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Edited Transcript of CHUY.OQ earnings conference call or presentation 21-May-20 9:00pm GMT

·35 min read

Q1 2020 Chuy's Holdings Inc Earnings Call Austin Jul 14, 2020 (Thomson StreetEvents) -- Edited Transcript of Chuy's Holdings Inc earnings conference call or presentation Thursday, May 21, 2020 at 9:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Jon W. Howie Chuy's Holdings, Inc. - VP, CFO & Director * Steven J. Hislop Chuy's Holdings, Inc. - Chairman, CEO & President ================================================================================ Conference Call Participants ================================================================================ * Andrew Strelzik BMO Capital Markets Equity Research - Restaurants Analyst * Andrew Marc Barish Jefferies LLC, Research Division - MD and Senior Equity Research Analyst * Brian M. Vaccaro Raymond James & Associates, Inc., Research Division - VP * Christopher Thomas O'Cull Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Senior Analyst * David E. Tarantino Robert W. Baird & Co. Incorporated, Research Division - Director of Research and Senior Research Analyst * Nerses Setyan Wedbush Securities Inc., Research Division - Senior VP of Equity Research & Senior Equity Analyst * Todd Morrison Brooks CL King & Associates, Inc., Research Division - Senior VP & Senior Research Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good day, everyone, and welcome to the Chuy's Holdings First Quarter 2020 Earnings Conference Call. Today's call is being recorded. (Operator Instructions) On today's call, we have Steve Hislop, President and Chief Executive Officer; and Jon Howie, Vice President and Chief Financial Officer of Chuy's Holdings, Inc. At this time, I'll turn the conference over to Mr. Howie. Please go ahead, sir. -------------------------------------------------------------------------------- Jon W. Howie, Chuy's Holdings, Inc. - VP, CFO & Director [2] -------------------------------------------------------------------------------- Thank you, operator, and good afternoon. By now, everyone should have access to our first quarter 2020 earnings release. If not, it can be found on our website at www.chuys.com in the Investors section. Before we begin our review of formal remarks, I need to remind everyone that part of our discussions today will include forward-looking statements. These forward-looking statements are not guaranteeing 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. We refer all of you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial conditions. With that, out of the way, I'd like to turn the call over to Steve. -------------------------------------------------------------------------------- Steven J. Hislop, Chuy's Holdings, Inc. - Chairman, CEO & President [3] -------------------------------------------------------------------------------- Thank you, Jon. Good afternoon, everyone, and thank you for joining us on the call today. While we will briefly touch on our quarterly results, our main focus today will be the impact of COVID-19 on our business and the actions that we have taken and will be taken in response. Beginning with the first quarter results. We had a solid start to 2020 as we continued to build upon the success of our key initiatives, including those surrounding targeted marketing, investments in technology and off-premise sales. The positive sales trajectory was evident in the 3.3% increase in our comparable restaurant sales for the first 10 weeks of the first quarter. However, as you would imagine, we experienced a material slowdown during the last 3 weeks of March as our company, along with the rest of the country, has been impacted by the COVID-19 pandemic. Since then, we have taken several steps to ensure that we can weather the short-term crisis and emerge as a stronger company in the long run. As many of you know, to comply with both state and local mandates, our team members worked tirelessly to transition 92 of our restaurants to an efficient off-premise model. During the stay-at-home order, we have offered our guests a focused menu featuring a number of long-term favorites as well as a convenient family meal and beverage kits delivered safely to our guests through enhanced takeout and curbside pickup procedures. We have also provided delivery services through our national delivery partner, DoorDash, as well as other local delivery services in some markets. I'm pleased to say that our team's hard work has paid off as our off-premise sales have more than tripled from pre-COVID levels. And our comparable sales have improved from a negative 67%, right after this, we transitioned to an off-premise-only operating model to the low 50% range just prior to the reopening of our dining rooms in certain locations. Additionally, many of our guests opted to celebrate Cinco de Mayo and Mother's Day with us earlier in May, resulting in one of the best weekly sales results since the onset of the crisis. I believe this is a lasting testament to the appeal of our made-from-scratch offerings even when consumed at home. I'm extremely proud of what our team members have accomplished during this unprecedented time, their commitment and ability to skillfully adapt in the face of COVID-19 crisis has been nothing short of amazing. And we're trying to do our part to help ease the impact that this pandemic has had on many of them. To that end, we have been providing support through our Redfish Relief Fund that was put in place several years ago to provide assistance to employees facing financial hardship. We are also currently paying the full cost of health insurance for all of our employees, including those currently furloughed. Lastly, it is an understatement to say that we're eager to welcome our guests back in our restaurants. With a number of states recently announcing new guidelines for business operations, we have begun the process of reopening our dining rooms. We have currently reopened the dining rooms of approximately 70 Chuy's restaurants with varying degrees of capacity. As you can imagine, our goal is to reopen each restaurant in an efficient manner and also prioritize the safety and well-being of both our employees and guests. In addition to proper social distancing, we have established procedures for regularly sanitizing our restaurants, and our employees are following local guidelines with regard to glove and mask wearing. Early on, we have encountered a very positive response to reopening from our guests. I can tell you it's been great to see the renewed energy in our restaurants as we welcome back our employees and guests. In closing, we are fortunate to be facing this current challenges in a solid financial position, as Jon will discuss in a moment. We believe we are equipped to weather this current crisis. And we remain committed to ensure that our loyal guests can continue to enjoy many of our freshly prepared, flavorful Mexican-inspired offerings, either in the safe environment of our dining rooms or in the comfort of their own home. With that, I will now turn the call over to our CFO, Jon Howie, to discuss financial steps we have taken and will be taken in the near future. -------------------------------------------------------------------------------- Jon W. Howie, Chuy's Holdings, Inc. - VP, CFO & Director [4] -------------------------------------------------------------------------------- Thanks, Steve. The financial steps we have taken thus far have primarily been focused on managing our liquidity to ensure that our business is well funded for the long term. As of May 17, we had approximately $27 million in cash, which included the previously announced credit facility drawdown. In addition, we just amended our revolving credit facility to extend its maturity to April 30, 2022, and provide additional financial flexibility during the COVID-19 pandemic by relaxing financial covenants through the new maturity date. To give you some additional color on our liquidity. As of May 17, we reduced our weekly cash burn rate to approximately $200,000 as compared to $500,000 a week during April, mainly driven by the increase in our off-premise business and cost savings initiatives we announced in recent weeks. Our burn rate assumes current sales levels, spending, normalized rent as well as the delay or cancellation of nonessential planned capital expenditures, including new restaurant openings during the remainder of 2020. That being said, we have temporarily suspended our rent payments on operating leases, and we are continuing to work with our landlords to negotiate rent concessions, abatements and deferrals. We are also expecting approximately $3 million in tax refunds in conjunction with the CARES Act as a result of an administrative correction of the depreciation recovery period for qualified improvement property as well as the reinstatement of the net operating loss carryback period. Lastly, on May 5, we filed a shelf registration statement for up to $100 million to allow us to access the capital markets and further enhance our financial position, if necessary, during this uncertain time. As a reminder, given the ongoing uncertainty around the magnitude and duration of the COVID-19 pandemic, we have withdrawn our previously issued guidance for fiscal year 2020. In summary, we believe we have the financial flexibility needed to weather this crisis, and we look forward to welcoming back our furloughed employees as we are slowly returning to normal restaurant operations. -------------------------------------------------------------------------------- Steven J. Hislop, Chuy's Holdings, Inc. - Chairman, CEO & President [5] -------------------------------------------------------------------------------- Thanks, Jon. We are pleased with how our company has been able to adapt during this turbulent time and evolve our business into an off-premise business-only, all while keeping the safety and well-being of our guests and employees foremost in our minds, while still serving our Chuy's fans the food they have come to crave and expect. I can't say enough about the dedication and hard work our entire Chuy's family has shown by being able to rise to the challenges this pandemic has caused on our industry as well as each of our lives. Thank you to all of you. With that, we are happy to answer any questions. Thank you. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Our first questions come from the line of Nick Setyan of Wedbush. -------------------------------------------------------------------------------- Nerses Setyan, Wedbush Securities Inc., Research Division - Senior VP of Equity Research & Senior Equity Analyst [2] -------------------------------------------------------------------------------- It's great to see the accelerating sales trends week to week. A quick clarification. Of the 9 units that were closed, are any of those units now open? -------------------------------------------------------------------------------- Steven J. Hislop, Chuy's Holdings, Inc. - Chairman, CEO & President [3] -------------------------------------------------------------------------------- No, they're not. We're going to continue to get all the ones that have been and doing to-go for the last 2 months. Once we get those opened, we'll look at reopening and looking at the feasibility of those restaurants. -------------------------------------------------------------------------------- Nerses Setyan, Wedbush Securities Inc., Research Division - Senior VP of Equity Research & Senior Equity Analyst [4] -------------------------------------------------------------------------------- Got it. And could you maybe talk about your experience as these dining rooms are opening relative to the capacity constraint? Are you seeing sort of the Friday night, Saturday night crowds at capacity? And how the shoulder periods are doing weekdays, lunch versus dinner? Anything would be very helpful. -------------------------------------------------------------------------------- Steven J. Hislop, Chuy's Holdings, Inc. - Chairman, CEO & President [5] -------------------------------------------------------------------------------- Yes. Again, it's so early. We're basically maybe 10 -- 8 to 10 days into this in a lot of the markets. One thing that I'm really excited about is how fast our guys mobilized to get in such a short time, 70 of these restaurants -- about 70 of these restaurants open in time. But we haven't -- it would be too early to say -- give you a whole bunch of color because a lot of the restaurants in, like, example, in Austin, it's 25%; in Tennessee, it's 50%. And it's going by the local laws in the different markets. But it would be too early really to even -- to comment on that. -------------------------------------------------------------------------------- Nerses Setyan, Wedbush Securities Inc., Research Division - Senior VP of Equity Research & Senior Equity Analyst [6] -------------------------------------------------------------------------------- Okay. Fair enough. And then, Jon, just of the $48,500 in terms of the weekly sales for the week ending 5/17, would it be possible for you to tell us what portion of that is dine-in versus off-premise? -------------------------------------------------------------------------------- Jon W. Howie, Chuy's Holdings, Inc. - VP, CFO & Director [7] -------------------------------------------------------------------------------- Well, I think what we had there, that is mainly just off-premise. Because as of -- if you look through... -------------------------------------------------------------------------------- Steven J. Hislop, Chuy's Holdings, Inc. - Chairman, CEO & President [8] -------------------------------------------------------------------------------- I think that's all off-premise. -------------------------------------------------------------------------------- Jon W. Howie, Chuy's Holdings, Inc. - VP, CFO & Director [9] -------------------------------------------------------------------------------- No, no. A little bit. We have a couple in that that... -------------------------------------------------------------------------------- Steven J. Hislop, Chuy's Holdings, Inc. - Chairman, CEO & President [10] -------------------------------------------------------------------------------- We've got a couple in that. But for the most part, I would say 90% of that is off-premise. -------------------------------------------------------------------------------- Jon W. Howie, Chuy's Holdings, Inc. - VP, CFO & Director [11] -------------------------------------------------------------------------------- Yes, yes. I agree. -------------------------------------------------------------------------------- Operator [12] -------------------------------------------------------------------------------- Our next questions come from the line of Chris O'Cull of Stifel. -------------------------------------------------------------------------------- Christopher Thomas O'Cull, Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Senior Analyst [13] -------------------------------------------------------------------------------- Jon, I know the company had to furlough a large portion of its hourly workforce during the period when dine-in -- when dining rooms were closed. But now that dining rooms are reopening and you're rehiring people, what kind of flow-through rate should we expect from the reopened dining room sales? -------------------------------------------------------------------------------- Jon W. Howie, Chuy's Holdings, Inc. - VP, CFO & Director [14] -------------------------------------------------------------------------------- Well, Chris, again, I think it's too early because there's a lot of moving pieces until we can get some trends. Because, as you know, when we turned it into it to-go only kind of operation, we cut a lot of services, we turned off all the lights in the dining rooms, we did a lot of things, right? And so now it's really trying to dial in the right amount of labor for the front of the house as we bring in 25% capacity or 50% capacity, and then slowly turn on those services. So at this point, I really -- I understand your question, but it's really hard to give you an idea of what that is yet until we can get some better trends. -------------------------------------------------------------------------------- Steven J. Hislop, Chuy's Holdings, Inc. - Chairman, CEO & President [15] -------------------------------------------------------------------------------- Yes. And as we're moving just in the 25%, 50%, Chris, we're bringing back some of the furloughed that would be coming back. As we move down the road, you will have some training impact on some labor as we move forward because, specifically, in the back of the house, in Texas, they kept construction. A lot of our kitchen fellows are working in construction right now, so we will have some start-up on some employee hiring as we move forward a little bit. -------------------------------------------------------------------------------- Christopher Thomas O'Cull, Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Senior Analyst [16] -------------------------------------------------------------------------------- Okay. And then can you -- Jon, can you guys describe the margin for takeout sales compared to dine-in sales? How do they compare? -------------------------------------------------------------------------------- Jon W. Howie, Chuy's Holdings, Inc. - VP, CFO & Director [17] -------------------------------------------------------------------------------- As far as just the -- as far as the margin, they're almost comparable now. Because what we've done is, as far as the delivery as well, we've increased the prices on those like we said we were going to, for the most part. So that it would be kind of cash neutral going out the back door, or margin neutral. And so for the most part, we've done that on the delivery. On the pickup, what we're finding is that it's a little higher check average given some of our kits and then also our margarita kits as well. So that's -- it's not taking up all the 18%, but we are seeing in the high single digits as far as bar mix, which we have been very pleased about. And then for the stores that we have opened up, that bar mix is actually coming back quite nicely. So the to-go, the margins are a little less, but I would say, probably not more than 100 basis points less. -------------------------------------------------------------------------------- Operator [18] -------------------------------------------------------------------------------- Our next questions come from the line of Andrew Strelzik of BMO Capital Markets. -------------------------------------------------------------------------------- Andrew Strelzik, BMO Capital Markets Equity Research - Restaurants Analyst [19] -------------------------------------------------------------------------------- My first question, can you talk a little bit about what the customer experience is like in the stores right now where you've reopened the dining rooms, some of the steps that you've taken? And how are you managing waits? -------------------------------------------------------------------------------- Steven J. Hislop, Chuy's Holdings, Inc. - Chairman, CEO & President [20] -------------------------------------------------------------------------------- Managing waits? Actually, I would have stopped there. First of all, right now, we have everybody usually waiting. If we're on a wait, they are waiting in their cars because, obviously, the social distancing, our vestibules wouldn't allow anything else. Believe it or not, they are pretty much self-managing that themselves, to be straight up and honest with you, as consumers are checking the wait, and then they're going back out to their cars. But as far as our operations are going, again, we're opening 25%. The standards that we've always had are kept. Obviously, the safetyness is the #1 thing, making sure we're sanitizing everything, making sure we have our masks and our gloves and making sure we have sanitizing solutions in all the areas that are expected for us to have them. But we have done very, very well with that. Part of the things that are allowing us to do it very, very well, especially on a ramp-up as we continue to do is we're running a very slimmed down menu at this current time, which is very similar to the menu that we used during all our to-go and delivery services. So that's what's in our restaurants kind of right now, so our execution is very, very good. We're pretty excited about the operations and how well they have been able to execute, and we're using that technology to make sure we're working on the waits and the close times just as we're going. But I'm very, very pleased with the execution inside the 4 walls, just as I was really pleased with the execution and the increase in our to-go volumes throughout the last 8 weeks. -------------------------------------------------------------------------------- Andrew Strelzik, BMO Capital Markets Equity Research - Restaurants Analyst [21] -------------------------------------------------------------------------------- Okay. Great. That's helpful. And then as over time, you've grown into newer states versus kind of your home base, can you talk about if there's any regional differences worth highlighting either in the legacy markets or the newer markets? How kind of sales have varied across the system? -------------------------------------------------------------------------------- Jon W. Howie, Chuy's Holdings, Inc. - VP, CFO & Director [22] -------------------------------------------------------------------------------- I mean, obviously, just like when we're open, I mean, Texas obviously has the stronger AUVs. But really no significant trend... -------------------------------------------------------------------------------- Steven J. Hislop, Chuy's Holdings, Inc. - Chairman, CEO & President [23] -------------------------------------------------------------------------------- No, I think, they're trying to have a similar -- the ones that -- and then Nashville is very strong also, very similar to Texas, but it has been in all categories before and after this thing. So I think it's -- they've acted like we're expecting them to, and they haven't traditionally in the past. -------------------------------------------------------------------------------- Andrew Strelzik, BMO Capital Markets Equity Research - Restaurants Analyst [24] -------------------------------------------------------------------------------- And then my last one, how sticky do you think the off-premise business will be? And is there anything you're thinking of doing in the stores or operationally to support what could be maybe a higher off-premise mix over time? -------------------------------------------------------------------------------- Steven J. Hislop, Chuy's Holdings, Inc. - Chairman, CEO & President [25] -------------------------------------------------------------------------------- Sure. I mean, I think if we go back to even a year ago, while we were on this call, probably, we talked about off-premise. We were in the 14% to 15% to-go premise anyway, and we were looking at a big initiative throughout the rest of the year also with catering last year, that we were looking at to-go areas in all our [restos], all our stores to enhance those. I think they are going to definitely be enhanced as we move forward with what's happened with this pandemic. And I don't think it's all going to go away. I don't expect it to be 45%, 50%, but I definitely expect it to be well north of where we were, which is in that 14% range. So we're going to continue with the thought process of -- obviously, we've learned a ton of stuff just to-go only on how to really set it up and how to stage it, and we're going to continue that within the parking lots and in our store-level operations also. But it's here to stay. As the industry is looking right now, convenience was always a big plus in quick casual. Convenience is going to be a big plus, it's going to be a major uptick in just casual also. Convenience of the guest, whether it be how they do to-go, how we do delivery, but also how we do the checks and do we have handhelds and all that stuff is going to become more and more important as we move down the road. -------------------------------------------------------------------------------- Operator [26] -------------------------------------------------------------------------------- Our next questions come from the line of David Tarantino of Baird. -------------------------------------------------------------------------------- David E. Tarantino, Robert W. Baird & Co. Incorporated, Research Division - Director of Research and Senior Research Analyst [27] -------------------------------------------------------------------------------- I hope you both are doing well. I had a couple of questions. The first one relates to your plan to drive traffic as the dining rooms reopen. I guess, can you talk a little bit about kind of what the marketing plan or what you're doing to try to drive awareness and traffic as things reopen? -------------------------------------------------------------------------------- Steven J. Hislop, Chuy's Holdings, Inc. - Chairman, CEO & President [28] -------------------------------------------------------------------------------- Sure. The basic thing. One thing that's great for us is we're very -- always been a strong local store marketing company on how we do things from a grassroots emphasis. And obviously, that's what we've been doing the last 2 months just doing to-go. And you're going to see us continue that probably through the rest of this quarter, into the third as we find out how big our areas are going to be allowed to get inside our dining rooms, whether it's 50%, do they go to a 75%. And we're also doing organic as far as social media, talking about our special days, whether it be Cinco or we have Tequila Day coming up here in the next month and those type of things. But as we get back in, you'll see us go back in probably, if things -- the trends go similar, you will see us get back into the marketing plan that we executed more like 2019. And you will see us definitely focus on social, digital as we were in all of 2019, that was having a great results for us, I believe. And we'll do that. You will see us maybe change some messages a tiny bit on some of our postings and some of our digital and social spend. And you will see us definitely talking about the convenience of what we do. Obviously, the to-gos area on the convenience side. You will talk -- you will definitely hear us talk about value within our menu, which is going to be so important as you move through with all the things that's happened to our communities over the last 2 months. And you are also going to see us talk a lot about safety and then how we take care of our employees and how we take care of our guests. But you will see probably in the fourth quarter very similar to the plans that we executed in all 2019. -------------------------------------------------------------------------------- David E. Tarantino, Robert W. Baird & Co. Incorporated, Research Division - Director of Research and Senior Research Analyst [29] -------------------------------------------------------------------------------- Got it. And then I guess the second question I have is a bit more qualitative, and it relates to some of the actions you've taken to reduce costs, which seem necessary at this point, but -- and furloughing a lot of employees. I'm just wondering what your thoughts are on the impacts that it will have, either on the culture of the company or your ability to pull them back in once you are able to. And I guess, overall, how much that disruption might affect the outlook in the next year or so? -------------------------------------------------------------------------------- Steven J. Hislop, Chuy's Holdings, Inc. - Chairman, CEO & President [30] -------------------------------------------------------------------------------- Yes. One thing, and you know about us a little bit, we are in constant contact with all our hourly furloughed, and specifically, all -- anybody in management, and specifically, home office. We're talking with them. Like Jon mentioned to you earlier that we've had pay and benefits for all those people throughout this time. But we are in constant contact with them talking about it. And I think we've done and communicated the right things. And what our role is, is to be safe and cautious and to make sure we come out of this at the end of it better than when we even went into it and offer them and our group and our company a long-term strategy for success, not only for the company but for them personally and professionally also. So we're in constant contact. We're excited about how we dealt with this in a very personable way with all our employees. And we're getting most of our hourlies. As we said, we just started on the hourlies 2 weeks ago, bringing them back. We're pretty pleased how they've reacted, and then have all come back. And the same thing is in the home office. We haven't really started bringing folks back from a home office perspective yet. We'll continue to look at that and see how the sales continue to ramp up and the level of work. But we are looking forward to getting our folks back working and just add-on and constantly evolve the culture as we move forward. -------------------------------------------------------------------------------- David E. Tarantino, Robert W. Baird & Co. Incorporated, Research Division - Director of Research and Senior Research Analyst [31] -------------------------------------------------------------------------------- Great. And then the last question I had is what are the sequence of events or the factors that you're looking at that would dictate when you would start putting capital to work and growing units again? I guess what should we be looking for to gauge when you might be ready to resume growth? -------------------------------------------------------------------------------- Steven J. Hislop, Chuy's Holdings, Inc. - Chairman, CEO & President [32] -------------------------------------------------------------------------------- Yes. As it is, again, I'd like to see -- I wish I had a real, real crystal ball that would tell me everything that's going to happen and no one is going to go backwards or any of that type of stuff. But as we move forward, obviously, I think we are comfortable with our cash position, as Jon mentioned to you earlier, whether -- with our burn rate and so forth. But as we go through, you'll probably see us where we have a couple stores that were pretty close to being complete and to be opened in 2000 (sic) [2020] that we put a halt to. You'll see us probably open those 2 to 3, possibly 4, depending on where it is in 2021, if everything goes as planned. And you'll probably see it the follow year to be very, very similar to that over the next 2 years is what I would say. -------------------------------------------------------------------------------- Operator [33] -------------------------------------------------------------------------------- (Operator Instructions) Our next questions come from the line of Andy Barish of Jefferies. -------------------------------------------------------------------------------- Andrew Marc Barish, Jefferies LLC, Research Division - MD and Senior Equity Research Analyst [34] -------------------------------------------------------------------------------- Just a couple of quick follow-up conversations on the to-go and delivery mix. Has there been any significant change in the last 8 weeks or so with the ramp-up of off-premise? -------------------------------------------------------------------------------- Jon W. Howie, Chuy's Holdings, Inc. - VP, CFO & Director [35] -------------------------------------------------------------------------------- Yes. I mean what we've seen, which we have been trying as a goal, is to increase our digital sales. And what we've seen is our digital sales has far exceeded obviously, delivery and the call-in. -------------------------------------------------------------------------------- Steven J. Hislop, Chuy's Holdings, Inc. - Chairman, CEO & President [36] -------------------------------------------------------------------------------- And it didn't start that way so that was... -------------------------------------------------------------------------------- Jon W. Howie, Chuy's Holdings, Inc. - VP, CFO & Director [37] -------------------------------------------------------------------------------- No, it didn't. So I mean it surpassed that. So our digital sales are probably about 45% right now. Our delivery -- or digital -- our delivery is still around 20%. So it stayed -- it's increased, but it stayed -- as a percentage of total off-premise has stayed somewhat consistent at about 20%. -------------------------------------------------------------------------------- Andrew Marc Barish, Jefferies LLC, Research Division - MD and Senior Equity Research Analyst [38] -------------------------------------------------------------------------------- Okay. And then on the mix of off-premise, you gave us the alcohol number. How much are other items like the family meals and things like that, just to kind of get a sense of what the core menu is driving right now? -------------------------------------------------------------------------------- Jon W. Howie, Chuy's Holdings, Inc. - VP, CFO & Director [39] -------------------------------------------------------------------------------- I don't have that mix report with me, Andy. But I would tell you that it's pretty strong in those family kits. -------------------------------------------------------------------------------- Steven J. Hislop, Chuy's Holdings, Inc. - Chairman, CEO & President [40] -------------------------------------------------------------------------------- Yes, family kits. -------------------------------------------------------------------------------- Jon W. Howie, Chuy's Holdings, Inc. - VP, CFO & Director [41] -------------------------------------------------------------------------------- I would beg to say it's in the 20s% to 30%. -------------------------------------------------------------------------------- Steven J. Hislop, Chuy's Holdings, Inc. - Chairman, CEO & President [42] -------------------------------------------------------------------------------- Yes, it's still not, obviously, the majority. Obviously, the core menu is still driving it. But those family meals and the convenience of those are doing very, very well. And like the margarita kits has done very, very well. -------------------------------------------------------------------------------- Jon W. Howie, Chuy's Holdings, Inc. - VP, CFO & Director [43] -------------------------------------------------------------------------------- I can follow-up with you, Andy, on that. -------------------------------------------------------------------------------- Andrew Marc Barish, Jefferies LLC, Research Division - MD and Senior Equity Research Analyst [44] -------------------------------------------------------------------------------- Okay, no problem. And then do you have a sense you can share with us on the next 20 stores or so as you go from the current openings to get back up to 92? -------------------------------------------------------------------------------- Steven J. Hislop, Chuy's Holdings, Inc. - Chairman, CEO & President [45] -------------------------------------------------------------------------------- Yes. I will tell you, by the end of this month, we'll probably be open in all of them, except 5 that I still have a to-be determined on the last 5 based on the local municipalities. -------------------------------------------------------------------------------- Jon W. Howie, Chuy's Holdings, Inc. - VP, CFO & Director [46] -------------------------------------------------------------------------------- That's Colorado. -------------------------------------------------------------------------------- Steven J. Hislop, Chuy's Holdings, Inc. - Chairman, CEO & President [47] -------------------------------------------------------------------------------- Yes. But pretty much by the end of this month. -------------------------------------------------------------------------------- Operator [48] -------------------------------------------------------------------------------- Our next questions come from the line of Brian Vaccaro of Raymond James. -------------------------------------------------------------------------------- Brian M. Vaccaro, Raymond James & Associates, Inc., Research Division - VP [49] -------------------------------------------------------------------------------- I wanted to circle back to the family meal kits. I'm personally a big fan. But I'm curious if you think those have attracted a new customer or occasion even in some ways during this period. And as you gradually reopen the dining rooms, are you planning on keeping those on the menu? -------------------------------------------------------------------------------- Steven J. Hislop, Chuy's Holdings, Inc. - Chairman, CEO & President [50] -------------------------------------------------------------------------------- Absolutely. Absolutely. And we're going to keep the alcohol kits on the menu, too, because I do believe that's the new way of the markets right now. So we're going to keep all those and have those as a part of our to-go and delivery options, except -- not the alcohol, obviously. That has to be a pickup. But yes, it's definitely going to be part as we move forward. And also, as far as new customer, maybe a little bit, but again, time will bear that out. One thing that it is, is we definitely in this value-conscious world that we're obviously in now and how it's going to continue definitely throughout the rest of this year, there is a little -- not a huge discount, but they're very, very well priced. Very, very well-priced in all areas. But again, my plan is to keep that price point on all those things as we move forward through the rest of the year, really looking at it at the time frame of our February price increase that we usually do every year. So we're going to be a little bit of -- even more value-conscious as we move forward through the rest of this year. -------------------------------------------------------------------------------- Brian M. Vaccaro, Raymond James & Associates, Inc., Research Division - VP [51] -------------------------------------------------------------------------------- All right. That's great. And then I know it's very early. But I wanted to circle back and ask about the recent sales trends. I guess the down 45% in the week ended 5/17. Could you break that down or help us frame kind of what the units that reopened the dining rooms look like versus those that were still off-premise only? And also I wanted to clarify, were those 50 units that you mentioned that were partially reopened, were they reopened for the entire week, all 7 days? -------------------------------------------------------------------------------- Jon W. Howie, Chuy's Holdings, Inc. - VP, CFO & Director [52] -------------------------------------------------------------------------------- No. So if you are looking at that, Brian, probably the average units, if you take the total that start of the week and the end of the week, the total units opened were about 35 stores. And I do have that mix that Nick asked earlier. So of that $48,495 or $48,500, about 34% of that figure was dine-in sales. So that's anomaly, but it's pretty close to 35 average stores and 34% dine-in, what makes that up. Yes, and what we're seeing -- -------------------------------------------------------------------------------- Steven J. Hislop, Chuy's Holdings, Inc. - Chairman, CEO & President [53] -------------------------------------------------------------------------------- And there, obviously, you don't open everything up on 1 day. They've all been opened at different days of the week, and they have all been kind of -- so a couple of them have been open a couple days of the week, one was open the full week. So it's all shuffled in a little bit. -------------------------------------------------------------------------------- Brian M. Vaccaro, Raymond James & Associates, Inc., Research Division - VP [54] -------------------------------------------------------------------------------- Okay, that's great. And then just last one, Jon, wanted to circle back on the weekly burn rate. I just wanted to clarify that. $200,000, that assumes you are paying full rent, but currently, you're not paying rent, if I heard that correctly. And then also, what does it embed in terms of a G&A run rate? -------------------------------------------------------------------------------- Jon W. Howie, Chuy's Holdings, Inc. - VP, CFO & Director [55] -------------------------------------------------------------------------------- Well, right now, it's basically our cash G&A burn rate, not a GAAP. But that G&A burn rate runs right around $1.1 million to $1.2 million right now period, so a 4-week period. So let me see, it's -- yes, so $300,000... -------------------------------------------------------------------------------- Steven J. Hislop, Chuy's Holdings, Inc. - Chairman, CEO & President [56] -------------------------------------------------------------------------------- $250,000. -------------------------------------------------------------------------------- Jon W. Howie, Chuy's Holdings, Inc. - VP, CFO & Director [57] -------------------------------------------------------------------------------- Yes, $250,000 -------------------------------------------------------------------------------- Brian M. Vaccaro, Raymond James & Associates, Inc., Research Division - VP [58] -------------------------------------------------------------------------------- Yes, okay. And if I was interpreting your rent comments correctly, it's fully burdened with rent. But you're deferring it at the moment? -------------------------------------------------------------------------------- Jon W. Howie, Chuy's Holdings, Inc. - VP, CFO & Director [59] -------------------------------------------------------------------------------- Yes, it's normalized rent because as we obviously defer some of those payments, we will have some extra payments as we go in the future into 2021, where some we've negotiated deferring those payments into '21. But on a normalized rent basis, that's what that's based on. -------------------------------------------------------------------------------- Operator [60] -------------------------------------------------------------------------------- (Operator Instructions) Our next questions come from the line of Todd Brooks of CL King & Associates. -------------------------------------------------------------------------------- Todd Morrison Brooks, CL King & Associates, Inc., Research Division - Senior VP & Senior Research Analyst [61] -------------------------------------------------------------------------------- A couple of questions. One, on the whole not paying rent and negotiating with the landlords, I guess, where do we stand on how much of the base you reworked maybe with landlords? And what has been the top ask? Has it been for abatement or has it been for more of a change to a percentage sales type of model for the lease? What's your #1 goal when you're talking to these landlords? -------------------------------------------------------------------------------- Steven J. Hislop, Chuy's Holdings, Inc. - Chairman, CEO & President [62] -------------------------------------------------------------------------------- It's really -- it's all of them. Jon, [I'm happy to start]. Obviously, we talked about everything on the -- under the sun on all that. But our priorities at the beginning was an April, May, June abatement. And to be honest with you, we are pretty pleased on at least partial abatements -- on full abatements, partial abatements on about 15% of them. So we are kind of pleased with that. Then the #2 priority was really to... -------------------------------------------------------------------------------- Jon W. Howie, Chuy's Holdings, Inc. - VP, CFO & Director [63] -------------------------------------------------------------------------------- Defer. -------------------------------------------------------------------------------- Steven J. Hislop, Chuy's Holdings, Inc. - Chairman, CEO & President [64] -------------------------------------------------------------------------------- Defer them. And that's probably a good number of those where you're starting to pay back, some a little bit in '21, a lot of it in '22 and beyond. So that's been -- and there's been a couple that we definitely have talked about percentage rent and so forth on. But overall, it's been a little bit of all, but the main two -- the main one is deferment to later years. -------------------------------------------------------------------------------- Todd Morrison Brooks, CL King & Associates, Inc., Research Division - Senior VP & Senior Research Analyst [65] -------------------------------------------------------------------------------- Okay, great. And the second question, just coming back to capacity. I know with Texas being at 25%, I guess, early openings and just what you've seen traffic-wise. What do you think you are missing with 25% capacity? And do you think that going to a 50% capacity in the Texas market will allow you to capture all the demand that you're seeing at the stores in that market now? -------------------------------------------------------------------------------- Steven J. Hislop, Chuy's Holdings, Inc. - Chairman, CEO & President [66] -------------------------------------------------------------------------------- I don't think 50% you're going to capture all the demand. But at 25%, you're not capturing hardly any. What you're doing there is really getting ready to get to 50%, because opening our restaurants at 25% long term, company-wide -- not saying store-specific, company-wide is really -- might be a little bit of a cash drain on you when you're trying to do that. So our goal is always to get ready to be set up, test some stores at 25% to make sure that we're ready to go when it actually goes 50%. An example in Texas, this 50% -- is going to go 50% tomorrow. So that's why we have a few that we kind of opened up and got ready for, brought some people back, did a little extra training on the menu to really get up. But the key for us was, at 50%, we feel we can have some good sales that we can have some leverage with. -------------------------------------------------------------------------------- Jon W. Howie, Chuy's Holdings, Inc. - VP, CFO & Director [67] -------------------------------------------------------------------------------- And the other thing, Todd, to remember, one of our advantages has always been our patios. Not extreme advantage when it's raining. But during this time, for the most part, most of these municipalities don't include that in your capacity limitations. They just want social distancing out there. So we've been able to spread those tables up and fill our patios up beyond those capacity limits. So that's been helpful in a lot of areas to help combat the 25% or 50%. -------------------------------------------------------------------------------- Operator [68] -------------------------------------------------------------------------------- Our next questions come from the line of Andy Barish of Jefferies. -------------------------------------------------------------------------------- Andrew Marc Barish, Jefferies LLC, Research Division - MD and Senior Equity Research Analyst [69] -------------------------------------------------------------------------------- Just circling back. I know it's early and this is still evolving, but the operating chops you guys have shown during this process, are there learnings kind of coming out of the last 8 weeks on staffing and efficiencies and running obviously a very, very lean back of the house and front of the house that maybe you can apply going forward with restarts and things like that? -------------------------------------------------------------------------------- Steven J. Hislop, Chuy's Holdings, Inc. - Chairman, CEO & President [70] -------------------------------------------------------------------------------- Absolutely, Andy. We obviously became very, very quick, very good at being able to do to-go, making the proper adjustments to our menu mix and our menu itself to where we could execute to-go and these basically kits on a quick basis. We're going to take all those learnings as we go back into our reopening and how our menu might evolve through the rest of this year, but specifically more important into next year. And so also our to-go service levels and also service steps also will be amended as we move forward and all that stuff. And obviously, part of that is you're really looking at all your P&L. Like our guys are really good at looking at cash right now. Really good at looking at cash. So obviously, there's going to be best practices that we'll start, and really -- we're talking about kilowatt hours and all that type of stuff now. So it's a lot of old things, but we're expecting to come out of this better than we went into it. -------------------------------------------------------------------------------- Operator [71] -------------------------------------------------------------------------------- There are no further questions at this time. I will now hand the call back over to management for any closing remarks. -------------------------------------------------------------------------------- Steven J. Hislop, Chuy's Holdings, Inc. - Chairman, CEO & President [72] -------------------------------------------------------------------------------- Okay, got it. I hope everybody is safe out there. I hope everybody is doing well. Thanks for asking about us. We're both doing well, and our group is doing pretty, pretty well. But thank you so much. Jon and I appreciate your continued interest in Chuy's, and we will always be available to answer any and all questions. Again, thank you, and have a good evening. -------------------------------------------------------------------------------- Operator [73] -------------------------------------------------------------------------------- This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a great evening.