Greetings and welcome to The ONE Group's Second Quarter 2025 Earnings Conference Call. This conference is being recorded. I will now turn the call over to Tyler Loy. Please proceed.

Thank you, operator, and hello, everyone. 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 and uncertainties 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 considering 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 condition. During today's call, we will discuss 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 or as a substitute for results prepared in accordance with GAAP. For reconciliations of these measures, such as adjusted EBITDA, adjusted net income, restaurant EBITDA, comparable sales and total food and beverage sales at company-owned, managed, licensed and franchised units to GAAP measures, along with a discussion of why we consider these measures useful, please see our earnings release issued today. With that, I would like to turn the call over to Manny Hilario.

Thank you, Tyler, and thanks to everyone joining us on today's call. Before we get into the results, I want to take a moment to recognize the incredible dedication of our more than 10,000 teammates across the organization. Your commitment to excellence not only drives our performance, it creates the great guest memories that keep our guests coming back time and time again. With that, I'd like to discuss our second quarter highlights. We are pleased to have delivered results that met our expectations. We achieved strong top line growth of 20%, driven by the successful integration of our Benihana acquisition and continued execution of our key strategic initiatives. Adjusted EBITDA was $23.4 million, underscoring our ability to drive efficiencies and profitability despite the challenging consumer environment. This quarter, we made additional investments in marketing, which helped drive positive same-store sales at Benihana and positive traffic at STK, the second and third consecutive quarters for each metric, respectively. Integration efforts following the Benihana acquisition are progressing ahead of schedule, and we are already realizing meaningful operational synergies across multiple business areas. And finally, our development strategy continues to gain momentum. So far this year, we have opened 3 new company-owned restaurants in our second franchise Benihana Express location. Now let's discuss our strategic priorities. Number one, first, drive and accelerate same-store sales growth. Same-store sales growth remains our top priority, and we continue to execute against our proven framework built around 3 pillars: operational excellence, culinary innovation and relevant and timely marketing. Demand remained strong during peak periods, particularly on Fridays and Saturdays, and we are focused on maximizing throughput through enhanced reservation systems and centralized logistics. These tools also allow us to better manage high-volume occasions like a record-breaking Mother's Day by balancing no shows and walk-in traffic to deliver exceptional guest experiences. To address weekday traffic, we've continued to emphasize value-focused programming, including our pre-fee menus at $69 per STK and $39 across our other brands, along with our highly popular $3, $6, $9 Happy Hour menus. These offerings are resonating with more value-conscious guests while maintaining our premium positioning. As we see more thoughtful spending behavior, particularly at STK, with increased demand for shared dishes and pre-fee selections, we've leaned into these patterns to drive weekday traffic and engagement. On the culinary innovation front, our Wagyu program at Benihana continues to meet expectations, and we are preparing exciting new premium menu enhancements across the portfolio intended to drive engagement and average check. Marketing continues to be a core growth lever. Our new Friends with Benefits loyalty program launched in Q2 is designed to deepen guest relationships across our brands. With more than 7 million contacts in our marketing database, this initiative is already showing strong traction in repeat visitation. Members earn points for every dollar spent and receive exclusive rewards, including birthday and half-birthday offers that encourage frequency and celebration across our portfolio. As national casual dining chains intensify promotional campaigns, we are responding with investments in targeted grassroots marketing, including stronger local store marketing and digital engagement to build brand affinity and guest frequency. Secondly, focus on asset-light or low-cost growth opportunities and prioritize high-quality relocations. We continue to execute our multipronged growth strategy, balancing company-owned development with asset-light models that deliver capital-efficient returns. So far this year, we have opened a new Benihana in San Mateo, California, which is the highest performing new Benihana in the company's 60-year history, followed by a new STK in Tapanga, and we relocated STK Westwood to a larger, higher-capacity location to strengthen our presence in that key market. Additionally, we opened our second franchise Benihana Express in Miami's Bayside Marketplace. As you can see, franchising is gaining momentum, and we are in active discussions with high-quality partners. Over time, we expect franchise licensed and managed locations to represent over 60% of our total footprint, driving scalable growth and reduced capital intensity. Looking ahead, we plan to open 5 to 7 new venues in 2025, including a company-owned Benihana in Seattle, Washington and the relocation of Kona Grill San Antonio to a higher-performing trade area. Relocations remain a key strategy to unlock stronger returns in existing markets. By prioritizing nearby high-quality real estate opportunities in markets that already embrace our brands, we can increase capacity, optimize traffic and better position our brands for long-term success. Number three, continued optimization of the grill portfolio. We continue to assess and optimize performance across our portfolio and the grill concepts remain a clear area of focus. While execution at the store level is strong, traffic in the upscale casual segment remains challenged. We are responding with more targeted marketing, enhanced visibility and grassroots efforts to drive awareness, trial and repeat visits. This past quarter, we closed 5 grill locations that were coming up on lease renewals or whose real estate quality did not match that of the rest of the portfolio. Our growth strategy for the grill concepts will be very disciplined. We will grow selectively, focusing only on top-tier opportunities that align with our brand standards and return profile. As the broader casual dining segment experiences pressure, we remain committed to enhancing performance while making strategic decisions to ensure long-term viability. Number four, maintain balance sheet flexibility. Our balance sheet remains strong with approximately $50 million in liquidity between cash, short-term receivables and revolver availability. This provides us with operational flexibility to navigate near-term challenges while supporting long-term investments. We continue to prioritize positive cash flow generation and have implemented cost discipline across all our functions from labor optimization to marketing efficiency. Lastly, the Benihana integration is progressing ahead of plan. We've already captured a significant portion of the $20 million in expected synergies with full realization target by the year-end 2026. Importantly, this integration is not just about cost savings. We are leveraging our strengths in operations, culinary innovation and marketing to unlock top line growth across Benihana and RA Sushi. Looking longer term, we remain focused on scaling from $1 billion to $5 billion in system-wide sales. Our development roadmap includes over 200 potential STK locations and more than 400 Benihana opportunities in the U.S., supported by a blend of company-owned, franchised, licensed and managed locations. STK continues to deliver industry-leading unit economics, generating approximately $11 million in annual revenues with 20% plus restaurant level margins. And as we previously mentioned, the Benihana in San Mateo is significantly above target from a revenue, profit and cash-on-cash return perspective. Based on the success of our new prototype that we opened in San Mateo, we now believe that the new model can deliver $8 million in annual revenues and restaurant level margins in the mid-20s before any franchise fees. We anticipate net capital expenditures will be between $3 million and $5 million per location and expect significant franchise interest in this model. As we move into the back half of 2025, we remain confident in our strategy and our ability to execute. Despite a challenging macro environment, we are seeing positive signals and are well positioned to gain share through our differentiated vibe dining model. We are building a unique portfolio of iconic brands that deliver not only for guests but for our shareholders. With that, let me turn it over to Tyler for the financial details.

Thank you, Manny. As a reminder, beginning this year, we are reporting financial information on a fiscal quarter basis using 4 13-week quarters with the addition of a 53rd week when necessary. For 2025, our fiscal calendar began on January 1, 2025, and will end on December 28, 2025, and our second quarter contained 91 days. Let me start by discussing our second quarter financials in greater detail before providing our outlook for the third quarter and the current year. As a reminder, we realized 61 days of the Benihana and RA Sushi acquisition in the previous year quarter. In addition, the current quarter includes $5.6 million in lease termination and exit expenses related to the 5 grill locations we exited, nearly all of which was noncash flowing through our operating and net income. Total consolidated GAAP revenues were $207.4 million, increasing 20.2% from $172.5 million for the same quarter of last year. Included in total revenues were our company-owned restaurant net revenues of $203.9 million, which increased 20.6% from $169 million for the prior year quarter. The increase was primarily due to the 30 additional days of ownership of Benihana and RA Sushi and contributions from the opening of 7 restaurants since the beginning of the second quarter of 2024. These were partially offset by a 4.1% reduction in consolidated comparable sales. Management, license and incentive fee revenues remained flat at $3.5 million for both quarters. Company-owned restaurant cost of sales as a percentage of company-owned restaurant net revenue remained flat at 21.2% for both quarters. This was primarily due to integration synergies, offset by higher-than-anticipated inflation driven by chicken, eggs and certain cuts of beef. Company-owned restaurant operating expenses as a percentage of company-owned restaurant net revenue increased 210 basis points to 63.5% from 61.4% in the prior year quarter. This was primarily due to the addition of Benihana and RA Sushi results in April, which typically have lower revenues and lower margins than that of the rest of the quarter. In addition, company-owned operating expenses were impacted by investments in marketing, general cost inflation and fixed cost deleveraging driven by a decrease in comparable store sales. Restaurant EBITDA decreased 210 basis points to 15.4% compared to 17.5% in the prior year quarter. This included restaurant EBITDA of 18.5% for the Benihana location and 15.9% at STK locations. The 2 new STK restaurants opened during the quarter impacted STK margins by 80 basis points due to increased costs during the startup period, and we anticipate these costs to normalize during the balance of the year. On a total reported basis, general and administrative costs increased $1 million or 9.7% to $11.7 million from $10.6 million in the prior year quarter, driven by the addition of Benihana in the second quarter of last year, offset by a reduction in performance-based compensation expense. When adjusting for stock-based compensation, adjusted general and administrative expenses were $10.2 million and $9.1 million in the second quarter of 2025 and 2024, respectively. As a percentage of revenues, when adjusting for stock-based compensation, adjusted general and administrative costs improved 40 basis points to 4.9% compared to 5.3%. The improvement is due to the sales leverage realized through the Benihana acquisition, the implementation of cost savings and integration synergies and a reduction in performance-based compensation expense. Depreciation and amortization expense was $10.9 million compared to $8 million in the prior year quarter. The increase was primarily related to depreciation and amortization for the Benihana and RA Sushi restaurants, depreciation associated with the opening of 7 new company-owned venues since July 2024 and capital expenditures to maintain and enhance the guest experience in our restaurants. Preopening expenses were $1.4 million, consisting primarily of payroll, training and other costs for Benihana San Mateo and STK Topanga, which opened in March 2025 and April 2025, respectively, payroll and travel costs for the training team and preopening expenses for restaurants currently under development. Preopening expenses were $2.5 million in the prior year quarter. Operating income was $0.7 million compared to $1.1 million in the second quarter of 2024 and included $5.6 million of lease termination and exit costs in the current year quarter. Excluding those costs, operating income would have been $6.3 million. Interest expense was $10.3 million compared to $7.9 million in the prior year quarter due to our higher level of outstanding debt post-acquisition, which occurred during the second quarter of last year. Provision for income tax was $0.7 million compared to a benefit of $3.5 million in the prior year quarter. The effective income tax rate year-to-date through the second quarter was negative 11.3% compared to 27.1% for the same time in the previous year, which is driven by the company's FICA tip credit. Net loss was $10.1 million compared to a net loss of $7.3 million in the second quarter of 2024 and the current year includes the $5.6 million in aforementioned lease expenses, the majority of which were noncash. Net loss available to common stockholders was $18.2 million or $0.59 net loss per share compared to $11.9 million in the second quarter of 2024 or $0.38 net loss per share. Adjusted net income was $1.7 million or $0.05 adjusted net income per share compared to an adjusted net income of $6.3 million or $0.19 adjusted net income per share in the prior year quarter. Adjusted EBITDA attributable to The ONE Group Hospitality, Inc. was $23.4 million compared to $21.8 million in the prior year quarter, an increase of 7.3%. We finished the quarter with $15.1 million in cash and short-term credit card receivables. Our cash and cash equivalents were lower versus the previous quarter due to the impact of biweekly payroll and reduction of accrued payroll at the end of the second quarter versus the end of the first quarter. We finished the quarter with $33.6 million available under our revolving credit facility, which remains undrawn. Under the current conditions, our term loan does not have a financial covenant. Now I would like to provide some forward-looking commentary regarding our business. This commentary is subject to risks and uncertainties associated with forward-looking statements as discussed in our SEC filings. We, as always, remind our investors the actual number and timing of new restaurant openings for any given period is subject to a number of factors outside the company's control, including macroeconomic conditions, weather and factors under control of landlords, contractors, licensees and regulatory and licensing authorities. Based on the information available now and the expectations as of today, we are issuing the following financial targets for the third quarter of 2025. Beginning with the top line. We project total GAAP revenues of between $190 million and $195 million, which reflects our anticipation of consolidated comparable sales of minus 4% to minus 2%; managed, franchise and license fee revenues are expected to be between $3 million and $4 million; total company-owned operating expenses as a percentage of company-owned restaurant net revenue of approximately 86%; total G&A, excluding stock-based compensation, of approximately $11 million; adjusted EBITDA of between $15 million and $18 million; and finally, restaurant preopening expenses of between $1 million and $2 million. Based on the information available now and the expectations as of today, we are reiterating the following financial targets for fiscal year 2025. Please note, this does not include the potential impact of tariffs on broader economic conditions. We project total GAAP revenues of between $835 million and $870 million, which reflects our anticipation of consolidated comparable sales of minus 3% to 1%; managed, franchise and license fee revenues are expected to be between $15 million and $16 million; total company-owned operating expenses as a percentage of company-owned restaurant net revenue of 83.5% to 82.2%; total G&A, excluding stock-based compensation, of approximately $47 million; adjusted EBITDA of between $95 million and $115 million; restaurant preopening expenses of between $7 million and $8 million; an effective income tax rate of approximately 7.5%; total capital expenditures net of allowances received from landlords of between $45 million and $50 million; and finally, we plan to add 5 to 7 new venues. I will now turn the call back to Manny.

Thank you, Tyler. Before we open it up for questions, I want to emphasize how excited we are about the future of our business. Our path to $5 billion in system-wide sales remains clear and achievable. With our strengthened portfolio, expanded franchise capabilities and proven ability to deliver industry-leading margins, we're well positioned to capture significant opportunities ahead of us. We thank you for your continued support and look forward to sharing our progress in the quarters ahead. Tyler and I look forward to your questions.

Our first question comes from Brian Mullan of Piper Sandler.

A question on Benihana. It's encouraging to see the positive same-store sales again at the brand. As we look at the current quarter, it seems like the brand has an easier comparison. Last year was down 4% in the third quarter. Can you just remind us what some of the issues were last year that you'll be lapping over? Did that have to do with integration or maybe something else? And then just related to that, just talk about any initiatives you're particularly excited about to drive the top line at Benihana over the balance of this year?

I mean, that's a great question regarding Benihana for the third quarter last year. Probably the more significant challenge we had with Benihana last year was that post our acquisition, we found out that there were a lot of HVAC opportunities within the model. As you know, it's a really hot restaurant with the tables in the restaurant. So we spent quite a bit of time last year working out the temperature and airflow issues in the restaurant. So I think that was kind of a year one learning for us. This year, we're much more proactive going into the summer months. We made sure that we got all the ventilation and some of those issues taken care of. So we feel much better about the sales opportunity for the brand in the third quarter this year.

Okay. And then sticking with Benihana, can you talk about the recently opened restaurant in San Mateo? It sounds like it's been a great opening from an AUV perspective. Manny, maybe remind everyone what was different with this opening versus some of the legacy restaurants? What have you learned? And what does that tell you about the future growth opportunity?

Yes. I think there are several differences. One is in the actual design of the restaurants; we chose to remove the sushi bar, which created additional space for tables. We also added tables in the bar area, which was new for this model. Despite being only 7,000 square feet, we managed to fit in a significant number of tables. Additionally, we lightened up the colors and introduced a takeout delivery station, improving the customer flow. The color scheme is brighter and more welcoming, with new artwork that enhances the aesthetics. Moreover, we conducted early marketing, which is not typical for us. We ran more ads and emphasized pre-marketing, leveraging our digital assets to inform people about our opening. As a result, we were extremely busy during the first two to three weeks after opening. It's been all about managing capacity, and we've been very pleased with that. As we continue to operate the restaurant, we feel that the consumer base and the market have really embraced it, so we’re optimistic about the new look and feel, as well as the preopening model we implemented for this location.

Okay. That's great. And then just one more for me. A question on the STK brand. You spoke to this in the prepared remarks a bit, but can you just talk about how you're managing this business at the moment to ensure positive traffic? Does that remain the main objective right now, even if you need to continue to give up a little bit in average check at least during the week? Is that how you foresee this at least while we're in this consumer environment? Any color on that would be great.

Yes. I think our strategy with STK still is traffic working with Happy Hour, working with value price points. Obviously, in the current economy with the uncertainty with the consumer, we think it's wise to have a great value proposition. So we continue to emphasize that. And then I think as we go into the third and fourth quarter progression, one of the things we'll continue doing is emphasizing premium products, so the barbell approach to try to mitigate the impact of value. So that will continue to be our strategy there. As I've always said, STK is about market share. So we're retaining market share in the existing restaurants. And then as we continue opening new restaurants, we're gaining market share. So I feel very positive about the future of STK just because we're really grabbing market share right now in an environment that you should not. If you look at all the industry statistics, sales are relatively flat in the industry, but traffic is down. So I would say that STK being at the price point that it is and getting traffic is an incredible success in terms of marketing and execution.

Our next question comes from Anthony Lebiedzinski of Sidoti & Company.

So first, I just wanted to check in if you guys could talk about the cadence of your same-store sales during the second quarter and whether or not you saw any notable regional differences in traffic or just same-store sales overall?

Yes, we definitely noticed that April and May had slower performances, influenced by the holiday and spring break shifts. However, we observed a steady improvement as the quarter progressed, with June ultimately showing the strongest same-store sales performance throughout the quarter.

Got you. All right. And then as far as any regional differences to speak of? Or was it consistent throughout your operating area?

I think you probably saw that this is Manny. The most notable geographical difference for us has been Vegas. Vegas was a challenged market based on what we observed. Aside from that, I wouldn't highlight anything other than that one specific market.

Got it. So was this because of a change in convention schedules? I think you had talked on the last call about that.

Yes, there has definitely been some shifting. If you look at the casino outlooks for the rest of the year, you'll see changes in the calendar for conferences. Additionally, the decline in Canadian visitors, along with a drop in traffic from Mexico, has also impacted Vegas. It's a combination of visitor traffic issues and changes in the convention calendar.

Got you. Okay. And then thinking about your guidance for the year, you kept it unchanged. So it does imply a meaningful step-up in the fourth quarter relative to what you've done so far and your guidance for the third quarter. So can you just walk us through like what gives you the confidence to maintain the annual guidance?

Well, I can't wait to get to the fourth quarter because as you've probably seen in our seasonal results, we do like fourth quarters. I think particularly for us this year, we had Benihana for the first time last year in the fourth quarter. And we frankly have record days around every single one of the holidays. And our biggest challenge, frankly, was managing the logistics and the throughputs at the tables. And frankly, that's one of the areas that The ONE Group is very good at is logistics and management at tables. So we think that there's a pretty large opportunity for us, particularly with Benihana going into the fourth quarter. As you know, Benihana is a significant part of our sales now. It's over 55% of our sales. So we feel very good about that. And then as I mentioned earlier, STK continues to deliver strong traffic results, and we think that the holidays again will be an opportunity for us to leverage those traffic build-up that we've been having for the last 3 quarters. So I think it will be a continued track of building the traffic there. So as we look at the year, obviously, the fourth quarter is the quarter that we feel very good about.

Sounds good. I'm sorry, go ahead.

Yes. Again, notice that none of my comments have to do with the economy. It all has to do with kind of internal identified areas that I think I can get the team organized around. So I think these are all within our control, manageable situations. Obviously, always the background is if the economy gets significantly worse, then obviously, that will be a little bit difficult to achieve. But in the context of the economy staying where it is and just the identified opportunities that we had from last year, I think this year should be a very good fourth quarter for us.

Our next question comes from Mark Smith of Lake Street Capital.

I wanted to ask first just about kind of the differences between Grill Concepts and STK and Benihana customers. What kind of behaviors are you seeing different between those customers?

I think there are several factors to consider regarding Grill Concepts. First, the business model has a strong connection to the movie industry, which has faced challenges since COVID. Second, the grills have significant exposure to seafood consumption, and when consumers are uncertain about the future, they tend to reduce their seafood visits more quickly than other types of cuisine. Third, with a concentrated sales base in sushi, there’s been an increase in low-cost sushi competitors due to low barriers to entry, impacting our position in the market. Finally, while we appreciated the bar vibe when we acquired Grill, recent metrics show a decline in alcohol consumption, adding to the challenges. We are aware of these issues and have strategies to address them. We are currently reshaping our portfolio, having closed five Grill locations this quarter as part of this effort. Our priority is to reset the portfolio, innovate the brand by expanding the menu beyond seafood, and enhance our marketing efforts, especially as competition increases in the casual dining category. Despite these short-term challenges, we remain optimistic about Grill's long-term potential as consumer confidence returns, leading to a resurgence in seafood dining.

I appreciate that information. I wanted to explore the closures in more detail. Were all of these closures related to Konas and categorized as non-core units? Additionally, how many of these closures occurred at the end of the lease term?

Yes. Most of them were at the end of their lease options and were nearing the end of their life cycle. This was a significant factor in how we identified these locations. Additionally, some of these locations required substantial capital investments, and based on their performance and the quality of the real estate, we decided not to pursue them. Therefore, we are categorizing these as non-core royalty in our external reports.

Okay. And then last one for me. I think, Tyler, you had talked a little bit about some places where you've seen some food inflation. I think it was chicken, eggs and a little bit of beef. Any other insights or anywhere post-quarter where you're maybe seeing some inflationary pressure?

Yes, Mark, I think we saw some of those commodities come down a little bit. So I think that we anticipate a little bit less pressure there on the commodities coming in the second half of the year. I think the one thing that we're watching is just beef prices are just tending to be a little bit more sticky than maybe we would like.

Yes, I would just like to add that this is exactly where innovation is headed for the fourth quarter. As we review our offerings for that period, we may be able to adjust based on the commodities landscape. Additionally, we have already secured some frozen seafood for the fourth quarter, which helps us manage costs.

Our next question comes from Joe Gomes of NOBLE Capital.

I would like to get more details on the franchising efforts for Benihana. In previous discussions, we spoke about the updates to the infrastructure and increased awareness. I'm trying to understand when you expect to see franchise agreements start to materialize. Will there be one store or multiple locations? Are you anticipating interest from existing or new franchisees in your model? Any additional information on this would be appreciated.

Great question. Yes, we have already made significant investments in our infrastructure. We have also focused on San Mateo as our new prototype, working on optimizing the cost per square foot to enhance franchising interest. It’s important for franchisees to have an affordable way to build these restaurants, and we’ve learned a lot from the San Mateo experience, which has helped us align the costs effectively. Regarding Benihana franchising, we offer two models: the full-size Benihana restaurant and the Benihana Express. There is considerable interest in the full-size model from existing franchisees, many of whom are looking to expand with additional locations. You can expect to see new agreements and commitments from them soon. We recently opened our second Benihana Express in Miami, which has generated a lot of excitement as it features the same great food, especially our fried rice, but without the traditional table dining setup. We are actively showcasing this model at various franchising conferences and industry events, and we have a growing list of interested parties. With our second location now open and a third and fourth in the works, we anticipate making announcements about new development agreements in the coming 90 days.

Great. And then just looking at the balance sheet. Cash at quarter end fell to about $4.5 million from $21 million at the end of the first quarter. I was wondering if anything specific behind that. Are you still comfortable with the liquidity level there? Just some more detail on that would be appreciated.

Joe, this is Tyler. Yes. So we talked a little bit about it in our prepared remarks around kind of the shifts in working capital on a week-to-week basis. And so a lot of what you're seeing there is just the difference in accrued payroll and the amount of accrued payroll that we have on the balance sheet between kind of one week to the next. So that's a big part of what's driving that. And then I think from a liquidity perspective, yes, I think we feel comfortable from just an overall liquidity position.

Yes. I think also, if you look at our capital guidance for the year and you look at our guidance and where we spent the money, we're front-ended on capital for a lot of reasons. We have the new restaurants coming up right at the beginning of the year. And I think as I answered one of the questions, we did have some planned CapEx, particularly for Benihana that we got out of the way in the first and second quarter because we want to get the HVACs and everything ready for the summer. So I think it's a function of both the working capital shift as well as a front-ended CapEx budget.

Our next question comes from Jim Sanderson of Northcoast Research.

I wanted to revisit the outlook for same-store sales in the latter half of the year. I believe the guidance provides a good range. What would need to happen, or how do you plan to achieve the lower range in the third and fourth quarters, especially if you're anticipating an exit around negative 4%?

Jim, it's around negative 2% really for the back half of the year.

Right. And what would it take you to get to that stronger outlook? And how you're looking at the puts and takes based on the range you provided?

You mean getting to the better end of the range on the...

Yes.

Okay. I mentioned earlier that as we approach the fourth quarter, the event business is a significant variable. We're still in the early stages of determining what that will look like. Additionally, as I noted before, the key factor is how much throughput we can achieve at Benihana, as this greatly impacts our results. To phrase it differently, our current turn times at Benihana are approximately 2 hours. If we can reduce that to about 90 minutes in the fourth quarter, that would be crucial. The range between 90 minutes and 2 hours for our turn times will directly affect how much we can enhance our fourth quarter sales.

Sure. Yes. So focusing on marketing events for the holiday season and improving turn times at Benihana could help us progress on the guidance. Regarding the loyalty program that we just launched, what are your expectations? Do you anticipate increased frequency and higher average spending? Can you provide any details on how it will function?

We currently have 7 million members in our database, and our focus now is on creating engagement with them. It has become a marketing effort centered on communication and raising awareness. We are also actively working to increase sign-ups at the restaurants, investing significant resources into this campaign. Over the next 3 to 6 months, we plan to intensify our efforts to attract new members and utilize more direct marketing to this group. In the industry today, a large portion of visits comes with loyalty programs in play. As we approach the fourth quarter, we expect to build on the momentum from our recently launched program. As we gain traction with loyalty, we anticipate seeing positive results starting in the fourth quarter, and we believe the first quarter of next year will reveal the true benefits of expanding our loyalty databases.

Understood. And then going back to the new Benihana location in San Mateo and that strong performance, any learnings that you can apply to the current store base that would...

We're learning that we will likely relocate sushi bars to the back of many of our existing restaurants. This change will create more space and allow us to add 2 to 3 additional tables in several locations, which should significantly enhance our throughput. This is part of our immediate strategy and insights. Another takeaway from the new opening in San Mateo is the benefit of having a dedicated takeout delivery station. This setup reduces congestion at the host stand and improves customer flow, which is especially important since our restaurants are quite busy, particularly on Fridays and Saturdays. By utilizing a separate area for takeout, we can manage customer turnover more effectively, making it easier to transition guests from the front dining area to their tables. These insights from the new prototype in San Mateo will be useful as we implement changes across the brand.

Okay. And just one last question for me. As far as closures go, is there anything we should be thoughtful of going forward with respect to leases that would indicate further closures or exiting the RA Sushi business?

We routinely assess our portfolio to determine what makes the most sense to retain. This includes reviewing end-of-lease restaurants. Many of our grills are nearing the end of their 17 to 19-year life spans. Kona Grill, for instance, experienced significant growth from 2006 to 2010, and now several restaurants are approaching the 20-year mark. The question for Tyler, the team, and me is whether to invest in an aging asset that requires extensive renovations at the end of its lease, especially if the real estate is a challenge. On the other hand, as I noted earlier, Benihana is performing well, particularly in places like San Mateo, and STK boasts an exceptional return on investment profile. Ultimately, our decision is about how we allocate our capital moving forward.

Our next question comes from Roger Lipton of Lipton Financial.

Most of my questions have been answered already, but get back to San Mateo, very impressive, of course. So that leads me to wonder the Seattle, Washington location is the next Benihana to open for the company. What's the configuration there in terms of size and cost so far? And when will it open?

The Seattle location is situated on Lake Union and is designed to be a flagship restaurant, featuring stunning water views that are among the best available. It's a prime real estate opportunity. Initially, we planned to open a Kona Grill there; however, during the design process, we decided to switch to a Benihana because we believe the revenue potential will be higher based on our observations in San Mateo. We will need to return to the city for some design and electrical adjustments. We are aiming to open this location by the end of the year, which is our target date. It’s a beautiful setting and we expect it to perform very well for the brand.

And how large is it, Manny?

That location is about 7,000-ish square feet. So it's almost identical to what we got in San Mateo.

Right. And you just made reference to reevaluating how you spend your money and allocating what was going to be a Kona. So I would imagine you're starting to rethink, assuming San Mateo continues to do as well as it has, that next year might be a little more emphasis on company-operated Benihanas than you might have previously thought?

Well, I mean, we haven't gotten there yet. But of course, as I said on my prepared statement, the great returns on the Benihana full-size footprint actually drive franchise interest. We've seen that coming from big franchisees who want to invest in the brand. And the reality is we have a 400-plus footprint outlook for Benihana in the U.S. So we're very early on in the growth story of that. I know it's a 6-year brand, but if I look at the potential of it, we're still very early on. So the reality is to open all that 400-plus with company-owned assets is a big commitment. So having really sized up to be a great franchise model is a good way of us accelerating the brand. And then ultimately, I think having a bigger brand allows us for a lot more marketing and advertising synergies with Benihana. So I think that's really the goal now is to grow Benihana a little faster so that we can get more marketing and advertising out of the model. Thank you, sir.

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

Thank you. And as I always close my calls with, I want to thank our teammates. They're doing a fantastic job of living our mission every day of executing on great restaurants and creating unforgettable memories all the time. So I appreciate the team continued effort on it. And frankly, they were the driver of our performance in Q2. And I look forward to seeing everybody on this call out in our restaurants. So everyone, have a great afternoon.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.