Good Times $GTIM Part 4
Q3 2025 Earnings
Disclaimer: This is not investing advice. Everything written here is my own opinion and is for informational purposes only. Everything written here is subject to my own errors, biases, and other types of mistakes. You should do your own research and consult a financial advisor before making any investment decisions. I own shares of GTIM.
Good Times reported its Q3 2025 results last month (08/07/2025) and despite lower revenue compared to the previous year, profitability was encouraging. Net income for the quarter was $1.5 million - that doesn’t look bad in the context of GTIM’s total market cap and enterprise value, which have been under $20 million since May and occasionally under $15 million.
Bad Daddy’s has seen better performance this year than the Good Times restaurants. Sales at Bad Daddy’s have declined by a very small amount year-over-year, whereas sales at Good Times restaurants are close to 10% lower than the previous year, which is more concerning. Furthermore, the restaurant level operating margin at Bad Daddy’s has held up better than that at Good Times.
Even though I’d rather see both brands facing less challenging business conditions and more lucrative times this year, the results from this quarter didn’t cause me to fret. I’m glad to see that the results coming from Bad Daddy’s have been the strongest part of the earnings reports this year. After all, Bad Daddy’s is a much larger part of the overall GTIM than the Good Times Drive Thru restaurants (70%+ of revenue). So, I’d much rather have Bad Daddy’s looking somewhat strong and Good Times looking somewhat weak than vice versa.
If you don’t know about GTIM’s two different restaurant brands which the company owns and operates, you should get up to speed by reading some of my previous writing about GTIM:
The market responded very positively to this most recent earnings report. I believe this was the result of two factors:
GTIM had simply gotten far too oversold prior to earnings. Market participants were in capitulation mode - we’ve discussed the math of how cheap GTIM appears to me at a market cap less than $20 million. Imagine my surprise when I saw people selling GTIM at a valuation of under $15 million! Immediately prior to earnings, GTIM traded below $1.40 per share. I think this was quite simply too cheap, and the market reacted and adjusted after the announcement.
Some amount of positive surprise coming from overall net income / EPS, or from the results of Bad Daddy’s and its encouraging margins. Perhaps this surprise was magnified by the broader context of an earnings season that has been painful and challenging for quite a few restaurant names.
The day after reporting earnings, GTIM popped about 20%. But, as you can see, this move merely returned it to a level around which it has traded during the last few months.
Readers will not be surprised to hear that I still find GTIM to be a very attractive opportunity. With the entire company valued at just $17 million today, GTIM is among the smallest handful of publicly traded restaurant names. It is also among the cheapest in terms of price/sales multiple.
It’s worth noting that in this size and valuation range, the neighborhood is filled with sketchy companies that, even at first glance, have various problems. A few of the neighbors are highly levered, and a couple are questionable startups with hardly any sales. But the questionable pivots are my favorite phenomenon to observe among these companies. BT Brands, a drive through burger restaurant with seven (7) locations from the Dakotas, just merged with a drone company (good luck with that!). The former Yoshiharu ramen restaurant chain is now “Vestand Inc” having secured some new financing and a new identity pursuing opportunities in real estate and digital assets.
This is all to say I’m not too surprised when I see GTIM being quite ignored by the market. It’s far easier for people to lump this group of companies together into one uninvestable set and ignore that whole set. Not to mention the fact that at this size, GTIM is far too small for most institutional investors to even think about. As you can see, there are a number of ingredients contributing to the recipe that makes GTIM heavily overlooked.
Overlooked means potential opportunity for those of us who are willing to pay attention and understand GTIM. I’ve written about valuation in some of my other pieces about GTIM, so I’ll just do a quick recap here.
GTIM’s market cap is currently $17 million. For that price, you are owning 39 Bad Daddy’s locations and just under 30 Good Times locations. The Good Times restaurants are older, smaller, less profitable, and compete with more fast food than Bad Daddy’s. In other words, it’s the kind of business line that a lot of analysts would like to simply say “let’s call it worth $0” and focus on Bad Daddy’s. I happen to think the Good Times brand is worth more than $0, but for the sake of this example I’ll attribute $0 value to it anyway.
Now, let’s take the $17 million market cap and divide it by the 39 Bad Daddy’s locations. That values the average restaurant at about $440,000. The average Bad Daddy’s location has revenue of about $2.5 million annually. GTIM reports approximately 14% restaurant level operating margin for the Bad Daddy’s restaurants. Let’s be even more conservative and think along the lines of a 10% operating margin - so $250,000 for the average location. Even with all the conservative assertions we’ve made so far, we are still paying a price for GTIM that values each restaurant at less than 2x operating profit.
To me, this valuation is compelling. But a low multiple on its own doesn’t make an investment case. I also want to have confidence in my understanding of the business as it exists today and have an idea of where it may be headed. Fortunately, this process involves eating a good number of burgers from the two restaurant brands. Besides checking in on the physical operations, I’ve followed GTIM from its quarterly earnings calls for a couple years now.
This quarter, there were some small changes in how management spoke about the company and its prospects. I found myself pleasantly surprised by some of them. Let’s walk through the call and I will describe anything I found notable and why.
The first thing I was mildly pleased to hear was commentary regarding price, specifically willingness and plans to increase menu prices at both brands. I understand it can be difficult to raise prices regularly when managing restaurants, especially in a competitive environment where competitors are focused on discounting. That said, I believe its important for any business to keep up with inflation, which I don’t consider temporary or trivial.
In other words, if you operate a business and think inflation is some amount, such as 4% annually, then you have the choice to either raise your prices by about 4% annually in line with inflation, or you are effectively decreasing your prices by doing nothing.
As I’ve written about previously, I think Good Times offers higher quality food than the likes of McDonald’s and Wendy’s. I believe customers are willing to pay more for that quality, and don’t expect a Good Times meal to be priced exactly in line with those larger competitors. I was pleased to hear that Good Times is thinking along similar lines. CEO Ryan Zink commenting on price at the Good Times brand:
“While our competitors are highly focused on discounting, we continue to focus on our quality positioning”
“We increased pricing by approximately 1% in a subset of our stores on August 1 and are measuring traffic impact prior to increasing across the entire system”
“Intuitively, we believe that we have the ability to take price without significant traffic erosion beyond the trends we are already seeing”
And commenting on the Bad Daddy’s brand:
“As with Good Times, we are considering incremental menu price to offset the input cost inflation”
I am glad to hear that management’s tendency at this time is to be thinking about potential price increases. Good Times and Bad Daddy’s offer high quality food at reasonable prices, and I don’t believe customers expect either restaurant to be the lowest cost option. I believe focusing on quality and being willing to increase menu prices consistently is wise. Here’s one more quote from the prepared remarks by Ryan Zink:
“Our restaurant operations at both concepts are delivering a better guest experience, both in product and service, than at any time during the past several years”
This is Keri August commenting on price at Bad Daddy’s:
“Our average menu price during the quarter was 3.8% higher than Q3 of 2024”
At Good Times, however:
“The average menu price for the quarter was approximately the same as the prior year quarter”
My interpretation of this, of course, is that there should be plenty of room for meaningful menu price increases at Good Times.
Moving on from price, I was glad to hear that about 22,000 shares were repurchased during the quarter. In the prior quarter’s earnings call in May, management had stated that the repurchase program would be temporarily paused in favor of repaying debt and allowing the company to accumulate cash. As a result of that statement, I had been expecting 0 share repurchases during the quarter, which would have been disappointing to see because the opportunity to purchase shares at low prices was better than ever this quarter. Any positive number of repurchased shares was a welcome surprise to me.
It was stated that share repurchases will still be low going forward, since the primary goal continues to be cash accumulation and debt repayment. I’d be happy to see the maximum number of shares repurchased at the low prices we’ve observed this year. However, I understand that sometimes another capital allocation goal may take priority over repurchasing shares.
Regarding capital allocation, we got some detail regarding repurchases and other capital allocation priorities from Ryan Zink during the Q&A:
“I think we do still have interest in share repurchases, particularly at the low price that the stock is trading currently. But I think our priority first really is building up additional cash reserves and having that ability to have optionality - whether that be for debt paydown, additional share repurchases, or - at either concept - new store development”
Wait - did he say new store development? At either concept? This is where things got interesting for me because this language was different from previous commentary on calls. In the past, the general way of speaking was that growth wasn’t really on the table for the Good Times brand, and even though the company was theoretically interested in growing Bad Daddy’s, the real estate landscape was unfavorable and the company was choosing to be very picky about locations.
To hear that growing both brands could be on the table was interesting to me. Of course, I’d be far more interested in new locations at Bad Daddy’s than at Good Times. There was some confirmation and more color later in the Q&A:
“we do continue to have new unit opportunities at both concepts. I would say the financial performance of Good Times will heavily impact any development there . . . I would say the real estate market has seemed to loosen up a bit and landlords have been a little more open to negotiations and reduced either additional TI or reduced rents, which has presented some new opportunities for the Bad Daddy’s brand for new unit development. And we want to have capital available to be able to execute upon projects should they come our way.”
From this comment, it seems that growth opportunities at Bad Daddy’s are being actively worked on and could materialize pretty readily, whereas Good Times is more of a wait-and-see approach. I’m somewhat optimistic after hearing this statement from the call. Recently, GTIM shares have been so cheap that I don’t really spend much time talking about growth. Needless to say, an actively growing number of Bad Daddy’s locations would make the current valuation and the overall investment thesis that much more attractive.
As always, it’s much easier to say something than it is to actually do it - so I don’t bank on future growth of Bad Daddy’s just because they said it was a possibility. I’ll be eagerly awaiting any news of planned future locations - I think Bad Daddy’s is a good brand which is being operated well, so I think it ought to continue to expand. It’s also worth remembering that GTIM has already grown the Bad Daddy’s brand by a decent amount during the late 20-teens. We’ll need to be patient to see the extent to which the team is able to add new locations and get the momentum at Bad Daddy’s rolling this time. I think there’s plenty of potential.
Today’s share price barely gives GTIM credit for being a real company, so it definitely doesn’t price in any growth. Whether you feel optimistic about future growth given managements comments or skeptical about growth given the recent few years without new units opening, perhaps we can agree that the market is giving us the potential rewards of GTIM’s future growth for free right now.
As always, thanks for reading!
Do you like big share repurchases? I do! Here is a write-up covering one of my favorite names when it comes to share repurchases:
MGM Resorts International $MGM
Disclaimer: This is not investing advice. Everything written here is my own opinion and is for informational purposes only. Everything written here is subject to my own errors, biases, and other types of mistakes. You should do your own research and consult a financial advisor before making any investment decisions. I own shares of MGM.