Hello all,
I wanted to quickly share an update with you about GENK before earnings get released. It hasn’t been confirmed yet by management but estimates on the terminal are expected later this week or next week - still TBD.
However, I wanted to give you just a quick update regarding the unit build. As you know, a large part of the GENK thesis is not just a) the overall unit build but, b) underwriting the conservative estimates that management gave.
This proved favorable to us as we underwrote 7 - 8 units this year before Q2 and with the last call, the range was bumped up to 10 - 11 which would bring the total unit count to 47 by EoY ‘24.
This was also important because the more units that open outside of CA, the less pressure we’ll be seeing from labor-related costs on a per-box basis.
After earnings, I sent around a link for the updated report (below) showing that once all 7 “coming soon” units were opened at the end of the year, GENK would have broken the 50% barrier for geographic exposure.
Happy to report that after checking this morning, it looks like 3 of the 7 are fully open, Tiggard (OR), Pflugerville (TX), and Maui (HI). This means that officially, GENK has lowered its CA exposure to below 50%.
I’ve attached a snapshot of the number of reviews and ratings below for your reference but right out of the gate, the reviews have been generally good.
Additionally, there are updates regarding their Hibachi offering. It was brand new when I updated you all back in September so there wasn’t much to go on.
Right now, the site is updated and it looks like the pricing has changed from a minimum of $500 to just a per-person fee but for “small groups” they need to inquire. Not sure what the minimum is for an actual party gathering.
They did however expand their locations from just LA and San Diego but now are in Los Angeles, Orange County, San Diego, Santa Clara County, Alameda County, and Contra Costa County.
It is important to note that given the nature of this offering, it can only be done in climates where outdoor weather permits. That means sunny and warm places for the chefs to come out and cook, otherwise, no one is ordering outdoor hibachi in Wisconsin in January.
This is very much a call option and I do get nervous about how many resources they’re putting behind it but that will be an interesting topic for them to answer come the earnings call.
I’m still incredibly bullish on the name and the company which is why it’s still my largest position to date.
Until next time,
Paul Cerro | Cedar Grove Capital
Personal Twitter: @paulcerro
Fund Twitter: @cedargrovecm