Strong unit volumes and a desire to find high-performers outside of the fast-casual market led Good Times Restaurants to announce its purchase of the Charlotte, North Carolina-based Bad Daddy's Burger Bar in late April.

Good Times is operator and franchisor of Good Times Burgers & Frozen Custard, a 38-unit quick-service brand based in Golden, Colorado.

Right off the bat, Boyd E. Hoback, CEO and president of Good Times, tells FSR, "We're real excited about owning 100 percent of the brand and have aggressive growth plans."

Those growth plans include four Bad Daddy's restaurants in development in Colorado, which will bring the total number of locations to 17 by year-end. Hoback says Good Times plans to grow that unit base 40–50 percent each year over the next three years or so. In 2016, growth of Bad Daddy’s will be centered in the two centers of Colorado and North Carolina, but beginning 2017, expansion will occur concentrically beyond those states.

Bad Daddy's restaurants opened 15 months or longer are averaging $2.7 million in unit volumes, a key performance indicator that caught Hoback's attention when he began looking at the brand. "[That AUV] out of about 3,600 square feet with good operating margins is a very, very strong opportunity."

The other trait that drew him to Bad Daddy's was the fact that it was producing chef-driven food, but outside the blossoming fast-casual sector. "We felt it was a highly differentiated concept, meaning the food quality was a considerable step up from what you find in casual operations," he says. "We intentionally stepped over fast casual; the risk is that it continues to get somewhat commoditized and hard to really differentiate there."

Before the purchase, Good Times already owned and operated three Bad Daddy's in Colorado as a licensee. In negotiating the licensee deal with Bad Daddy's International approximately two years ago, Good Times ensured it had the first rights of offering, meaning that if the owners wanted to sell, they were required to first talk to Good Times and try to negotiate a deal. Hoback says his company put in an offer in late 2014.

"We have two very high-volume stores and felt like we were really ready to take it to the next level, and we needed to be able to control the brand and the development for us to do so," Hoback explains.

While three of Bad Daddy's current locations are franchised or licensed, Hoback says the majority of the development going forward will be in the form of company-owned stores, with franchises being granted selectively to highly qualified franchisees.

Good Times had the best stock performance among quick-service brands in 2014, according to QSR magazine, as shares jumped 176.2 percent.  Total net revenues for Good Times’ six months ended March 31, announced yesterday, were $16.6 million.

By Sonya Chudgar