Portfolio Update

I made a couple moves last week after GTIM reported earnings. I thought the news from GTIM’s earnings release and conference call was positive. So I sold AA and put part of the money into more GTIM. I kept the rest of the cash I raised to maintain a slighty larger cash position given my increased concentration and general concern about the overall market.

These were among the positives I liked from the earnings release and call:

– The newest Bad Daddy’s opened in January in Aurora is off to a strong start and is currently the second highest grossing store system-wide, second only to the company’s Northglenn location, which remains the highest grossing store system-wide. I think this shows that management is really learning where best to put stores for success.

– Management said they expect their under-performing Cherry Creek location to start doing better come Spring/Summer.

– The company still expects to open 4 more Bad Daddy’s this year. 2 leases have already been signed and two more are in the final stages of negotiation. One of the new locations will have a roof-top patio, similar to their top performing Northglenn location.

– The company plans to focus more on company-owned stores in the near term. While management said part of the reason was that potential franchisees wanted to continue to see the concept succeed in more locations, I always thought it made more sense for the company to focus on company owned stores first before franchising heavily. Company owned stores will add more revenue and earnings faster than franchise locations.

– Still, the company said they do expect to have a franchise announcement to make soon.

– The company should soon have a CFO and an additional real estate development executive in place.

– While initially an afterthought to my investment thesis, the existing Good Times restaurant concept seems to be continuing to do well and management said they were exploring expansion plans for the concept.

– The company will soon begin providing financial guidance. They mentioned being at a $50 million revenue run rate by the end of 2015.  They also mentioned accelerating Bad Daddy’s growth in 2016.