Saturday, September 27, 2014

Three Largely Unknown But Potentially Tasty Small Cap Restaurant Stocks (BJRI, GTIM & GIGL)

Small cap restaurant stocks BJ's Restaurants, Inc (NASDAQ: BJRI), Good Times Restaurants Inc (NASDAQ: GTIM) and Giggles N Hugs Inc (OTCMKTS: GIGL) aren't well known to most investors and consumers, but they have produced their share of decent returns for investors. Here is what investors need to know about all three small cap restaurant stocks:

BJ's Restaurants, Inc. Back in 1978, two guys with a recipe for deep dish pizza opened the first BJ's in Santa Ana, California, and as years went by, new BJ's restaurants were opened in beach cities along Southern California's coastline. Today, small cap BJ's Restaurants owns and operates 150 restaurants as of May 2014, located in California, Texas, Florida, Arizona, Colorado, Nevada, Washington, Ohio, Oklahoma, Oregon, Kentucky, Indiana, Kansas, Louisiana, Maryland, New Mexico, Virginia and Arkansas. Each of these restaurants is operated either as a BJ's Restaurant & Brewery, which includes a brewery within the restaurant; a BJ's Restaurant & Brewhouse, which receives the beer it sells from an in-house brewery or an approved third-party craft brewer of its proprietary recipe beers; or a BJ's Pizza & Grill, which is a smaller format, full service restaurant with a more limited menu than the company's other restaurants. BJ's Restaurants' menu features award-winning, signature deep-dish pizza, handcrafted beers as well as a wide selection of appetizers, entrees, pastas, sandwiches, specialty salads and desserts including the unique Pizookie dessert. Several of BJ's Restaurant & Brewery restaurants also feature in-house brewing facilities where BJ's proprietary handcrafted beers are produced for many of the company's restaurants. Back in August, BJ's Restaurants approved a $100 million increase to the company's share repurchase program first announced on April 22, 2014. After giving effect to approximately $48 million in repurchases made since the plan was first authorized on April 22, 2014, approximately $102 million of repurchase authorization remains available on the newly expanded plan. In late July, BJ's Restaurants reported that total second quarter revenues increased 10.5% to $219.4 million, comparable restaurant sales declined 1.7% and net income and diluted net income per share of $8.0 million and $0.28, respectively. The CEO commented:

"Our initiatives to leverage our industry-leading guest traffic levels, improve kitchen efficiencies, and manage operating and occupancy costs, combined with the launch of our new menu and branding programs, all contributed to BJ's solid second quarter operating results. New menu items such as our Kale and Roasted Brussels Sprouts Salad and our Mediterranean Chicken Pita Tacos have become guest favorites within their respective categories and highlight the value, innovation and quality of the BJ's menu and dining experience. Reflecting the success of the new menu and our branding campaign, comparable restaurant sales improved on a quarterly sequential basis and BJ's finished the quarter on a strong note with positive guest traffic for June, which benefited from a successful graduation season, Father's Day and the World Cup."

On Thursday, small cap BJ's Restaurants rose 1.31% to $37.77 (BJRI has a 52 week trading range of $25.11 to $38.15 a share) for a market cap of $1.05 billion plus the stock is up 21.7% since the start of the year, up 19.3% over the past year and up 128.1% over the past five years.

Good Times Restaurants Inc. Opening its first restaurant in 1987 in Boulder, Colorado, small cap Good Times Restaurants owns and operates, and franchises, restaurants in Colorado and Wyoming. Good Times Restaurants is a quick service restaurant chain serving a high quality, fresh, unique, proprietary selection of hamburgers made with Meyer All-Natural, All-Angus beef, All-Natural chicken from Springer Mountain Farms, Hatch Valley Green Chile Breakfast Burritos, signature Wild Fries and Fresh Cut Fries, Beer Battered Onion Rings and fresh, creamy Frozen Custard in a variety of flavors, hand-spun shakes and Spoonbenders. Good Times Restaurants operates Good Times Burgers & Frozen Custard, a regional chain of quick service restaurants located primarily in Colorado, in its wholly owned subsidiary, Good Times Drive Thru Inc. In addition, Good Times Restaurants owns and operates Bad Daddy's Burger Bar restaurants as a licensee through its wholly owned subsidiary, BD of Colorado LLC and plans to franchise Bad Daddy's Burger Bar restaurants through its 48% ownership of Bad Daddy's Franchise Development LLC. Bad Daddy's Burger Bar is a full-service, upscale, "small box" restaurant concept featuring a chef-driven menu of gourmet signature burgers, chopped salads, appetizers and sandwiches with a full bar and a focus on a selection of craft microbrew beers in a high energy atmosphere. Earlier this month, Good Times Restaurants announced that same store sales for its Good Times Burgers and Frozen Custard concept increased 12% in August 2014 over the prior year's increase of 18.7%, representing a two-year increase of 30.7%, the eleventh consecutive month of two-year same store increases over 20%. In early August, Good Times Restaurants reported a 16.7% third quarter revenue increase to $7,572,000, a 12.5% same store sales increase for company-owned Good Times restaurants for the sixteenth consecutive quarter of increasing same store sales and a net Income increase to $272,000 from $208,000 last year. The CE! O commented:

"Continuing our trend at Good Times, our sales gains continue to leverage our fixed and semi-fixed operating costs, translating into large increases in our restaurant profitability. While we have certain commodity cost pressures in beef, bacon and dairy, we've been able to maintain our gross profit margin through price increases and menu engineering… The opening of our second Bad Daddy's at much higher sales levels than the system average is very gratifying and we expect it will significantly accelerate our achievement of profitability from the BD of Colorado subsidiary as early as our fourth fiscal quarter this year, but certainly in fiscal 2015 as the first store matures and we bring several new stores online."

On Thursday, small cap Good Times Restaurants fell 0.98% to $5.06 (GTIM has a 52 week trading range of $2.06 to $5.49 a share) for a market cap of $38.25 million plus the stock is up 95.4% since the start of the year, up 110.8% over the past year and up 34.9% over the past five years.

Giggles N Hugs Inc. The first and only restaurant that brings together high-end, organic, nutritious and reasonably priced meals along with active, cutting-edge play and entertainment for children, Southern California based small cap Giggles N' Hugs is an up and coming restaurant stock that offers an upscale, family-friendly atmosphere with a dedicated play area for children 10 and younger that creates a fun, casual, family atmosphere where children can interact with parents and each other.

All of Giggles N' Hugs restaurants feature high-quality menus made from fresh and local foods plus nightly entertainment such as magic shows, concerts, puppet shows and face painting along with party packages for families. The company owns and operates one restaurant in the Westfield Mall in Century City, California; a second restaurant in the Westfield Mall in Topanga, California; and a third restaurant in Glendale Galleria in Glendale, California. In the future, Giggles N' Hugs plans to open a number of themed restaurants in high end malls throughout the country – either using a franchising model or company owned stores. Giggles N' Hugs is also developing new products and services such as curb-side take-out, a beer/wine license, furniture and equipment referrals through a partnership with a baby products supplier to receive commissions for each referral, baby food, merchandising and gift certificates. Already, Giggles N Hugs has been:  

Voted the #1 birthday party place in Los Angeles by Nickelodeon. Voted "Best Pizza in Los Angeles" by Nickelodeon. Listed best family & kid-friendly restaurants by CitySearch and GoCityKids.

In addition and being based in Southern California, Giggles N Hugs has an entire page on its website dedicated to its celebrity customers. On Thursday, small cap Giggles N Hugs fell 1.71% to $0.570 (GIGL has a 52 week trading range of $0.10 to $2.00 a share) for a market cap of $17.96 million plus the stock is up 159.1% since the start of the year and up 153.3% over the past year.

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