Good Times Restaurants' Q1 2025: Unpacking Contradictions in Capital Allocation, Legal Challenges, and Expansion Plans

These are the key contradictions discussed in Good Times Restaurants Inc.'s latest 2025Q1 earnings call, specifically including: Share Repurchase Program and Capital Allocation, Legal Case Update, Menu Pricing Strategy, and Bad Daddy's Expansion Plans:



Bad Daddy's Sales and Menu Engineering:
- Bad Daddy's posted 1.5% same store sales increase in Q1 2025, driven by successful seasonal specials like the classic smash and smokehouse smash burgers.
- The introduction of smashed patty burgers helped offset roughly half of the year-over-year menu price increase of 4.5%.

Labor Cost Control and Productivity:
- Bad Daddy's labor costs decreased by 70 basis points to 35.1%, driven by higher sales leveraging fixed labor costs, increased menu pricing, and improved labor productivity.
- The increase in menu pricing was not sufficient to cover the impact of Colorado's minimum wage increase, which may affect year-over-year labor costs in the second quarter.

Good Times Sales and Cost Challenges:
- Good Times same store sales remained flat year-over-year, with an average menu price increase of 3.9% not adequately covering cost increases.
- Elevated costs, including food, packaging, occupancy, and other operating costs, led to a decrease in restaurant level operating profit as a percent of sales to 8.6%.

Weather and Sales Impact:
- January 2025 sales were significantly reduced due to severe weather, particularly in Colorado and the southeastern US, impacting Bad Daddy's and Good Times sales.
- Bad Daddy's experienced a 5.5% same store sales decline during the first four weeks of the quarter, while Good Times saw a decline of over 7%.

Capital Allocation and Franchise Strategy:
- The company continues to explore new Bad Daddy's locations but remains selective due to rent and economic considerations.
- The company has slowed its franchise repurchases, instead focusing on renovating the Good Times brand and maintaining its share repurchase program.