New restaurants are earning $5 million in annualized AUV.

Gen Korean BBQ’s life as a public company has been short, but not without major accomplishments.

The chain’s four new restaurants—Chandler, Arizona; Manhattan; Las Vegas; and Webster, Texas—are earning annualized AUVs of about $5 million and tracking toward an average payback period of roughly 2.1 years, in line with the company’s expectations.

Looking ahead, the brand has three new stores planned for Q4, including one in Houston that opened in October. Another three are under construction and scheduled to debut in Q1 or Q2. Additionally, Gen Korean has 12 leases signed or in final stages and another eight in the LOI stage of negotiations. With leases for most 2024 restaurants signed or near completion, the barbecue concept is already in the process of securing units for 2025 and 2026.

Not a bad start for a company that just finished its first full quarter on the stock market.

With $45.6 million in Q3 revenue, a 7.4 percent increase year-over-year, Gen Korean is one of the largest Asian casual-dining restaurants in the U.S. The chain had 35 restaurants as of October 31 in California, Nevada, Arizona, Texas, Hawaii, New York, and Florida. Gen Korean employs a self-service concept, wherein food is presented family-style, and diners utilize a built-in tabletop grill to prepare their meals. As a result, Gen Korean doesn’t rely on professional chefs and maintains a minimal staff in the kitchen. Patrons have the option to enjoy unlimited servings for a fixed cost, with lunch prices ranging from $17.95 to $20.99, and dinner prices varying between $25.95 and $29.95 as of March 31.

The company has been cash flow positive and net income profitable since inception, except for the impact of the pandemic. It currently generates more than $20 million in annual cash flow, with each additional restaurant building this total. Gen Korean also has $30 million in cash and a $20 million line of credit, giving the brand “availability of over $70 million to further grow the company,” said CFO Tom Croal.

Same-store sales decreased 1.2 percent in the third quarter, but that was mostly due to the impact of Hurricane Hilary, which hit the West Coast in August. The storm resulted in power outages and 12 days of closure—the highest number in Gen Korean’s history. Compared to 2019, Gen Korean’s same-store sales lifted 34.2 percent.

Here’s a look at how comps have trended since 2022:

Q1 2022: 71.8 percent; 25 percent against 2019

Q2 2022: 3.7 percent; 32.6 percent against 2019

Q3 2022: –0.3 percent; 34.8 percent against 2019

Q4 2022: 0.4 percent; 32.1 percent against 2019

Q1 2023: 3.9 percent; 31.3 percent against 2019

Q2 2023: 1.4 percent; 36.4 percent against 2019

Q3 2023: –1.2 percent; 34.2 percent against 2019

A price increase benefited comps by 0.9 percent; Kim said it helped offset inflationary pressures, but maintained the chain’s value offer. The company noted that most markets are still under $30 for dinner and no new price bumps are in the near future.

Executives said the consumer remains consistent and that restaurants aren’t feeling any notable impact from the rise of weight loss drugs.

“We are always looking at what our local competitors are doing in our space,” Kim said. “And the non-branded competitors, especially in California, the Los Angeles area, we are still hearing that they are down double digits, but we’re not. So we’re maintaining our brand and our customer base. We haven’t seen a drop yet.”

Kim named Texas as the brand’s strongest market. Florida and New York City will become a larger focus too. New upcoming city and state markets include Seattle, Portland, Boston, Colorado, Oklahoma, and Utah. Gen Korean maintained its guidance of 10 to 12 restaurant openings per year. The chain said it has room for 250 restaurants domestically.

Although development is progressing, Kim admitted that challenges still loom. Units run from 4,700 to 12,000 square feet, and it takes a lot of engineering to open a Gen Korean restaurant. For instance, Kim noted that a normal store may have three ventilated hoods. But the barbecue chain allows customers to cook meals at their own tables, meaning it requires 50-plus hoods. He added that most of the pressure is coming from the government. There’s one restaurant that should be starting soon after taking more than a year to receive a building permit.

“After COVID, it is harder to open restaurants, from the perspective of the governmental issuance of permits to the contractors building these restaurants outside of our core markets,” Kim said. ” … We are having to float more restaurants to hedge the risk that is out there of delayed openings. But we are steadfast in what we are looking at.”

Cost of goods decreased 100 basis points to 31.9 percent due to favorable commodity pricing and negotiation with vendors. Payroll and benefits expenses grew 190 basis points to 31.7 percent because of upticks in minimum wage rates, mostly in California. There are also increases in manager training for a ramp-up in new store development.

Restaurant-level adjusted EBITDA was 18.4 percent, compared to 20.3 percent last year. Excluding new locations, it would have been 19 percent.

In anticipation of growth to all 50 states, Gen Korean is switching from US Foods to Sysco. The process is 80 percent complete and should be wrapped up by mid-December. The new partnership will allow for new menu items, Kim said.

Feature, Finance, Growth, NextGen Casual