KRUS (2020 - Q4)

Good afternoon, ladies and gentlemen and thank you for standing by. Welcome to the Kura Sushi USA, Inc. fiscal fourth quarter 2020 earnings conference call. At this time, all participants have been placed in a listen-only mode and the lines will be open for your questions following the presentation. Please note that this conference is being recorded today, November 16, 2020. On the call today we have Hajime Jimmy Uba, President and Chief Executive Officer, Koji Shinohara, Chief Financial Officer and Benjamin Porten, Investor Relations Director. And now, I would like to turn the conference over to Mr. Porten. Benjamin

Thank you operator. Good afternoon everyone and thank you all for joining. By now, everyone should have access to our fiscal fourth quarter 2020 earnings release. It can be found at www.kurasushi.com in the Investor Relations section. A copy of the earnings release has also been included in an 8-K we submitted to the SEC. Before we begin our formal remarks, I need to remind everyone that part of our discussions today will include forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees of 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 condition. Also during today's call, we will discuss certain non-GAAP measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation nor as a substitute for results prepared in accordance with GAAP and the reconciliations to comparable GAAP measures are available in our earnings release. With that out of the way, I would like to turn the call over to Jimmy.

Thank you Ben and thank you everyone for joining us today. I hope everyone is staying safe and healthy. As our last quarter's call, in our discussion today, we will mainly focus on a business update on our company's strategies. However, if you do have specific questions about our fourth quarter financial results, we will be happy to answer them during Q&A. As many of you likely remember, as restaurant guidelines in mid-March instituted mandatory shutdowns of in-restaurant dining, we made the difficult decision to close all of our restaurants system-wide. From the start of the pandemic, our primary concerns have been the safety of our guests, the ongoing health and the welfare of our team, our liquidity and our ability to quickly and efficiently resume operations when the time was right. As conditions allowed, we began the process of reopening our stores in late-May and by the end of our fiscal fourth quarter, we were able to open 23 out of 25 restaurants. Keep in mind that our restaurants have been hampered by various COVID capacity restrictions which is reflected in this quarter's sales. You might remember that in California, which contains roughly half of our restaurant base, Governor Newsom issued a restriction on all indoor dining beginning on July 1. And because this restriction was in effect throughout the fourth quarter, our California stores operated gladly on to-go and outdoor seating spaces until restrictions were relaxed in certain counties in September. Outside of California, most of our restaurants were operating at 50% seating capacity during the fourth quarter and we have been very excited to see spur in demand from our guests for our differentiated dining experience as we opened our dining rooms. In Texas, we saw significant improvement in September with the return of the full Kura Experience and the seating capacity increase to 75%. With our Q4 comp in Texas negative 60%, our comp for September were negative 38% and our October comps improved to negative 24%, which we think is indicative of the recovery which we expect in diligence with reopened indoor dining rooms and the full Kura Experience. We saw another example of this with our recent new restaurant opening in Fort Lee, New Jersey. Subsequent to the end of the quarter, where sales levels have reached 50% to 60% of our pre-pandemic system AUV in spite of New Jersey's 25% seating capacity limitation. As I noted, a significant part of our consumer appeal is our ability to provide guests with multi-sensory Kura Experience in our dining rooms through the use of our revolving conveyor belt, our on-demand ordering screen and express belt, our Mr. Fresh dome and our Bikkura-Pon rewards machine. As you can imagine, this experience is almost impossible to replicate due to current restrictions. Our most significant headwinds have been in California, due to a system-wide ban on conveyor belts which has resulted in a lot of signature element of the Kura Experience as well as the front of house labor efficiencies that our conveyer belt provides. To mitigate the loss of in-store sales, starting in late-July and early-August, we implemented several initiatives to supplement our table service, including limited outdoor seating in many of our California restaurants and a system-wide rollout of online ordering and delivery options through Grubhub. As a result of our focus on off-premises dining including Grubhub implementation, we were able to grow our off-premises mix to 17% for Q4. This compared to our historical off-premises mix of around 1% of sales. Additionally, by the end of the fourth quarter, we had 10 restaurants in California with outdoor dining spaces. While we are able to recoup some of the loss of sales, as you can imagine, we are eager to bring back the full Kura Experience to our guests in California as soon as we can. As implementation of efforts such as outdoor dining and our Grubhub listing were completed in August, we began to see the Grubhub benefit of this new initiative beginning in September. Our September and October results were also buoyed by the reduction of dining restrictions in certain California counties. To provide a comparison between our past quarter and our current quarter, we began our FY2020 fourth quarter with only three open dining rooms. But today, we have 18 restaurants that offer in-store dining. While our Q4 comps were negative 73%, we have seen consistent comp improvement as we enter our new fiscal year, with September comps of negative 53% and October comps of negative 44%. Notably, we have achieved close to 30% sequential increase on system-wide revenue growth in September in spite of August historically being our strongest month. This strong result continued into October which was further system-wide revenue growth of 20% over September. We are continuing to see monthly improvement in our off-premises sales business as well. While our Q4 Grubhub sales were only $35,000, we were able to grow our Grubhub sales to $84,000 in September, bringing our total off-premises sale to $350,000 for that month. In October, our off-premises sales continued to grow with off-premises sales of $405,000, $123,000 of which was from Grubhub. These early results have been very encouraging and we are exploring working with other channels to expand our digital footprint and mitigate margin pressure from third-party fees. We are currently relying on in-store titles for online ordering through Square and pending results, we plan to expand it system-wide. Through Square, we will be able to offer online ordering through our homepage or from mobile ordering, through out waitlist app and eventually provide contactless service and table side payment for our dining room guests. Our full Kura Experience have been the one of the driver of our industry-leading pre-COVID unit economics and operating our restaurant without this has been a challenge. However, we feel good about the demand for Kura Sushi when our dining room is available and we continue to look for ways to deliver a great guest experience in spite of these limitations. In addition, due to the steps we have taken at the onset of COVID, including retention of a store manager and critical kitchen staff, we believe we are well-positioned to ramp up our operations swiftly efficiently when indoor dining restrictions are lifted and the seating capacity limitations are relaxed. Regardless of our restaurants capacity, our main goal continues to be the health and safety of both our guests and our team members. To further promote a safer environment and give our guests peace of mind, we have taken several steps for each of our restaurants, including personal protective equipment for our team members, enhanced cleaning processes, social distancing sufficient between booth and team member's health checks prior to the prior to the start of each shift. As we mentioned on our last call, we continue to implement a customer survey as part of our checkout process, focusing on our COVID-19 safety procedures. To-date, the response have been overwhelmingly positive. Let's quickly discuss our development efforts. Subsequent to the end of the fourth quarter, we opened our Fort Lee, New Jersey restaurant in September and our Koreatown, Los Angeles and Washington DC restaurant in November. We currently have four stores under construction including one that may end up opening in early fiscal year 2022. All-in-all, we still expect to maintain our stated goal of over 20% unit growth CAGR over a five-year period which began in fiscal 2019 but, as you can imagine, in the current environment, there are number of factors out of our control that could alter or delay our plans. In terms of liquidity, I will directly iterate how fortunate we have entered this challenging time with a capital position that can sustain our company and our growth plans. As of the end of the quarter, we had $9 million in cash on hand and no debt. We have also increased our revolving line of credit to $35 million from Kura Sushi Japan along with an extension of the payback period from one year to five years. With the expansion of our revolver, our capital position provides us pretty good runway not just for supporting the company through the pandemic but for continuing to execute our growth plan. With our planned capital expenditures for fiscal year 2021, we have just began drawing down on our revolver. As always, we appreciate the support of Kura Japan and their confidence in the long term success of our business. Our fourth quarter weekly expenditures of approximately $850,000 a week was within our expectations and we expect our weekly cash burn rate to be approximately $800,000 for fiscal Q1 2021. Our expected Q1 burn rate is higher than our burn rate expectations for subsequent quarters during the fiscal year as our D&O insurance payment falls on the first quarter. Lastly, due to the ongoing uncertainty driven by COVID-19, we will not issue financial guidance for fiscal year 2021 at this time. In closing, I would like to thank all of our team members for their tireless efforts in serving our guests during this challenging time. With strong pent-up demand and solid financial footing, we are excited about the long term growth opportunity of our business and we remain prudent as we navigate through this challenging environment. This concludes our prepared remarks. We are now happy to answer any questions you have. As a reminder, during the Q&A session, I may answer in Japanese before my response is translated into English. Please bear with us. Operator, please open the line for questions.

[Operator Instructions]. Our first question comes from James Rutherford with Stephens Inc. Please proceed with your question.

Hi. Thank you for taking the question. A few from me. I want to start on taxes, where I think you said the comp was negative 24% in October. Just to clarify, was that achieved without being able to run the primary belt? And also what off-premise mix did you see in Texas during October, compared to kind of the 17% level for the company-wide?

Sure. Thank you, James, for your first question. Please allow me to answer in Japanese. [FOREIGN LANGUAGE] Yes. As of October, we have been able to offer the full Kura Experience, including our primary belt in Texas which is certainly a driver for our improving comps in that market. [FOREIGN LANGUAGE] In terms of the Texas off-premises mix, our 17% mix for Q4 has decreased as we have entered Q1 and we have able to reopen some of our dining rooms and increase seating capacity in other markets. And so, across our system, we are seeing a lower off-premises mix in Q1. And the absolute dollar value is increasing. It's just a mix is going down. So Texas is following that same pattern where the mix is lower than it was in Q4. [FOREIGN LANGUAGE] We are experiencing great momentum in Texas and we are excited to continue to deliver a great guest experience through our conveyor belt and unique sushi suite. We are excited to continue to build out our off-premises business in that market. And we think that between these two, we will be able to maintain the strong comps we have been seeing so far in this quarter.

Excellent. That's very helpful. And then to look at that off-premise sales mix at 17% of pre-pandemic sales levels, very impressive. I mean just what were the main pieces that drove that improvement? Was it primarily the addition of delivery? Because I don't think that online ordering has been launched system-wide yet. So I mean just unpack the components of that nice step up in off-premise, please.

[FOREIGN LANGUAGE] So we began a lot of different off-premises efforts during Q4 and we can see the full impact of that starting in Q1. And that's really been driving the increase in off-premises sales. I am sorry. Go ahead. [FOREIGN LANGUAGE] And then the growing dollar amounts is certainly being driven by Grubhub. And so we are sure that rolling this out system-wide was the lightning force.

If I could just add on that on a little bit. James, you mentioned that we don't have online ordering yet. I am extremely excited and proud to announce that actually if you go to our website you can order online now. We started working with Square to begin a pilot there. One of the most interesting things that we have learned as a result of Grubhub implementation was that the vast majority of our guests that were ordering through Grubhub were actually ordering for pickup as opposed to delivery, which is completely not what we had expected. And so once these results became apparent to us, we decided to partner with Square as well because their fees for pickup are much, much more competitive than Grubhub. And because of the Square implementation, we have actually been able to offer online ordering on our website. And our waitlist app is actually undergoing an update right now. It's being actively reviewed by the Android and iOS app stores that will allow people to check into the waitlist app and then directly order through the app. And so if you are in Irvine, which is one of the test stores and you see like a two-hour waiting period, we have got the button right there to say, hey, why don't you order to go instead. You don't have wait two hours. And so I am extremely excited about that.

Excellent. Thank you Jimmy. Thanks Ben.

Thank you James.

Thank you. Our next question comes from Peter Saleh with BTIG. Please proceed with your question.

Great. Thank you. I believe you have mentioned you have three restaurants that are open so far in 2021 and there is four more under construction. Can you just talk to us about the four that are under construction, what the cadence is of those openings throughout this year?

[FOREIGN LANGUAGE] So given that we already have these four units under construction, looking at our historical buildout times, we would expect opening timings of between Q2 and Q3 for the four stores. That being said, because we are in the pandemic, we might have unexpected in city inspections, permitting, et cetera. And so there are externalities, but as long as we don't face those, we expect Q2 and Q3 openings. [FOREIGN LANGUAGE] And as Jimmy mentioned in his prepared remarks, we continue to hold, I am sorry, let me rephrase, we may decide to push back one of these four units into fiscal 2022 depending on the ongoing circumstances of the pandemic.

Understood. Okay. Very helpful. Can I ask about the third-party delivery? I know you partnered with Grubhub. Are you guys in conversations to add other delivery partners to expand the off-premise business?

[FOREIGN LANGUAGE] So as an overall context for ultimate strategy, we would like to move all of this in-house to mitigate third-party fees. And that's been one of the main reasons we decided to start working with Square. [FOREIGN LANGUAGE] And we are very excited for what the app upgrade will mean for our off-premises business.

I would just add on to that. Square actually has a partnership with both DoorDash and Postmates. We have the option to turn on that functionality at any point. We are waiting on this because again the goal with Square is to grow our pickup business and not have margin pressures. But if we decide that offering delivery through Square is the right decision, that would be very easy to implement.

Understood. Right now, is the partnership with GrubHub for delivery? Are you doing delivery with them? Or is this primarily pickup? And what is the pricing structure? Have you adjusted the prices if it is delivery to be higher on GrubHub's site?

[FOREIGN LANGUAGE] And so with GrubHub, we are offering delivery and pickup. The fee structure for delivery and pickup are different. But what was very interesting about the first month of GrubHub is that we found that the majority of sales are coming in through pickup. And that's why we moved to Square or that's we were rolling in Square so that we can capture and continue to grow these off-premises sales with fewer margin pressures while also reducing friction for our guests that are making online orders.

All right. Thanks very much.

Sorry. I skipped one thing. For the pricing structure, because of the GrubHub fees, our GrubHub menu is more expensive than our in-restaurant menu. But because the fee structure with Square, we are able to offer the same in-store prices. And so if you are ordering a pickup order, a takeout order through Square, there is zero change, there is zero difference in fee as if you got into a restaurant yourself to order it.

Understood. Thank you.

Thank you Peter.

Thank you. Our next question comes from Jeremy Hamblin with Craig-Hallum. Please proceed with your question.

Hi. Thanks for taking my question guys. I actually wanted to follow-up on the online ordering, just to understand a couple of things. The first in terms of the timing of potentially rolling out Square to the broader set of stores, how does the timing look like on that? That's part one. And then part two is, what type of tickets are you getting? What's the average order size that you are seeing? How does it compare to your typical ticket when you are getting a digital order pickup and delivery?

[FOREIGN LANGUAGE] So we are actively rolling this out to more and more stores. We just added a second test store today. We are a little bit hesitant to give a firm date for the rollout, but we do hope to have this rolled out within the end of this calendar year. Given how quickly we are able to rollout Grubhub, I think that's a completely realistic goal. [FOREIGN LANGUAGE] So we haven't disclosed any information about ticket sizes yet and so we prefer not to disclose ticket size information at this point. [FOREIGN LANGUAGE] Regarding delivery. [FOREIGN LANGUAGE] I am sorry. I misspoke earlier. So our ticket average pretty much are mapping on to double our indoor receipts. And I think people are just ordering for couples or family. So instead of the $18 to $20 average ticket, we are getting double that. And our average party size is about, I think, 2.2 people. And so it's pretty much exactly the same as indoor dining.

Okay. So I think we can interpret that as, if you are able to get pickup through Square, is it fair to assume that those tickets that come in because of the size of them, is that likely to be margin neutral versus your kind of pre-pandemic levels? Or is that still going to be slightly dilutive versus pre-pandemic levels?

Jeremy, I am sorry. Let me make sure with Ben if I understand your question correctly.

Sure.

[FOREIGN LANGUAGE]

[FOREIGN LANGUAGE]

[FOREIGN LANGUAGE] Fro Square in particular, we are very excited about it could mean for our business, not just for customer experience but for our margins as well. Up until now, most of our pickup orders that have not be coming in through Grubhub have been processed by our servers manning telephones. With the Square order, we expect the need for that to be much, much lower. And so we will be able to reassign those servers and have a more efficient staffing process. And so that will actually help our margins from a labor perspective. In terms of, I know from some of our peers, their packaging has had an impact on margins. But with off-premises sales, we don't have any disposable plates unlike with the conveyor belts. And so they offset each other. And so we expect no margin difference between a Square order and an indoor order.

That's a great opportunity. Okay. I wanted to come to another point and make sure that I heard the details correct. So in terms of your present cash burn rate, I think what you said is for Q1 it is running in the $800,000 per week range, right. And then we are almost at the end of Q1, but that you expect that to fall a little bit as we move forward. Is there any additional color that you might be able to provide on that or just clarify the cash burn rate?

Sure. I am happy to do that. [FOREIGN LANGUAGE] So the first think we want to make clear is that the $800,000 per week burn rate is limited to Q1. We don't expect that to go forward past Q2, Q3, Q4. We expect the full year burn rate to be materially lower than the $800,000 we are seeing for Q1. [FOREIGN LANGUAGE] So the bucketing for the $800,000 in Q1, $450,000 were spent on CapEx, $300,000 on G&A and $50,000 on restaurant level contribution. Given that we already have three units open and four under construction, the CapEx expenditures are going to be frontloaded for the fiscal year. And so we expect the CapEx bucket to have the most material change as we proceed through the fiscal year.

Okay. Go ahead.

Thank you. [FOREIGN LANGUAGE] And so with the steady decreases in CapEx spending throughout the year, we expect our full year burn rate average for CapEx to come in at half or less than half of the burn rate we saw for CapEx in Q1.

Okay. That's very helpful. And then just start taking that one step further, as we get into calendar 2021 and hopefully the vaccine information presents hopefully a little bit of a light at the end of the tunnel on the top line results and maybe having fewer restrictions, do you have a sense now with the Square relationship and the way that your business is running today, what types of sales volumes do you need to get to that would make your cash burn rate relatively neutral? Do you need to be at 70% of pre-pandemic sales, 80%? Can you give us a sense of where you need to recover to, to get that run rate down to flattish, again assuming the CapEx is a little bit lower than what you just had for Q1?

[FOREIGN LANGUAGE]

[FOREIGN LANGUAGE]

[FOREIGN LANGUAGE] So in context for answer, we would like to just not that we are high-growth concept and that as our restaurant level operations improve and no longer part of the weekly burn rate, that we would want to reinvest, those savings we would want to reinvest into CapEx to continue our unit growth. [FOREIGN LANGUAGE] And so given that we want to maintain a 20% unit growth CAGR, we think it would be difficult to achieve a neutral burn rate without our business recovering to pretty much 100% of pre-pandemic levels.

Okay. Great. That's helpful color. Thanks for taking the questions and good luck.

Thank you Jeremy.

Thanks.

[Operator Instructions]. Our next question comes from Andrew Strelzik with BMO Capital Markets. Please proceed with your question.

Hi. Thanks for taking the question. My first one, I was just hoping you could give a little more color on the Fort Lee store and kind of what's driving the really strong sales performance relative to the capacity? Is there anything that you can kind of learn from that and adapt to either the legacy stores or kind of site selection as we go forward here?

[FOREIGN LANGUAGE] Fort Lee's performance has even actually surprised us. It's been a very pleasant surprise. We think the biggest factor for Fort Lee's success is its location. It's in an excellent location in New Jersey and the proximity to New York and the George Washington Bridge, we imagine, gives us access to multiple traffic markets. [FOREIGN LANGUAGE] And then another thing that we have been thinking about is that while there is a ton of sushi demand in that area, there isn't a lot of revolving sushi. So I think we filled in -- we are dressing demand that has not been addressed up until this point.

Okay. Great. That's super helpful. And then kind of shifting gears a little bit to the off-premise business. Where you have seen the dining business rebuild maybe the most and you are layering in the off-premise on top of that, especially with the sales dollars increasing, how are you finding operational components of that? And do you think that in particular with some of the marketplaces that you are working with now, do you find that those customers are more new customers? Or do you think that this is kind of just a transition of the order from one channel to the other?

[FOREIGN LANGUAGE]

[FOREIGN LANGUAGE]

[FOREIGN LANGUAGE] In terms of the operational limitation, it was actually quite simple. We haven't really run into a lot of difficulties there. In terms of our guest mix for the off-premises orders, obviously we imagine a huge portion of them are existing fans, but being on the GrubHub marketplace, I am sure has opened up the possibility for new guests to come in. GrubHub is pretty tightlipped with its data. And so we can't really actually confirm the number of new guests that are coming in through Grubhub versus existing guests. But listening to the store managers, they are saying that the Grubhub marketplace listing is bringing new guests.

That's great to hear. And then my last question is, if you could just kind of discuss the dynamics of reaching out to your customer base and creating awareness as the stores reopen as the capacity limitations eased in the markets, you talked about going to 75% in Texas, for example, how are you finding the sensitivity around that? How quickly when you see capacity limitations change, there is demand change as well? And just have evolved at all your tactics around communicating with the customers? Thank you.

[FOREIGN LANGUAGE]

[FOREIGN LANGUAGE]

[FOREIGN LANGUAGE] Because of our response in terms of our marketing efforts I think has been incredible. They have been extremely receptive. So after we have reopened an indoor dining room, we are usually hitting capacities in that market within a matter of days. When we reopened the conveyor belts in Texas, we were able to make that announcement and that was big news for everybody and we saw traffic levels immediately were up.

One of the really great things that we are experiencing now and this is just adding on to what Jimmy said, but our rewards program is coming even more useful. As of today, we have over 70,000 members. And these are all people that are quite dedicated. And the activation rates with these rewards members is much, much higher than the industry average. So we have been really successfully able to leverage this existing database in terms of effectively reaching out to our guest which I think is one of the big drivers for how quickly we have been able to pack our restaurants once we had our capacity restrictions lifted in various markets. The other thing that I would add is that, it's good to have new news. So obviously reopening a dining room is news, being able to reopen conveyor belts is news. And so this off-premises stuff is also an opportunity for new news, especially once we have the integration into our waitlist app finalized, that will be another advertising push for us. So we are currently working on creating new ways to engage with guests and keeping them excited about our business.

Great. Thank you very much.

Thank you Andrew.

Thank you. Our next question comes from George Kelly with ROTH Capital Partners. Please proceed with your question.

Hi everybody. Thanks for taking my questions. So first I was hoping that we could go back to the Fort Lee opening. And so I guess my question is about, you mentioned a couple times now that that location has exceeded your expectation. And with it being your first Northeast location, just wondering why that is? What are you finding? Is the brand already well-known, better known than you would have thought before opening? And I guess the second part of that question is, does it give you confidence to open additional restaurants in the Northeast?

[FOREIGN LANGUAGE] To answer your second question first, yes, we are extremely encouraged by the results we have seen in Fort Lee and we are actively scouting new sites in the Northeast and some of them are already in our pipeline. [FOREIGN LANGUAGE] And the reason that we chose this specific location in the New Jersey, New York City market is the Fort Lee market satisfied a lot of our existing site selection criteria. And so it indicated that it would be highly successful. And it has been highly successful.

George, if I could answer your question about brand recognition. My assumption would be that our brand recognition in the Northeast is extremely minimal, given that our core markets are in California and Texas. I really think the Kura Experience is what has drawn this huge traffic. Whenever we enter a new market, our advertising strategy is to air promotional videos showing off the full sushi suite and just exactly how much fun our restaurants are. And that strategy has been very successful for us in the past and I believe it's been successful with Fort Lee as well. And so it's extremely encouraging that we have been able to enter a new market and do so well for us immediately just on the strength of our offerings as opposed to existing customer goodwill.

Okay. Great. And then next question for me, back to CapEx and new store development. How long does it usually -- the direct is, in 2021 are you still going forward full steam ahead with your 2022 and beyond development pipeline? And is that a lot of the CapEx budget that you talked about?

[FOREIGN LANGUAGE] So our revolver is $35 billion. As of November, we have drawn down $3 million bringing it to $32 million. But with that capital access and looking at our ongoing performance, we have a very solid runway for fiscal 2021 and 2022 to maintain the 20% unit growth CAGR. Obviously, we will continue to watch our performance and make sure that we are managing our balance sheet. But at this point, we are quite -- yes,, we are 20% growth. [FOREIGN LANGUAGE] So while we have the $32 million revolver right now and our capital position is strong, we are actively building and going through every possible scenario for how the pandemic is going to shakeout. And this is an ongoing discussion among the U.S. Board of Directors. And our last decision in terms of a capital raise was to increase the size of our revolver. But every option is on the table and we want to make sure and we are by preparing but there is now, to be ready to make the best possible decision at the best, when the timing is appropriate. And so yes, we are very excited.

Okay. Great. And then last question for me. Since I guess this summer, I have seen some real modest pricing changes across your, not at every restaurants, but at quite a few. And so just wondering if you are feeling like pricing and this is all for in-store level, it's at a good level now? Or should we continue to expect sort of modest annual pricing, sushi pricing increases?

[FOREIGN LANGUAGE] Our pricing strategy is extremely important to our business mission. We think that huge part of our consumer appeal is our competitive price point and the accessibility to a huge market. And so we are always extremely cautious with pricing. Historically, the only pricing we have taken has been to coincide with minimum wage increases. And we have taken very small increases just to offset that labor pressure. So we have typically taken what, $0.05 $0.10, $0.25. In terms of the summer, you might be referring for our Texas markets. While there haven't been statutory minimum wage increases in Texas since we have entered that market, the competitive hiring rates have increased to effectively increasing the amount of minimum wage necessary to maintain our workforce, which is why we decided to take the first pricing leap in Texas. Going forward, we plan to do the exact same strategy where we have our pricing coincide with minimum wage increases. And they will continue to be extremely modest and designed only to offset the increase in minimum wage. We are not planning on taking any pricing as a way to grow our margins.

Okay. Great. Thank you.

Thank you George.

Thank you. There are no further questions at this time. I would like to turn the floor back over to Jimmy Uba for any closing remarks.

Thank you very much for the time. We look forward to see you at the next earnings call. Thank you very much.

Ladies and gentlemen, this concludes today's webcast. You may now disconnect your lines at this time. Thank you for your participation and have a great day.