Earnings Call Transcript
KURA SUSHI USA, INC. (KRUS)
Earnings Call Transcript - KRUS Q4 2021
Operator, Operator
Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Kura Sushi USA, Inc. Fiscal Fourth Quarter 2021 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode and the lines will be opened for your questions following the presentation. Please note that this call is being recorded. On the call today, we have Jimmy Uba, President and Chief Executive Officer; Steven Benrubi, Chief Financial Officer; and Benjamin Porten, Vice President of Investor Relations and Business Development. And now, I would like to turn the call over to Mr. Porten.
Benjamin Porten, Vice President of Investor Relations and Business Development
Thank you, operator. Good afternoon, everyone, and thank you all for joining. By now, everyone should have access to our fiscal fourth quarter 2021 earnings release. It can be found at www.kurasushi.com in the Investor Relations section. Before we begin our formal remarks, I need to remind everyone that part of our discussion 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 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 Uba, President and Chief Executive Officer
Thank you, Ben, and thank you, everyone, for joining us today. I'm delighted to see the continued momentum in our business recovery despite the challenges presented by COVID and its variants. On a high level, we generated meaningful top line growth during our fiscal fourth quarter, including comparable sales growth of 4.9% versus pre-pandemic fiscal 2019 figures. We believe this is a testament to the strong connection our guests feel to our brand because they are returning to get excited for their favorite menu items or new guests that are amazed by the uniqueness of the Kura experience. Moreover, we delivered sequential improvement in profitability over the previous quarter, resulting in restaurant level operating profit margins of over 16%, strongly narrowing the gap to our pre-pandemic performance. Let me provide more color on our sales performance. We began the quarter with operating restrictions, limiting our foot traffic in restaurants to 50% indoor dining capacity for the first 2 weeks of June. As the California market contains half of our system base, these restrictions were a meaningful revenue headwind. However, I'm pleased to say that we overcame this initial setback with fourth quarter revenue of $27.9 million, an increase of over 50% as compared to the previous quarter's revenue of $18.5 million. In our previous earnings call, we mentioned that our general system-wide comps following the end of the capacity restrictions exceeded those of fiscal 2019. This continued through the quarter, ending with system-wide comps of 4% to 4.9% as compared to pre-pandemic fiscal 2019 figures. Our restaurants at the market, in particular, which had no operating restrictions regarding Q4, performed phenomenally with comps of 17.2% as compared to fiscal 2019. As we look to fiscal 2022, we are pleased to see this strong momentum continue. Our Q4 has historically been our stronger quarter. September sales remained very robust at $9.6 million as compared to August revenue of $9.9 million. This trend continued in October with sales increasing further to $10.3 million. Through the first 2 months of Q1 of fiscal 2022, we've generated comps of 22.2% as compared to fiscal 2019 with key markets of California up 13.6% and Texas up 31.6%, buoyed by the benefit of an additional weekend in October 2021. Strong sales we've seen throughout Q4 and onward are particularly notable for 2 reasons: the first is that we've seen minimal deceleration in sales in spite of the resurgence of COVID with the delta variant beginning in August. The second is that in our effort to offset inflation, we implemented high single-digit pricing at the start of September, making it the single largest operating event in our corporate history. To be clear, we have seen pushback for budgetary concerns, but guests have indicated that even after this pricing, Kura remains an excellent value. Now even, our prices remain substantially below those of many peers in the fish industry, and we continue to reinvest our operational efficiencies into our premium ingredients for an unbeatable value on a dollar-to-dollar basis. I was proud to see that our customers recognize that our brand goes beyond our unique dining experience and that the food we serve is truly an excellent value. Now I would like to discuss off-premises, which continues to represent an incremental sales opportunity. In spite of the opening of our entire system with the Kura experience, our Q4 off-premises revenue held strong at $1.4 million as compared to the previous quarter's off-premises revenue of $1.8 million. Our fourth quarter off-premises mix of 5% was lower than Q3's 10% mix, but this is largely due to greater sales overall in Q4 driven by increased seating capacity in California. We continue to expect an off-premises mix of mid-single digits going forward. Like our restaurant industry peers, hiring and retention is top of mind for us. I'm proud of the efforts made by our operations and recruiting teams especially upon the June 15 relaxation of indoor dining capacity restrictions in California. With half of our system in California, moving from 50% capacity to 100% capacity required increasing our workforce at unprecedented speed. Due to the round-the-clock efforts by our operations and recruiting teams, we were able to be almost completely fully staffed in time for the capacity expansion, setting us up for the sales recovery we saw throughout the quarter. Of course, we've hardly been resting on our laurels since this major push. Earlier in the pandemic, our low employee turnover rates were a point of pride, and we are making every effort to return to our pre-pandemic figures. As simple as it sounds, we believe the Q2 employee retention is being assessed on how much people want to work here. To this end, we are fundamentally reevaluating our training protocols and working on a systematic, transparent path for career advancement. These projects will be critical to our continued success as we continue our rapid growth, and we need our employees to grow alongside us. A strong store management team is built on our internal candidates, and we want employees to know there are meaningful long-term opportunities for everyone with clear guidance on working towards them. To bolster this effort, we are pleased to announce the hiring of Arlene Petokas as our Chief People Officer, who joined us in October. Arlene has had an extensive career in the restaurant industry working with brands like Del Taco, CKE, and most recently at Farmer Boys, where she served as their Chief People Officer. We are confident we will benefit tremendously from Arlene's expertise, especially as we navigate our growth through a changing landscape in the hospitality industry. Technological innovation and automation have been a major focus in our industry since the pandemic, and we are fortunate that these very things have been part of the DNA of our company since its founding in Japan almost 40 years ago. Introducing tech-driven efficiencies has been fundamental to our business. And the pandemic has highlighted its importance. We've redoubled efforts during the last fiscal year, we created our off-premises channel and the new mobile app that integrates our reward program, and implemented new technologies like CrunchTime and EcoTrac. These investments in technology continue to be key to our strategy. Our pilot programs, including table-side payment and table-side drink ordering, continue to expand and we hired our first IT Director to accelerate our projects. Other stakes include adopting Square for all credit card processing, which will give us unprecedented insights into our guest interactions since every non-cash transaction will now be captured by Square. Our rewards program growth momentum continued in Q4, with membership growth of over 65% over the quarter for a total of 240,000 members at the end of fiscal year 2021. We will also implement additional heating technologies used by our parent company, pending ATL and NSF certification for commercial use. On the development front, 2021 was the most productive year in the history of the company. We closed the development plan with our June opening in Bellevue, Washington, totaling 7 new units, representing almost 30% unit growth and bringing our system total to 32 units. Our development team did exceptional work, and we believe the fiscal 2021 vintage may be one of our strongest closes yet. In fact, Bellevue and Fort Lee are already among our top 3 performing restaurants. Most of these openings being in new markets underscore a broader view of Kura Sushi and the portability of our concept. In terms of our plans for the current fiscal year, we expect to have an even busier year than 2021 with a target of 8 to 10 new restaurant openings. We have been extremely pleased with the performance of our first new unit in fiscal 2022, Stonestown Galleria in San Francisco, which opened in October. Besides Stonestown, we have executed leases for 9 units, all of which are under construction. Our geographic strategy continues to be a mix of new markets and in-fills. Brand new markets this fiscal year are Arizona, Massachusetts, and Pennsylvania. We continue to believe our whitespace potential is larger than ever due to pandemic-driven restaurant closures, particularly the closure of Japanese restaurants, and we will commission a new whitespace study once COVID is finally behind us. We are pleased with our growth momentum and are excited to bring the Kura experience to new guests across America. Last year was the most difficult year in recent memory for our industry and that was certainly the case for us as well. However, we were fortunate to have the financial support of our parent company through their $45 million revolving credit facility, which allowed us to make some strategic decisions for our long-term success. As I mentioned earlier, ongoing CapEx investment resulted in our busiest development year ever, positioning us to recover much more quickly as we exit the pandemic. As the revolver provided financial strength, we were able to focus our negotiations with landlords on long-term favorability, including lease extensions on several of our most profitable units. The pandemic has transformed our operations; we are discussing new revenue opportunities like off-premises and have deepened our talent bench. We have been fortunate to welcome our new CFO, new COO, our first CDO, and our first CTO. In July, we conducted a follow-on offering with net proceeds of over $53 million through the sale of 1,265,000 Class A shares. Again, I would like to thank all of my team members for their incredible work, as well as our parent for the financial support and strategic freedom the revolver provided, which resulted in a transaction that exceeded our expectations. With this raise, we have abundant capital to continue our aggressive plans and are more excited than ever about our future. With that, let me turn the call over to Steve to briefly discuss our financial results and liquidity.
Steven Benrubi, Chief Financial Officer
Thank you, Jimmy. For the fiscal fourth quarter, total sales were $27.9 million as compared to $5.5 million in the past year period. We believe the measurement of comparable sales growth is most relevant versus the pre-COVID period of 2019. On that basis, comparable sales grew by 4.9%, with California down by 6.8%, largely due to the early June capacity restrictions, while our Texas market increased by 17.2%. Turning to costs, food and beverage costs as a percentage of sales were 30.8% compared to 33.3% in the prior year quarter, reflecting largely normalized performance as sales volume improved and inventory spoilage decreased. Labor and related costs as a percentage of sales decreased to 29.9% from 60.3% in the prior year quarter, primarily due to higher sales leverage and a $1.2 million employee retention credit recognized under the Cares Act extension. Excluding the credit, labor and related costs would have been 34.3%. The decrease as a percentage of sales from the prior year quarter was primarily due to the effect of lower sales and minimum staffing needed to operate our restaurants at reduced capacities in the fourth quarter of 2020. Occupancy and related expenses as a percentage of sales improved to 6.8% from 30.6% in the prior year quarter, primarily due to higher sales leverage. Other costs as a percentage of sales decreased to 12.9% compared to 26.8% in the prior year quarter, also due to higher sales leverage. General and administrative expenses were $5 million compared to $3.1 million in the fourth quarter last year. Excluding the impact of an $800,000 litigation accrual, general and administrative expenses would have been $4.2 million. This increase was primarily due to compensation-related expenses as we made additions to our team to support our accelerated growth plans. As a percentage of sales, adjusted general and administrative expenses improved to 15.2% compared to 55.5% in the prior year quarter. Operating loss was $800,000 compared to an operating loss of $6.8 million in the fourth quarter of 2020. Restaurant-level operating profit as a percentage of sales was 16.4% compared to an operating loss as a percentage of sales of 41.6% in the fourth quarter of 2020. Adjusted EBITDA was $600,000 compared to a negative $5.4 million in the fourth quarter of 2020. Income tax expense was $18,000 compared to an income tax benefit of $5,000 in the fourth quarter of 2020. Net loss was $800,000 or $0.09 per diluted share compared to a net loss of $6.8 million or $0.82 per diluted share in the fourth quarter of 2020. Adjusted net loss was $1.4 million or $0.15 per diluted share compared to adjusted net loss of $7 million or $0.84 per diluted share in the fourth quarter of 2020. Turning now to our cash and liquidity. At the end of the fiscal fourth quarter, we had $40.4 million in cash and cash equivalents, and no debt as we paid down our outstanding balance of $17 million on our revolver during the quarter. During our fiscal fourth quarter, we also successfully completed our follow-on offering of 1,265,000 shares of our Class A common stock for net proceeds of approximately $53.5 million. The cash not only allowed us to pay down debt on our revolver but also provides us with the capital needed to execute on our fiscal 2022 growth plans and perhaps beyond. Turning to our annual outlook for this fiscal year. We are providing the following guidance. We expect total sales between $130 million and $140 million. We expect general and administrative expenses as a percentage of sales of approximately 17%, and we expect the opening of 8 to 10 new units with net capital expenditures per unit of $2.1 million. It bears mentioning that these expectations assume that we experience no further operating restrictions or material downturns in the pandemic situation. Our expectations are based on the recent results that we have seen in the fourth quarter of fiscal '21 as well as our performance to date in the current first quarter of fiscal '22. And while we believe the above expectations are appropriate given our current operating environment, the restaurant industry remains highly vulnerable to COVID-related volatility. Now I'll turn the call back to Jimmy.
Hajime Uba, President and Chief Executive Officer
This concludes our prepared remarks. We are now happy to answer any questions you have. Operator, please open the line for questions. 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, Operator
Our first question comes from Andrew Strelzik with BMO.
Andrew Strelzik, Analyst
All right. Great. Congratulations on the momentum you’re experiencing in the business. I wanted to begin by understanding the pricing you mentioned in relation to the inflation you’re anticipating. What are your expectations for commodities and wages in 2022? How much does the high single digits cover?
Hajime Uba, President and Chief Executive Officer
Thank you for your question, Andrew. Before we answer your question, I would like to make a quick correction to our prepared remarks. We have 9 executed leases, not 7. So 9 executed leases besides Stonestown. I just want to make sure with you guys before we answer your question. Steven, could you answer Andrew's question?
Steven Benrubi, Chief Financial Officer
Sure. I'll speak a little bit to the pricing and Jimmy, give it over to you for further context. But just to reiterate, we made on average high single-digit pricing increase effective September 1. We took into account the competitive environment in every one of the metro areas we operate in. And we also disconnected a little bit some of our state level pricing and looked at it more on a market basis where the Dallas market, let's say, may merit or command different pricing from Houston or Austin, for instance. So that was a change in approach for the company and also something that we think better reflects where we stand in the market. And we feel, as Jimmy noted, we're still in a great value positioning nonetheless, having taken that. And we have been very encouraged in the first couple of months of Q1 about just how much that pricing has offset the inflationary pressures that have come primarily from food and labor. At the same time, we know there's a lot of volatility still in both of those categories as well as some supply chain challenges that we feel like we're dealing with very well. But nonetheless, with the outlook still a little bit unclear as to where food and labor may go for the rest of the year, we're not in a position yet where we'd want to get into too much detail about what we think the puts and takes are between the pricing and those costs. But we'll say that early indications are positive. We're pleased with the leveraging off the sales with the increase that we took on September 1.
Andrew Strelzik, Analyst
Okay. That's helpful. And then in the press release and the prepared remarks, there was some conversation around the efficiencies that you're realizing. And I'm just curious if you can kind of frame where you're seeing the biggest benefits in particular? If there's anything new that you've kind of unlocked going forward? And just a little more color around what you're doing on that side would be fantastic.
Steven Benrubi, Chief Financial Officer
Yes. To start, I want to highlight that we are very pleased with our ability to manage staffing levels in our restaurants. Unlike others in the industry, we are not facing significant labor shortages. Currently, our restaurants are fully operational. However, we do have many new employees, and we are working on improving efficiency as they undergo training. Additionally, with the opening of new restaurants, there is a natural learning curve. Jimmy can provide more insight into the efficiencies we are achieving through various initiatives, such as table-side payment and drink ordering procedures.
Hajime Uba, President and Chief Executive Officer
So please allow me to add something in Japanese. Ben will translate.
Benjamin Porten, Vice President of Investor Relations and Business Development
As Steve mentioned, the most important projects in our immediate initiative pipeline are the table-side payment and touch panel drink ordering. We believe that these initiatives will significantly reduce the workload for servers, which will enable us to improve our labor efficiency. Regarding margin growth, we see this as our greatest opportunity because the margin growth we experienced in the last quarter was driven by sales leverage. As we turn tables more quickly and serve more guests each day, we anticipate this will be a significant contributor, particularly in our mature stores.
Andrew Strelzik, Analyst
Yes. That makes sense. And then if I could just squeeze one more in. I'm just curious kind of as you look at the volume recovery, the strength of the performance of some of the new units, and maybe it's too early, maybe it's just not enough data points yet across the number of locations you'd like to see. But I'm just curious if you think the economic model for new units that you had kind of laid out over the last couple of years, do you still think that's the right way to think about the new unit performance? Or do you think maybe we're in a better place now than we have been? I obviously understand the inflationary environment, but just kind of thinking about some of the comments, and I'm wondering how you think about that.
Steven Benrubi, Chief Financial Officer
Sure. Yes. I think...
Hajime Uba, President and Chief Executive Officer
Go ahead.
Steven Benrubi, Chief Financial Officer
Okay. I'll speak a little bit. We have been so encouraged by the tremendous volumes that we've seen, particularly in our new markets like Bellevue, Fort Lee, and Troy. We think there is clear evidence that the portability of our concept is extremely strong and that the appeal is nationwide.
Hajime Uba, President and Chief Executive Officer
In terms of the reasons that we think that we've seen such success in our new store openings for fiscal '21, the first would be we're taking a more data-driven approach to our site selection. And with every new unit that we're opening, that improves our data set, especially because we have a relatively small system base. And so our analysis becomes more and more sophisticated with each store opening. Our marketing teams and opening teams have also done excellent work in terms of ensuring that every opening is absolutely up to our quality standards.
Operator, Operator
Our next question comes from the line of Jeremy Hamblin with Craig-Hallum Capital Group.
Jeremy Hamblin, Analyst
And congrats on a great job. I wanted to come back to menu pricing and kind of check for a second here. So you definitely have great relative value. I think that's why you haven't seen a ton of pushback. In terms of the average check for kind of quarter-to-date, FY '22 versus 2 years ago, where is average check today versus 2 years ago?
Steven Benrubi, Chief Financial Officer
Yes. So Jeremy, this is Steve. I will start by discussing some reasons we are encouraged by the ongoing reception from our customers following the pricing change. Looking at our sequential performance compared to 2019, we saw high single-digit growth overall in August. After the price increase took effect, we experienced nearly 19% growth in September and over 20% in October. This clearly shows we are outpacing the price change with further sequential growth in our comparisons. Additionally, we will be able to provide a more detailed analysis of metrics such as average check and traffic at the end of the quarter. However, we are feeling very positive about the strong continued support from our customers based on what we've observed in performance since the price adjustment.
Jeremy Hamblin, Analyst
Fair enough. Maybe I can ask a slightly different question then to get some kind of relative performance. So if California in Q4 was down 6.8%, Texas up plus 17.2%. Where do those markets stand quarter-to-date? Just trying to get a sense for how California is trending?
Steven Benrubi, Chief Financial Officer
Sure. I mean Texas continues to be the strongest market overall. But California, that down 6.8%, you may recall, the first half of June, we were still dealing with dining capacity restrictions in the restaurants. And so we were running low single-digit negative in California the last couple of months of Q4. In Q1, we moved immediately to low double-digit positive in California in both September and October. And then in Texas, we're talking about north of 25% comp performances in each of those months. And so really, we're very pleased with the trend move and just on an absolute basis, what's happening there. And again, those are against the '19 numbers, just to be clear, on comps.
Jeremy Hamblin, Analyst
Understood. In terms of your other operating costs, there was significant sequential growth. Revenues increased by 51% sequentially, while other operating costs rose by 33% sequentially. I'm interested in how your business model has evolved with more off-premises business, along with rising utility costs and other factors. I would like to understand your perspective on these additional operating costs, particularly regarding their normalization or projected range for 2022.
Steven Benrubi, Chief Financial Officer
Sure. I'll address the earlier question regarding the economic model. Throughout the pandemic and the subsequent recovery, we see no indication that we can't return to the pre-pandemic restaurant economics that this business was built on. If you analyze the first quarter comp performance recovery, the early signs are quite promising about the potential for our overall restaurant volumes moving forward. Given those figures, it's clear that we anticipate restaurant volumes will increase. Additionally, there has been significant progress on the labor and cost of goods sold side. Adjusted figures show that labor costs decreased by about 200 basis points compared to the previous quarter, now standing at 34.3% of sales, while COGS is at 30.8% of sales. Although we acknowledge inflation in other costs, they represent a much smaller portion of our expenses once we move beyond the prime area. We considered this when adjusting our pricing to not only offset these impacts but to also maintain strong restaurant economics and ensure we remain a high-value concept in our market. So far, we believe we are achieving that.
Benjamin Porten, Vice President of Investor Relations and Business Development
If I may add to the discussion about off-premises, typically, the two additional costs associated with growth in off-premises are packaging and delivery costs. For us, packaging costs are largely balanced out because there is no disposal cost with off-premises orders, whereas for in-store dining, we usually have a 3% to 4% plate disposal rate, which creates margin pressure. Regarding delivery costs, our business is primarily focused on pickup, and we do not subsidize any delivery fees if a guest chooses that option, so there is no cost pressure from delivery either.
Jeremy Hamblin, Analyst
Great. Then just one clarifying question. On the menu pricing, what is your current food cost inflation rate? I mean I think that the 30.8% in Q4 is actually the lowest food and beverage costs you've ever had in any quarter. And I would think maybe with the price increase that you're probably tracking slightly below 30% food and beverage costs now.
Steven Benrubi, Chief Financial Officer
Yes. I'll give a little more color on the 30.8%. Our sales mix by geography normalized a little more in the fourth quarter as well once California came fully back online with 100% indoor dining capacity. Our pricing on average is higher in California than the Texas market, for instance, because of a much different labor environment. So if you were to look at California restaurant P&Ls overall, you see a better COGS number, and you're going to see higher labor spend. It's just a fact of doing business here. As more and more of our sales now have gotten back to California and that's more normal for us, that has helped the move in COGS as a percent of sales. In terms of current rates, I'm just going to fall back again on the high single price move that we made. We're very pleased with how that's helping us offset the impact of cost. We're also well aware that there can be shifts that happen very quickly from month to month in food. Now we do have a very diverse menu, as you know. Our top 5 commodities are around only 25% combined of our total food cost. So that diversification helps us. But when things like labor or freight, which are going to be a factor for almost all of the food that comes in and other macro factors, it can move potentially significantly. We just feel like we're going to have better visibility to where the food cost situation is down the road and maybe be able to give some more granularity around future expectations after that.
Operator, Operator
Our next question comes from the line of Sharon Zackfia with William Blair.
Matthew Curtis, Analyst
It's Matt Curtis on for Sharon. I have a question on overall restaurant level margins. If you look at restaurant level margins, where you are now versus where you were pre-pandemic, I think you had adjusted restaurant level margin of about 20% in fiscal 2019. I'm curious as to how much of that gap do you think you can close in fiscal 2022?
Steven Benrubi, Chief Financial Officer
I'll maybe reiterate our thoughts. But we don't see any reason why we can't completely recover back to the kind of restaurant level margins that we had in the business pre-pandemic. What clouds the future may be a little bit or we want to hold on to and see some more experience is a little bit of the opaque nature of the cost environment in both food right now, and to some degree, in labor now. We're pleased with where things are going; we feel very good about the progress we made to get to the 16.4% margin in Q4 in spite of the fact that the first half of June had a very constrained California still in terms of indoor dining capacities as well as, as I mentioned, a lot of new labor coming on board and some learning curves and efficiency building that needs to happen with some of our newer team members. Putting that in context, we think getting to that 16.4% was a very significant and positive move and obviously narrowing quickly on what our historical best was. But we're just not at a point where we think it makes sense to try to predict specific dates or times when we get back to that historical level, but we're very confident it's there for us to achieve.
Benjamin Porten, Vice President of Investor Relations and Business Development
Just to add to that, the restaurant level operating profit margin for the prior quarter was 5.8%. The 16.4% that we saw in Q4 was tremendous growth, really driven by the increased sales leveraging. We've been very encouraged by the revenue that we're seeing quarter to date.
Matthew Curtis, Analyst
Okay. Understood. Following up, I guess, on the labor and commodity inflation. I mean understanding you've just taken pricing, which is helping to offset that. Could you also talk about other ways you may have been mitigating this either through the optimization of the conveyor belt offerings or anything else?
Steven Benrubi, Chief Financial Officer
I'll begin by highlighting a few key areas. We've previously discussed the enhancements made to our support infrastructure, particularly the leadership in our COO role with Sean joining us a couple of months ago. He has been actively involved with our supply chain team, exploring opportunities as we expand our business and increase our volumes, aiming to optimize our costs and structure related to food. We also have initiatives like table-side payment and drink ordering that will enable our teams to concentrate more on customer service and enhance the Kura experience in our restaurants, which we believe will benefit us moving forward. Additionally, we've invested in training programs for our team members to boost their efficiency and customer service skills. There are numerous initiatives underway aimed at improving our operational efficiency. Our brand has historically relied on a well-established back-of-house robotic system, developed through years of experience in Kura Japan, which has been very effective. While we may not have many obvious opportunities for further efficiencies, we are constantly seeking ways to improve through the various initiatives I’ve mentioned.
Matthew Curtis, Analyst
Okay. Got it. And then on your G&A guidance for fiscal 2022. I was hoping you could break out the components of the dollar increase in G&A. I mean it sounds like it includes technology investments and things like table-side payment and drink ordering and other things. I was wondering if you could perhaps separate that from the core G&A dollar growth you're seeing next year?
Steven Benrubi, Chief Financial Officer
Yes. I'll discuss the key components that represent the majority of what's happening. It starts with our people. On the leadership side, we've welcomed Sean as COO and Arlene, our Chief People Officer. Additionally, we've hired a Director of IT, as we've previously relied on third-party services for that function. We've reached a point where we need to build our IT capabilities in-house. We're also planning to add a couple of staff members to support IT under that director. Last year, we made some important investments in personnel that are already yielding strong results, particularly in recruiting for restaurant positions. We've expanded our store opening team as well since we now aim to open 8 to 10 new restaurants, requiring two teams to work simultaneously on this effort. The benefits of these additions were evident when California reopened fully on June 15, which allowed us to recover sales and achieve comp store sales through October, made possible by having strong staffing levels at nearly all our restaurants. Those involved in recruiting and the new opening team played a crucial role. Also, as we grow, we face increased travel needs to visit restaurants, which was limited during the COVID period. There are additional costs associated with our growth, like insurance and D&O. As we've hired more people to support an aggressive growth strategy, the responsibilities in some roles have expanded, affecting our hiring rate compared to when the company was smaller. All these factors account for the majority of what is changing in G&A. We’re proactive in positioning our business for intelligent growth.
Matthew Curtis, Analyst
Okay. So I guess would it be...
Steven Benrubi, Chief Financial Officer
And then the final point...
Matthew Curtis, Analyst
Sorry, go ahead.
Steven Benrubi, Chief Financial Officer
If you don't mind, is that we really do look at what we've done with these additions to the team is something that can serve us for a multiyear period. There's always going to be growth in G&A on an absolute dollar basis in a growing business. But we feel like the fiscal '22 additions I've talked about here, that should be followed by more nominal growth or more modest growth, certainly in the G&A in the next several years because we've really positioned ourselves with a team that can handle things for a while.
Operator, Operator
Our next question comes from the line of George Kelly with ROTH Capital Partners.
George Kelly, Analyst
Congratulations on a successful quarter and the momentum you're experiencing. Following up on the previous question, with the infrastructure you're developing, considering reaching 8 to 10 new restaurants this year is significant. I understand there are challenges related to lease signing and construction timelines. With your infrastructure now established, do you feel that looking ahead a couple of years, your team is prepared to accelerate growth beyond that 8 to 10 restaurants in future periods?
Hajime Uba, President and Chief Executive Officer
Okay.
Benjamin Porten, Vice President of Investor Relations and Business Development
We wanted to mention that as Steve had mentioned, the G&A investments that we're making now are really investments that are going to serve us for multiple years. In regards to the 8 to 10 restaurants that we have for this pipeline, over the last fiscal year, we've really made meaningful additions to our construction team, real estate team. They've grown tremendously, both in terms of talent and additional members. Given the lead time for an opening, as you've mentioned, the investments we make now are what's going to allow us to have that much bigger pipeline in coming years?
Hajime Uba, President and Chief Executive Officer
The investments we are making now will benefit us for many years. Regarding the 8 to 10 restaurants in our pipeline, we have significantly strengthened our construction and real estate teams over the past fiscal year, expanding both in talent and personnel. Considering the time required to open new locations, the investments we are making now will enable us to have a much larger pipeline in the future.
Benjamin Porten, Vice President of Investor Relations and Business Development
And then the opening team's line item also falls under G&A. By growing our opening team and having 2 opening teams, we'll now be able to open stores in parallel. This is also something that wasn't just useful for us in the preceding year. It's going to serve us very well for the coming years.
George Kelly, Analyst
Okay. Okay. Great. And then next question again on your new store openings. With the success you've seen, I mean, I see wait times, sometimes over 200 minutes or 300 minutes even at some of your new stores. Does that cause you to rethink the size of your store at all? I mean the obvious kind of question is could your stores be bigger? But are there any other format changes that you're contemplating on this next batch of stores?
Hajime Uba, President and Chief Executive Officer
Given the success with your new store openings and the long wait times occasionally exceeding 200 or even 300 minutes at some locations, are you considering changing the size of your stores? Is the possibility of larger stores the only consideration, or are you thinking about other format changes for the upcoming batch of stores?
Benjamin Porten, Vice President of Investor Relations and Business Development
We're always looking to what's been particularly successful with any new store opening, and we want to keep a flexible format generally going forward. But it's not a simple one-to-one relationship between a larger store size and its earning ability. Just as an example, Fort Lee, which has done tremendously well, is quite small. So we're as always, we're really going to be approaching this on what's best for that specific market. Just as an example, with the recent Stonestown opening, that was a location that we've been looking at for several years. We were very confident that we'd be able to draw a ton of traffic. With compelling rent, we were open to opening a larger store. We're always thinking holistically in terms of the return on investment. We meet periodically as the strategy and development committee, and when it's appropriate, we are opening larger stores.
Hajime Uba, President and Chief Executive Officer
We approach this with a focus on what is best for each specific market. For instance, the recent Stonestown opening was a location we had been considering for several years. We were confident that we could attract a significant amount of traffic. With appealing rent, we were willing to open a larger store. Our thinking is always comprehensive regarding the return on investment. We meet regularly as a strategy and development committee, and when it makes sense, we open larger stores.
Benjamin Porten, Vice President of Investor Relations and Business Development
We believe our flexible real estate footprint gives us a significant competitive edge because we are not restricted by a predetermined size or shape. We avoid ruling out potentially great spaces just because they don't meet a specific 5,000 square foot minimum. We want to keep all opportunities available to us, especially considering the substantial whitespace we have. Regarding wait times, the implementation of table-side payment is a top priority for us. We believe this will significantly reduce wait times and enable us to serve more guests. Additionally, high wait times influence our in-fill strategy, as markets with longer wait times become higher priorities for us.
Hajime Uba, President and Chief Executive Officer
We see tremendous opportunities, especially considering how much potential we have. To revisit your earlier point about wait times, improving table-side payment is a top priority for us. We believe this will significantly reduce wait times and enable us to serve more guests. Additionally, wait times influence our in-fill strategy; if they are particularly long, that market will be prioritized accordingly.
Benjamin Porten, Vice President of Investor Relations and Business Development
So one example of the technology that we're planning on bringing over from the parent, pending ETL and NSF certification, would be a robot that helps fully automate the dishwashing process. It moves all the plates from the staff, collects the plates, and directly places them into the dishwasher. Really, all the employees need to do is just grab clean plates, and it's not something that you ever need to think about again. This is particularly important because if you're not able to keep up, that does limit your throughput. You always need clean plates to continue to serve guests. Dishwashers are one of the harder positions to staff, and they're an extremely critical position for the exact reason that I mentioned that they sort of limit your throughput. We're particularly excited about that one. Looking at the near term, the table-side payment and the touch panel drink ordering are the ones that are closest to full rollout.
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