. Owned restaurant cost of sales as a percentage of owned restaurant net revenue decreased 190 basis points to 24% in the fourth quarter of 2022, compared to 25.9% in the prior year, primarily due to menu mix management and price increases partially offset by increased commodity prices. Owned restaurant operating expenses as a percentage of owned restaurant net revenue increased 340 basis points to 57.1% in the fourth quarter of 2022 from 53.7% in the fourth quarter of 2021 primarily due to consolidated average wage increases and higher operating expenses, both driven by inflation consistent with the industry. This was partially offset by a low single digit price increase in August of 2022 and a mid single digit price increase in November of 2022. We believe that we have additional pricing power for both brands as we compare our prices to those of our competitors. Restaurant operating profit decreased 150 basis points to 18.9% for the fourth quarter of 2022, compared to 20.4% in the fourth quarter of 2021. Restaurant operating profit at STK decreased approximately 220 basis points, but was still a robust 22.6%, and Kona Grill operating profit decreased 180 basis points and was 13.1% to the quarter. On a total reported basis, general and administrative expenses were $8.5 million compared to $8.3 million in the prior year. The increase was attributable to additional investments ahead of growth, increased accounting and legal fees, and increased stock-based compensation expense, partially offset by a decrease in performance-based variable compensation expense. In addition, the company experienced increased travel expenses due to rising hotel and airfare costs. When adjusting for stock-based compensation, adjusted general administrative expenses were $7.3 million in the fourth quarter of 2022 and $7.5 million in the same quarter last year. Pre-opening expenses were $1.7 million compared to $0.2 million in the prior year. This increase was primarily related to payroll, training, and cash and non-cash pre-opening rent for SDK Dallas, which opened in November of 2022, Coneville Columbus, which opened in January of 2023, and other venues that are currently under construction. Interest expense was $0.7 million in the fourth quarter of 2022, compared to $0.5 million in the fourth quarter of 2021. The increase was primarily driven by increases in benchmark rates year over year. Income tax expense was $0.2 million in the fourth quarter of 2022, compared to an income tax benefit of $0.6 million for the fourth quarter of 2021. Our 2022 annualized effective tax rate was 6.2%. Net income attributable to One Group Hospitality Inc. was $5.1 million, or $0.15 net income per share, compared to a net income of $5.8 million in the fourth quarter of 2021, or $0.17 net income per share.
spk10: When adjusting for non-recurring expenses or gains, adjusted net income was $6.5 million, or $0.19 adjusted net income per share, compared to an adjusted net income of $8.3 million in the fourth quarter of 2021, or $0.24 adjusted net income per share.
spk02: Adjusted EBITDA for the fourth quarter attributable to the One Group Hospitality Inc. was $13 million, compared to $13.3 million in the fourth quarter of 2021, We have included reconciliation of adjusted EBITDA in the tables in our fourth quarter and full year 2022 earnings relief. During the fourth quarter of 2022, we repurchased approximately 0.6 million shares of our common stock. We purchased an additional 118,000 shares during the first two months of 2023. In total, we have purchased 1.2 million shares under our buyback program, and approximately $2.1 million in share repurchases remain available under the $10 million share repurchase program announced on September 7, 2022. We will continue to use discretion in determining the conditions under which shares may be purchased from time to time, if at all. Now, I'd like to provide some forward-looking commentary regarding our business. This commentary is subject to risks and uncertainties associated with forward-looking statements as discussed in our SEC filings. We, as always, remind our investors the actual numbers and timing of new restaurant openings for any given period is subject to a number of factors outside the company's control, including weather conditions and factors under the control of landlords, contractors, licensees, and regulatory and licensing authorities. Based on the information available now and the expectations as of today, we're providing you with the following financial targets for 2023. Beginning with revenues, we project our total GAAP revenues to be between $360 and $380 million, including managed license and incentive fee revenues of between $17 and $17.5 million. Total owned operating expenses as a percentage of owned restaurant net revenue of 82.5% to 82%. Total G&A excluding stock-based compensation of approximately 27 to 29 million. Adjusted EBITDA of 50 to 54 million, which represents an approximate 21 to 30% increase compared to 2022. Restaurant pre-opening expenses between $5.5 and $6.5 million. Operating income between $25.5 and $28.5 million. An effective income tax rate of between 5% and 10%. Capital expenditures consisting of approximately 2% of company-owned revenue and approximately $3 to $3.5 million per new company-owned venue net of allowances received from landlords. And finally, we plan to open 8 to 12 new venues in 2023, including one managed or licensed SDK restaurant. I will now turn the call back to Manny.
spk01: Thank you, Tyler, and thank you all for your time today. Let me conclude by saying that we are proud of our performance in 2022, and we are truly excited for 2023. We are in the early stages of our long-term growth strategy, as we continue to build a portfolio of high volume, high margin brands with compelling returns for our shareholders. Above all, I'm grateful to all our teammates who bring our mission to life every day to be the best restaurant in every market where we operate. They do this by delivering exceptional and unforgettable guest experiences to every guest every time. I also would like to thank our customers that visit and continue to return to our restaurants so they can enjoy the highly differentiated vibe dining experiences they have been craving. We appreciate everyone joining us on the call today. Tyler and I are happy to answer any questions that you may have.
spk06: Operator.
spk00: We will now begin the question and answer session. To ask a question, you may press star then one on your touchstone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question is coming from Mark Smith from Lake Street Capital. Mark, please go ahead.
spk08: Hi, guys. Thanks for taking questions here. First one for me is, you know, what are you guys seeing in the development pipeline for new restaurants in regards to, you know, what the locations look like, maybe TI dollars? And then if you can talk about, you know, any headwinds permitting, you know, construction, any headwinds that you're seeing out there on getting them open?
spk01: Yeah, so, Mark... In terms of what we're seeing is, at least for us, we continue to see very good deals from a TI perspective, so I think that those funds are still available. I still think that developers are looking for high volume type of operations, so I think that's still a very favorable market. In terms of construction, I would say probably the, I mean, it's definitely challenging, as we said in our prepared statement, but If I had to narrow it down to one area, that's probably the one that you have to be very thoughtful about right now is just equipment purchasing and making sure that you do that on time because there's challenges in getting some of the equipment. But we've been able to deal with some of that. We've actually aggregated some of our and pre-purchased some of our equipment for future stores just in anticipation of some of the hard times to get that equipment. So I would say that's probably our biggest headwind relative to development.
spk08: Okay. And then as we look at kind of restaurant-level margins for 2023, you gave some good guidance here. What are the main kind of pressure points, if you were to kind of rank them, that you see kind of putting any pressure on margin in 2023?
spk01: So I probably answered a question from a perspective of risk of the margin is really inflation levels. I think what we're seeing right now, you know, still price increases over a year, but they certainly have, you know, been less than historically in the last 12 months. So really that is the pressure point on the margin is always going to be, you know, what happens with inflation. I think labor, which frankly has been The biggest pressure point for us, I think that has stabilized. I think that with some of the, for instance, Amazon not increasing their labor pool or actually diminishing their labor pool actually has been helpful. It's taken a lot of pressure off talented individuals coming out of the industry. So really, labor is the big unknown. So I think there's a lot more labor out there right now, and that's good for us. And as we said previously, our restaurants continue to be fully staffed, which we think it's a long-term competitive advantage for us.
spk08: Perfect. And then the last one for me, just as we think about new restaurants, maybe if we look at Kona and STK separately, The average weekly sales at the new corner that you open look really solid. But can you talk about as you open these new units, do you expect kind of pressure on, you know, these restaurant margins to pressure kind of consolidated margins in the first couple months that they're open?
spk01: I mean, so starting with STK, yeah. Our pipeline coming up is Charlotte. We got Boston. We have, you know, really what we think will be very good revenue restaurants for us. So I don't expect any pressure point coming out of SDK at all. I think the margins will be very solid from the get-go in SDK. Conagra, we did open Columbus. Columbus is, frankly, done exceptional considering that we opened in the slow month of the year. which was January, and I think we're super encouraged with the velocity of guests there. And so I think my overall answer would be that, you know, I don't expect pressure from new stores, and I think that our guidance for the year reflects our view on the new stores.
spk06: Excellent. Thank you, guys. Thanks, Mark.
spk00: Our next question comes from Tyler Prowse from Stevens. Tyler, please go ahead.
spk09: Hey, guys. Congrats on the quarter, and thanks so much for taking my question here. So the strength of the consumer has been a large point of discussion industry-wide during this earnings season, and we really appreciate your focus on providing an affordable luxury through compelling entry-level price points and allowing some consumers to trade up if they please. But I was going to see if you could talk more about what you're seeing for consumers of your two concepts, and are you seeing any notable call-outs such as trade-down, mix management, or maybe variants of trends by region or day part?
spk01: Yeah, so thanks, Tyler, and a very good question. I would say probably the only noticeable factor I probably see today different from, you know, maybe six months ago is perhaps the build of the business Monday through Sunday. I do think that the weekends are super robust, so Friday, Saturday business, lots of appetite, and particularly because we have focused on social occasions and including date nights, we see a tremendous amount of demand for our product. I think Mondays through Wednesday, I do think that There, I think that if there's a place where the consumer might be making more decisions about going out or not is on those days of the week. However, as you pointed out there, I think that our happy hour program, particularly with the $3, $6, and $9 price points, it is super, uh, super compelling. So I, we still see tremendous strength on those days and happy hours. So people are coming out for that. And, uh, and as you know, we, we go out of our way to convert that, uh, into, uh, into the, uh, dinner business. And then, uh, the only other thing I would say about the consumer, I do think that brunch, uh, which is a day part that we focus on is clearly becoming very important on Sundays. And, uh, And particularly for us, brunch is a very good price point, particularly for SDK brands. So we do see a lot of excitement about the brunch day part on the SDK brand. But overall, from in-store behavior of customers doing less when they're in the restaurants, we do not see that at the SDK brand. And Kona Grill, we don't see that either. We do actually see more people trading up to surf and turfs at the corner brand, which is actually a higher price point. And we believe that they're doing that because the product is very good. So I think that's where, you know, managing perhaps the consumer behavior by having this great team mix. So that's what we've seen. So we've seen basically a little bit more velocity of visits towards the weekend. But other than that,
spk09: it's really all about managing a great product and a great experience in the restaurant wonderful i appreciate that and i've got one follow-up just kind of shifting gears here could you remind us how you're currently contracted on commodities uh you know specifically beef and kind of how those contracts are you know shaping up in 2023 yeah uh good question so on beef we we don't have contracted quantities but
spk01: We do have pricing arrangements with our vendors and for us that seems to be relatively stable, actually very stable out for the next 90 to 180 days. The other one that we actually actively lock in is seafood and we've been able to lock at very good seafood pricing. So seafood, particularly shrimp and lobster and the frozen products. So I would say overall the stuff that we actually work in and we walk pricing or quantities, I think we're doing a very, we're actually pretty good, favorable or equal to last year's prices.
spk09: Awesome. And just one final question here. I know you kind of touched on price a little bit during the call, but what was the price that you ran for the fourth quarter for effective?
spk10: Yeah, from a consolidated perspective, it's Right around 6%, and that's pretty consistent across each brand.
spk06: Okay, great. I appreciate your time today. Thanks, Tyler.
spk00: We have a question from Nick Sadian from Wedbush Securities. Nick, please go ahead.
spk03: Thank you. Can we just hone in on the Kona brand and the negative 7% comp and I guess what's driving that, first of all, is it just tough compares, particularly when you think about the pricing that's in there, so negative double-digit, presumably, transactions. And then maybe just how things have trended thus far in Q1, given the industry strength across almost all categories. And then just kind of internally, how you're thinking about you know, the Kona comp as 2023 progresses? Thank you.
spk01: Yeah, I mean, so there is no presumed double-digit traffic in Kona in the fourth quarter. I think they're in the mid-single digits on the traffic down. But the reality is for the fourth quarter for Kona Grille is that we were going up a very strong comp in 2021. As you may recall, We were up 34% in the fourth quarter for Kona Grill relative to 2019, which was pre-COVID. So I would say that if I had to evaluate Kona Grill's comp is that we were, if not best, one of the best in class for casual in the fourth quarter last year. Maybe Texas Roadhouse did it very, very well. But I would say we would be top four. of industry. And then this year, obviously we're going up against tremendous amount of excitement from that in the prior year. And so it was just a very hard lap this year. As I look at 2023 for Cone and Grill, I'm very encouraged with the start of the year. As a matter of fact, for quarter to date, Cone and Grill is relatively flat year over year and on the same store sales. And then we have some strong performance from the new unit at $115,000. I think $115,000 a week for Kona Grill is actually a very good result for the industry. As I look at Kona Grill for the rest of 2023, particularly the quality of the new sites coming out, I'm looking for a fantastic year for Kona Grill this year. As well, if I look at the margin, In the fourth quarter, we're up in the mid-double digits. I think we're 13-1 for the quarter on the margin. So I think that, you know, the concern coming from the third quarter was the margin, and I think that the team has done an exceptional job of working on that margin, and obviously the pricing also helps. So I'm super, super excited about 2023 for Conegroil.
spk03: Okay, and I was going to ask about sort of, you know, the trajectory of the margins at Kona. You know, so I guess the guidance, the overall guidance implies some expansion in the Kona, you know, restaurant-level margins. Maybe just walk us through in terms of the kind of inflation you expect at both brands in 23 and the kind of pricing that, you know, you're contemplating.
spk01: Yeah, so pricing right now, we don't have any pricing requirements in mind right now, additionally, to what we've done with Coing to Grow, and as we look out for the rest, again, it's always difficult to get a in the current environment, but Tyler and I are thinking somewhere between two to four points in inflation for the year, so much more moderate than that, and you're accurate that our guidance for the year implies that you know, we've made progress. And as our fourth quarter number shows, we have made progress on the margin at Kona Grill. And a lot of it is permanent adjustments that we made to the business model. Also keep in mind that the new restaurants and the new restaurant design, if you haven't been to the new one yet, is designed to be labor and margin friendly. We've shrunk the sushi bar in Kona Grill, which is a heavy labor users. So I think as the mix of the new design restaurants come into play, I think you'll see the brand really come into some very nice margins. I think the new prototype is in the 17% level margin. And so, yeah, I mean, that's kind of the path that we now have for Coin the Grill is continue working sales and the volumes in the new stores should be additive to the AV for the brand. And I think that the margin will improve for the brand.
spk06: Great, thank you very much. Thanks, Nick.
spk00: Our next question comes from JP Woollen from Roth MKM. Please go ahead.
spk07: Great, good evening, guys, and thanks for taking the questions. Maybe if we could just start with kind of the development pipeline at Kona. I just want to make sure I'm understanding correctly The idea is something in the range of two to four units for 2023. And I was just hoping maybe you could expand on that a little bit. If I recall, I think we had three units pushed from last year into this year. And so maybe we're kind of expecting to have had a few more coming in 2023. So anything you can maybe call out there and just confirm that two to four is the right number.
spk01: Yeah, I mean, so. We have opened Columbus, and so now left in the pipeline, at least that we're already working on, is Riverton is pretty much almost built. Then we have Phoenix-Deserich that's almost also built, and then we have Anderson in Nevada, which is also already in progress and then Tigard is the next one that we're working on and and then we're doing the next one in Lake Union Washington state so we have all those sites in the process and it's just a matter of opening them so as we've discussed in the past we are very sensitive to to our neighborhood when we open these restaurants. So Riverton, we're just waiting a couple more weeks here to get to a place where I feel comfortable with the surrounding market, and we will open that here. And then Deseret won't be that much after that. So our commitment is three to five on Kona Grill. You are correct. We did push two. We did push the openings into the beginning of this year. So we're going to get through those relatively quick here at the beginning of the year, and then we will start working on the remaining pipeline towards the end of 2023. Okay.
spk07: Great. Thanks for the clarity there. If we could kind of turn a little bit to STK, I just want to – talk for a second. I think earlier last year, we kind of talked a little bit about holiday event business and kind of what that could mean for Q4. And I'm just curious if there's anything now that we're through that, that you can tell us about kind of how the event business went, corporate events, holiday parties, anything like that. And just whether that gives you kind of any changes to your thoughts or your plans for 2023 and kind of targets there.
spk01: Yeah, so I think as we've discussed previously, the business continues to build. So we do have positive, you know, momentum on that business. I think the fourth quarter, you know, the books were really good for those type of events. I would say that, and although I'm not a weather guy and I don't talk about weather a lot, um, you know, we did have, uh, you know, some harsh weather, um, in, in December too, which I think kind of put a little bit of a damper perhaps on some of the event business and the stuff going on in the quarter. Uh, but, uh, But I would say overall, I would say that it was a very promising and actually very, very positive business there. And I think coming into this year, 2023, we've already seen the convention business really spark up, particularly, I think, as we said in our prepared comments, Orlando, Vegas. Vegas has been very strong on that. So I think that our outlook for that business is very favorable this year. Although from an SDK perspective, also as I discussed there, really owning holidays and owning date night has become a very strong part of that brand, particularly in the city. So I'm very excited about that. But anyhow, a strong outlook for business by Intel this year.
spk07: Great. Thanks. And if I could just sneak one last one in there. Just to call out the strength you're seeing at the new openings, Dallas and San Francisco. Is there anything you can share just about what you're learning there, what you're taking away, and kind of why things are going so great there? It would just be great to know as you think about the upcoming opening.
spk01: I mean, so I'd like to, first of all, give credit to the brand, on those openings. So when we're coming out to opening those restaurants, I think people know the brand really well because we have grown quite a bit. So I think just the brand awareness and the way that we go about defining our geography. So we're, you know, Dallas is a very complimentary, very great city for stake and so we're really picking some great cities in terms of development for SDK. So I think the combination of that cities and geography and quality of real estate as well as the brand being there and then the last thing I would say, on the success of the openings is our focus on marketing has always been digital. And we have, in my opinion, really become an incredible digital marketed brand. So we're able to create a lot of excitement and a lot of, through social, a lot of excitement about these openings. So I think the combination of those things has really led to these openings. These great opening revenues. Again, I think as we mentioned in our prepared statements, we only expect 150 to 160 to get to those 50% type of returns. These kind of volumes are paid back on these restaurants are less than one year. So it's a very good problem to have for Tyler here that we can pay him back in that short period. So So, again, it's those three components, and we'll continue opening them in big cities and great pieces of real estate, and the brand still does very well. So I expect that we will have a very good development year in 2023.
spk07: Great. Thank you for your time.
spk06: Best of luck. Thank you, sir.
spk00: We have a question from Roger Lipton from Lipton Financial. Roger, go ahead.
spk04: Yes, thanks very much for taking my question. Just, Manny, can you just give us a little more feedback in terms of the SDK openings, the next several openings, and are they going to be company-operated or managed facilities?
spk01: Yeah, so the next sequence, which is Charlotte, Boston, Washington, D.C., and then we also have Aventura in Florida and Philadelphia. Those will be all company-owned, and they're all A real estate, so we're super excited about all those locations.
spk04: And roughly, when might they open?
spk01: Charlotte is very close, and Boston will be two to three months after we finish Charlotte, and then we could plan the other ones to come about a month. to six weeks thereafter each other. So that's kind of how we look at timing of openings for those.
spk04: And what's your net investment, the cash out, on this current crop of stores? Yeah, Roger, so this is Tyler.
spk10: Yeah, so we typically net anticipate new SDK units to be about three points. $8 million, roughly. Excluding pre-opening costs.
spk04: Right. Okay. And have your rents escalated within this inflationary environment?
spk01: I would say that the answer is, at least for us, and this is not a really market read, I think for us, particularly because of the high demand for STK and even in Kona Grills, I think that we've been able to get some very competitive rates on rent. So my answer actually is I think our rents are very good relative to what historical levels has been in some of the cities that we're going into. So the answer is no, I have not seen any impact on rent rates because of the inflation.
spk06: Thanks very much. Thanks, Roger.
spk00: And this concludes our question and answer session. I would like to turn the conference back over to CEO Manny Hilario for any closing remarks.
spk01: Thank you. And as always, I want to close the call here by thanking our incredible team, which do an incredible job every day living our mission of operating great restaurants and focusing on exceptional and unforgettable guest experiences to every guest every time. So thank you for that. And then I also want to thank everyone for having an interest in our company and being on the call today. And I'm sure I'll run into all of you in our restaurants in the next couple weeks. Thank you, everyone, for being on the call.
spk05: The conference has now concluded.
spk00: Thank you so much for attending today's presentation. You may now disconnect.
Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

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