Business Context and Reporting Period
Company: Good Times Restaurants Inc. (GTIM)
Filing Type: Form 10-Q (Quarterly Report)
Reporting Period: Quarter ended March 31, 2026 (13 weeks) and Year-to-Date (26 weeks).
Business Overview: The Company operates two primary concepts: Bad Daddy's Burger Bar (full-service) and Good Times Burgers & Frozen Custard (drive-thru quick-service). As of March 31, 2026, the Company operated or franchised 38 Bad Daddy's locations and 30 Good Times locations.
Key Financial Metrics
| Metric (in thousands) | Q2 2026 (13 Weeks) | Q2 2025 (13 Weeks) | YTD 2026 (26 Weeks) | YTD 2025 (27 Weeks) |
|---|---|---|---|---|
| Total Net Revenues | $33,232 | $34,279 | $65,938 | $70,612 |
| Income from Operations | $172 | $(514) | $472 | $(437) |
| Net Income (Loss) | $159 | $(627) | $357 | $(453) |
| Net Income Attributable to Common Shareholders | $149 | $(624) | $330 | $(460) |
| Diluted EPS | $0.01 | $(0.06) | $0.03 | $(0.04) |
| Adjusted EBITDA | $1,365 | $1,024 | $2,626 | $2,286 |
| Cash and Cash Equivalents | $2,749 | $2,712 | $2,749 | $2,712 |
| Working Capital | $(8,888) | $(9,124) | $(8,888) | $(9,124) |
| Long-Term Debt (Net of Current) | $1,044 | $2,310 | $1,044 | $2,310 |
Note: Working capital is calculated as Current Assets ($5,844) minus Current Liabilities ($14,732). The deficit is primarily driven by short-term operating lease liabilities.
Material Changes vs. Prior Period
- Revenue Decline: Total net revenues decreased 3.1% quarter-over-quarter (QoQ) and 6.6% year-to-date (YoY).
- Bad Daddy's: Sales decreased due to the closure of two locations (one in late FY2025, one in Q1 FY2026) and reduced guest traffic, partially offset by a 0.2% menu price increase.
- Good Times: Sales decreased due to the temporary closure of one location for lease negotiations, partially offset by a 1.0% menu price increase.
- Profitability Improvement: The Company returned to profitability, reporting operating income of $172,000 compared to a loss of $514,000 in the prior year quarter. This turnaround was driven by reduced impairment charges and lower general and administrative (G&A) costs.
- Cost Management:
- Food Costs: Decreased as a percentage of sales (29.7% vs. 30.7% prior year) due to reduced waste and favorable chicken/dairy pricing, despite higher beef and bacon costs.
- Payroll: Decreased as a percentage of sales (34.4% vs. 34.6% prior year) due to improved labor efficiency, offsetting higher wage rates.
- G&A Expenses: Decreased significantly ($382,000 QoQ) due to reductions in multi-unit supervisory roles and technology costs.
- Impairment Charges: Impairment of long-lived assets decreased to $227,000 (Q2 2026) from $494,000 (Q2 2025). The current quarter charge relates to the temporary closure of one Good Times restaurant.
- Debt Reduction: Long-term debt decreased from $2,310,000 to $1,044,000 (net of current portion) as the Company made significant principal payments ($1,765,000 YTD) against its Cadence Credit Facility.
Guidance, Outlook, and Risks
- Outlook: Management anticipates organic sales growth opportunities but is executing unit growth with increased scrutiny on real estate selection and a more conservative approach to leverage due to high costs and volatile inflation.
- Inflation and Wages: The Company faces persistent wage inflation and elevated beef prices. While menu price increases have been implemented, management notes that wage inflation currently exceeds what can be reasonably passed through to customers without negatively impacting demand.
- Liquidity: The Company maintains a working capital deficit but believes it has sufficient capital to meet needs through existing cash and the Cadence Credit Facility, which has approximately $7.24 million in committed funds available.
- Share Repurchases: The Company has a $7.0 million share repurchase authorization. As of March 31, 2026, approximately $1.98 million remains available. No shares were repurchased in Q2 2026.
- Risks: Key risks include competition from well-established competitors, potential same-store sales declines, inability to offset input cost inflation with price increases, and the impact of tariffs on imported food and packaging supplies.
Investor Verification Checklist
- Restaurant Closures: Verify the status of the two closed Bad Daddy's locations and the one temporarily closed Good Times location to assess long-term revenue impact.
- Beef Pricing: Monitor commodity reports for ground beef prices, as management cites this as a significant cost pressure that may not be fully offset by menu pricing.
- Debt Covenants: Review the Cadence Credit Facility terms to ensure continued compliance with leverage and fixed charge coverage ratios, especially given the recent debt paydown.
- Same-Store Sales: Track same-store sales trends for both brands, which declined 0.8% QoQ, to gauge the effectiveness of promotional strategies and menu pricing.
- Working Capital: Analyze the working capital deficit ($8.9M) in the context of operating lease liabilities to understand the true liquidity position versus GAAP presentation.