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Southern Concepts reports Q2 sales up 27%, fast casual concept growing

Southern Concepts Restaurant Group reported restaurant sales up 27 percent over the same year-ago quarter to $1.8 million, driving gross profit of $12,000 versus a loss of $35,000.

August 13, 2015

Southern Concepts Restaurant Group reported restaurant sales were up 27 percent over the same year-ago quarter to $1.8 million, driving gross profit of $12,000 versus a loss of $35,000.

"Revenue growth in the second quarter was primarily driven by the opening of our third Southern Hospitality restaurant in Lone Tree, Colorado," said Southern Concepts CEO Mitchell Roth. "This expansion, combined with improving our operating income at our existing locations, helped produce our first quarter of positive gross profit."

Other highlights included:

• Opened third full-service Southern Hospitality restaurant in Lone Tree, Colorado.
• Began build-out of the company's first Carve Barbecue fast casual restaurant in Glendale, Colorado.
• Received the Five Star Diamond Award from The American Academy of Hospitality Sciences for Global Excellence. The award is described as 'the most prestigious emblem of achievement and true quality in the hospitality industry worldwide,' and its recipients are deemed to be of 'pinnacle quality and global recognition.'
• Southern Hospitality Southern Kitchen voted "Best New Restaurant" by editors of the Colorado Springs Gazette.

"These positive trends also reflect our ability to keep our menus fresh and appealing to our customers, along with providing exceptional customer service," Roth said.

Gross profit in the second quarter of 2015 totaled $12,000 compared to a loss of $35,000 in the year-ago period. The increase in gross profit was attributed to increased scale achieved by opening the second full service Southern Hospitality location in the Denver metro area, as well as increased sales in catering and party takeout.

"Our Denver and Lone Tree stores cumulatively earned 7 percent as a percentage of revenue, while our Colorado Springs location has yet to turn cash flow positive," Roth said. "However, we believe Colorado Springs is destined to become one of our most successful restaurants because of its ideal location, with a Bass Pro Shop recently opening next door, and a new resort and water park that is currently under development nearby. This development is expected to create one of the highest trafficked intersections in Northern Colorado Springs."

Roth said during the quarter the company invested in improving one of the most profitable revenue streams for any full service restaurant, which is large take-out and catering.

"While it resulted in increased SG&A as we invested in a stronger catering infrastructure, the system can now be used by any of our locations," he said. "We have also hired a full-time sales professional to take advantage of the new system and drive increased catering and large take-out orders."

Growing fast casual

The chain’s planned expansion into the fast casual category with the Carve Barbecue concept will enable it to employ a more economical labor model, as well as achieve greater economy of scale in terms of food cost and revenue per square foot, Roth said.

"More importantly, our Carve Barbecue concept will be more scalable from a development standpoint, and reflects the tastes and healthier preferences of consumers which has generated the strong momentum within the fast casual category," he said.

Roth expects the typical Carve Barbecue fast casual location to generate approximately $1.8 million in annual revenues with 20 percent store-level EBITDA margins.

"We see the operating model of this concept as potentially more scalable, profitable and more easily franchised," he said. "Carve will be different than the traditional pit barbecue restaurant — it will be 'barbecue without boundaries.' Its menu will reflect barbecue influences from around the country, and will set itself apart by choosing only the finest quality, all-natural meats, such as those produced by Creekstone Farms."

In 2016, Roth is targeting strong growth with Carve with one new location opening per quarter, and is evaluating sites in Colorado Springs and Boulder, as well as in Phoenix and Scottsdale