Earnings Call Transcript - KRUS Q4 2020

Operator, Operator

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 Porten, Investor Relations Director

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.

Hajime Jimmy Uba, President and CEO

Thank you, Ben, and thank you everyone for joining us today. I hope everyone is staying safe and healthy. As in 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 mainly on to-go and outdoor seating 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 a surge 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 increased to 75%. With our Q4 comp in Texas at negative 60%, our comps for September were negative 38% and our October comps improved to negative 24%, which we think is indicative of the recovery we expect 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, sales levels reached 50% to 60% of our pre-pandemic system AUV despite 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 the loss of a signature element of the Kura Experience, as well as the front-of-house labor efficiencies that our conveyor 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, compared to our historical off-premises mix of around 1% of sales. Additionally, by the end of Q4, we had 10 restaurants in California with outdoor dining spaces. While we are able to recoup some of the loss of sales, 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 in system-wide revenue growth in September despite August historically being our strongest month. This strong result continued into October which was a 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 sales 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 mobile ordering through our waitlist app and eventually provide contactless service and table side payment for our dining room guests. Our full Kura Experience has been one of the drivers 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 despite 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 and efficiently when indoor dining restrictions are lifted and the seating capacity limitations are relaxed. Regardless of our restaurant's 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 distance between booths and team members, and health checks 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 responses 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 restaurants 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 numerous factors out of our control that could alter or delay our plans. In terms of liquidity, I will directly iterate how fortunate we have been to enter 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 a 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 begun 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 were 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 in 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, Operator

Our first question comes from James Rutherford with Stephens Inc. Please proceed with your question.

James Rutherford, Analyst

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?

Hajime Jimmy Uba, President and CEO

Sure. Thank you, James, for your first question. Please allow me to answer in Japanese. 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. In terms of the Texas off-premises mix, our 17% mix for Q4 has decreased as we have entered Q1 and we have been able to reopen some of our dining rooms and increase seating capacity in other markets. Across our system, we are seeing a lower off-premises mix in Q1. The absolute dollar value is increasing, but the mix is going down. Texas is following that same pattern where the mix is lower than it was in Q4. 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 eager to build out our off-premises business in that market, and we believe that these two factors will help us maintain the strong comps we have been seeing so far this quarter.

James Rutherford, Analyst

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.

Hajime Jimmy Uba, President and CEO

We initiated several off-premises initiatives during the fourth quarter, and we're starting to see their full impact in the first quarter. This has significantly contributed to the rise in off-premises sales. Additionally, the increased dollar amounts are largely attributed to Grubhub. We're confident that implementing this across the entire system has been a driving force behind the growth.

Benjamin Porten, Investor Relations Director

If I could just add on that 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's 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 to wait two hours. And so I am extremely excited about that.

James Rutherford, Analyst

Excellent. Thank you, Jimmy. Thanks, Ben.

Hajime Jimmy Uba, President and CEO

Thank you, James.

Operator, Operator

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

Peter Saleh, Analyst

Great. Thank you. I believe you have mentioned you have three restaurants that are open so far in 2021 and there are 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?

Hajime Jimmy Uba, President and CEO

We currently have four units under construction, and based on our historical buildout times, we anticipate their openings to occur between the second and third quarters. However, due to the pandemic, we may encounter unforeseen city inspections and permitting issues. If everything goes smoothly, we expect to open in Q2 and Q3. Additionally, as Jimmy noted earlier, we might consider delaying one of these four units into fiscal 2022 depending on the ongoing situation with the pandemic.

Peter Saleh, Analyst

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?

Hajime Jimmy Uba, President and CEO

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. We are very excited for what the app upgrade will mean for our off-premises business.

Benjamin Porten, Investor Relations Director

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.

Peter Saleh, Analyst

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?

Hajime Jimmy Uba, President and CEO

With GrubHub, we are providing both delivery and pickup options, which have different fee structures. Interestingly, during the first month of working with GrubHub, we observed that most of the sales were generated through pickup. This insight led us to collaborate with Square, allowing us to capture and expand our off-premises sales with lower margin pressures while also streamlining the online ordering process for our customers.

Peter Saleh, Analyst

All right. Thanks very much.

Benjamin Porten, Investor Relations Director

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 went into a restaurant yourself to order it.

Peter Saleh, Analyst

Understood. Thank you.

Hajime Jimmy Uba, President and CEO

Thank you, Peter.

Operator, Operator

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

Jeremy Hamblin, Analyst

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?

Hajime Jimmy Uba, President and CEO

We are actively expanding this to more stores and have just added a second test store today. While we are hesitant to provide a specific date for the full rollout, we aim to complete it by the end of this calendar year. Given the speed of our Grubhub rollout, this seems like a realistic goal. We have not shared any details about ticket sizes yet and prefer to hold off on that information for now. Regarding delivery, I apologize for my earlier mistake. Our average ticket size is roughly double that of our indoor receipts. It seems that customers are ordering for couples or families. Instead of the average ticket size of $18 to $20, we are seeing double that amount. Our average party size is about 2.2 people, which aligns closely with indoor dining.

Jeremy Hamblin, Analyst

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?

Hajime Jimmy Uba, President and CEO

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

Jeremy Hamblin, Analyst

Sure.

Hajime Jimmy Uba, President and CEO

Benjamin Porten, Investor Relations Director

I'm sorry. Let me check with Ben to ensure I understand your question correctly.

Hajime Jimmy Uba, President and CEO

From Square, we are very excited about the implications for our business, not only for customer experience but also for our margins. Until now, most of our pickup orders not made through Grubhub were handled by servers answering phones. With the Square order system, we anticipate needing significantly fewer staff for that purpose. This will allow us to reassign those servers, leading to a more efficient staffing process and improving our margins from a labor standpoint. I understand that some of our competitors have seen their packaging affect margins, but with off-premises sales, we do not use disposable plates as is common with conveyor belts. Therefore, the two factors balance each other out, and we expect to see no margin difference between a Square order and an indoor order.

Jeremy Hamblin, Analyst

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?

Hajime Jimmy Uba, President and CEO

Sure. I’m glad to clarify that. The first point to highlight is that the $800,000 weekly burn rate is specific to the first quarter. We do not anticipate this rate continuing into the second, third, or fourth quarters. We expect the total burn rate for the year to be significantly lower than the $800,000 we are currently experiencing in the first quarter. To break down the $800,000 for Q1: $450,000 was allocated to capital expenditures, $300,000 for general and administrative costs, and $50,000 for restaurant-level contributions. Since we have three units already operating and four more under construction, the capital expenditure costs will be frontloaded for the fiscal year. Therefore, we anticipate the capital expenditure portion will see the most significant changes as we progress through the year.

Jeremy Hamblin, Analyst

Okay. Go ahead.

Hajime Jimmy Uba, President and CEO

Thank you. 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.

Jeremy Hamblin, Analyst

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?

Hajime Jimmy Uba, President and CEO

Given the current relationship with Square and how your business is performing, what sales volume do you think you need to achieve for your cash burn rate to become neutral? Would it be around 70% or 80% of pre-pandemic sales? Can you provide an idea of the recovery level needed to stabilize your run rate, especially if your capital expenditures are slightly lower than in the first quarter?

Benjamin Porten, Investor Relations Director

Given your partnership with Square and the current operations of your business, what sales volumes do you believe are necessary to achieve a cash burn rate that is relatively neutral? Should you aim for 70% or 80% of pre-pandemic sales? Can you provide guidance on the recovery level needed to stabilize your run rate, assuming that capital expenditures are somewhat lower than what you experienced in Q1?

Hajime Jimmy Uba, President and CEO

In this context, we want to emphasize that we are a high-growth concept. As our restaurant operations improve and are no longer a part of our weekly burn rate, we plan to reinvest those savings into capital expenditures to support our unit growth. To maintain a 20% compound annual growth rate in units, we believe it would be challenging to achieve a neutral burn rate unless our business recovers to nearly 100% of pre-pandemic levels.

Jeremy Hamblin, Analyst

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

Hajime Jimmy Uba, President and CEO

Thank you, Jeremy.

Benjamin Porten, Investor Relations Director

Thanks.

Operator, Operator

Our next question comes from Andrew Strelzik with BMO Capital Markets. Please go ahead with your question.

Andrew Strelzik, Analyst

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?

Hajime Jimmy Uba, President and CEO

Fort Lee's performance has pleasantly surprised us. We believe the key factor in Fort Lee's success is its strategic location. Being in New Jersey and close to New York and the George Washington Bridge allows us to tap into various traffic markets. Additionally, we've noticed a strong demand for sushi in that area, but there is a lack of revolving sushi options. We feel we are meeting a demand that has previously gone unaddressed.

Andrew Strelzik, Analyst

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?

Hajime Jimmy Uba, President and CEO

How are you managing the operational aspects of the off-premise business, especially as the dining business continues to recover and sales increase? Additionally, are you noticing that the customers from the marketplaces you are currently engaging with are mainly new customers, or is this more of a shift in orders from one channel to another?

Benjamin Porten, Investor Relations Director

The dining business is experiencing a significant rebuild, and you're adding off-premise sales on top of that, especially with an increase in sales dollars. How are you managing the operational aspects of this? In particular, with some of the marketplaces you are currently working with, do you find that those customers are mainly new customers, or is this mostly a transition of orders from one channel to another? Hajime Jimmy Uba, President and CEO.

Hajime Jimmy Uba, President and CEO

Regarding the operational aspects, it has been relatively straightforward for us, and we haven't encountered significant challenges. Concerning our guest mix for off-premises orders, we expect that a substantial number of these orders come from our loyal fans. However, being present on the GrubHub marketplace likely allows us to attract new customers. GrubHub does not share much data, so we can't verify how many newcomers are using GrubHub compared to our existing customers. However, feedback from store managers suggests that the GrubHub listing is indeed attracting new guests.

Andrew Strelzik, Analyst

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 how have you evolved at all your tactics around communicating with the customers? Thank you.

Hajime Jimmy Uba, President and CEO

Can you discuss the dynamics of reaching out to your customer base and creating awareness as the stores reopen and capacity limitations ease in the markets? For example, with Texas moving to 75%, how sensitive are you finding that change? How quickly does demand change when capacity limitations change? Also, how have your tactics for communicating with customers evolved? Thank you.

Benjamin Porten, Investor Relations Director

As we discuss the dynamics of reaching out to your customer base and creating awareness with the reopening of stores as capacity limitations ease in various markets, such as reaching 75% in Texas, how are you finding the sensitivity surrounding this? How quickly does demand change when capacity limitations shift? Additionally, how have your tactics for communicating with customers evolved? Thank you.

Hajime Jimmy Uba, President and CEO

Our marketing response has been remarkable, and people have reacted very positively. After reopening our indoor dining rooms, we quickly reached full capacity in those markets. When we announced the reopening of the conveyor belts in Texas, it generated significant excitement and we immediately saw an increase in traffic levels.

Benjamin Porten, Investor Relations Director

One of the great things that we are experiencing now and this is just adding on to what Jimmy said, but our rewards program is becoming even more useful. As of today, we have over 70,000 members. And these are all people that are quite dedicated. The activation rates with these rewards members are 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 guests 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.

Andrew Strelzik, Analyst

Great. Thank you very much.

Hajime Jimmy Uba, President and CEO

Thank you, Andrew.

Operator, Operator

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

George Kelly, Analyst

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 of times now that that location has exceeded your expectations. 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?

Hajime Jimmy Uba, President and CEO

To answer your second question first, yes, we are very encouraged by the results we have seen in Fort Lee, and we are actively looking for new sites in the Northeast, some of which are already in our pipeline. The reason we selected this particular location in the New Jersey, New York City market is that the Fort Lee market met many of our existing site selection criteria, indicating it would be very successful. And it has indeed been highly successful.

Benjamin Porten, Investor Relations Director

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.

George Kelly, Analyst

Okay. Great. And then my next question is about CapEx and new store development. In 2021, are you still moving forward vigorously with your development plans for 2022 and beyond? Is that a significant portion of the CapEx budget you mentioned?

Hajime Jimmy Uba, President and CEO

Our revolver stands at $35 billion. As of November, we have utilized $3 million, reducing it to $32 million. With access to this capital and our ongoing performance, we have a strong trajectory for fiscal years 2021 and 2022 to sustain a 20% unit growth compound annual growth rate. We will continue monitoring our performance to ensure we manage our balance sheet effectively, and at this moment, we are indeed seeing 20% growth. While we have the $32 million revolver, our capital position remains solid. We are thoroughly evaluating all possible scenarios regarding the pandemic's impact, and this is actively being discussed among the U.S. Board of Directors. Our last decision regarding capital was to increase our revolver size. However, we are considering all options to ensure we are prepared to make the best decision at the right time, and we are genuinely excited about our prospects.

George Kelly, Analyst

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 restaurant, 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?

Hajime Jimmy Uba, President and CEO

Our pricing strategy is crucial to our business mission. A significant part of our consumer appeal lies in our competitive price point and the accessibility to a large market. Therefore, we remain very cautious with our pricing. Historically, our only price adjustments have been in line with minimum wage increases, and these increases have been minimal—typically around five, ten, or twenty-five cents. Regarding the summer, you might be referring to our Texas markets. Although there have been no statutory minimum wage increases in Texas since we entered that market, competitive hiring rates have effectively raised the minimum wage needed to keep our workforce, which prompted us to increase prices for the first time in Texas. Moving forward, we intend to continue this strategy of adjusting our prices in conjunction with minimum wage increases, keeping these adjustments modest and solely aimed at offsetting the increase in minimum wage. We do not plan any pricing changes to boost our margins.

George Kelly, Analyst

Okay. Great. Thank you.

Hajime Jimmy Uba, President and CEO

Thank you, George.

Operator, Operator

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.

Hajime Jimmy Uba, President and CEO

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

Operator, Operator

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.