Highlights

• Good Times Restaurants (GTIM) owns two concepts - the original “Good Times Drive Thru” and “Bad Daddy's Burger Bar.”

• Despite continued cash generation, shares have recently traded lower to a $17m Enterprise Value.

• I expect shares to recover once inflationary pressure eases.

Brief Commentary

Good Times Restaurants (NASDAQ:GTIM) finds themselves at an interesting crossroads with two operating chains: Good Times Burgers & Frozen Custard, and Bad Daddy's Burger Bar. Bad Daddy's had a much harder time during the pandemic than the fast-casual Good Times (i.e. Q3-20 same store sales (SSS) for Good Times restaurants increased 11.9% and for Bad Daddy’s restaurants decreased 36.7%). The balance between the two chains helped the company tread water better than some peers, though Bad Daddy's made up a much larger portion of historic sales.

Good Times Restaurants appears cheap compared to peers, while having strong underlying cash flow characteristics in their Bad Daddy’s segment. Given Management has explored selling the Good Times segment in the past, shareholders may be optimistic that Management recognizes that being public as such a small business is not necessarily worth their while, and may seek to monetize their assets soon. I believe shares represent an attractive value around $2 and could rebound sharply when inflationary pressures ease.

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