ONE Group Hospitality, Inc. Q2 FY2021 Earnings Call

Greetings, and welcome to The ONE Group Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to Tyler Loy, please go ahead.

Thank you, operator and good afternoon. Before we begin our formal remarks, let me remind you that part of our discussion today will include forward-looking statements. These forward-looking statements are not guarantees of future performance, and you should not place undue reliance on them. These statements are also subject to numerous risks or views that could cause actual results to differ materially from what we expect. Please also note that these forward-looking statements reflect our opinion only as of the date of this call. We undertake no obligation to revise or publicly release any revisions of these forward-looking statements in light of new information or future events. We refer you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial conditions. During today's call, we will refer to certain non-GAAP financial measures, which we believe can be useful in evaluating our performance. However, the presentation of these measures or other information should not be considered in isolation, nor a substitute for results reported in accordance with GAAP. A reconciliation of these measures, such as adjusted EBITDA, adjusted net income, restaurant operating profit, comparable sales, and total food and beverage sales of owned, managed, and licensed units to GAAP measures, along with the discussion of why we consider these measures useful, can be found in our earnings release issued today. With that, I'd like to turn the call over to Manny Hilario.

Thank you, Tyler. And hello, everyone. Thank you for joining us today; we sincerely appreciate everyone's continued interest in The ONE Group. I would like to begin by thanking our team members who worked so diligently under challenging circumstances during the height of the pandemic, and who now continue to work exceptionally hard during the recovery period as guests seek out our restaurants. It is because of their commitment to operating the best restaurants in the industry that we move forward today with confidence in the long-term opportunity we see for The ONE Group. Today, I'd like to provide some detail on our recent results and strategic initiatives, and then discuss our robust development plans. Finally, I'll turn the call over to Tyler, who'll walk you through the quarterly financials in greater detail. We are thrilled to report that our restaurants continue to accelerate their performance as capacity restrictions have been eased, coupled with the focused execution of our sales tracking initiatives. We continue to experience industry-leading same-store sales improvements, which for the second quarter resulted in an increase of 38% when compared to 2019—a truly remarkable metric. Same-store sales at STK increased 54.3%, truly impressive considering the already strong performance in 2019. And Kona Grill same-store sales increased 23%, both compared to 2019. In addition, same-store sales increased 59.5% in July, including a 92.8% increase at STK and a 31.9% increase at Kona Grill, all compared to 2019. The stellar performance validates our position that guests are looking for the high-energy, differentiated experience that our Vibe Dining offering delivers. As I said earlier, our teams are doing a phenomenal job providing this experience, and I couldn't be more proud of them. Also impressive, our second-quarter U.S. average weekly sales were $288,000 for STK compared to $197,000 in the same period in 2019, and $103,000 for Kona Grill compared to $84,000 in the same period in 2019. We were then able to leverage our top-line growth into a 22.6% restaurant-level profit margin. For the quarter, STK restaurant-level margins were 27.4% and Kona Grill's restaurant-level margins were 17.2%. These strong margins are a result of our focused self-initiatives, strengthened execution, and strategic cost management within our four walls. Additionally, we recorded $12.9 million in adjusted EBITDA for the quarter. This is the highest quarterly adjusted EBITDA we have achieved in the history of our company and brings our year-to-date adjusted EBITDA to $19.4 million. Turning to our sales initiatives, celebratory occasions have always been a driver of the business and have allowed us to showcase our innovation in culinary and our strength in digital marketing. Throughout the second quarter, we ran several promotions around Easter, Mother's Day, and Father's Day at Kona Grill and STK. As a result of these efforts, we achieved record-breaking sales during these holidays. Additionally, we continue to drive sales through our elevated brunch program, which is now our core business in both of our concepts, as it allows us to use our capacity to capture strong daytime demand on Saturdays and Sundays. Prior to the pandemic, Monday to Wednesdays were typically for business travel diners and corporate private events, especially at STK. Due to the lower levels of business travel, we have been able to adapt by focusing on social occasions, particularly date nights. In addition, we continue to innovate our activations and culinary offerings such as the Vibe from Around the World menu at STK to drive interest and repeat visits. These social occasions have been highly successful in more than replacing lost sales from business dining. Over the long term, we do expect business events will return and further enhance our unit volumes, and we have already begun to see bookings for the fourth quarter of all events. As more restaurants are open at full capacity, our off-premise business still remains a strong and additive layer of sales at both STK and Kona Grill. We look at delivery as a huge opportunity for the brand, with the goal of converting these guests to long-term loyal customers. We attribute our off-premise success to the investments we have made in state-of-the-art technology, people, operational execution, and the marketing initiatives we have in place. Our guests are now able to order for curbside pickup or delivery from nine separate delivery partners. During the quarter, we have several marketing initiatives around delivery targeting trial. We launched a Takeout Tuesday event at STK, which features our popular VIBE burger and fries for just $9.99. At Kona Grill, we offered a $7.99 KG burger and fries for National Burger Month in May. Both of these events were extremely successful in driving off-premise sales. Overall, we believe that both brands have recovered extremely well, and we feel optimistic about their opportunities for continued sales growth for the remainder of the year and beyond. Now turning our focus to development, we have an exciting pipeline of growth through both company-owned restaurants and managed unlicensed deals for the remainder of 2021 and into 2022. We still plan to open 30 new STK and F&B venues between 2021 and 2022. To date, in 2021, we have opened six new venues, all of which are off to an incredible start. These include a managed STK in Scottsdale, Arizona, which opened in January, a licensed STK at the Los Cabos airport in Mexico that opened in May, which we believe will be the first of many future airport locations globally. We continue to be super excited about this platform as weekly sales volume near $200,000 a week. We opened the managed STK and two F&B venues in the Westminster area of London in May at the Curio hotel. Finally, on July 21, we opened a company-owned STK in Bellevue, Washington. This is the first STK to open in the Pacific Northwest, and it's truly one of the most beautiful restaurants in our portfolio. Last week, while still operating under soft opening protocols, we generated over $240,000 in revenues. As of today, there are two additional STKs under construction. They include a company owned STK in Dallas, Texas, and a managed STK in the Stratford area of London. Finally, we have identified The ONE Group's first new open for Kona Grill, a company-owned restaurant in the Salt Lake City, Utah market, specifically in the Riverton area, a high-profile site. Long term, we see a growth opportunity for Kona Grill of over 200 restaurants. We begin our growth journey by establishing the initial target of three to five new Kona Grill locations per year. Kona Grill's annual unit volumes now near $5.4 million, with top quartile level margins, and high demand for new units from high-profile landlords provide a very attractive 40% plus return on investment suburban growth platform for Vibe Dining. For STK, we continue to see our total addressable market of at least 200 restaurants globally. We now believe that Kona Grill, as I discussed earlier, can be at least another 200 restaurants domestically. All this growth will be asset-light, and our company-owned activity will be self-funded through internally generated cash. To conclude, our team has certainly proven their resiliency and they are doing a fantastic job welcoming guests back into our restaurants for a great Vibe Dining experience. Ultimately, our focus on operations and day-to-day execution has proved effective in translating to a strong P&L. We are very hopeful that the trajectory we're calling on will continue to accelerate in the months ahead. Now I'll turn the call back to Tyler.

Thank you, Manny. Let me start by discussing our second quarter financials in greater detail, and then provide an update on our cash and liquidity. For the second quarter, total GAAP revenues were $70.8 million, increasing 324.6% from $16.7 million for the same quarter last year. Included in our total revenues for the quarter are our owned restaurant net revenues of $67.8 million, which increased 310.9% from $16.5 million for the same quarter last year. The increase in revenue is primarily attributable to strong sales momentum as state and local governments eased seating capacity restrictions in the markets in which we operate, along with strong execution of our sales-driving initiatives. Domestic consolidated comparable sales increased 38% for the quarter compared to 2019. For STK, comparable sales increased 54.3% versus 2019, and for Kona Grill, comparable sales increased 23.0% versus 2019. As Manny mentioned, consolidated comparable sales for July increased 59.5% compared to 2019, including a 92.8% increase at STK and a 31.9% increase at Kona Grill. Management, license, and incentive fee revenues were $2.9 million in the second quarter of 2021 compared to $0.1 million in the second quarter of 2020. This increase is primarily the result of local governments easing seating capacity restrictions in the markets in which we operate, coupled with the openings of STK Scottsdale in January, STK Los Cabos Airport in May, and STK Westminster with two F&B venues in May, as well. Owned restaurant cost of sales as a percentage of owned restaurant net revenue were 25.3% in the second quarter of 2021, which were flat to the same quarter last year and in line with the first quarter's numbers. Owned restaurant operating expenses as a percentage of owned restaurant net revenue improved by over 2000 basis points to 52.1% in the second quarter of 2021 from 72.8% in the second quarter of 2020. The decrease was driven by increased sales volumes coupled with actively managing operating costs, particularly managing restaurant labor and implementing operating cost measures. Restaurant operating profit was 22.6% for the quarter, a record high for the company. Again, we've made tremendous progress in running more efficient operations since the beginning of the COVID-19 pandemic, and we plan to continue to execute the current operating model into the foreseeable future. On a total reported basis, general and administrative expenses were $6.1 million compared to $2.4 million in the prior year. This year's results include $1.1 million of stock-based compensation driven by a substantial increase in our stock price during the quarter. When adjusting for stock-based compensation, adjusted general and administrative expenses were $5 million in the second quarter of 2021 and $2 million in the same quarter last year. This year's number reflects accruals for performance-based compensation. As a reminder, the company minimized general and administrative expenses during the second quarter of last year, while our restaurant operations were limited due to the COVID-19 pandemic. As a percentage of revenues, adjusted general and administrative expenses were 7.1% of total revenue in the second quarter of 2021, compared to 11.7% of total revenue in the second quarter of 2020. We incurred approximately $1.1 million of direct costs related to COVID-19 during the second quarter, composed primarily of costs for regular electrostatic cleaning of our venues, personal protective equipment, and sanitation supplies to prevent the spread of COVID-19. This compared to $0.7 million of similar costs last year. Interest expense, net of interest income, was $1.2 million in both the second quarter of 2021 and in the second quarter of 2020. Income tax expense was $1 million for the second quarter of 2021 compared to an income tax benefit of $3.2 million for the second quarter of 2020. Net income attributable to The ONE Group Hospitality Inc. was $13.8 million, or $0.41 net income per share, compared to a net loss of $2.9 million in the second quarter of 2020, or $0.10 net loss per share. Included in this quarter's net income was an $8.6 million gain related to the forgiveness of CARES Act loans. When adjusting for the gain related to the forgiveness of CARES Act loans and COVID-19 related expenses, adjusted net income was $6.5 million, or $0.19 net income per share, compared to an adjusted net loss of $2.4 million in the second quarter of 2020, or $0.08 net loss per share. Adjusted EBITDA for the second quarter attributable to The ONE Group Hospitality Inc. was $12.9 million in the second quarter of 2021 compared to an $824,000 loss in the second quarter of 2020. Our adjusted EBITDA does not include any gains related to the CARES Act loan forgiveness, and marks the highest adjusted EBITDA quarter in the company's history. We've included a reconciliation of adjusted EBITDA and adjusted net income or loss and GAAP net income and loss in the tables in our second quarter earnings. Finally, to touch on liquidity, as of June 30, we have $41.4 million in cash and cash equivalents on our balance sheet, and we generated positive cash flow throughout the second quarter. In addition, on August 6, the company amended its current credit facility with Goldman Sachs. The amended agreement provides for a lower interest rate and extends the maturity date for both the term loan and the revolving credit facility by five years. The amendment provides a revolving credit facility of $12 million and a $25 million term loan. Other key modifications include the removal of many limiting restrictions and the removal of all financial covenants except the maximum net leverage ratio of 2:1. Under the amendment and calculated retroactively, the company would have been compliant with this covenant throughout 2020, including during the toughest times of COVID-19. Finally, with the amendment, we will save $2.5 million in cash interest expense annually, and after cash in hand, we pay only $5 million in net debt. Lastly, on July 13, the company received confirmation that its remaining CARES Act loan of $9.8 million has been fully forgiven by the SBA. As a reminder, due to the uncertainty of COVID-19, other than development, we have suspended all financial guidance for this year, but we'll provide further business updates as warranted. I will now turn the call back to Manny.

Thank you, Tyler, and thank you all for your time today. Let me conclude by saying that although COVID-19 is still not fully behind us, I'm very encouraged by our results to date and our prospects for 2021 and beyond. Our financial position, balance sheet, and operating performance have never been better, as reflected by our record revenues and restaurant operating profits. Above all, I'm grateful for our teammates, who bring our mission to life every day to be the best restaurant in every market where we operate. They do this by delivering exceptional and unforgettable guest experiences to every guest every time. I also want to thank our guests; they have continued with us over this past year, and are coming back to our restaurants and enjoying the Vibe Dining experience they have been craving. We appreciate everyone joining us on the call today. Tyler and I are happy to answer any questions that you may have. Operator?

We will now begin the question-and-answer session. Our first question comes from Nicole Miller with Piper Sandler. Please go ahead.

Thank you. Good afternoon and great quarter. A couple quick ones. The top line recovery is amazing. Can you talk to that relative to capacity? Where do you stand in terms of any mandated restrictions or even just social distancing restrictions you're placing upon your own stores would be the first question.

Thanks, Nicole. I think from a capacity perspective, I would say, for all intents and purposes in the U.S., we're at capacity. So, I mean, we can use the majority of our restaurant space. Obviously, there are still some places where we have to do some social distancing. But in general, we're pretty much where we need to be from a capacity perspective. So, I would say no limitation. Tyler, do you want to give any of the color on that?

Yeah, I think that's right. I think that what we're seeing in most jurisdictions now is a 100% capacity for the time being. And so, we're fully open in most places.

And then also on the top line, just a day part, if you could, thinking about the strength of brunch, which I assume we should take into consideration, not only as a recovery of AUVs but additional sales. If you could talk about the day part or day of week mix in comparison to total sales or the corporate on July, that'd be helpful as well, or even just the most recent quarter. Thanks.

Yeah, I mean, the day parts are strong and stronger. I mean, I think we're very strong across all the parts on all days of the week. I would say that the strongest days of the week for us would be Friday, particularly Friday and Saturday. So, we see tremendous demand for our brands, our properties those days of the week. And then Monday through Wednesday, we've been heavily promoting date nights, which seems to have become a significant going out day part. We continue to leverage that. I would say the strength is across all aspects, and we've seen, as I mentioned earlier, Saturday, Friday, and actually Sunday is now becoming a very significant day for STK and Kona Grill. We believe that our emphasis on brunch has really spurred that on. So, strength across pretty much all day parts, all days, and we think that we're still early on brunch. We still have a lot of opportunity. And as you know, brunch is habitual. So as more people learn about where we could have a great brunch, they will work on their frequency. So, I think that the game relative to brunch is very big. Also, we're encouraged by takeout and delivery business; we haven't really seen a slowdown whatsoever in that business. As a matter of fact, we look forward to continuing promoting that business. I think that's still a great layer of business. So, I would say right now, I don't see really anything but strength in all parts of our business. The only area that has huge opportunity, and probably is not as strong, is events. I think that as we look out into the fourth quarter, we're starting to see a lot of demand for holiday parties. So, I believe that in the fourth quarter, that will be the next layer of business that will sit on top of the underlying business and will even further drive our top lines.

Just the last question, we didn't hear too much on beef. I'm wondering if that's two reasons. I mean, you have some options on cuts, I imagine and even the presentation, but then also a great beverage mix. Can you speak to that? Thanks.

Yeah, actually, interesting. I would say that our big help on costs has been our emphasis on the premium product line. If you go to our restaurants, we have an incredible quality product, and we are able to get pretty good pricing on that product. So, we've actually utilized our promotions to really help us offset the pressure on that part of the market. And as you mentioned, obviously wine, liquor, and beverage in that business really help with the overall margins. So, we've offset some of our pressure on commodities there. We do have pricing commitments on these. We did have protection from some agreements with our vendors. So, we benefited from that in the quarter. We do have agreements in place for pretty much the rest of the year. We obviously have been flexible with our vendors because we don't want them to be put out of business unnecessarily. So, we have given some concessions. I think that's a good partnership and that's how we approach the business. Overall, I think we've made use of promotions; our premium products, and we've added a lot of emphasis on toppers for our steaks to drive additional sales, which we've engineered to be cost-effective for us. So, all in, we have seen a lot of erratic behavior out of the supply chain, but for all intents and purposes, we've managed through that well.

Thank you for your time.

Thank you, Nicole.

The next question is from Mark Smith with Lake Street Capital Markets. Please go ahead.

Hi, guys, a couple of questions for me. The first one that I wanted to ask about was just the off-premise. You guys did a great job over the last year and a half of driving off-premise sales. Can we talk about the conversion of these customers to dine-in? Are you seeing that? Do you want that? And kind of what trends you're seeing from customers?

Thanks, Mark. Fantastic questions. We have seen particularly in markets like San Diego—mid-size markets. We have seen the takeout delivery platform as being a great introductory price point offering to those markets. If you look at our menu, we have crafted the takeout delivery menu to extend from our in-room or dining room menu. So, think of things like we offer cassava, which is a short rib; it has the same short flavor of what we have in the dining room. We've done a good job of utilizing the same products at a lower price point on takeout and delivery. We believe, and we have some anecdotal and factual data, that people are introduced to the brand and then come in to celebrate their birthdays or anniversaries with us because they were introduced to the brand through the takeout delivery business. We do think that takeout delivery has become a complement to happy hour. Remember that we have always used happy hour under the same strategy of introducing guests to the brand. Now we have a one-two punch with takeout delivery and happy hour providing lower price points to introduce people to the brand. Additionally, we are using brunch for this purpose and have fantastic price points on our brunch menu that act as introduction to the brand. Holidays also serve as an opportunity for introducing people to the brand. So, I think those are the four areas where we've fielded requests for customer engagement. We're indeed very happy with takeout and delivery being another arrow in our quiver to introduce guests to our brands.

Excellent. And then you touched on it a little bit, but have you seen any change in trends yet with business travel, even for restaurants like Las Vegas vacation travel? Anything that's maybe helped sales?

Yeah, I mean, the suits are back. I was in New York last week and we started to see people coming in with suits. There's tremendous demand—trying to see that coming into the restaurants—but in terms of how we approach our business, our core demographic is women. Even today, if you go to our restaurants, we have done a fantastic job of driving our dining rooms to be 55% female-driven in both brands, Kona Grill and STK. This has become a big part of our business model. Also, female groups have now become a significant part of our business model, whereas historically there had been more male groups for business dining. Now we're seeing a lot more female groups on social occasions, particularly Fridays and Saturday nights. So, we are beginning to see that lift in our dining rooms. As I mentioned earlier, there is demand for holiday parties, and people are wanting large holiday gatherings. There is big pent-up demand for high-dollar events coming up in the fourth quarter.

Okay, perfect. And then you touched on commodities a little bit, but can you talk about any other places you're seeing inflationary pressure, primarily labor, and what you're doing to retain your good labor?

Yeah, I mean, we mentioned beef; there are other commodities like seafood. We’ve seen a little bit of that. And then obviously labor. It’s well documented—the challenges in the labor environment—and we're obviously not immune to those issues. But we've done a very good job through what we call our rapid deployment strategy of being aggressive about recruiting and bringing employees onboard. As a matter of fact, I just looked at our statistics; we are at about 100% parity on hourly employees and about 105% on salary. So, for all intents and purposes, let’s knock on wood; we've done a very good job of keeping our restaurants fully staffed to what we need. That doesn't mean that every restaurant has the ideal number of employees—there are still some geographies where we have some challenges—within the portfolio, but those are fewer than many. So that's good. In terms of what's happened from an inflation perspective, all the wages are up. Demand for particularly back-of-the-house employees is significant, and there are a lot fewer of those out in the marketplace. So we've had to roll out what we call the perks program for employee benefits. The perks have been very beneficial in bringing people to the company. So overall, we face a tough environment—one of the toughest we've had in terms of labor—but we have executed hard on our strategy. At the end of the day, the best strategy is to retain your employees. I’ve been working closely with the management team to ensure that we hold onto our top talent, particularly GMs and executive chefs, and I think our track record of retaining those key individuals is phenomenal. Also, at the multi-unit level of operations, we have a pretty intact team there. So, I think the ultimate weapon in this environment is retention.

Perfect. And then just one last one for me. I'm happy to see some development happening again with Kona Grill. Can you give us any rough timeline of when you expect to maybe sign leases or have some openings there?

Yeah, so the first one I spoke about in the prepared comments; we do have two additional ones that are literally in LOI and getting close here. So, we will have three within the next several weeks that we will begin to design. The one in Salt Lake City should go into construction here very shortly because we plan to open that location in May of next year. We’ll be working under a very aggressive development schedule there. We are super excited about that. I have to be honest with you: our intent with Kona Grill was to really work on volume and margin. I think the results this quarter got us above where I thought we would have been; our average volume is around $103,000 a week, or $5.4 million annualized, and our operating margins are starting to rise above 17%. I still see a path here to achieve 20% or better margins for Kona Grill. With landlords continually reaching out to offer incredible real estate opportunities at great values, we are thrilled to restart development again. This brand is super strong, and I think some of the things we've done with the bar program, the music program, and the addition of brunch have contributed significantly because we are in several suburban projects where people need things to do on weekends. We've also targeted patios for our future Kona Grills, so you can expect to see a strong emphasis on patios and rooftops to drive great economics with low real estate costs.

Excellent. Thank you, guys.

Thanks.

The next question is from Mitchell Sacks with Grand Slam Asset Management. Please go ahead.

Hey, guys. Fabulous quarter, by the way.

Thanks, Mitch.

If you could talk a little bit about the opening schedule on the STKs, as you kind of see it rolling out over the next few quarters. And then the second question has to do with you talking about the restaurant-level margins of the Kona. If you can just kind of talk about what kind of target restaurant-level margins you might have at the owned STKs?

So, the schedule—you mentioned Dallas is under early construction, but that's under construction. We do have the Stratford location also under construction, which is a managed location. We have San Francisco kicking off here very soon. So, it'll be a horse race between San Francisco and Dallas to see who opens first. We have a couple of additional deals that are heavily in lease negotiation. Think of Dallas, San Francisco, and Stratford being within the next call it three to six months. As for the margins for STK, I think Tyler commented on this quarter: we worked with a target of 27% margins. I think it’s reasonable to expect our targets to be in the 27% to 30% range. As we increase volume in super high-volume restaurants, we can break 30% relatively easily. Our cost structure is great; our cost of goods is fantastic, as you probably saw in the financials. Labor is becoming a small percentage on our P&L. Our prime costs at STK are probably around 45%, which is an incredible cost structure. We’re very bullish about that. Our biggest challenge now is to open as fast as we can, which is why we’re getting Dallas and San Francisco running. As we mentioned in our prepared comments, Bellevue did over $240,000 in its first week open, and that's without the patio; the patio has another 100 seats. We're still keeping marketing toned down, and we’re getting the operations really lined up for that. Revenues and margins look fantastic overall. Internally, we'll have a target of 30%, and we’ll keep pushing toward that.

And then in terms of restaurant design, as you do these new restaurants, and you mentioned your nine partners for delivery—are they designed to deliver differently so that you can do a larger volume of takeout delivery?

Yeah, that's another great question. Bellevue was one of the first restaurants designed within the COVID period. We established a separate takeout delivery area in the kitchen. If you go to the back of the house, you'll see we've added some technology to help with that. We’re also utilizing a second line in the kitchen to take pressure off the main lines for the dining room. We’re adapting our model to maximize efficiency. Dallas will be the first restaurant that opens with a dedicated takeout delivery area separate from the dining area. Our rationale is that a lot of people come to STK to pick up takeout or delivery, and they may not feel comfortable walking into a crowded restaurant on a Friday or Saturday night while they are dressed casually. So, it makes sense to have a separate area for takeout delivery. Some of our larger takeout delivery restaurants are doing annualized over a million dollars in this segment—maybe in some cases, even upwards of a million and a half. In many cases, this volume is nearly half of the volume of casual restaurants. So, we are definitely in the takeout and delivery business at STK, and we need to ensure that our restaurants execute well in that regard.

Final question has to do with alcohol. Could you compare and contrast how you're dealing with alcohol sales before COVID and how you're dealing with it now, and then kind of what you think the opportunity might be as things go back to some form of normal?

I have mixed feelings about that, so let me provide some background. We love the margins on liquor and wine. Historically, if someone were to ask me, I would tell you that we encourage people to have pre- and after-drinks. However, right now, the demand for the dining room is so high that the alcohol mix is important, but the way we have our pricing and cost structure set up, the advantage of liquor to food is not as significant. The check is dramatically higher on food. So, whereas I would have said 35% liquor was ideal a couple of years ago, I would now say that somewhere between 25% and 30% is probably our sweet spot. I apologize for the long answer, but as we continue to have these really high volumes, that’s one of the things we really have to weigh into the business model.

Great. Thanks so much.

Thanks, Mitch.

This concludes our question-and-answer session. I would like to turn the conference back over to Manny Hilario for any closing remarks.

Yes, thank you, everyone, for your continued interest and support of The ONE Group. As always, I'd like to thank the incredible teammates and team that really makes it happen here in the company. They’re fantastic professionals and one of the best teams in the industry, and I’m very proud to be associated with them. I appreciate that, and for all of you, I look forward to running into you at our restaurants. So, see you all soon. Thank you, everyone.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.