David Kim, the co-CEO of Gen Restaurant Group, the newly public owner of Gen Korean BBQ, made a declaration on Monday that should probably be more common than it is for executives giving their first earnings call. “We’re profitable,” he said. “We have always been profitable in the history of our company, with the exception of the pandemic year.”
Perhaps that’s why Kim feels confident enough to shoot down suggestions that he raise prices to improve margins. The 34-unit chain, which was little known outside the Southwest before its late June IPO, has a long-term focus. The company serves proteins that its customers make at grills in the middle of their tables, Korean barbecue style.
That method, rare in the U.S., enables the chain to operate more efficiently than many other concepts, with smaller kitchens, more seats, fewer cooks and lower, overall prices. “It allows us to provide the best value proposition for our guests,” he said.
That value could be important going forward, particularly if the economy hits a recession. “We provide value,” Kim said. “In case there is a headwind of recession we’re not ready for, our value and brand proposition is ready for that. Consumers will not stop eating. They’ll just trade down.”
“There’s no concept that can provide the guest experience, especially at the amount of protein we give, at the price we offer,” he added.
Restaurant chains have been raising prices aggressively over the past two years as their costs have soared. Gen Korean’s prices are lower than the independent restaurants with which it competes, Kim said. But he is not eager to match those prices.
Instead, he prefers keeping it slow, which improves the chain’s value and enables it to grow its base of customers without alienating them. The chain’s prices typically range from $26 to $30.
“Now we’re hearing companies are raising for the sake of raising just to make a better margin,” Kim said. “We will increase very modestly, but not to the extent that we will be remembered by consumers that we took advantage of them.”
All that’s easy enough when a brand is profitable. And Gen Korean did report profitability last quarter. Net income last quarter was $4.5 million, or 9.6% of revenue. Its restaurant-level EBITDA, or earnings before interest, taxes, depreciation and amortization, was $9.5 million, or 20.4% of revenue. Same-store sales, however, increased 1.4%.
The company was founded by Kim, the former CEO of Baja Fresh Mexican Grill, and Jae Chang, a longtime restaurant operator. The company raised $43.2 million in its IPO.
Gen believes it has plenty of room to grow. The company has spent recent months educating the public, and landlords, on the chain. It expects to open six to seven new locations the rest of the year, mostly in existing markets. The chain’s restaurants are in California, Texas, Nevada, Arizona, Hawaii, New York and Florida. It next plans to test its concept in additional states, such as Colorado, Massachusetts, New Jersey, Oklahoma, Oregon, Utah and Washington, D.C.
“We believe we can succeed even under poor economic conditions or through the headwinds of recession,” Kim said.
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