Not all the restaurant news came from big chains this earnings season

Earnings roundup: Results from smaller operators and several industry suppliers also cast light on the industry’s performance, particularly by independents.
Photo: Shutterstock

Earnings seasons like the one currently drawing to a close typically bring a concentrated blast of financial results from big public restaurant companies. The firehose effect can drown out what smaller concerns are doing to contend with the times. Add in the reports of several public suppliers and a far more nuanced picture emerges of how operators are coping, as this roundup of first-quarter postings reveals.

Fat Brands focuses on Twin Peaks, different form of cross-utilization

Longtime company leader Andy Wiederhorn has stepped down as CEO, but that didn’t stop him from leading an analysis of the diversified franchise company’s first-quarter financial results for the benefit of Wall Street analysts. Identified in a transcript from the Sentieo financial services firm as “outside consultant and strategic advisor,” Wiederhorn detailed Fat Brands’ aggressive expansion strategy, which includes plans to double the size of its Twin Peaks sports bar concept.

The chain should end 2023 with about 115 units, said Wiederhorn, according to a transcript from the financial services firm Sentieo. He added that the concept’s high unit volumes may lead the company to double development of company-run stores as well, to five or six per year. The restaurants average about $6 million in annual sales, with some units in Florida generating as much as $12 million, Wiederhorn said.

About 95% of the 2,000 restaurants sporting one of Fat Brands’ 17 brand names are franchised. A number of the outlets are two Fat Brands concepts sharing the same site.

Wiederhorn revealed the company is using a factory that produces the cookie dough for its two cookie chains to try a different sort of co-branding. Several of Fat Brands’ burger concepts are using the dough to add cookies to their menus, Wiederhorn said. He noted that the factory is currently using less than 40% of its capacity.

Same-store sales for the quarter rose 4.3% across the company’s portfolio, which includes Johnny Rockets, Round Table Pizza, Ponderosa, Bonanza, Elevation Burgers and Hurricane Grill & Wings.

Wiederhorn is being investigated for possible violations of federal securities regulations stemming from the operation of  Fog Cutter Capital,  his family's investment arm and the largest shareholder of Fat Brands. Wiederhorn stepped down as CEO and president at the beginning of May, ceding his responsibilities to CFO Ken Kuick and EVP Rob Rosen. In addition to keeping their current duties, the two have taken on the role of co-CEO.

Losses deepen for Fiesta Restaurant Group

Net losses for the operator of the Pollo Tropical quick-service chain deepened in the first quarter ended April 2 to $1.9 million despite an improvement in transactions and unit-level margins, according to new Fiesta CEO Dirk Montgomery, as recorded by Sentieo. He attributed the decline to impairments and lease adjustments, and stressed that traffic had risen 1.9% and 1.1% in March and April, respectively. Transaction counts rose 1% for the entire quarter, elevating same-store sales by 9.7%.

Montgomery revealed that the Latin-flavored chain was adjusting its promotional strategy to run fewer but “more impactful” limited-time product promotions over longer stretches. The adjustment will foster quality and consistency, the CEO said.

Independents’ orders jumped, distributor PFG reports

In a sign of independent restaurants’ health, foodservice distributor Performance Foodservice Group (PFG) said case orders from existing one-off customers jumped 8.3% during the first three months of 2023, nearly double the rate for the prior two quarters. Order volumes for the period, PFG’s third fiscal quarter, rose 3% overall, the company said.

It noted that inflation dropped during the period. Food costs should hold nearly steady, with increases “normalized” to low-single-digit changes, said CEO George Holm.

US Foods sees upswing from independents, inflation dropping by half

Arch-rival US Foods also saw a surge in case sales to independents during the first quarter, with the volume for that sector rising 8% versus a 6% increase across the distributor’s whole customer base.

Case sales to chain restaurants ebbed 1%, the company said, as reported by Sentieo.

It clocked inflation at less than 4%, or less than half the rate revealed by the distributor in prior quarters

New CEO Dave Flitman told financial analysts that the key component of his strategy for the company will be continuing to evolve its sales-and-service strategy, with renewed emphasis on inclusion and employee safety.

Olo grows with new, existing clients

In the first quarter, the tech supplier brought aboard 300-unit Shipley Do-Nuts, expanding its total restaurant count to more than 76,000 units, an increase of 7% year over year.

Meanwhile, some existing clients started using more of its products. Noodles & Co. in the quarter opted into the Olo Pay payments service, and Denny’s began using Olo’s guest data and marketing tools.

The increased product adoption is reflected by Olo’s ARPU, or average revenue per unit. That number increased 22% year over year to $632 for the period.

Total revenues were $52.2 million, also a 22% increase. The company posted a net loss of $13.7 million compared to $11.5 million last year. 

New locations drive revenue for Toast

More than 5,500 restaurants started using Toast in the first quarter, helping to expand its revenue by more than 50% year over year.

The strong results led the tech company to raise its revenue guidance for the year. It now expects growth of 37% and an EBITDA range of negative $10 million to positive $10 million. 

Toast said it’s getting traction from restaurants of all sizes, not just the mom-and-pops that have long been its bread and butter. For instance, it added the 57-unit pub and restaurant chain McMenamins and also signed a 300-unit fast-food chain in Q1.

More than 85,000 restaurants now use Toast, which offers POS, server tablets, online ordering, payroll services and more.

Good Times QSR chain questions the importance of speed

The 23-store Good Times Burgers & Frozen Custard chain is easing its speed-at-all-costs philosophy to give more weight to considerations such as warmth of service, prices and product quality, Ryan Zink, CEO of parent company Good Times Restaurants, told financial analysts.  The upshot, he predicted, will be an improvement of both speed and quality.

On the quality front, he said, the Good Times chain is revamping its burger-cooking procedures and product-holding policies. According to Sentieo, Zink also revealed that the concept will revamp menu boards at walk-up windows to resemble the digital listings used for its drive-thrus. The emphasis is part of an effort by the dual-brand company to upgrade the operation of existing restaurants, an effort that includes undertaking deferred maintenance projects.

The company also runs the 39-unit Bad Daddy’s Burger Bar full-service  chain. Same-store sales for the second quarter ended March 28 rose 7.6% at company-run Good Times restaurants and 4.6% chainwide for Bad Daddy’s.  

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