But now the interest rates are 8.5%, 9.5% for corporate money, it’s just — the carrying costs become too much. And so we have to reevaluate that. We have to run all these — we have to go back and do all the quick great math over again. And that’s what we’re in the process of doing, and you’ll see us through the rest of this quarter. And I plan to have everything lined out in the next 6 months, which gets us everything on track running into fiscal 2025.
Anthony Lebiedzinski: And then so as you rebrand some of the clubs, I mean, what’s your expectation as to the lift in sales that you will get after you do such a rebranding?
Eric Langan: Liquor clubs tend to run — some liquor clubs tend to run, obviously, more sales in the BYOB clubs. I’m assuming we can get those high enough that we’ll also have better total margins. The margin rate may be about the same, but because the revenues are higher, obviously, the bottom line should be higher. We’ve ran some models, but we’ve really only converted one club so far. So in the course of the [Technical Difficulty] — as we do El Paso and Harlingen and the FCC Dallas that’s now been converted as of last week, I’ll probably be able to give you more color on that as we get into the next call.
Mark Moran: Next up, we’re going to have Rob McGuire of Granite Research.
Rob McGuire: So Eric, you’ve discussed what’s happening or avoiding what happen in Dallas again. But if you move from a BYOB to a liquor club, do you work with the different total regulators?
Eric Langan: Well, you have alcohol, the TBC and Texas becomes a new regulator for, yes.
Rob McGuire: In general, do you find that, that creates an easier environment or you just — I’m wondering if you could elaborate a little further about the strategy helping you avoid what happening with XTC.
Eric Langan: It’s just irrelevant. They come in with time place manner and decided that all the clubs in Dallas seemed to close at 2:00 if they have an adult entertainment license I believe it’s unconstitutional. If you close me, you need to close every business. So far, the judge has disagreed with us or they agreed with us, then they disagreed with us. And so now we’re going back and forth with this. The litigation will take too long for us to sit there with that club, not making any money. And so we just converted it and to avoid that in other markets, not every market because some of BYOB because are still very successful, and we’ll just take the chance on those. And what I consider the underperforming markets where we ran analysis like Harlingen, El Paso and Abilene as we believe that we will do much better.
These clubs have been around since early 2000s. And some of the areas have changed, the market has changed and the club stayed the same. And so we’ve gone in and said, look, we believe these particular locations will do much better under this new concept that we acquired before we acquired the Duncan Burch’s acquisition, we didn’t have this concept. But now that we have this concept, we’re able to take it and run its numbers and its demographics and against some of our BYOB clubs in those three particular clubs, especially Harlingen and El Paso and even the XTC in Dallas, I think we do very, very well with this new console.
Rob McGuire: And then with regards to the economic uncertainty, you talked about in the last call how you’re starting to discount on Monday and Wednesday nights. Are you seeing an uplift in terms of traffic on that or in general, could you just comment about what you’re seeing that’s working in the clubs as you adjust in this environment?
Eric Langan: I mean running specials are helping for sure. Sports is helping tremendously right now. So that’s been a big plus for us in this quarter and last quarter — or I mean, this month and last month. We will see how that runs out through June being on who makes finals. Obviously, we end parties, PIP parties, just getting our teams much more involved and much less complacent, I think, is really helping. As you’re trugging along, you don’t realize sometimes that you get complacent. We hired some new management in the clubs as well as the Bombshells, and we’re seeing results from that. So it’s a lot of just getting everybody back on track. We’re turning back to the basics. And that’s what got me thinking. As we return to the basics and the restaurants, return basis in the clubs, I thought to myself, well, are we returning to the basics at a corporate level?
And what are the basics at the corporate level? And I said, well, let’s go back to 2015 and ’16 when we adopted this capital allocation strategy and let’s reevaluate our assets like its 2015 again. it was highly successful for us. It worked very, very well. And well, I think we’ve stayed true to the capital allocation strategy. I think we got a little complacent on existing assets, existing team members. And it was easy. We were making lots of money in ’21 and ’22. ’23 was kind of a wake-up cost for us. And as we moved into the last quarter, especially with Bombshells, it kind of became a wake-up call, and then we’ve seen some decline in same-store sales at the club levels. And I say, we got to cut this off immediately at the club level. We can’t go on as long as we did at Bombshells.
And so that’s where we’re at today.
Mark Moran: [Operator Instructions] Next up, we’ll have Steve Martin.
Steven Martin: So most of my questions have been addressed. What are you seeing from the competition? And do you think you’re outperforming the competition on the club side?
Eric Langan: On the club side, in most of our markets where we’re number one or number two, we are definitely outperforming our competition. We do have some lower brand clubs in certain markets that are probably similar to our competition. I talked to other club owners. I think overall, we’re seeing 15% to 30% decline, probably an average of 20% declines from their peaks in ’21, ’22 and off again, down in ’23 and now they’re down again in ’24 so far. It’s a struggle for the mid-level consumer. The majority of clubs cater to that mid-level consumer. So I think it’s just one of those things we’re going to work through over the next few months. And it’s not that we’re — I think a lot of the misunderstanding because I hear people — especially in 2009 when everybody talked about us going out of business when we were still making $6 million.
We’re still making $60 million to $50 million, right? It’s not like we’re not making a ton of money still. We’re not going out of business. It’s just we’re not making the same type of easy revenue and easy money that we made in ’21 and ’22 when there was just tons of free money, and we were the — and in ’21, we were some of the only clubs open. Our only business is opened in ’22. There was just so much free money left out there. Things tightened up, interest rates went up, the consumers being squeezed in multiple places with inflation. We’re seeing wage inflation ourselves. And so it’s changed and we’ve had to adopt to that and change with it.
Steven Martin: And you’ve put in a lot of cost containment measures. How long do you think that’s going to take for those to show through into the earnings?
Eric Langan: Well, I mean I think you’re seeing some of it right now because our revenues were down, but our EBITDA adjusted EBIT is not down as much, I think, on a same-store sales basis. And I think — so we think we’re seeing some of that. We made a decision about 1.5 weeks ago as we got through the end of April. And said, we’re cutting off all future project costs that we — that are controllable costs. We can’t give it of carrying cost interest on that, but we’re not going to hire any new employees. We’re not going to continue the management training or any kind of training the — through these new concepts until the day they’re complete. So when we have a direct opening date, then we’ll start all that. And then we’ll carry those costs.
But we’re not going to have any preopening costs that we carry for — we think we’re going to open in three months, but it takes nine. So we end up carrying those costs for nine months. I said we’re just going to wait from now on. If it takes us an extra month or two to get open. It cost me very little to have a store set they’re ready to open and not open because they don’t have the staff, then it costs me to carry that staff for nine or 10 months. And so we’ve cut all of that type of stuff. I mean, this is all going back to the capital strain strategy where we’re not making any investment until we know exactly what the ROI is on it.
Mark Moran: Next up, we’ll have Orchid Wealth. Orchid Wealth, I think you’re on mute still.
Unidentified Analyst: Obviously, the main thing that I’m focusing on right now is just with the environment that you’re in, have you noticed any significant impact from people calling you and are they still holding on to their prices or these people open to negotiation.
Eric Langan: We’ve been negotiating price pretty well. A lot of it right now has been terms and uncertainty. And people have been trying to hold on to their ’21, ’22 deals, but now they’ve got to ’23, we’re in ’24. And I think people are starting to wake up to that ’21 and ’22 was kind of a fluke. There was, like I said, just a lot of free money out there and people are coming out of COVID and a lot of business is closed, things are normalizing. I mean, who would think we’d be thinking of normalization five years later, but that’s really where we’re at. I mean it was unprecedented to close so many businesses are closed down the country at one time like that. And then for such a long period of time when it was supposed to be two weeks.
And so I just think there’s been a lot of adjustment going on. We’re getting back to that normalization. And like I said, I think a lot of — I don’t think it’s just us. I think a lot of companies, a lot of people got complacent. I was talking with Mark today when I came into his office here in New York City. And I think last time we were here, there were 15 people in this office at most. And most of the time, we come over here, there’ll be eight or nine. And I said, “You guys got 35, 45 people here, what’s going on?” Everybody’s back to work. And we’re seeing that in our numbers in New York City as well as the clubs. So I think like I said, I think this is going to return back to normal. And I don’t know what that means just yet, but I do know that we’ll be staying on top and staying ahead of it instead of playing catch-up like we’ve done in 2023.
Unidentified Analyst: And my assumption is when I roll — take out the numbers for all of the years, previous years before the, let’s call it, the COVID bump. I kind of feel like you guys are still on trend line from what you were for the previous five years of what you had been doing. And just in terms of overall just you’re growing — you have this like we kind of have like a heat wave, you sell a lot of ice cream and you get back to normal temperatures, you’re going to sell about a certain historical number of ice cream. I mean I’m assuming things are along those lines or are you noticing anything different?
Eric Langan: When we compare to ’18 and ’19, we’re in pretty good shape. I mean, you have certain markets. Minnesota was dragging for a while, but I mean they not only had COVID, you had the Gergely issue up there, you have major changes in that market that had affected it for a while. But the TW are breathing life into downtown again. I’m seeing numbers that we hadn’t seen in Rick’s, Minneapolis in a long time. The Savill club is doing much better. So I’m optimistic that, that market is going to finally turn. New York is turning as people return back to the offices. So I’m very optimistic there. The biggest problem we have is Florida was just incredible, right? I mean you took to never — the highest year ever was $26.8 million or $26.6 million in ’18 or ’19. And then in 2022, they did $39.6 million gross. And then I think last year, 35 and change or 30 change. So that’s a $5 million change is a big swing on a quarterly basis for same-store sales.
