Good afternoon, ladies and gentlemen. Welcome to the Good Times Restaurants, Inc. fiscal 2017 first quarter earnings call. All participants will be in listen-only mode. [Operator Instructions] By now, everyone should have access to the company's first quarter earnings release. If not, it can be found at www.goodtimesburgers.com in the Investors section. As a reminder, a part of today's discussion will include forward-looking statements within the meaning of federal securities laws. These statements are commonly identified by words such as anticipate, continue, plan, expect, intend, should, will and other terms with similar meanings. 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 and, therefore, investors should not place undue reliance on them and the company undertakes no obligation to update these statements to reflect the events or circumstances that might arise after this call. The company refers you to their recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial conditions. Lastly, during today's call, the company will discuss non-GAAP measures, which they believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP and reconciliation to comparable GAAP measures available in our earnings release. Please note that this event is being recorded. And I would now like to turn the call over to Mr. Boyd Hoback, President and CEO of Good Times. Please go ahead, sir. Please go ahead.

Thank you, Daniel. Thanks everyone for joining us this afternoon. I'm here again today with Jim Zielke, our Chief Financial Officer, and I’ll again cover a summary of our first quarter and current developments and then Jim will provide some more details on our financial results for the quarter as well as any additional color on our guidance for the remainder of the year. Our total revenues increased 20% during the quarter to $16.5 million with comp sales increasing 2% at Bad Daddy’s and they were down a half a point at Good Times. The sale at Good Times were an improvement sequentially over the negative 2% reported two quarters ago and negative 1.2% reported last quarter and we’re better than the guidance given last quarter of a projected 1% to 2% decline. And the 2% increase of bad debt is in line with our guidance of a 1% to 2% increase this year. Through the first six weeks of our second fiscal quarter, Good Times comp sales are down 1.6% and Bad Daddy’s comp sales are up 2.3%. Good Times sales are very heavily influenced by the weather and we were actually down 3.7% in the first four weeks of the quarter, but we’ve been up to 2.5% during the last two weeks, again, reflective of the Colorado weather. For Good Times, we’re on track to have our new production line equipment and all our product improvements implemented in all the stores by the end of March and then we plan to roll a new television advertising campaign at the beginning of April, with the advertising for the whole fiscal year heavily weighted toward the last two quarters of the fiscal 2017 to support both the new product enhancements as well as new product and price point introductions. And…

Thanks, Boyd. As it relates to the Good Times brand, comp store sales, as Boyd mentioned, were down 0.5% for the quarter which again was slightly better than our guidance. We had about 2.2% year-over-year menu price increase in place, so traffic was down about 2.5% this quarter versus last year. Food and packaging costs at Good Times improved 1.1% to 32.2% versus last year, which was also an improvement by 0.2% over the previous quarter. This decrease versus last year was primarily due to the 2.2 menu price increase I spoke of and also 44% decrease in baking costs and offset by about 2% higher beef cost in last year in the first quarter. Sequentially to the previous quarter, beef costs were about 0.4% and baking costs were down another 13% versus the fourth quarter of last fiscal year. Total labor cost at Good Times increased to 34.9% from 33.1% for the quarter last year. Most of this relates to the increase in average wage rate of approximately 6% for the quarter versus last year. This was due to the very competitive labor market we continue to experience here in Colorado, as we’ve mentioned in past calls. We expect similar wage pressures in the coming year, plus the State of Colorado recently passed the 12% increase in the minimum wage that began this last January 1, which alone will increase wages by approximately 50 basis points. Restaurant-level operating profit at Good Times decreased $95,000 to $995,000 from the $1.09 million last year during the quarter. As a percent of sales, restaurant-level operating margin declined by 1.2% versus last year. As it relates to the Bad Daddy’s brand, sales increased 42% versus last year from $6.7 million to $9.5 million this year. This was due to the five new units…

Thanks, Jim. We’re very proud of the progress we’re making in a really challenging competitive environment, but we’re a bit frustrated about not yet being ahead of the curve on our new store development, but we’re getting that fixed with a really focused development in several of these new markets that I mentioned. We’re very excited about the opportunity to regain same-store sales growth at Good Times. We think we’ve got the most significant initiatives coming here that we've had in a couple years. We’re continuing to build great operating teams and we’re continuing to open Bad Daddy’s here in the right places and those are really the focus for the balance of this year. Again, appreciate your time with us today. And with that, operator, we’ll open the call for questions.

Thank you. [Operator Instructions] Our first question comes from Will Slabaugh with Stephens. Please go ahead.

Hey, thanks, guys. This is actually Drew on for Will. So, I’ve got two questions, if I may. First off, I just wanted to check on how pleased you’ll are with the most recent class of openings for Bad Daddy’s, specifically just from fiscal 2016 and how those are comparing, volumes and margin-wise, versus where you’ll anticipated going in?

Sure. So, the most recent one obviously being Fayetteville has opened up very, very strong. Jim, the average of our stores in 2016, most of which have not yet been open a year, but if we try and annualize them as best we can?

Yeah. Probably – again, you can extrapolate that just based on the restaurant weeks that we've reported in the earnings release. But it would be in the neighborhood of $2.3 million on an annualized basis. But, again, a couple of those units are clearly – we have some positive momentum over last year and then again, of course, some of them have had some honeymoon period last year. But that is kind of trying to filter all that out as well as the seasonality. So, that's what we’re looking at for fiscal 2017 for the class of 16.

Sure, thanks. And then just one more broader question in terms of general state of the industry as we head into the new year as it relates to discounting and any trends you’ll are noticing and what steps you’ll have taken to offset the discounting that we saw at the end of last year and how you’ll can continue to effectively compete with both brands?

Good question. We have not seen any abatement. And if anything, it continues at a pretty hot and heavy pace both in QSR and in full service casual theme. That's one of the reasons we’re really excited about our April rollout of the $3 and $5 price points, which we’re calling our West Coast Double and our West Coast Double Combo. And it’s a taste profile that’s very similar to the in-and-out product which we don't currently have in our menu, but it's a really great burger and it’s gone very well in tests. It is actually our third highest selling burger on the menu. But with an average check that’s approaching $7 and not really a value component at the low end, we think that mid-tier pricing is our best option to come out with a relevant price point without dumbing down the quality in anyway. In fact, it’s a very high quality product. So, on Good Times, that's really going to be our focus for the back half of the year. On Bad Daddy’s, we continue to see discounting going on at the casual theme level. We’re still maintaining good solid growth on Bad Daddy’s. We are pretty aggressive on rotating in our chef specials and specific price points. We’ve gotten also a lot more aggressive and we've hired a local store marketing coordinator. We’re doing a lot of things at the local level that we weren’t doing last year in terms of connecting with the communities, selective promotions, we’re getting a little bit more promotional in our bar on particularly the slower nights of the week. But we really are not playing a price point game on Bad Daddy’s, which is positioned at the top end with a $17 check. And as long as we’re seeing continued growth in transactions in our same-store sales, we’re going to continue down that path.

Great. Thanks, guys. And congrats on the quarter.

Our next question comes from Mark Smith with Feltl and Company. Please go ahead.

First off, can you walk us through any changes in timing of those Bad Daddy’s opening through the rest of the year?

So, Mark, again, we’ve opened the two. We have a couple more or several more under construction. Two of them will open in Q3. And those two will open in between mid-April and mid-May, both of those. Those will be the only openings in Q3. So, then the other four to five would be Q4. So, we’re really not talking about a lot of store weeks from those final four to five openings of the year. I’d 25 store weeks combined between all those four to five final units of the year. So, we’re pretty locked in the five openings this year and then the last three being – last three or four being mid to late Q4.

Okay. And then, food costs came in better than we had expected. Sounds like you’re getting some savings on bacon, can you walk us through your thoughts on COGS through the rest of year?

Yeah, Mark. I think on the Good Times side, we’ll continue to run – Q2, the one we’re in right now, is our best quarter last year, cost of sales wise. So, we ran about, I think, 31.7 last year in Q2 and we just ran 32.2 this year. So hopefully flat to last year in Q2, which would be an improvement over what we just did in Q1 with some additional purchasing efficiencies that we’ve been able to take advantage of. In the balance of the year, again, I think we will run just a little bit ahead of last year on cost of sales for Good Times. And again, most of that probably given back and then some – a little bit on the labor line. So, Good Times margins probably will be a little bit lower than they were last year. Again, a lot of that depends on getting the 3% comp store sales at the back half of the year. On the Bad Daddy’s side, kind of really similar. We had nice cost of sales improvement versus last year and we will continue to see that, the balance of fiscal 2017 being better than last year with again the wage rates in Colorado causing labor probably to be a little bit higher than last year. But I would say Bad Daddy’s would be pretty flat margins, maybe a little bit improvement when you get to the end of the year over fiscal 2016 for the full year.

And then last, can you just walk through your average weekly sales at Bad Daddy’s as we see the comp up with those average weekly sales down a bit? Maybe walk us through how much of that is new restaurants opening at maybe lower volumes versus anything else happening that point that number down a bit?

Based on the previous group of questions, again, just comparing Q1 2016 to Q1 2017, and extrapolating that based on 2% comps and knowing that the rest of the average volume declined would be from – again from the new units being slightly lower, that kind of is what kind of gets you to around $2.3 million annualized volume and keep in mind that Q1, from a seasonality perspectives, anywhere from 7% to 10% less than the average quarter. That’s what we saw last year Q1 was right at 7% less than the average weekly sales for the year. We would anticipate that to be very similar this year. So, again, keep that in mind when you're looking at the weekly sales and trying to extrapolate that for the full year.

You called that weather a little bit on Good Times. Did you see as far as the Bad Daddy’s in Colorado the same impact here in this quarter?

Yeah. It’s a little less impactful to Bad Daddy’s than it is to Good Times. We had in the first quarter, it wasn’t snow, but it was a hurricane down in North Carolina that ended up delaying Fayetteville. But in Colorado, when we get really severe weather, yeah, it is impactful, but relatively inclement weather as long as people can drive around. Bad Daddy’s is not as impacted as heavily seasonally as Good Times is. Some of that is driven by the fact that Good Times, at a lot of our stores, the only seating is in our outdoor patios and that, obviously, goes away when the weather turns nasty. It’s going to be 75° here tomorrow. So, we’re going to have a big Good Times day.

Excellent, thank you.

[Operator Instructions] Our next question comes from Jeremy Hamblin with Dougherty & Co. Please go ahead.

Hi. This is actually David Burdick on for Jeremy. Thanks for taking my questions. Just wanted to touch on those new units for the year. Just was hoping to get a little more color on where you are in discussions on the remaining leases and when those need to be signed, so they are able to open by September?

Yeah. So, we’ve got – beyond the three that are actually under construction right now, we’ve got two leases that have been signed and signed for quite a while in Charlotte and that's really not driven by signing of the leases. We’re waiting – those are new lifestyle center developments and we’re just waiting on the turnover of those. So, that really dictates the timing of those. We're probably finalizing – we’re going to be ready to execute our first lease in Atlanta and in Oklahoma next week. And one of those is – shelves is already constructed, so there's no waiting on that development. The other one also is probably 80% of the way there. So, we’re confident that that’s going to be delivered on time and we’ve got plenty of time for our permitting and licensing to get those done. And then we’ve got one other one that will be in either Nebraska or Oklahoma as well and we’re past the tenth stage on that negotiating final lease. So, given that it's mid-February, we’re coming up on mid-February. We've got plenty of time to be able to get those open this year. The challenge has been – and those two Charlotte ones are good examples where we've had those leases signed for quite a long time. And the developer has now twice set back their delivery dates just because of their construction is behind. So, as I mentioned, moving into 2018, we’re just going to be factoring that in a lot more proactively on any new developments and not counting on the initial delivery date, but really planning something later than that. But those are where we are right now. We've got the three that are under construction. One of those is in Raleigh, which will be our third store in Raleigh, and the other two are in Denver, one of which is up in Northern Colorado and one is right here in core Denver [ph].

Okay, great. Thanks. And then, I know in the past, you’ve spoken about maybe some opportunities for some labor improvements. Just wondering, can you explain where you are – where you see those opportunities, where you are in implementing those opportunities and maybe what we should expect?

Sure. So, those really largely exist on the Bad Daddy’s side. Good Times, we run really efficiently on that side and really now it's a matter of offsetting the average wage increase through the minimum wage hikes. On the labor side, on Bad Daddy’s, we continue to make some progress there. And in addition to the cost of sales line where we’ve got some purchasing efficiencies that Mark was asking about, we've been working on simplifying some of the back of the house processes as well as our production line on the Bad Daddy’s. Some of that is through – will be a little bit offset on the cost of sales side as we change some of the products we’re bringing, but we’re anticipating some continued incremental improvement on the labor line. One of the biggest impacts on the labor line as well, we carve out a lot of our training. We still have some excess labor that we carry at the stores in terms of having full five and six-man management teams in most of the stores. As we get the market built out here in Colorado and get that fully rationalized, we will see a little bit more labor improvement at the store level from that as well.

Okay, great. Thanks, guys. And best of luck.

Thanks, David.

Thank you.

We have no further questions in the Q&A line. At this point, I would now like to conclude today's conference. Thank youfor joining the presentation. You may now disconnect.