Chuy's Holdings, Inc.
Q1 2015 Earnings Call Transcript

Published: 5 May 2015

[Operator:]

Please stand by, we are about to begin. Good day, everyone, and welcome to the Chuy’s Holdings Incorporated First Quarter 2015 Earnings Conference Call. As a reminder, today’s conference is being recorded. At this time, all participants have been placed in a listen-only mode and the lines will be opened for your questions following the presentation. On today’s call, we have Steve Hislop, President and Chief Executive Officer; and Jon Howie, Vice President and Chief Financial Officer of Chuy’s Holdings Incorporated. At this time, I’ll turn the conference over to Mr. Howie. Please go ahead.

[Jon Howie:]

Thank you, operator, and good afternoon. By now, everyone should have access to our first quarter 2015 earnings release. It can also be found at our website at www.chuys.com in the Investors Section. Before we begin our review of formal remarks, I need to remind everyone that part of our discussions today will include forward-looking statements. These forward-looking statements are not guarantees of future performance and therefore you should not put undue reliance on them. These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. We refer all of you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial conditions. With that out of the way, I’d like to turn the call over to Steve.

[Steve Hislop:]

Thank you, Jon. And thank you, everyone, for joining us on the call today. We’re pleased to have begun 2015 with solid financial results, which include earnings per share of $0.19, an increase just shy of 19% compared to last year. Additionally, our comparable store sales increased a solid 1.9% during the first quarter despite the effects of winter weather that negatively impacted our comparable sales by approximately 2 percentage point. During the quarter, we continued our focus on initiatives to drive sales and improve margins. And we’re pleased to see our initial progress related to cost of sales and labor, particularly in our non-comp stores, which emphasizes zero base management of our production shift and rolling ordering guys to better control our cost of sales. And we’ve implemented scheduling best practices and management staffing levels based upon volumes to maximize our labor productivity. We’ll continue to implement these initiatives throughout our system during the second quarter to augment our day-to-day store level execution. In addition to our margin enhancing initiatives, we believe our enhanced local store marketing and branding designed to highlight our key strengths and points of differentiation are beginning to gain traction as sales drivers. As we continue to fill out smaller existing markets in 2015 and beyond, and brand awareness continues to improve, we believe we will see a corresponding improvement in AUV. Switching to development, we opened three new Chuy’s restaurants during the first quarter in Salt Lake, Texas part of the Dallas metroplex; our second Little Rock, Arkansas location; and our third Orlando, Florida location. Subsequent to the end of the quarter, we opened our fourth new restaurant of 2015 in Dayton, Ohio. We are still on plan to open 10 to 11 new Chuy’s restaurant this year and our 2016 plan is already shaping up nicely. We continue to focus on getting to larger, denser markets more quickly as we grow our restaurant base. While we’re still staying in the same geographical footprint than we historically discussed, we will make a quicker leap into major densely populated markets like Chicago and Southeastern Florida, similar to our entry into the DC market. Although our focus is on larger markets, we will continue to backfill the existing markets, which we believe will provide a boost to awareness and branding in those markets. We continue to believe we have a huge run way for growth ahead of us. Now, I’d like to turn the call over to our CFO, Jon Howie for a more detailed review of our first quarter results.

[Jon Howie:]

Thanks, Steve. Revenue is increased 19.4% year-over-year to approximately $66.8 million for the first quarter ended March 29, 2015. The increase included $10.4 million in incremental revenues from an additional 142 operating weeks produced by 14 new restaurants opened during and subsequent to the first quarter of last year. We had a total of approximately 786 operating weeks during the first quarter of 2015. Comparable restaurant sales grew 1.9% during the first quarter driven by 3.3% increase in average check, offset by project by 1.4% decrease in traffic. We estimate that the severe winter weather negatively affected approximately 4 out of 13 operating weeks in our Texas, Oklahoma and Southeast markets, which as Steve noted, negatively impacted comparable restaurant sales by approximately 200 basis points. There were 44 restaurants in the comparable base during the first quarter of 2015, including three new restaurants added to the base at the beginning of the quarter. We consider restaurants to be comparable in the first full quarter following 18 months of operation. As a reminder, our restaurants can open at volumes greater than their normalized run rate. In the case of our strongest openings the honeymoon period may last longer than the 18 months we allowed before a restaurant enters into the comp base. Given the small number of restaurants currently in our comparable base, the timing and strength of our new unit openings may create a short-term headwind in our comparable restaurant sales growth in some quarters. To-date, that headwind had typically reduced our comparable restaurant sales growth by about 50 to 120 basis points in any given quarter. Switching over to expenses, cost of sales as a percentage of revenue decreased approximately 150 basis points year-over-year to 26.3%. The improvement resulted from the combination of lapping last year’s inflationary spike in dairy and produce which is now decreased to more normal level and the benefit from recent price increases taken in September 2014 and in February of 2015. While we’re pleased with the year-over-year improvement, I caution you that we don’t expect to see it continue for the balance of the year. Our second quarter chicken costs are expected be up approximately 25% sequentially due to an unexpected change in spec from our supplier, as well as an increase in market prices. We also expect increases in beef and our limes have begun to spike again as well. Although, we don’t expect them to reach the cost per case that we saw last year. However, now based upon the current favorability and what we project we expect to see overall inflation for 2015 between 0% and 1% versus previous guidance of 1% to 2%. Labor cost as a percentage of restaurant revenue decreased 30 basis points from last year to 33.1%. As Steve mentioned, we have made progress with our labor initiatives, particularly at our non-comp restaurant. And we continue to focus on best practices throughout our system. Restaurant operating cost as a percentage of revenue increased approximately 50 basis points year-over-year to 14%, largely due to increases in our hourly health insurance costs related to the affordable care act and increases in workmen’s comp insurance. Occupancy cost as a percentage of revenue increased approximately 30 basis points year-over-year to 6.7% driven by increased rent and property taxes as a percentage of sales in our newer locations as we pick out more development in larger market in the East and Northeast. General and administrative expenses increased $1.2 million to $4.1 million in the first quarter. As a percentage of revenue, G&A increased approximately 90 basis points year-over-year to 6.1%. The increase was driven primarily by an increase in compensation and long-term incentives of approximately $800,000, as we continue to invest in our employees. And this amount also includes staffing additions made during the last 12 months. G&A also included a write-off of scrib sites [ph] of approximately $10,000. Depreciation and amortization expenses increased approximately $682,000 to $3 million from $2.3 million in the first quarter of 2014. The increase was driven by increases in equipment and leasehold improvement costs associated with new restaurants. Finally, net income in the first quarter of 2015 increased 22.9% to $3.2 million or $0.19 per share as compared to $2.6 million or $0.16 per share in the first quarter of last year. With respect to our 2015 outlook we are providing the following update to our annual guidance. Our diluted net income per share is now expected to range from $0.76 to $0.79 versus our previous range of $0.74 to $0.77. This compares to diluted net income per share of $0.69 in 2014. Our net income guidance for fiscal year 2015 is based in part on the following annual assumptions. Our revenue expectations included comparable store sales increase of approximately 2.5% for the balance of the year. Restaurant preopening expenses are expected to range between $4.2 million and $4.7 million. We expect G&A expenses to run between $14.8 million to 15.3 million versus previous guidance of $14.5 million and $15.0 million. We expect our pro forma effective tax rate for the full-year to range between 28% and 30%. And we expect our annual weighted average diluted shares outstanding of 16.7 million 16.8 million. Lastly, our development plans for 2015 calls for 10 to 11 new Chuy’s restaurant of which four have already opened. One important note regarding our development schedule, while we had originally expected a relatively even opening schedule during 2015 the change in our development plans to focus on larger markets and its effect on specific 2015 site decision and inclement weather we’ve experienced during the construction of some of our new location will result in a more backend loaded schedule than we had anticipated. Our capital expenditures net of tenant improvement allowances are projected to be approximately $27.5 million to $30 million. And now I’ll turn the call back over to Steve to wrap up.

[Steve Hislop:]

Thanks, Jon. In close, we are pleased with the start of 2015 and are excited about the short- and long-term prospects of our business, including the continued growth in our restaurant base, where sales volumes and returns well ahead of industry norms. Our freshly prepared favorable Mexican inspiring offer, tremendous value, and energetic atmosphere has led to industry leading average unit volumes and a long history of same-store sale growth. We continue to tackle the near-term challenges. We believe that the sales driving and operational enhancing initiatives put in place along with a continued back fill of these developing markets both drive those results towards company average. We are using the learnings from all of our recent openings to optimize our new unit model going forward. Before I turn the call back over to the operator for questions, I first would like to take a moment to thank all of our Chuy’s employees, our success has always been a testament to their hard work and dedication to earn the dollar every single day. With that, we’re happy to answer any questions. Thank you.

[Operator:]

Thank you. [Operator Instructions] And we will take our first question from Will Slabaugh with Stephens Inc.

[Will Slabaugh:]

Yes, thanks, guys. I had a question on the same-store sales. We’ve heard a number of your peer’s reference that you obviously saw a pop in January is subsequent sort of slowdown and then a few of the Texas exposures even talked about things, kind of picking back up a little bit as the weather compares to get better in April, I want to know how much you guys would care to comment on what you saw throughout the quarter and then anything quarter today you care to comment on?

[Steve Hislop:]

Hi, Will, this is Steve. Throughout the time, we finished last year around three, and it kind of state pretty much right around there, except for the weeks that we had the weather, which was really around 8, 9, 10, and a little bit around now just week two at the beginning of the year. So I’ve been pretty consistent throughout the whole quarter, except for those particular weeks.

[Will Slabaugh:]

Gotcha, that’s helpful. And then another question if I could around the new units and the margin improvement that you are seeing there, you referenced some definite improvements you are seeing around the labor line, so I’m just curious along the sort of bigger picture line of improving these new or lower volume units to get to that mid-teens margin over time, sort of how you feel about that progression before you are seeing now, it gives you more confident that you are going to get there over a certain period of time?

[Steve Hislop:]

I do, I’m very confident. But I think what we originally told everybody is, some of these labor improvements really kind of stayed, maybe a little bit flat to even a little bit higher in the first-half of the year, and then some reduction in the second-half of the year. So I’ve been kind of pleased with our guys on the best practices within that. I’m jumping out there a little quicker than I kind of expected. But by the second-half of the year, we should still do what we guided for the second-half of the year.

[Will Slabaugh:]

Great. Congrats, guys.

[Steve Hislop:]

Thank you.

[Operator:]

And we will take our next question from Jeff Farmer with Wells Fargo.

[Jeff Farmer:]

Great. Thanks. Just actually following up and drilling down a bit on labor, so considering that you did see that 200 basis point weather headwind, how good could have weather been, I’m sorry, could have labor been had you not seen that weather headwind could it have been much more favorable than what you saw?

[Steve Hislop:]

Yes, I think, we might have done a little bit better. But I tell you what I think my operators out in the field and the supervisors really did a nice job on dealing with it, and one thing about weather - weathermen was pretty accurate for the first quarters. So we did a really nice plan and just happened to hit us a lot on the weekends, but I think we had real, real good plans in place. So it maybe a tiny bit, but not much.

[Jeff Farmer:]

Okay. And then you hit the sort of the back-ended unit openings, anything more specific than up by quarter that you guys can provide?

[Jon Howie:]

Sure. Well, like we said on the first call or to start the year off, we thought it was going to be more evenly spaced during the year. But in the Q2, we’re only going to open one unit and then we will open three in Q3 and Q4. So it’s more back loaded given that we’re not going to have any more than one in Q2.

[Jeff Farmer:]

Okay. And then last completely unrelated question. Just looking at your unit map, and I know that Nashville, the market is not a great proxy for some of those higher population and then tier cities like DC and Chicago, but it is a good size market, I think you guys have poorest front there pretty close proximity. Question is, how does that concept perform in a market like this, do you see, or did you see average unit volumes grow with brand awareness, is there a good case study there you could share with us as you begin to sort of move into markets like DC and Chicago?

[Steve Hislop:]

And were you mentioning Nashville, did you?

[Jeff Farmer:]

Yes, Nashville, yes?

[Steve Hislop:]

Yes, Nashville, we got off on a good path there, but obviously as we’ve grown this start-up, I think, I originally scaled it to three and we have four there now. And as a market, they act pretty much like any of our Texas stores. They average over $5 million AUV in the whole market as a group. So we’re pretty pleased with that.

[Jeff Farmer:]

Okay. Thank you.

[Steve Hislop:]

You’re welcome.

[Operator:]

We will take our next question from David Tarantino with Robert W. Baird.

[David Tarantino:]

Hi, good afternoon. My question mainly - well, my question is related to the guidance for this year. And, Jon, can you talk about the factors that are driving the increase in the guidance, is it over performance versus your expectations in Q1, or is it something related to the outlook or some combination of both of those?

[Steve Hislop:]

It’s really a combination of both, the over performance in Q1. In the back-half of the year, we haven’t changed our guidance all that much other than back-end loading of the store opening, and then having a little more favorable cost of sales that we’ve seen in the first quarter. But like I guided, I don’t anticipate that come in - or continuing on at that level, but I do expect a little more favorable in the back than what we saw in, I mean, than we saw last year?

[David Tarantino:]

Got it. And on the Q1 over performance, can you give us some sense of what portion of that was related to maybe the commodity inflation settling in versus some of your initiatives to drive better margins for the non-comp units. Is there a way to talk about the contribution to the overage of those two buckets?

[Steve Hislop:]

I haven’t really broken those out per say. But we - some of that commodity increase or I should say the cost of sales performance was based on some of the initiatives we had in place as well. But as far as the labor as we said earlier, or to start our guidance there, we were expecting labor to be flat to slightly up, so most of that was with all over-performance in that area.

[David Tarantino:]

Got it. Sounds good. And then on the cost optimization initiatives, I think there is a reference to managing through costs a lot better, or was there - is there anything there that you can share in terms of that impact in the first quarter and for the rest of the year?

[Steve Hislop:]

Yes, and again as Jon just said, the commodity is definitely a plus for us. But some of the things that we were looking at was based on historical sales and inventory management and specifically waste management just awareness and fundamentals in our operations, but I’m very, very pleased. As a group, I’m dealing with the best practices high to low and sales incremental category that have gotten much tighter. And we were always been rather good at that, but we’ve even gotten a little bit better in the first quarter, and then obviously the bigger ones is that the quick push into the labor efficiencies through the best practices, and again how we are doing that is just a really looking at like $50,000 incremental sales volumes putting them into a category and using them best practices on schedules.

[Jon Howie:]

Let’s go back to the cost of sales, we were expecting flat inflation to maybe a little down in the first quarter and then they are going back up to get to that 1% to 2% and we were actually down a little over 2% in the first quarter - quarter-over-quarter.

[David Tarantino:]

Got it. Okay, great. Thank you very much.

[Steve Hislop:]

Thank you.

[Operator:]

And we will take our next question from Andrew Strelzik with BMO Capital Markets.

[Andrew Strelzik:]

Hey, good afternoon, everyone.

[Steve Hislop:]

Hi, Andrew.

[Andrew Strelzik:]

Could you talk a little bit more about the chicken supplies that you were talking about it, and how long is that going to take the 25% setup sequentially? How do we think about that in terms of duration and how long does it take to work itself through?

[Steve Hislop:]

It’s basically a change in - the change in spec you are talking about?

[Andrew Strelzik:]

Yes, exactly.

[Jon Howie:]

We’re still working through that issue right now. The market has been up a little bit. We are thinking that it will probably take three or four weeks to kind of work through that or maybe complete the period.

[Steve Hislop:]

Yes, we won’t take a full period. And then at the end of the day right now our chicken is going up anyway, because it’s gone into the summer times with the coke outs and so forth, and that’s a normal trend year-in and year-out. But there would be a small blip probably for four to six weeks.

[Andrew Strelzik:]

Okay. And then when you think about marketing in some of the denser markets, is there anything that you are planning to do differently or that you think you need to do differently versus what you’ve done? In some of your legacy markets, there is a pretty much the same game plan going forward?

[Steve Hislop:]

Again, as we’ve mentioned clear, that’s evolving, it’s constantly evolving as we go into every single new store and new market, where we add on some best practices. But as far as a leap into a major media now that it’s all going to be still at a local level and it’s going to be definitely about our charity and getting on some of the - with our really talking about going to new markets with new managers in those markets. But really, really getting the message of our defining differences out. As you know, we always get a local PR firm and we start our PRs a good six months before we ever go into an opening and we’ve actually changed our direction from about 10-mile radius to more of a 30-mile radius. So we’re enhancing that as we go, but there will be no major marketing.

[Andrew Strelzik:]

Okay, great. Thanks a lot.

[Steve Hislop:]

You’re welcome.

[Operator:]

[Operator Instructions] We will take our next question from Andy Barish with Jefferies.

[Andy Barish:]

Hey, guys. Nice job on the labor. I guess it surprised me how quickly. Is it kind of a factor that you tell operators to focus on something and they are really good at focusing on something and maybe pushing it a little bit too far, or do you think this kind of progress can continue through the rest of the year?

[Steve Hislop:]

Andy, it’s a great question. Andy, what we do is a very balance. If you know anything about us, we’ve always had the binoculars on right, and sales is a fix-all for anything. So that’s going to be our main emphasis that we chat about every single day. What we’ve done really is, it reacted a little quicker. As you know, we’ve really started these initiatives probably the last period of last year. But we just took it all in where we all had meetings and we really all got in a great game plan had our General Managers and our supervisors buy into understanding that if you’re over productive or under productive the same thing happens to you if have sales decreases. So we really balance it through our best practice of scheduling and we jumped into it a little quick and I was very, very, very pleased with the operators on that. But make no mistake, it’s always a balance to drive the top line and about to drive the top line and that’s our main and always will be our number one focus. And as you said, we planned to add a little bit in the second-half and that’s included in our yearly guidance.

[Andy Barish:]

Okay. And then, Jon, on the - I guess, on the 13 class some of which are entering the comp base, can you just give us kind of a broad brush stroke on how those stores are acting? Do they actually have a honeymoon headwind here in the first quarter, or some of those stores start to grow and reduce that headwind?

[Steve Hislop:]

There were still a little headwind associated with those. It’s a little smaller, if you were to look at the headwind, it was about 50 basis points. So it’s on the low end of our range, but we’re definitely not seeing a tailwind yet.

[Andy Barish:]

And how much do you think volume helped in the first quarter, Jon?

[Jon Howie:]

Yes, it’s a great question. So I mean, normally those run about 20 bucks a case, and they have spiked recently at about 50 to 60 bucks a case. But as you know, last year, it really straddled the quarter, quarter one and quarter two and went up to about a 120 bucks a case. But I don’t have that at my fingertips, but if I was to have to guess, I would say by 20 basis points.

[Andy Barish:]

Okay. Thanks guys.

[Operator:]

And we will take our next question from Chris O’Cull with KeyBanc.

[Chris O’Cull:]

Thanks. Good afternoon, guys.

[Steve Hislop:]

Good afternoon, Chris O’Cull.

[Chris O’Cull:]

How much of the labor - well, Jon, it sounded like maybe labor benefited 30 to 50 basis points from changes to the non-comp basis labor plan. Is that true? And then also is - should we expect that type of improvement going through the rest of the year?

[Jon Howie:]

Well, we had - like Steve said, we’ve got the benefit a little earlier than we thought. I mean, we still have the improvement already baked in, in the back-half of the year. But as far as we did see some improvement on the comp stores as well, but a significant improvement on the non-comp stores.

[Chris O’Cull:]

For example, the second quarter, I mean, should we assume that’s going to be down year-over-year?

[Jon Howie:]

Sequentially, I would say sequentially from the first quarter, it’d be flat to down and flat to down over the first quarter. But I wouldn’t see it being substantially down at this point.

[Chris O’Cull:]

Okay, okay. And then, can you help us understand the non-comp store margin in the quarter and then what kind of trend is running at, maybe first year, the store’s first year?

[Jon Howie:]

As far as 2013…

[Chris O’Cull:]

No, no, the stores that have been opened in the last 12 months, what kind of trend are we seeing in terms of more margin for those stores, is it mid-single-digit or high single-digit?

[Jon Howie:]

Well, we’re seeing those trends like our new, we’re hitting those trends like we talked about in the new prototype. So in the second year, we’ll start to see those low double-digit, in that first year, we’re starting to see those high single-digit.

[Chris O’Cull:]

Okay, okay, great. And then can you remind us how much pricing is going to be in the menu the quarters assuming you don’t seeking additional?

[Jon Howie:]

But if you were to look at the pricing in the first quarter, it’s about 2.5% and a weighted for the whole year, it’s probably going to end up right around 2.8%.

[Chris O’Cull:]

Okay, great. Thanks, guys.

[Operator:]

And we will take our next question from Nick Setyan with Wedbush Securities.

[Nick Setyan:]

Hi, gentlemen. Thanks for taking my question. Hey, Jon, you kind of mentioned that, you continue to expect the comp-based stores or the stores in some of the comp-based to remain a little bit of the headwind to the comp. With the class 2013 entering the comp-based should we actually start seeing that turn into the tailwind?

[Jon Howie:]

Well, at this point, I mean, there are some still running that normal honeymoon curve that we’ve seen and so I don’t think it’s going to turn into a tailwind, but like I said earlier I do think it’s going to be less of a headwind that we've seen - then we've seen in the back.

[Steve Hislop:]

The key thing on the 2013 stores as we continue to grow in that 2014 and 2015 stores as you know, we’re doing 80% of our stores in existing locations where we have stores already, more awareness we get and we do expect them to move but it’s just time getting those stores into those market.

[Nick Setyan:]

Right, which kind of leads to my other question and if we kind of talk about the Little Rock and Orlando stores in Q1, like relative to maybe the early experience in 2014 or past 2014, road to 2013, I mean, it was clearly seeing the operational efficiencies take a hold. And can we start to seeing maybe some of these newer openings reach some targets or unit level EBITDA margins are even higher than say high-single-digits in year one? And then going forward it also seems like you’re changing or you made some changes to the opening cadence, perhaps with that on the consideration. So again can we kind of see perhaps us seeing efficiencies reaped a little bit sooner than we have seen previously?

[Jon Howie:]

Well, again, we talk about a blended rate, and that’s our target as those high-single-digits in the first year and then below double-digit in the second, and then getting up to that 16%, because as we backed fill those smaller markets we expect those to be lower than that 3.7%. So depending on the mix of the stores you can see that vary from quarter-to-quarter up and down. But our overall targets are those that we suggested and we’re getting those currently.

[Nick Setyan:]

Just to be clear, it sound like your year-three-plus, the margin target, that 16%.

[Jon Howie:]

Yes.

[Nick Setyan:]

Thank you.

[Steve Hislop:]

Welcome.

[Operator:]

And we will take our next question from Paul Westra with Stifel.

[Paul Westra:]

Great, good afternoon.

[Jon Howie:]

Hey, Paul.

[Paul Westra:]

Just a follow-up question on your cost of goods sold, just trying to do maybe get a better gauge of how I guess sequentially from 1Q to 2Q and the remainder of the year. I mean should we be looking for the basket to be up another 3% to 5% sequentially or trying to see what that balancing off that one quarter low might look like?

[Jon Howie:]

Well, we are looking at it in the back half of the year, averaging right around the like 2%.

[Paul Westra:]

On a year-over-year basis?

[Jon Howie:]

Yes.

[Paul Westra:]

And second quarter being certainly above that given the chicken and lime impact.

[Jon Howie:]

Yes.

[Paul Westra:]

Okay. That’s helpful. Thanks. And then on the workers’ comp and insurance on the operating income expense line, you said that there was most of the 50 basis points headwind. Is that going to be a comparable headwind to that level the rest of the year or some of this upfront accrual?

[Jon Howie:]

No, the workers’ comp was really kind of a one-time deal. It’s kind of a retro adjustment if you will. However the ACA is still like I think we said in the guidance, that’s probably going to be right around $500,000 or $600,000. So it’s going to be about 20 basis points, 20 to 30 basis points is what we’re seeing an increase on a year-over-year basis.

[Paul Westra:]

Great. Okay, that’s the only questions I had. Thanks.

[Jon Howie:]

Okay. Great.

[Steve Hislop:]

Thanks, Paul.

[Operator:]

And we will take our next question from Robert Derrington with Wunderlich Securities.

[Robert Derrington:]

Yes, thanks. Jon, just a couple of bookkeeping questions for a second, on D&A it drifted a little bit higher as a percent. I’m just wondering whether that was related to some of the underperformance or is it little bit higher asset-based as you’re opening new stores, how should we think about that?

[Jon Howie:]

On the DA - or the depreciation?

[Robert Derrington:]

Yes, yes.

[Jon Howie:]

It’s really kind of just the increase in new stores and higher asset-base.

[Robert Derrington:]

Okay, are the new stores causing a little bit more? Are they still within the previous framework?

[Jon Howie:]

They’re still in that frame of anywhere from 2 to 2.3.

[Robert Derrington:]

Okay, fine.

[Jon Howie:]

But, that’s net, Bob. But the deal is, is that we’ve got a lot more TI dollar this year, that’s bringing that down so your gross cost is up a little bit.

[Robert Derrington:]

Okay. All right, and then just on the pre-ops, the - looks like pre-ops came in nicely lower than expected this quarter, somewhere in the vicinity of $370,000 approximately. Any kind of a thought there, are there something going on there that we should think differently as we go forward?

[Jon Howie:]

No, I don’t think so. I mean, it was similar to last year. We opened up the same number of stores that we did last year. So it’s pretty consistent and we’re looking at that $375,000 to $425,000 depending upon when we get access to the store and how much straight line rent we have in there.

[Robert Derrington:]

Got you. Very good. Great quarter, guys. Congrats.

[Operator:]

And this does conclude our question-and-answer session for today. And we’ll turn the call back to management for additional or closing remarks.

[Steve Hislop:]

Thank you. Well, everybody, thank you so much. Jon and I appreciate your continued interest in Chuy’s. We always will be available to answer any and all questions. Again, thank you and have a good evening.

[Operator:]

And this does conclude today’s conference call. Thank you again for your participation and have a wonderful day.