Ark Restaurants Corp. (ARKR) Earnings Call Transcript & Summary

Sure. We're in the process of building out a new concept in Las Vegas. It's an Asian fast food concept, a lot of rice balls and bow bonds. We've been putting the brands together for about 8 months now. We think that it has potential to roll out a few concepts. So we're sort of piloting in New York, New York Hotel in Las Vegas. So that's the only real new concept we have on deck, but we're excited about it and it's set up to be rolled out more as a brand rather than one-off. So we should be opening that in the next month or so. And we'll see how it goes. And if that's successful, we're definitely looking for new locations to place that.

And finally, do -- go ahead, I'm sorry.

No. We have a letter of intent out on the purchase of the restaurant. But I think -- there's some -- with all of these things, with the one-off who we're trying to buy the land or we're trying to buy cash flow, we got very lucky in the first 5 or 6 of these that we did. Management stayed, sales remain strong, in most cases, profitability increased, and lately, the last 3 or 4 of these deals that we've tried to do, and they were all pretty much in Florida. One was in Wisconsin that we looked at, they're trying to sell us something, let's say, 4x cash flow, and they have -- in Florida, they have the same problem we've had. Their cash flow is disappearing a little bit compared to last year's numbers. So when we go back to renegotiate that becomes a problem for the seller because they're hoping the cash flow will build again and they'll come back to us at a later date or whatever. So we're looking at stuff. We just don't -- there always seems to be a flying [indiscernible] with the seller's cash flow performance or in some cases, the landlords are asking them about changing clauses in the lease that we need as a public company. So it's not a lack of effort to try to find things to expand, but we're not in control -- the landlords or the cash flows of the restaurants that we're looking at. I would tell you that we're more interested -- excuse me, I shouldn't say more interested. We are as interested now in trying to build a brand that we can control, to have a vehicle to expand the company's cash flow that is as interesting to us as buying cash flow.

And good luck on that endeavor as well. I was just curious, you mentioned having spent a lot of money in the Gallagher's renovation, has that brought a more upscale traffic? Has there been any sort of conversations with the landlord about that process.

I would tell you that we're now comping against last year's results when Gallagher's was completely open. It's too early to tell whether that business has increased enough to warrant having spend that kind of money. But the answer is we didn't have a choice. In order to get the lease, we had to commit spending a little under $2 million. The real cost was not the amount of money we spent in the restaurant, but having the restaurant closed for 12, 13 weeks [indiscernible] cash flow. The lease is a much steeper lease. What we always thought -- and to a certain extent, the relationship with MGM requires us to rely on their marketing people who were convinced that we were too far under the price points of other steakhouses and they wanted us to be to increase prices to be more life of the steakhouses in Vegas. I could tell you that the product is excellent, and we're seeing that in the Yelp reviews now. I mean most of those reviews are 5-star reviews. We had some problems early on because the kitchen was refigured and we probably had the wrong chef when we reopened, but we have -- that's been corrected and the product is excellent. The real problem is that -- and MGM or New York, New York put in a new circus stage show, but they also are put in competition in the park. It's very hard for us to figure out why sales aren't 20% up or some bigger number than we're seeing now, whether it's competition, which is more expensive than us, by the way, but there's another steakhouse attached to New York, New York property, which was a surprise to us. Or if the fact of the matter is -- and by the way, the T-Mobile Arena, which is in that same park is more active than it's ever been, and we would suspect that, that would be a customer who will come to Gallagher's. But the real problem is New York, New York in terms of property is a middle-income customer. And what you're seeing now in general throughout the company, I believe, is if you look at the fast food courts that we run in Hollywood and Tampa and New York, New York, they're all doing well. They're up. Tampa are a little less than Hollywood and New York, New York. But when I looked at New York, New York figures last week, which the food court was up 12%, 13%, 14% from last year. Sales at the next restaurant that is modestly priced, which is our burger bar are down from last year. I think there's a big shift in these properties from high-priced restaurants to lower-cost tickets to the customers that aggregate in New York, New York. And I must tell you that if you go to Hollywood, and I think this is true everywhere, but especially Hollywood. When we built Hollywood out and Tampa, both locations, the location of Hollywood was moved about 2 or 3 years ago when they did the [indiscernible] hotel they moved us to a new section. And we said, look, we're going to do fast food but we want the quality to be restaurant quality, not fast food quality. And all of a sudden, you have really great food in terms of what customer expectations are -- and the price points in full-service restaurants in the Hollywood Casino are kind steep. And so I think as a migration from full service restaurants to our fast food courts, where we are and the properties we're in. It speaks well of the quality of the product and the fast food, but it doesn't speak well to the price points in the full-service restaurants. And my question in my mind always is how much is that limiting Gallagher's ability to really comp much better from the prior to the renovation to now. So we have competition on 1 hand, but we do have T-Mobile Arena to more business or having more dates when something is going on. We also have a show, which we didn't have right next to Gallagher's. So I think those are positives. But the negatives is the price point than the customer. We don't see a well yield customer. So I may be confusing in terms of an answer, but it's confusing to us to see how we're doing. What we know we're doing well is the customers that are walking into the place really enjoying because [indiscernible].

Our next question comes from the line of Roger Lipton with Lipton Financial.

Michael, Sam. Could you describe -- I didn't quite get that description of the new prototype you're building in New York, New York. Could Sam describe it a little bit further for us?

Sure. It's sort of a quick service to put place a setup. It's an Asian concept, it's rice bowls, it's bowl bonds. And we're starting small. It's just 3 different ingredients. We have a beef or pork and chicken option and a vegetarian option. And it's essentially rice bowls, bowl bounds and [indiscernible] become very popular. We've been seeing a lot of success in other spots in Las Vegas and other areas that we've been looking at. So -- we're trying to build this little concept that puts both of them together and then we're also making our own fresh led big multi-domes. So that's pretty much the gist of it.

Is it going to be in a food court.

Yes, it's going to be in the New York, New York hotel food court.

Okay. And when do you think you'll be getting that started?

End of June, it's looking like. We're about to start construction now.

Got it. Okay. Good. And Michael, is there anything at all new in terms of the casino -- downstate casino discussions? I mean, I see periodic reports in the press, but you're probably watching a little more closely than we are. Any movement at all in terms of that?

Again, it's the opinion of my partners in the deal who are substantially have substantially more equity in the deal than we do. that you can't move forward with a referendum in New Jersey until you have downstate casinos. And that requires licenses and the process in New York has been slow. There is a lot of activity that you read about the proposals related and others -- and now I guess, bar leases in there since they bought the Trump property in [indiscernible] Certainly, Yonkers is in there and Aqueduct is in there [indiscernible] has a proposal in. So there are a lot of proposals, I guess, to be analyzed the states basically said we need more time. So until those licenses are issued, then I'm pretty sure everybody pretty much agrees that Yonkers and Aqueduct will be 2 of the 3 recipients. The good thing about Aqueduct and Yonkers is if they get a license, they could be in business in 60 days. And I think that pushes Jersey to start to draft a resolution or referendum. That needs a public vote. But yes, if you look at the other side, and the question has been asked all the time by investors what is Jersey waiting for. I mean we basically the Meadowlands LLC -- New Meadowlands LLC, which is the holding company that runs the Meadowlands Racetrack now. We've committed a guarantee of $500 million 1 year to the state. What are they waiting for? But the reality is they're waiting.

In terms of -- so we're waiting really waiting as it's been waiting in New York, you don't have any new feedback that New York is going to really come to [indiscernible] this thing.

We read the same thing. We read the same articles and newspapers that you read.

So you might be paying a little closer attention than I can. But whatever, you'll do the best you can. You can't control it. Obviously, it's just a question of what you're observing.

Our next question comes from the line of [ Alan Goldberg ] private investor.

You may not remember, but you and I had a lovely time. We went to lunch down here in Florida. I'm not in Florida. I mean Chicago at the moment. And I was calling to see if there was any update on the Meadowlands. But since that's already been asked, I wanted to tell you that I think you are maneuvering very well through this tough time. I know this is not what you want to hear, but in Chicago, I went to Maggiano's last night for dinner, and they had 19 patrons while I was having my dinner. And that sort of shocked me. And I asked them how things are going. They say, actually, what you see tonight is an anomaly, we have been so busy here and not even barring Mother's Day, they said their price point seems to be very, very good. And I think most of our price points are very, very competitive. And everybody wants results yesterday. And you and I met, it's certainly more than 5 years ago. We were a little younger. And I'm very pleased with what you're doing. I think you're moving in the right direction. Now you may say, under your breath or in silence, my god, he's cr*zy. But I'm not crazy. People are eating out more and more and more. The problem that's hurting -- look, if McDonald's is telling you they're slowing down because of people concerned about money. I agree. I think it hurts all restaurants. But I also noticed nobody seems to care they give the credit card, and they just don't care. Again, I'm not teaching your business, I know absolutely nothing about it, except I enjoy your restaurants. But I think we should continue doing what you've been doing. Look, as you said, look for places that are reasonable to us, this whole industry is going to change. The world is changing. We've got a major election coming as we all -- I'm not teaching you economics. That's my feel. But I think you're doing the right thing. And as you know, you may not remember, I ran a hedge fund for a number of years. And you look for things that are going to take place in the next 3 to 5 years. That's how a good investor should invest. And I'm very pleased with the way you're running it and the people on your with you that I don't know. But -- and I just want to tell you, it's a pleasure hearing your voice. Thank you, if you ever have any questions of me, I'm always there for you, and thank you so much. Thank you for the meetings. Good luck to all everybody, all of us, and thank you.

Thank you, Al.

[Operator Instructions] I'm showing no other questions at this time. Mr. Weinstein, I'll turn the floor back to you for any final comments.

All right. Well, thank you all for joining us, and we'll speak to you at the end of the next quarter. .

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.