Kura Sushi USA, Inc. (NASDAQ:KRUS) Q2 2023 Earnings Call Transcript

Page 5 of 10

Benjamin Porten: In terms of the 50 to 60 basis point improvement we just mentioned, we’re very €“ it’s a very hard number. It’s a very concrete number for us. We can see it reflected in the schedules that we’ve built in the working hours that are required to operate our restaurants. But people might notice that we didn’t get the full leverage flow through from the pricing that we took in December in terms of labor. And that’s because we’re seeing about 10% labor in place year-over-year. We’re hoping for that to ease, but it’s not baked into our expectations. And so that’s going to be an ongoing factor for us in Q3 and Q4. We’re going to do absolutely our best to manage that. But that is the labor market that we’re in right now.

In terms of the Waitlist, that’s going to come €“ the labor advantage of that is really going to be coming more from sales leverage. It’s just being able to serve more guests per day, which allows you to spend your labor dollars more effectively. And in terms of the dishwasher, the technology is a lot €“ it is wide, it’s ready to go. It’s just a matter of getting certification, but that’s a pretty opaque process. Historically, it’s been one to two years given just how much upside we see in it. We’re going to be pushing as much as we can, but ultimately, we’re at the certification agencies mercy. But the expectation would be that it would have at least the impact of those three initiatives, if not more.

Joshua Long: Great. That’s helpful. And last one for me, when we think about these G&A efficiencies, how much of that is being driven by some of the things that you talked about, Jeff, when you onboarded in terms of opportunities to optimize spend and really just think about the timing and cadence of investments versus just some of the near-term sales leverage as we think about sort of the guidance range being given in terms of G&A margins? Is there more to come there? How early on are we in terms of really being able to optimize the overall spend in kind of G&A investment pipeline?

Jeff Uttz: We’re very happy with 120 bps that we €“ and leverage that we achieved in this quarter and that’s just the start. We’re continuing to work hard. One of the reasons we’re being able to see benefits right now is the last 12 to 18 months, we spent a lot of money investing in the office in terms of C-suite and Vice President level positions, expensive people. We’ve built that team out now. We’re not going to have those additional hires of that magnitude going forward, and that’s going to continue to help the G&A leverage. The other thing that’s going to help the leverage on the regional side is continue to infill markets with additional restaurants. We’ll be able to be much more efficient with our area managers instead of an area manager having say five or six restaurants, maybe in four or five states, we’ll be able to compartmentalize them more into restaurants that are closer and will be able to save on travel and it’ll just make their time much more efficient as well.

So those are the two things going forward that I believe are really going to deliver more G&A leverage. There is more to come, haven’t given a timeline on when we’re going to get down to a single-digit number. However, what we’ve seen so far has been really, really encouraging and there is more to come.

Joshua Long: Great. Thank you.

Page 5 of 10