Good Times Restaurants Inc. (NASDAQ: GTIM)

Sector: Consumer Cyclical Industry: Restaurants CIK: 0000825324
Market Cap 12.56 Mn
P/E 11.90
P/S 0.09
Div. Yield 0.00
ROIC (Qtr) 0.05
Total Debt (Qtr) 1.83 Mn
Revenue Growth (1y) (Qtr) -9.98
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About

Good Times Restaurants Inc., a Nevada corporation, operates under the brand names Bad Daddy's Burger Bar and Good Times Burgers & Frozen Custard, primarily in the restaurant industry. The company owns and operates 41 Bad Daddy's restaurants and 31 Good Times restaurants across seven states, offering diverse dining experiences to its customers. Bad Daddy's Burger Bar is a full-service, casual dining concept that prides itself on scratch-cooked menu items, a full bar, and a high-energy atmosphere. The brand's success is primarily due to its focus...

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Investment thesis

Bull case

  • Good Times Restaurants’ focus on a “cook‑to‑order” system is a critical differentiation that can significantly lift operational efficiency and guest perception. By reducing pre‑made inventory and allowing chefs to prepare items fresh, the company can keep quality high while trimming waste, thereby improving margin resilience even as commodity costs remain volatile. The executive team’s clear roadmap to implement this system across all Good Times locations indicates a scalable operational upgrade rather than a one‑off pilot. This move also aligns with consumer trends toward customization and transparency in food preparation, which are particularly pronounced in the Colorado market where the brand operates. Consequently, the potential for a swift return to a healthy same‑store sales trajectory exists, especially if early adopters demonstrate measurable productivity gains.
  • The introduction of a refreshed mobile app coupled with the GT Rewards loyalty program presents a dual catalyst for incremental revenue per transaction. The app’s streamlined ordering interface directly addresses friction points that have historically dampened off‑premise sales, especially during late‑night or weekday rushes. Loyalty rewards have the added benefit of fostering repeat visits and increasing average basket size, a proven growth engine in the quick‑service sector. By tying the loyalty program to app usage, Good Times can collect granular data on customer preferences, enabling targeted promotions and menu tweaks that resonate with high‑spending segments. As these digital initiatives mature, the incremental lift in customer lifetime value could materially improve the company’s EBITDA profile.
  • Pricing strategy remains a key lever for Good Times, with the company maintaining a modest 1% average menu price increase since January 2024 while preserving a premium relative to competitors. This disciplined approach allows the brand to capture higher margins on core items without eroding volume in a price‑sensitive market. In contrast, larger fast‑food chains have pursued aggressive price hikes, risking alienation of their core customer base. Good Times’ ability to fine‑tune specific item pricing—especially in high‑margin burger categories—provides a tactical advantage to respond to regional cost fluctuations without a blanket increase. Over the next 12 months, incremental price adjustments on targeted items are likely to improve revenue quality and bolster the bottom line.
  • Franchise growth is an understated catalyst in the company’s business model, particularly for the Good Times concept that operates 30 franchised locations. Franchise fees and ongoing royalties can deliver a steady, low‑margin revenue stream that is largely insulated from operating risk at individual restaurants. Furthermore, franchisee capital investment can accelerate geographic expansion without burdening the company’s balance sheet. If the company can continue to attract high‑quality franchisees, it will gain broader market presence while maintaining operational control over key brand elements. This expansion pathway supports long‑term revenue diversification and reduces dependence on the comparatively smaller Bad Daddy’s system.
  • The strategic realignment of general manager schedules to peak revenue periods reflects a data‑driven approach to labor productivity, a critical cost lever in the industry. By aligning staffing levels with consumer traffic patterns, the company can reduce labor costs per sale while simultaneously improving service quality. The executive leadership’s emphasis on training and accountability signals a robust culture of operational excellence that can be replicated across new and existing outlets. These initiatives are likely to manifest in higher average check sizes and improved customer satisfaction, creating a virtuous cycle that feeds back into same‑store sales. Over the next fiscal year, disciplined labor management is expected to mitigate the impact of rising minimum wages in Colorado.
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Bear case

  • The company’s recurring negative adjusted EBITDA and persistent margin compression raise fundamental concerns about the sustainability of its business model. Despite incremental improvements in same‑store sales, the impact of elevated beef and other protein costs continues to erode gross margins, pushing the brand into a precarious profitability position. The management’s acknowledgement of these cost pressures, coupled with a modest price increase strategy, suggests that the company may be operating on thin margins that are highly sensitive to commodity fluctuations. Should beef prices remain elevated or re‑rise, the margin squeeze could intensify, potentially negating the positive effects of operational efficiencies.
  • Labor costs have surged to 35.9% of sales, a 200 basis point increase from the previous quarter, largely due to market‑driven wage increases in Colorado. The company’s reliance on a labor‑intensive model—characterized by higher staff turnover and reduced productivity—amplifies this pressure, creating a cyclical cost burden that is difficult to offset. With the state’s minimum wage climbing to $15.16 for all workers and $12.14 for tipped staff, the company faces continued upward pressure on labor expenses that may outpace any incremental revenue gains. This scenario could lead to a further decline in operating profit, undermining long‑term shareholder value.
  • Supply chain constraints remain a salient risk, as highlighted in the earnings call’s risk factors and the transcript’s acknowledgment of high input costs. While the company claims improved food and beverage costs in the first quarter, the underlying commodity market is notoriously volatile, with the potential for sudden spikes in not only beef but also eggs, bacon, and dairy products. Any abrupt escalation would immediately erode margins and could force the company to raise menu prices, which may not be well‑received by price‑sensitive customers. The fragility of the supply chain thus represents a hidden catalyst for potential operational disruption.
  • The Good Times and Bad Daddy’s concepts occupy a fragmented market space, where brand differentiation is critical yet difficult to sustain. The company’s premium positioning is countered by the dominance of large national chains that benefit from scale economies, extensive marketing budgets, and deep supplier bargaining power. As a result, Good Times may struggle to compete on price and brand awareness, especially if consumers revert to cheaper, familiar options during economic downturns. The competitive threat is further intensified by the growing popularity of fast‑casual concepts that offer a similar value proposition with superior service quality, potentially eroding Good Times’ market share.
  • Franchise growth, while a potential upside, also introduces operational variability and potential brand dilution. Franchisees are responsible for day‑to‑day operations, and inconsistencies in service quality or menu execution can tarnish the brand’s reputation. In a market where customer experience is paramount, such variances can lead to negative word‑of‑mouth and diminished loyalty. Additionally, the company’s royalty model generates a limited upside compared to fully owned stores, meaning that expansion through franchising may not translate into proportional revenue growth. This dependency on franchise performance introduces a layer of risk not fully captured in the company’s financial projections.
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Segments Breakdown of Revenue (2025)

Equity Components Breakdown of Revenue (2025)

Peer comparison

Companies in the Restaurants
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 SBUX Starbucks Corp 98.72 Bn 72.29 2.62 16.08 Bn
2 YUM Yum Brands Inc 43.12 Bn 27.65 5.25 11.91 Bn
3 CMG Chipotle Mexican Grill Inc 41.70 Bn 27.12 3.50 -
4 QSR Restaurant Brands International Inc. 24.27 Bn 31.39 2.57 13.32 Bn
5 DRI Darden Restaurants Inc 22.68 Bn 20.29 1.80 0.44 Bn
6 YUMC Yum China Holdings, Inc. 17.85 Bn 19.19 1.51 0.03 Bn
7 DPZ Dominos Pizza Inc 12.00 Bn 19.94 2.43 4.82 Bn
8 TXRH Texas Roadhouse, Inc. 10.77 Bn 26.61 1.83 -