Welcome to Chopping It Up.
I'm your host, Mike Allen, Senior Restaurant and food Service analyst at Bloomberg Intelligence. Our research and that of bi's five hundred analysts around the globe can be found exclusively on the Bloomberg terminal. Today, we're joined by Joe Hummel, the CEO of Twin Peaks Restaurants. Hey, Joe, sorry we didn't have a chance to catch up at ICR, but this will have to do.
This works, This works just fine.
Yeah, and I'm sure you've been a very busy man. Fat brand spin off of Twin Peaks and Smoky Bones is less than a week away.
That's right. Our record date is the twenty seventh of January.
So and shares will start trading on twenty ninth. I think I saw, yeah, twenty ninth. Yeah, NASDA TWNP is their symbol. All right, good stuff. So what initially you've been there for a little while, But what initially drew you to Twin Peaks.
Well, I had about a two decade career at Hooters. I worked for Hooters of America and this new brand came up and was stealing some share, and they're a pretty cool brand, and I was intrigued by him, and so twenty eleven, myself and a couple of my partners at Hooters left and bought a six state development agreement in twenty eleven and there was fourteen stores, So we did take a leap of faith. We felt in our gut it was a great brand that could really grow,
and we left Hooters. It was probably four hundred and thirty units, just under a billion in sales, and so we jumped in and so we I think our first door we be in July of twenty twelve, which was number twenty two in buck Ed, Georgia. So we've been blessed to see the brand from twenty eleven till today. So I've been a part of some former fashion of hotter At units being opened and look forward to the next hundred. It's going to be great.
Yeah, you made a could bet back then.
I did. I should have been in Vegas that day.
Right, throw the dice right early retirement. I would know what to do with myself as retired. For you couldn't retire you're way too young. What's the day parts split? And what percentage of your sales are from alcohol?
Food? Is fifty two percent liquor, beer, wines, forty eight day part, approximately thirty eight percent lunch the rest of the week dinner. Now that dinner portion eleven of it's late night. So nice, nice spread of the three segments. But you know we're running about a sixty forty dinner to lunch, but dinner carries further out.
One hundred and seventy two restaurants at the end of three Q seventy four US franchise, seven international franchise, thirty three US company owned, and there's fifty eight company owned Smoky Bones. Per your release, you expect to convert about half of the Smoky Bones restaurants. A twin peaks how much well the conversion's costs versus building a new unit from scratch.
Yeah, you know, when I look at our units, out of one hundred and fourteen, twin peaks, ninety of them or second generation. So myself, our corporate development, and our franchise partners are used to doing second generation. We have some great ground ups. So we you know, we saw that as an opportunity when Fat Brands bought Smokey Bones is a real estate play. We ran it through our real estate platform and about thirty of them made very scored very well for Twin Peaks. So we did our
first one in Lakeland, Florida. It was doing about three million for Smokey Bones. We opened it in late September. The sales are run rate and at about eight point three million, so quite a bit of a difference. We put about four point two million in it between leasehold improvements in FF and E some good syentergies we were able to pull out of the building. You know, you get a lot of good things out of second generation.
Every second generation building gives you something different. But the store itself is great footprint, really doing well, great addition to the central Florida market. And we're finalizing our second conversion in brandon be sometime in mid February. Okay, cool, Yeah, that was a great strategy for Cava. How big are the restaurants They average about seven thousand to eight thousand
square feet. I have units anywhere from sixty five hundred to fourteen thousand in the in our Twin Peaks portfolio, so seven you know, our sweet Spot prototypes about eighty two hundred, so it works just fine. It's a nice thing about second generation. You can have all kinds of different footprints and floor plans. They all have the same DNA, but they have different you know, lodge effects. So it's
pretty cool. You get your own local lodge. Lakeland will be different than Brandon, and Brandon will be different than Cassemi, and you know, they all have their own special you know, local lips about it. That's cool.
Is it changed strong in Florida? And are there any other states where it's strong geographically?
Virginia for Smoking Bones, that is, for twin Peaks, Well, we're in Dallas for starters. Dallas is quite strong. Texas we have about thirty four stores. Florida we have fifteen, and we're still growing quite a bit. Those are probably the most concentrated. Arizona does really well. You know, the brand's so portable. We see the fanfare whether it's Dallas, Miami, Lakeland, Florida, Columbus, Columbus, Ohio,
Louisville still has that same fact, same volume. We don't see a volume letof because of different regions warm weather, cold weather. And we have seven down of Mexico. Okay, Cole, what's the right number of company owned restaurants for you? We're in a seventy thirty mix between franchise and corporate. We think our sweet spot seventy five to twenty five, which is very doable. We have a lot of good
franchise partners. We have about one hundred development franchise commitments from our franchise partners already, so very doable.
Number okay cool, excluding excluding the Smokey Bones conversions. How many units do you expect to open in twenty five and are you having any issues finding new sites?
Well, that was one of the reasons we picked up the Smoky Bones. Control in those sites gave a nice short term path. So with the Smoky Bones because we'll do probably five or six this year conversions between ourselves and our franchisees. We looked to do two to four corporate stores ten to twelve franchise stores for this year. Last year we got nine open total. For me, it was a little slow last year, so we looked for
hopefully things picked up a little bit with that. You know, a lot of staffing issues and with the perameters and inspectors and just being short staffed.
Gosha, what percentage of new units are opened by existing franchisees coming up?
Uh?
Yeah, Well, ten to twelve will be franchisees. Two to four will be corporate existing or from out of the system.
That's that'll be existing, that's in the existing system. So we still you know, we have a friend development team that's selling new territories. They're actually out in California doing our real estate tour right now with us some prospects. We just signed somebody out up for the Fargo, South Dakota, Montana market. We have another group looking out of Canada. So franchise development side active on finding new groups and then the existing groups are actively built.
Okay, great new stores. Do they have big honeymoon periods or they tend.
To build to your target AUV? You know, it depends. It depends on if you're in a mature market. I've had stores even here in Dallas that start out at five five six, they're at nine million now. So we have dural MP in last year it's run rating at fourteen million. And then you have some newer markets where the development's coming and so you get there before the development and the mature markets just sell right into their
average AUV quickly. So all depends on the market. We see a big fanfare when we open a new store in the DMA by itself, because it's just they haven't seen anything like it.
Okay, And I noticed in the in your disclosures, current AAV is about five two to five three million versus the target of six point five for new builds. So what's the difference there? Are you building bigger units, are you modeling strong same sort of sales growth from the existing sore base and that we'll get to that six ' five or is there something else that kind of explained that gap?
Yeah, the difference is you have some legacy stores. They are lower avs. You know, they started off in the early day Z five six oh seven. When we started building eleven, we started exploring with some bigger buildings, bigger footprints, two bars, patios. In sixteen seventeen we really started finding
tuning what we thought our guests needed and wanted. With our design team, we employed our real estate strategy platform E Site and that really helped us take our consumer demographics and map out where we should be putting our stores based off the white space available. So it really helped us in our targeting. You know, the early days, you're not targeting because you don't have you don't have a base to target off of. You kind of going with your gut, and as you build that demographic up,
you really know what your user is. So when you go to new space, as you find that user and that platform really helps you do that. So as we continue to fine tune that from sixteen seventeen, we really fine tune the brand, the model, the offering, and then the real estate strategy too. And then we just all the new openings have been very strong. So it's actually the new all the new openings I say new openings.
You know, from twenty twenty one twenty two, I have been dragging that AUV up and you know some of those early legacy stores as those leases expire, will shift markets and go for a different sized building.
Yeah, six point five millions a strong AUV. Is there any other unit economic data that you'd like to share?
You know, we target sixteen percent four while margin. The biggest thing is, you know, we we want to concentrate on the unit economics. So conversions give you about a twenty eight percent cash on cash return, and then if you do a new build where you're buying the dirt and doing a sale lease back, you can get upboards to thirty seven percent cash on cash return because you can get to take those sale lease back proceeds. So the boat strategies were great. Those are great unit economics
for US. Six ' five we think is a reasonable number. You know, as I said, Lakeland's trailing at eight point three million Lakeland, Florida. That's not a huge metropolis. And even like the you know, the Derials of the world that opened last year, like I said, we're thirteen fourteen million. So we think six five is a modest number to go for because our AUV has been driving up with every new opening.
Yeah, so same store sales are strong versus your peers versus twenty nineteen, but there were down a little more than the casual index in twenty three. Why do you think Twin Peaks was hit harder than other chains last year?
Well, if you look at our same store sales, double digit stacked. Eventually you stop stacking and it's time to open new I mean, And so it doesn't what doesn't take an account if you're doing a market and I have a market in San Antonio three stores for the longest time, and we added a fourth, you pick up six million in total sales, but you lose five hundred
thousand out of one of the other stores. So the six million you don't get accounted for in same stores because it's in you know, it's not in that eighteen month period where you start comping, but that the guy you lost five hundred, he loses the comp So, you know, we look at overall market share. Same sources is certainly an effective tool to make sure the brand's still relevant. It's one of the reasons we use black Box to make sure we're keeping our ear to the wall with
what our guests are saying about every store. We like to see what the stores are doing per their zip code, and that's black Box is able to give us that. You know, if if our stores are trending high or lower than zip code, we were able to take action either way. The social sentiment's big to us because it
really truly says what our guests are talking about with us. So, you know, I think that's one of the reasons you just you get double digit same store, same store, same store, Eventually you stop comping, and as I said, you have to build no store.
Yeah, you know, and let's let's stick to that black Box intelligence point. When we did a panel together back in twenty three. I was impressed by how data driven you are from people I know in the industry. You know, they say you're very dialed into the numbers and run your business accordingly. Can you talk about how you're using that data, particularly to analyze store performance, bonus out your employees and stuff like that.
Yeah, you know, we use black Box for a lot of different reasons, whether it's sales traffic, even from an employee standpoint, making sure we're in the right pay categories by position. That social sentiment side helps tell the rest of the story. And even like I said earlier, tracking your sales by zip code which really helpful because you look at your sales versus DFW. Well, DFW is quite large or Chicago quite large, so I can track my
store in I'll go by a zip code. Then I'm kind of in the game because obviously for geographic region and so having the sales, the traffic, and the social side of it gives the full story. You could be up in sales, but your zip codes up even higher, so maybe you're not exceeding what you should be. You could be down in sales, but the zip codes tremendously down, and so you're you're battling and you're knocking it out based off whatever reasons causing that and the other reason.
You look at sales and traffic and then you compare it to the social side of it, and we get a daily, weekly, monthly, quarterly feed. We do a quarterly recap with black Box, kind of going over the whole analytics of of everything they're seeing with us and out there. But the social side tells a story too. And you could be doing really well in sales because the traffic's just so high, so dense, but your but your guests
are given negative comments. So let's let's us focus even to the point of it might not be affecting your sales, but somebody could be saying, your frieser cols, your frier coal. Hey, this month, we need to focus on fries. Let's make sure we're serving hot, fresh fries and we're not dragging fries. So it does dial us into certain elements of the brand or the business or the community if we're doing better than the other side. So it just gives us
a better parallel platform. And we use data word data junkies. We try not to do paralysis by analysis, but we do take that data with us to the field to help us understand what's being said. No matter where it's at, whether it's black Box or the east Site platform we use for our real estate, we have a lot of different data elements.
Yeah, it sounds like you're leaning on it basically as a leading indicator, right that it could show moves and seam sourselves.
But before they still have to be in the field, whether it's looking for sites or being in a restaurant. You can't just look at the data and say, oh, this is what's happened. You still need to go. And my emphasis to our team is you've got to be in the field. Four walls are where it's happened. This office we're sitting in today, it does not make any money. It costs money. The fuss make the money, and my whole support team and executive team has to be driven
to the field. We want them part of the field for sure.
How are you looking to drive same star sales growth in twenty five.
Well, we have a built in marketing calendar called Sports which is really helpful and we're able to take that experience with the Twin Peaks Girl our kitchen and our bar, and that is our mechanism driven same shot sales, just the overall memorable experience event that happens in our stores. We want to stay really dialed in on food. We want to keep a pricing structure that's in bar belt strategy. We want to be able to something on an affordable level.
If you're working off a lower budget, you want to splurge on yourself. There's a higher end. We don't want to take big, big price jumps. That's not that's not how we're going to go. I think the consumer's tired of price jumps, and we've been fortunate enough not to do them. We've done small two to three percent over the you know, over traarly twelve months, keeping up with some minimum wage increases. But we try not to take those big five six percent jumps, which some people do.
So we just execute executing, understanding the sports calendar and making sure that sports day is so overwhelming to you in a good way you come back just for lunch on Monday.
Yeah, I'm sure the expanding sports calendar is helping, right, the bigger college football playoff, right, and then we're seeing new sports Formula one, right, yeah.
I mean the seasonality of sports used to you know, you're really in season, you're out of season or in the season. It's really stretched. And even NFL they started dabbling into some Friday games, some different day games that you weren't used to. Heavy. We're heavy into soccer Champions League, Gold Cups, South America Cups, World Cup obviously is coming
to town. We lean in the Premier League, La Liga, all the different and those are nice time zones too, because a lot of those games are you know, two three o'clock afternoons, so it really plays well with stretching the calendar out. NBA is just big, you know, we really you know, it's a long season, and then from
April to June, it's just playoff mania. You know, you're you get rid of you go college NFL College playoffs, NFL Playoffs, Super Bowl, roll into the February and you're into conference basketball, March madness, playoff implication, NBA, NBA playoffs, NHL playoffs. Through June, there's probably a little lull, but then there's always a lot of summer, a lot of summer soccer that happens, and those those cups are happening during then the you know, European Cups, South American Cups,
all those are happening a lot of the summertimes. Then you roll in Fantasy Draft and you're back in football, so it stretches. Yeah, I hope the college playoffs go to thirty two teams. Just keep adding game. I'm sure that was big business man with UFC, big partner of ours, and you know they're they have great material as pay per view, but then they have a material that's on ESPN Plus that we're playing, and they have a lot
of different elements there. There's always boxing that lay in there, so there's there's always In marketing, one of marketing's jobs are really to keep up the calendar and all right, we have this big event coming on Friday. What are we gonna do to accent that event besides just have it off. What's the beer special or the drink special or what you know, what what element are we gonna put in there to make that just a notch above
everybody else. It gives our operators a chance to plan because you see the calendar, so it's not like a bus is pulling in and you're unprepared. You know they're gonna you know, you're gonna be crowded, so let's overstaff and make sure that experience is incredible. Great.
Are there any changes to the marketing planning making the share now? We're staying We're staying focused on you know, local store marketing. We like that one three five mile radius.
We think it's important to be a part of the local lodge versus some national commercial that maybe doesn't have the impact. And you know, our footprint doesn't allow for a national commercial, so it'd be kind of a waste, and we just think our money's better spent at the local DMA for sure. So we're going to continue to push that one three five mile radius. Local sports talks, local businesses, festivals, local teams, you know, sponsorships that way,
really just driving that traffic in. You know, everybody's like when you do a commercial, Well, when everybody in your one three five mile radius has tried you and wants to come back to you, we'll start thinking about commercial because there's a lot of bodies between one three and five and our building should be a marketing tactic. You're picking good sites with a lot of good traffic driving by you, and your building is beautiful. That's going to
drive people in. That's a billboard itself for sure. If you need a billboard, you probably pick the wrong site. Sometimes, no doubt you touched on it a little bit.
It's like you're not taking too much pricing. I think that's the smart play in twenty twenty five. You know how much inflation do you expect, and how much price are you willing to share?
How much creature between two and three percent, and really just to keep up at the minimum wage. We've locked a lot of our proteins in so we know what our cost effects are there. We ate some margin last year and we went after the margin in other categories, but we ate some margin. And the poultry. Poultry is extremely high last year, five year high. But we know
it's sick. It moves, you know. We track in month to month, year to year, and if you took price every time we went to an all time high, you would outprice yourself. So you just have to be cost effective in other areas and eat some of that costs.
So yeah, our in our research, some of the chains like Texas road Has and wing Stuff that have the highest cogs are generating the most traffic, right, they're offering the most.
Value on the plate. Yeah, we we're pretty pleased with our.
Cog good and you know it sounds like you're going to spend some of your cash on building three new stores. But i'd imagine you generate a lot of cash. Can you talk about, you know, how you plan to use that excess cash this yere?
Uh.
You know, we'll delever, delver some of our debt. And that's one of the reasons you know we're moving towards a spin off, is for investors to look at us as a standalone portfolio and understand this brand, give us focus on development. We certainly want development equity there so we can continue to grow the footprint, and then we'll deliver some of our debt. All right, good stuff, So
what's your favorite menu item? Liquid would be something from Kentucky on a clear ice ball and I spent you know, love love me some Blantons and weller, I can't go wrong with any of those. Nothing wrong with us. A good micaltree there the Corona. Food wise, love our flatbreads, smoked wings. We have our own smoker programs. We smoke most we smoke briskets, wings, chicken thighs or so. Once
again that scratch kitchen. Our kitchens are great. Charg real flat top fryars, convection of it and smokers really gives us a lot of flexibility to make that menu flexible. But those are probably like go tos, flatbreads and smoke wings really good go too, or hand cut steak. We have handcut in New York strips.
All right, good stuff. Yeah, the wings are great. I'm gonna have to try those smoke chicken thighs, man, it'll sound pretty good too.
Yeah, we smoke our own chicken thighs, and then we utilize them in our chicken nachos, we utilize them in the case of das, we utilize them in our green chili chicken soup. So yeah, we try to really make sure our pantrees has good flow through. So our chef's great, he's able to look at recipe items and make sure we maximize the pantry item out of it. So we don't have just one item sitting there for one recipe because we know how that goes either run out or
it doesn't make it. And so if you have good flow through on your inventory, that helps up.
All right, good stuff, Thanks for doing this. Where can the audience go to find their nearest twin Peaks and what social media program should we follow you on?
Well, at twin peaks dot com, that's the best for following us. We have great Instagram. Every store has its own Facebook Instagram really try to stay localized. So you just click on your local Instagram twin Peaks, it'll pop up great feeds, local store, depends on where you're at. The next new one will be Brandon, Tampa, Florida.
Okay, cool man, Yeah, I have to follow you on Instagram.
Yeah, good luck. Man.
This is going to be a fun one to watch, a little too small for me to cover, but I'll be watching closely.
Man. Are you based out of I'm in New Jersey. I'm working on it, working on Pennsylvania right now. Now. Okay, yeah, I've listen.
I've been Scottsdale, Austin, Southern Florida, so I've been to a few. I'll try to get closer to Are you a Giants fan Jets fan? Well, I'm a Raiders fan. I'm actually a Raiders fan. I was born into this life of disappointment. They won the Super Bowl the day I was born, and I grew up wanting to be a Raider.
Now you got TV twelve leading the team. He's Mike. I'm hoping for uh an improvement for sure. You might get the Sanders kid. Need could be your QP.
It does a lot of rumors swirling around man. Yeah, we'll see. It's always fun to watch and keep up with it. Yeah. Who's your team? Cowboys Living Down Okay? Yeah?
Yeah, yeah, yeah for sure man. Uh you know, there's a lot of Cowboys fans here and everywhere.
But actually my team is wherever, wherever a store is, that's my team. I feel like a bookie. Then when I'm watching a game and my family's like, who do you want? Like, I want this, white want that. We have three stories. Brother.
Yeah, thanks again, and I want to thank the audience for tuning into. If you like the episode, please share with your friends and colleagues. Check back soon for a discussion with Kyle Kavanaugh, the founder at Maine and May