Good Times Restaurants Earnings Call: Margin Pain, Early Gains

Good Times Restaurants ((GTIM)) has held its Q4 earnings call. Read on for the main highlights of the call.

Good Times Restaurants Confronts Margin Squeeze Amid Early Signs of Stabilization

Management at Good Times Restaurants struck a cautiously defensive tone on the latest earnings call, acknowledging that the quarter was dominated by sales softness, sharp cost inflation—particularly on beef and labor—and a resulting swing into slightly negative adjusted EBITDA and a small net loss. While executives emphasized operational fixes, more disciplined pricing and promotional strategies, and early sequential improvement in same-store sales heading into the new fiscal year, these initiatives have not yet fully offset the headwinds. The overarching message: pressure on margins remains significant, but there are initial indicators that performance may be stabilizing rather than deteriorating further.

Sequential Same-Store Sales Improvement at Good Times

Good Times’ core drive-thru concept remained under pressure, with same-store sales down 6.6% for the quarter. However, that performance represented a 240-basis-point sequential improvement versus the prior fiscal third quarter, suggesting the worst of the decline may be easing. Management highlighted that in the first 11 weeks of fiscal Q1, same-store sales at Good Times improved further to down 3.6% year over year, signaling a gradual recovery trend even as traffic remains challenged.

Early First Quarter Momentum at Bad Daddy’s

Bad Daddy’s Burger Bar also posted negative comps, with same-store sales down 4.6% for the quarter across 38 comparable stores. Yet, like Good Times, trends improved into the first 11 weeks of fiscal Q1, where same-store sales were down only about 1.6% versus the prior year. The sequential improvement indicates that while consumer demand is not robust, the brand may be stabilizing off a lower base, providing a slightly better starting point for the new fiscal year.

Operational Initiatives to Tighten Execution

To combat sales softness and justify a premium pricing position, management is leaning heavily on operations. The company is realigning general manager schedules to match peak business periods, expanding restaurant-level training, and rolling out a cook-to-order system for burger products. The goal is to improve service speed, product consistency, and overall guest experience. Management believes these operational upgrades will help re-earn their price premium over competitors over time and support improved productivity at the restaurant level.

Disciplined Pricing and Targeted Promotions

Good Times Restaurants is taking a conservative approach to price increases, choosing to preserve traffic and brand equity rather than push aggressive pricing. Good Times has implemented only about a 1% price increase since January 2024, and Bad Daddy’s blended price increase in the quarter was under 1%, with Q4 menu price at Bad Daddy’s up just 0.4%. Looking ahead, the company expects an average price increase of about 1.7% year over year in Q1 FY26. Instead of broad discounting, they plan to focus on tightly targeted value promotions and expand their GT Rewards loyalty program and refreshed mobile app. This strategy aims to drive frequency and traffic without damaging the brand through heavy blanket discounting.

Product Wins and Menu Strategy at Bad Daddy’s

Bad Daddy’s had several notable product successes that management believes can be leveraged for future growth. Seasonal offerings such as a giant Bavarian pretzel and an in-house chocolate cookie cheesecake performed well during fall and holiday promotions and are being evaluated for potential inclusion on the core menu. In addition, the company plans to streamline its “burger of the month” program to simplify operations and sharpen marketing messages, hoping to balance innovation with better execution in the kitchen.

G&A Leverage Provides Some Relief

General and administrative expenses offered a rare bright spot in an otherwise pressured cost structure. Combined G&A came in at $2.4 million, or 7.0% of total revenues, a 70-basis-point improvement versus the prior-year quarter. Management signaled that they expect G&A to run between 6% and 7% of revenues in fiscal 2026. This demonstrates some discipline at the corporate level and provides incremental margin support as the company battles inflation in food, labor, and operating expenses.

Top-Line Contraction Across the System

Total revenues for the quarter fell approximately 5.1% to $34.0 million, reflecting both weaker same-store sales and some sales deleverage. For the full year, revenues declined modestly by about 0.5% to $141.6 million versus a record fiscal 2024 base. While the full-year drop is relatively small, the negative momentum exiting the year raises investor concerns, making the early Q1 sequential improvement an important trend to watch.

Bad Daddy’s Sales and Margin Compression

Bad Daddy’s experienced a meaningful pullback in both sales and profitability. Total restaurant sales decreased $1.7 million to $24.0 million for the quarter, with same-store sales down 4.6%. Restaurant-level operating profit fell to around $2.4 million, or 9.9% of sales, compared with $3.4 million, or 13.2%, in the prior year. Management attributed this margin compression primarily to higher food and labor costs, compounded by sales deleverage that magnified fixed-cost burdens. The brand’s margins will likely remain under scrutiny until input costs ease and comps return closer to flat or positive territory.

Good Times Concept Weakness and Profit Drop

The Good Times brand also saw significant profitability erosion. Same-store sales fell 6.6% across 27 comparable restaurants, and restaurant-level operating profit declined by $0.4 million to $0.8 million. As a percentage of sales, profit dropped 420 basis points to 8.0%. Elevated food, labor, and other operating costs—combined with lower comp sales—drove this pressure. Management is banking on operational initiatives, modest pricing actions, and more targeted promotions to rebuild restaurant-level margins over time.

Input Cost Inflation Driven by Record Beef Prices

Cost of goods sold moved sharply higher, with management calling out record-high ground beef and broader protein inflation as key culprits. At Bad Daddy’s, food and beverage (including packaging) climbed to 31.6% of sales, up 40 basis points year over year. At Good Times, food and beverage expenses rose to 32.1% of sales, an increase of 120 basis points. These elevated input costs significantly compressed restaurant-level margins, and the company’s modest pricing actions were not enough to fully offset the inflation. The anticipated moderation in commodity costs will be critical to near-term margin recovery.

Labor and Operating Costs Continue to Climb

Labor was another major source of margin pressure. Bad Daddy’s labor expenses rose to 35.7% of sales, up 140 basis points, while Good Times labor costs increased to 35.9%, up 200 basis points year over year. Other operating costs also moved higher: Bad Daddy’s at 16.0% of sales, up 80 basis points, and Good Times at 15.0%, up 110 basis points. Management cited repairs and maintenance, utilities, third-party delivery, and technology expenses as key drivers. Further wage pressure is expected, particularly in Colorado, where higher minimum and tipped wages will raise the cost floor in 2026.

Profitability and Liquidity Under Strain

The combination of weaker sales and cost inflation pushed the company into slightly negative profitability metrics for the quarter. Adjusted EBITDA was a loss of $74,000, compared with positive $1.3 million in the prior-year Q4, underscoring the extent of the margin squeeze. Net loss to common shareholders was effectively breakeven at $3,000, versus net income of $0.2 million a year ago. On the balance sheet, the company ended the quarter with $2.6 million in cash and $2.3 million in long-term debt, providing some liquidity but leaving limited room for major missteps if operating trends do not improve.

Guidance: Cautious Optimism on Sales and Margin Recovery

Looking ahead to Q1 FY2026, management expressed cautious optimism, guiding to improved same-store sales and better adjusted EBITDA versus the latest quarter. Early Q1 results show Good Times comps at down about 3.6% and Bad Daddy’s at down around 1.6%, both better than Q4 trends, suggesting further sequential improvement. The company expects an average menu price increase of roughly 1.7% year over year in Q1, and anticipates that food and beverage costs—which were 31.6% and 32.1% of sales at Bad Daddy’s and Good Times, respectively, in Q4—should improve quarter-over-quarter as commodity prices, especially beef, begin to ease. However, management warned that labor inflation will remain a significant headwind and highlighted upcoming wage increases. They aim to keep G&A between 6% and 7% of revenues, avoid aggressive discounting, rely on targeted value promotions starting in the spring, and continue rolling out cook-to-order and loyalty enhancements. Overall, they expect Q1 to show better comps and a rebound in adjusted EBITDA from the negative $74,000 posted in Q4, though not a full recovery.

In summary, Good Times Restaurants’ latest earnings call painted a picture of a company squeezed by falling same-store sales and rising costs, particularly for beef and labor, resulting in sharply weaker margins and negative adjusted EBITDA. Yet, sequential improvements in both Good Times and Bad Daddy’s comps, coupled with tighter operating discipline, targeted pricing, and product innovation, offer some early signs that the downturn may be bottoming. Investors will be watching closely to see whether easing commodity costs and operational initiatives can outpace wage inflation and restore restaurant-level profitability over the coming quarters.