WEBVTT - Gong cha May Benefit as Bubble-Tea Sales Jump 0:00:23.280 --> 0:00:25.560 Welcome to Chopping It Up. I'm your host, Mike Hallen, 0:00:25.600 --> 0:00:28.720 the senior restaurant and food service analyst at Bloomberg Intelligence. 0:00:28.880 --> 0:00:31.680 Today we're joined by Jeff Henry, president of the America's 0:00:31.720 --> 0:00:33.920 at Goncho Global. Thanks for doing this. 0:00:33.880 --> 0:00:36.560 Jeff, absolutely, it's a pleasure to be here. 0:00:37.240 --> 0:00:39.840 And happy birthday. Man. It's a big one today. 0:00:40.720 --> 0:00:43.080 Yep, it is a milestone for me. I can't believe 0:00:43.080 --> 0:00:45.520 it's already been five oho, but it's been good. 0:00:45.400 --> 0:00:48.680 Five Oh, that's cool man. Any plans tonight. 0:00:50.159 --> 0:00:53.320 Plans for the weekend, so today is actually just a 0:00:53.360 --> 0:00:55.480 little more arrest. Lots of travel lately, So I just 0:00:55.480 --> 0:00:55.920 hoping they. 0:00:55.840 --> 0:00:58.680 Take it a little easy today, Okay, So well, I'll 0:00:58.680 --> 0:01:00.280 take it easy on you then I want to Yeah, 0:01:00.520 --> 0:01:05.000 it's too hard, you know, all right? So gun Cha 0:01:05.640 --> 0:01:10.880 I'm sure you know many of our listeners are unfamiliar 0:01:10.880 --> 0:01:12.959 with the brand. I'm lucky enough to have one right 0:01:12.959 --> 0:01:16.000 down the street in Montclair, New Jersey. But so, why 0:01:16.040 --> 0:01:19.040 don't you tell everybody what gog Cha is, what it sells, 0:01:19.080 --> 0:01:21.080 and what attracted you to the opportunity. 0:01:22.000 --> 0:01:28.559 Yeah, so, Gungsha, we are the leading bubble tea franchise 0:01:28.640 --> 0:01:33.160 concept we've got over twenty one hundred locations globally. I 0:01:33.160 --> 0:01:36.760 think we're now in over twenty four countries. We sell 0:01:37.760 --> 0:01:41.440 a wide variety of freshly brewed teas, but most of 0:01:41.480 --> 0:01:44.120 our guests come in for what we call like a 0:01:44.200 --> 0:01:49.280 milk tea or a bubble tea. So it's tea, it's milk. 0:01:49.480 --> 0:01:53.920 It's toppings like pearls also known as boba. It can 0:01:53.960 --> 0:02:01.200 be other toppings like jellies or coconut pearls, milk foams. 0:02:01.480 --> 0:02:04.560 Basically a wide variety of way for our guests to 0:02:04.600 --> 0:02:08.440 customize their bemverage. And you know, the category has been 0:02:08.600 --> 0:02:11.399 around for over twenty years, starting in Asia, but it's 0:02:11.440 --> 0:02:13.959 been really kind of taking off here in the US 0:02:14.040 --> 0:02:18.000 the past seven or eight years. And you know, Gunchha 0:02:18.440 --> 0:02:23.000 started in the Americas back in like twenty fourteen, and 0:02:23.040 --> 0:02:25.400 we've now kind of grown to know well over four 0:02:25.440 --> 0:02:28.680 hundred locations in the Americas. And I joined pretty recently. 0:02:28.680 --> 0:02:32.399 I joined basically exactly a year ago. Spent the last 0:02:32.400 --> 0:02:35.839 twenty years in beverages, but I've really enjoyed my time 0:02:35.840 --> 0:02:40.400 here at Guncha. Just a fascinating brand, great category, and 0:02:40.440 --> 0:02:43.560 I think just an exciting opportunity for both guests to 0:02:43.600 --> 0:02:46.840 get a fantastic beverage, but also it's a great franchise concept. 0:02:48.200 --> 0:02:52.080 Yeah, and beverages are hot, and cold beverages are hot, 0:02:52.680 --> 0:02:58.000 right acciden, but popular, I should say cold beverages are 0:02:58.080 --> 0:03:02.480 very popular. Yeah, all right, So about four hundred in 0:03:02.480 --> 0:03:08.080 the United States? Where are those located? What states invavements 0:03:08.080 --> 0:03:08.720 are you strong in? 0:03:09.280 --> 0:03:11.880 So it's four hundred in the America. So we actually 0:03:12.000 --> 0:03:15.600 currently have presence from Canada into the US, Mexico, and 0:03:15.600 --> 0:03:19.240 all the way down to Panama. So in the US specifically, 0:03:19.360 --> 0:03:23.480 we're we've got about two hundred and thirty locations. We're 0:03:23.480 --> 0:03:28.200 in twenty states, big presence kind of in the Northeast 0:03:28.240 --> 0:03:35.880 from Massachusetts down to Virginia, big presence in Texas, and 0:03:35.960 --> 0:03:41.000 big presence in California and parts of the Midwest. In 0:03:41.040 --> 0:03:42.320 the US specifically. 0:03:42.920 --> 0:03:46.160 Okay, cool. So what percentage of the global store base 0:03:46.280 --> 0:03:49.920 and the US or America's store base is franchised. 0:03:50.960 --> 0:03:54.040 Yeah, it varies a little bit by region. So in 0:03:54.120 --> 0:03:57.680 the US we're heavily franchised. We're basically ninety nine percent franchised. 0:03:59.440 --> 0:04:03.000 You know in some markets, you know, like Canada, Mexico, 0:04:03.160 --> 0:04:06.880 or one hundred percent franchised, but in some of our 0:04:07.120 --> 0:04:11.680 larger markets in Asia, it's more like eighty five. So 0:04:11.760 --> 0:04:15.240 it just kind of varies by region. But in the 0:04:15.280 --> 0:04:18.560 Americas specifically, you know, we started with a master franchising model, 0:04:18.560 --> 0:04:22.039 which kind of lends itself to heavily franchising and so 0:04:22.200 --> 0:04:25.039 and we'll continue to be heavily franchised in the Americas. 0:04:25.279 --> 0:04:30.279 How big is the box? And you know, what else 0:04:30.279 --> 0:04:32.920 do you have on the menu besides the bubble teas? Yeah, 0:04:32.920 --> 0:04:35.200 if you could and talk about like the service model, 0:04:35.480 --> 0:04:38.919 you know, kind of how everything kind of stuck. 0:04:39.120 --> 0:04:41.479 Yeah, yeah, So, I mean the great thing about gun 0:04:41.600 --> 0:04:45.240 Cha and the category is that the footprints are extremely versatile. 0:04:45.440 --> 0:04:48.520 So you might find a gun Shaw, you know, in 0:04:48.600 --> 0:04:51.520 the middle of a shopping mall corridor where we have 0:04:51.560 --> 0:04:54.080 a kiosk that's two hundred and fifty square feet, right, 0:04:54.920 --> 0:04:56.880 But you could also find one that's in a strip 0:04:56.880 --> 0:04:59.520 mall that perhaps is you know, a thousand square feet 0:04:59.560 --> 0:05:03.080 that's got seating for fifteen or twenty people. So we 0:05:03.160 --> 0:05:05.560 definitely have flexibility and that folt. We're actually starting to 0:05:05.560 --> 0:05:08.320 get into some drive through locations as well, which is 0:05:08.320 --> 0:05:13.360 exciting for us, But it's a pretty simple operating model, right, 0:05:13.440 --> 0:05:16.800 So we've got a variety of teas and pearls that 0:05:16.839 --> 0:05:20.359 we grew fresh multiple times per day. You know, in 0:05:20.480 --> 0:05:23.320 most of our locations, you can run the store with 0:05:24.200 --> 0:05:26.880 two team members. Obviously during peak time you might both 0:05:26.920 --> 0:05:29.799 have to have three or four, but it's a pretty 0:05:29.800 --> 0:05:33.080 simple model. We're investing into digital technology to make it 0:05:33.080 --> 0:05:36.520 easier for the team members to focus on making beverages 0:05:36.520 --> 0:05:40.039 as opposed to having to take orders. And so I 0:05:40.040 --> 0:05:43.200 think in this environment, you know, with higher interest rates, 0:05:43.839 --> 0:05:46.440 construction costs the way they are, you know, I think 0:05:46.480 --> 0:05:48.240 one of the things that makes us appealing is our 0:05:48.360 --> 0:05:50.599 versaal footprint. And we're actually starting to see some of 0:05:50.640 --> 0:05:55.720 our franchisees kind of paired Gunsha with other franchise concepts 0:05:55.760 --> 0:05:58.279 to do kind of almost like dual brand or try 0:05:58.360 --> 0:05:59.320 brand locations. 0:06:01.040 --> 0:06:02.880 Oh very cool, and I'm sure that's that's going to 0:06:02.920 --> 0:06:07.599 accelerate growth, having those those that flexible store footprints. That's cool. 0:06:08.279 --> 0:06:10.640 Who are your customers and how often did they visit? 0:06:12.080 --> 0:06:17.080 Yeah, so our our core guest is definitely uh younger 0:06:17.160 --> 0:06:20.400 probably than you and I. You know, our core guest 0:06:20.480 --> 0:06:26.000 is typically you know, a gen Z or a younger millennial. 0:06:26.720 --> 0:06:30.320 It's very popular with high school college aid students. But 0:06:30.360 --> 0:06:32.640 now that the category has been around for you know, 0:06:32.680 --> 0:06:35.000 ten plus years, you're having the category starting to age 0:06:35.080 --> 0:06:36.840 up because of those college students from seven or eight 0:06:36.920 --> 0:06:39.320 years ago are now in the working world, perhaps have 0:06:39.400 --> 0:06:42.080 a young families, and so they're actually bring their you know, 0:06:42.120 --> 0:06:46.479 their families in for a beverage on the weekends. But 0:06:46.520 --> 0:06:49.600 it's definitely a younger audience. But you know, everyone likes 0:06:49.600 --> 0:06:51.880 to feel youthful, right, so we actually have you know, 0:06:52.000 --> 0:06:54.039 we do bring in, you know, people who are certainly 0:06:54.760 --> 0:06:58.159 a couple of decades older than our core target. But 0:06:58.760 --> 0:07:00.800 you know, the target for us is pretty similar for 0:07:00.960 --> 0:07:03.839 who's drinking the category globally. I mean, bubble tea is 0:07:03.880 --> 0:07:08.720 a global phenomenon, and so there's a big generational divide. 0:07:08.720 --> 0:07:11.480 If you talk to somebody who's you know, thirty or under, 0:07:11.680 --> 0:07:14.280 they know exactly what bubble tea is, it's highly likely 0:07:14.360 --> 0:07:16.760 they've had it. It's also quite possible that they're a 0:07:16.760 --> 0:07:19.480 regular consumer of it. If you talk to somebody who's 0:07:20.560 --> 0:07:24.400 fifty or over fifty like me, now, it's highly likely 0:07:24.440 --> 0:07:26.080 that they haven't heard of it or haven't had it 0:07:26.200 --> 0:07:29.960 unless they've got perhaps teenagers in the household. So it's 0:07:30.000 --> 0:07:33.080 just fascinating to watch. What's one alm with this I 0:07:33.080 --> 0:07:36.800 think global phenomenon because it really is bubble Tea in 0:07:36.840 --> 0:07:38.480 gun Chaw very much at the center of it is 0:07:38.520 --> 0:07:40.440 kind of the drink of this younger generation. You know, 0:07:40.480 --> 0:07:42.200 they don't necessarily want to be drinking everything that their 0:07:42.240 --> 0:07:46.239 parents are drinking. And I think the personalization, customization aspect 0:07:46.320 --> 0:07:49.240 of it kind of lends itself really well to our 0:07:49.280 --> 0:07:52.560 core target and to your earlier question about what's on 0:07:52.600 --> 0:07:54.360 the menu. Yeah, we sell tea, you know, so you 0:07:54.360 --> 0:07:56.360 can get a hot tea, you can get a nice tea, 0:07:56.600 --> 0:07:59.120 you can get a milk tea. We also sell slushies, 0:08:00.080 --> 0:08:02.800 We sell creative series. We sell a few food items 0:08:02.840 --> 0:08:06.560 like freshly made waffles. In some instances we have freshly 0:08:06.560 --> 0:08:09.720 made doughnuts or cookies. But the vast majority of what 0:08:09.760 --> 0:08:11.720 we sell is kind of made to order beverages. 0:08:13.120 --> 0:08:14.720 And it looks nice, right. 0:08:15.320 --> 0:08:17.840 It looks great. I mean again, it's these products. You 0:08:17.880 --> 0:08:21.880 can have multiple layers, multiple colors, multiple textures, So people 0:08:21.920 --> 0:08:25.120 are coming in for the experience, right, They're coming in 0:08:25.200 --> 0:08:29.120 because one the product tastes great. But the great thing 0:08:29.120 --> 0:08:31.960 about like if you order the top selling it in 0:08:32.040 --> 0:08:35.560 most of our locations is you know, our milk tea 0:08:35.559 --> 0:08:38.880 with pearls, and so if you're a young twenty year old, 0:08:38.920 --> 0:08:41.440 you're getting a lot of actual functional benefits. In addition 0:08:41.480 --> 0:08:44.640 to it tasting great and looking great, You're getting, you know, 0:08:44.840 --> 0:08:47.560 a little bit of caffeine from the tea. You're getting 0:08:48.000 --> 0:08:51.120 kind of a carbohydrate boost because the boba or the 0:08:51.160 --> 0:08:56.480 pearls you know, are a high carboed hybrid as well, 0:08:56.520 --> 0:08:59.199 so you're getting kind of that energy left. And then actually, 0:08:59.600 --> 0:09:01.599 if you've or had it, the pearls are kind of 0:09:01.640 --> 0:09:04.240 chewing texture, so we actually can chew on the pearls 0:09:04.240 --> 0:09:08.760 and it's almost like a soothing mechanism, particularly for you know, 0:09:08.960 --> 0:09:11.360 university students maybe who are studying for an exam, so 0:09:11.400 --> 0:09:13.760 they can kind of sip on their melt tea while 0:09:13.760 --> 0:09:15.600 they're in the library studying for a few hours and 0:09:15.600 --> 0:09:17.960 it's kind of helps them keep them focused but also 0:09:18.000 --> 0:09:20.800 perhaps brings down their stress a little bit. So there's 0:09:20.840 --> 0:09:22.640 a lot of reasons I think why people are kind 0:09:22.640 --> 0:09:24.320 of gravitating to the product. 0:09:25.000 --> 0:09:26.840 Yeah, no, I've I've had a chance to try it. 0:09:26.880 --> 0:09:30.280 This stuff tastes great. Like I said, it looks great. 0:09:30.320 --> 0:09:33.760 So it's very instagrammable, which is which is important to 0:09:33.800 --> 0:09:39.000 the younger generations. So what's the sales mix of digital 0:09:39.000 --> 0:09:41.280 and delivery. 0:09:41.440 --> 0:09:44.320 Yeah, so we are, you know, we're leaning heavily into 0:09:44.520 --> 0:09:48.200 digital again with our core guests being kind of that 0:09:50.160 --> 0:09:53.840 Generation Z younger millennial. You know, they're obviously gravitating towards 0:09:53.880 --> 0:09:56.360 digital orders. In some case they prefer that because it's 0:09:56.400 --> 0:09:59.920 just more kind of they're kind of first nature for 0:10:01.679 --> 0:10:04.080 So if you break down digital for us, we do 0:10:04.200 --> 0:10:07.080 about most locations do anywhere between you know, eight to 0:10:07.120 --> 0:10:12.240 ten percent in kind of delivery, and then another five 0:10:12.280 --> 0:10:15.560 to ten percent what I would say is order ahead digital, 0:10:16.679 --> 0:10:20.960 and then we're investing significantly into in store self order kiosks, 0:10:21.600 --> 0:10:23.640 which for us have done phenomenally well. So I'm getting 0:10:23.640 --> 0:10:26.120 back to like the beverage and the product. If you 0:10:26.160 --> 0:10:28.960 walk into a gun Char location, we've got a lot 0:10:29.000 --> 0:10:30.880 of different things for you to choose from, right, both 0:10:30.920 --> 0:10:38.160 different categories of beverages melt teese, creative series, slushies, standard tees, 0:10:38.679 --> 0:10:40.880 but also a variety of topics. So the Kiosk does 0:10:40.920 --> 0:10:43.600 a great job of letting the guests kind of navigate 0:10:43.640 --> 0:10:46.480 the menu, and it's got great looking pictures of the 0:10:46.480 --> 0:10:49.840 product and so therefore it just helps of the guests 0:10:49.920 --> 0:10:53.320 find a beverage that they're looking for. And we tend 0:10:53.320 --> 0:10:55.520 to see a slightly higher tickets well, you know, ten 0:10:55.559 --> 0:10:58.679 to fifteen percent higher off of a digital Kiosk than 0:10:58.720 --> 0:11:01.600 we do at the counter, and many of our locations, 0:11:01.679 --> 0:11:04.319 you know, they quickly jumped to twenty five or even 0:11:04.360 --> 0:11:07.040 as high as fifty percent within the first month of 0:11:07.160 --> 0:11:09.160 launching a self order Kiosk in the store. So the 0:11:09.200 --> 0:11:11.920 guest is basically naturally going to the Kiosk versus the 0:11:12.000 --> 0:11:16.680 counter to kind of put in their customized beverage, which 0:11:16.720 --> 0:11:19.240 is good also for you know, labor management, because then 0:11:19.280 --> 0:11:22.720 the team members can focus more on making beverages versus 0:11:22.720 --> 0:11:24.120 taking orders. Yeah. 0:11:24.160 --> 0:11:26.360 That's great. Yeah, and it seems like you're on the 0:11:26.440 --> 0:11:29.559 right side of the demographics, right, So I guess do 0:11:29.600 --> 0:11:33.040 you have any industry data about how fast this category 0:11:33.120 --> 0:11:34.600 is expected to grow? 0:11:37.080 --> 0:11:39.280 Yeah? So, I mean, just going back in time, it's 0:11:39.320 --> 0:11:42.360 interesting because you know, just personally for me in my career, 0:11:43.040 --> 0:11:45.480 you know, ten years ago, I was with Coca Cola, 0:11:45.480 --> 0:11:47.640 and I was running Coca Cola's kind of coffee and 0:11:47.640 --> 0:11:50.720 tea business for North America, and most of our focus 0:11:50.800 --> 0:11:54.760 was on iced teas, primarily you both in restaurants and 0:11:55.000 --> 0:11:56.880 the bottle can side of it. But we were starting 0:11:56.920 --> 0:12:00.000 to see bubble tea emerge in the US, and quite Franks, 0:12:00.080 --> 0:12:02.200 they didn't know if there's going to be something that 0:12:02.280 --> 0:12:04.480 was a fad or really going to stick, because again, 0:12:04.520 --> 0:12:07.040 it had been around in ages since the early two thousand, 0:12:07.160 --> 0:12:12.200 starting back in Taiwan, which is also where gungcha originated from. 0:12:12.480 --> 0:12:14.200 But the category, you know, if you read a lot 0:12:14.240 --> 0:12:18.040 of different kind of analyst reports, you know it's expected 0:12:18.080 --> 0:12:20.400 to at least double, if not triple in size here 0:12:21.440 --> 0:12:23.800 to be. You know, I think north of five billion 0:12:24.760 --> 0:12:26.880 in the next five to six years. And so I 0:12:26.880 --> 0:12:30.360 think it's it's just a really attractive opportunity. Again, you've 0:12:30.360 --> 0:12:34.360 got both, you know, the younger age demographic and as 0:12:34.400 --> 0:12:36.760 it's it's a it's a category that get introduced to 0:12:36.920 --> 0:12:39.880 consumers at a young age too, right, So it's high schoolers, 0:12:39.920 --> 0:12:42.280 college students, and as they age up, they're continuing to 0:12:42.360 --> 0:12:45.959 drink this beverage and introduce it to their kids as well, 0:12:45.960 --> 0:12:47.600 because you can get a lot of you know, great 0:12:47.600 --> 0:12:50.760 products that don't have caffeine and a gun cha, which 0:12:50.800 --> 0:12:54.000 I think just makes for a great kind of family occasion. 0:12:54.160 --> 0:12:56.800 So I think the reason there's so much excitement is 0:12:56.840 --> 0:12:59.200 because I think there's just a lot of interest in 0:12:59.200 --> 0:13:01.760 the category with this younger generation. 0:13:02.920 --> 0:13:06.120 For sure. I think it's also interesting because you know, 0:13:06.200 --> 0:13:10.960 typically we see US brands being exported, not international ones 0:13:11.000 --> 0:13:14.040 being boarded. You know, were there any good examples of 0:13:14.040 --> 0:13:18.600 brands coming into the US from Asia or other places 0:13:18.600 --> 0:13:19.840 that you were able to study? 0:13:21.920 --> 0:13:24.360 You know, I think to your point in terms of 0:13:24.400 --> 0:13:29.520 our approach, you know, we've we've taken the master franchising approach, 0:13:29.600 --> 0:13:32.880 right so in Asia, where we have fifteen hundred plus locations, 0:13:32.880 --> 0:13:34.640 if you go to South Korea, we've got over nine 0:13:34.720 --> 0:13:37.840 hundred locations. You know, we're pretty much everywhere in South 0:13:37.880 --> 0:13:42.200 Korea and so and so we kind of perfected that 0:13:42.280 --> 0:13:46.880 model for roughly ten years before we brought it to 0:13:47.240 --> 0:13:50.640 this side of the world. But we started with a 0:13:50.640 --> 0:13:55.600 master franchising model to really focus on select entrepreneurs who 0:13:56.080 --> 0:14:00.480 were up for the challenge of managing operations, marketing in 0:14:00.520 --> 0:14:04.280 addition to supply chain as well as franchise sales, which 0:14:04.320 --> 0:14:07.120 is not the easiest thing to find in the US 0:14:07.200 --> 0:14:11.800 because most multi unit franchises and developers want to focus 0:14:11.840 --> 0:14:16.040 on operations and marketing, not managing end to end supply chain. 0:14:17.200 --> 0:14:21.160 And so I think the approach we've taken was more 0:14:21.160 --> 0:14:22.840 of the what model. Like you said, it's more of 0:14:22.840 --> 0:14:24.880 the model that you would see if you were as 0:14:25.560 --> 0:14:28.920 originally a US based company going overseas. We kind of 0:14:28.920 --> 0:14:31.960 did the inverse in this sense, and so I think 0:14:32.000 --> 0:14:34.200 we just kind of before we took it overseas and 0:14:34.240 --> 0:14:38.400 overseas being the Americas, we perfected it back in Asia, 0:14:38.760 --> 0:14:41.320 and I think continue to perfect it. And I've really 0:14:41.320 --> 0:14:42.840 now had to even since I joined in the past 0:14:42.880 --> 0:14:45.600 twelve months, stood up even more of a global operation 0:14:45.720 --> 0:14:49.720 where we're leveraging best practices from Australia, from Japan and 0:14:49.760 --> 0:14:52.880 from Korea and many of our markets around the world. 0:14:53.560 --> 0:14:55.440 So let's dig into that a little bit more. That 0:14:55.560 --> 0:15:00.160 shift to direct franchising. How are the agreements lined up? 0:15:00.160 --> 0:15:03.440 Are you are you giving exclusive territories to certain states? 0:15:04.000 --> 0:15:06.480 What is the typical size of the agreements that you're 0:15:06.520 --> 0:15:09.600 signing any of that color would be helpful. 0:15:10.480 --> 0:15:13.840 Yeah, So we literally just started direct franchising at the 0:15:13.880 --> 0:15:17.440 start of the year, so we're still getting momentum. We've 0:15:17.440 --> 0:15:20.560 got several new franchisees signed up. We've got a few 0:15:20.600 --> 0:15:22.640 stores that are opening here in the next few weeks 0:15:22.640 --> 0:15:26.080 in a couple of different states. So depending upon you know, 0:15:26.360 --> 0:15:28.920 the market, we could be looking at the deals that 0:15:28.960 --> 0:15:31.600 are you know, three to five stores to start with. 0:15:31.640 --> 0:15:34.520 We've got some opportunities where they're starting with a handful 0:15:34.560 --> 0:15:38.520 of stores with them potentially the opportunity to expand to 0:15:38.560 --> 0:15:41.680 forty or fifty and have kind of exclusive rights over 0:15:42.280 --> 0:15:45.400 that state or territory. But it really just depends upon 0:15:45.440 --> 0:15:49.400 the market. We're trying to actually to try and grow faster. 0:15:49.520 --> 0:15:51.240 So if we can have you know, one or two 0:15:51.320 --> 0:15:56.360 experienced operators in a DMA kind of building in parallel 0:15:56.480 --> 0:16:00.560 to kind of capture even more market share fat maybe 0:16:00.600 --> 0:16:04.120 block out some of our competition, that's the approach we're 0:16:04.160 --> 0:16:06.200 looking to go to, which is part of the reason 0:16:06.200 --> 0:16:09.760 we're doing direct franchising, because before within master franchising, we 0:16:09.840 --> 0:16:12.400 had to rely on the master to you know, find 0:16:12.640 --> 0:16:16.200 subfranchises to make it work, which got us to a 0:16:16.200 --> 0:16:18.240 great point in time here now. But I think we 0:16:18.280 --> 0:16:21.600 can move even faster with the direct model because again, 0:16:21.680 --> 0:16:25.080 that's what most US developers are used to dealing with. 0:16:25.120 --> 0:16:26.760 They don't want to have to manage end to end 0:16:26.800 --> 0:16:27.440 supply chain. 0:16:28.200 --> 0:16:31.480 Yeah, and I like when chains, when franchise or is 0:16:31.560 --> 0:16:35.720 opening up a territory to competition, it tends to motivate 0:16:35.760 --> 0:16:38.120 the franchises a lot more because you know, in a 0:16:38.120 --> 0:16:41.840 lot of instances, you know, development agreements tend turn into 0:16:42.200 --> 0:16:45.680 you know, agreements not to the develop right right exactly. 0:16:46.040 --> 0:16:48.600 They get to a they get comfortable, you know, with 0:16:48.680 --> 0:16:51.840 a certain level of sales and earnings, and they're not 0:16:52.040 --> 0:16:54.240 really motivated to build anymore. 0:16:55.120 --> 0:16:58.640 Yeah, and we've got we've got some great master franchises 0:16:58.680 --> 0:17:00.600 and we're going to continue to have them, you know, 0:17:01.280 --> 0:17:03.240 lead and manage the states that we've sold them. But 0:17:03.280 --> 0:17:06.920 we've got about fifty percent of the geographic US left 0:17:06.960 --> 0:17:09.320 to sell and that's what we're doing kind of via 0:17:09.560 --> 0:17:10.480 direct franchising. 0:17:11.600 --> 0:17:14.120 All right, great, and how are you prioritizing markets? 0:17:16.200 --> 0:17:20.320 We're prioritizing largely based upon kind of the I think 0:17:20.359 --> 0:17:23.200 the category potential in those markets. So we're looking obviously 0:17:23.240 --> 0:17:28.920 heavily at kind of population, population density, age demographics, and 0:17:29.359 --> 0:17:32.119 certainly weather too. Right, So you know, having been in 0:17:32.160 --> 0:17:36.680 beverages for twenty plus years, there's a lot of seasonality 0:17:36.920 --> 0:17:40.920 in beverages, both in ready to drink beverages as well 0:17:40.960 --> 0:17:44.720 as kind of made to order beverages, and so we're 0:17:44.720 --> 0:17:48.400 looking at all those factors again, you know, population size, 0:17:48.520 --> 0:17:54.560 age demographics, seasonality of weather. You know, historically the brand 0:17:54.600 --> 0:17:58.399 in the US started more heavily in Asian communities, so 0:17:58.440 --> 0:18:02.320 it maybe was a Chinatown or Korea town like in 0:18:02.359 --> 0:18:05.480 New York City. But now that the category is becoming 0:18:05.520 --> 0:18:09.320 a lot more kind of well known and i think 0:18:09.359 --> 0:18:13.520 distributed across the country, you're seeing it in basically all 0:18:13.560 --> 0:18:16.920 types of locations where perhaps it's even a very low 0:18:16.960 --> 0:18:22.320 Asian population demographic, but there's already the awareness of the category, 0:18:22.359 --> 0:18:25.160 and so versus five years ago, there's a lot more 0:18:25.359 --> 0:18:27.800 markets that we're looking to get into today than we 0:18:27.840 --> 0:18:28.400 did back then. 0:18:29.200 --> 0:18:32.480 It's cool, excuse female, i'd assume too, right. 0:18:32.760 --> 0:18:35.960 It does skew female. Yeah, it's about i'd say probably 0:18:36.280 --> 0:18:41.000 typical split is maybe sixty forty, so it definitely skews female. 0:18:42.359 --> 0:18:45.000 And again there is you know, the reasons for that, 0:18:45.040 --> 0:18:49.600 I think are one because of the customization and the 0:18:49.600 --> 0:18:52.680 different options that kind of the guests can get. There's 0:18:52.680 --> 0:18:55.159 also you know, I think nutritional benefits. Again, you know, 0:18:55.240 --> 0:18:57.159 the core product is tea. You know, t is the 0:18:57.240 --> 0:19:00.520 number two beverage consumed in the world after water, and 0:19:00.560 --> 0:19:04.120 there's obviously a lot of health benefits antioxidants associated with tea. 0:19:04.520 --> 0:19:07.000 So while the majority of our beverages are kind of 0:19:07.200 --> 0:19:10.639 on more the indulgence side, with the malteese or the 0:19:10.640 --> 0:19:13.639 brown sugar milt teese, people do come in for just 0:19:13.640 --> 0:19:15.200 a straight up great tasting tea as well. 0:19:16.720 --> 0:19:20.720 Great And how's a pipeline looking What are your what 0:19:20.760 --> 0:19:22.480 do you how many stores do you expect to develop 0:19:22.920 --> 0:19:25.160 in the United States in twenty four and twenty five. 0:19:26.520 --> 0:19:29.200 Yeah, I mean the pipeline's looking really good. We've got obviously, 0:19:29.640 --> 0:19:33.600 our existing master franchisees have been working on a pipeline 0:19:33.600 --> 0:19:37.320 here for a couple of years now. We are expanding 0:19:37.359 --> 0:19:41.720 our direct franchising development pipeline. You know, we're targeting north 0:19:41.760 --> 0:19:45.399 of one hundred openings in the America's this year, about 0:19:45.400 --> 0:19:49.760 half those coming from the US. And you know, as 0:19:49.760 --> 0:19:52.480 we continue to sell more territory. We expect that number 0:19:52.520 --> 0:19:55.520 to increase r year because we're also now getting into 0:19:55.560 --> 0:20:00.240 Central America. We'll have our first stores in Honduras up 0:20:00.359 --> 0:20:05.000 and Guatemala opening up later this year, probably by by 0:20:05.600 --> 0:20:08.080 early June, and then we're also looking to get into 0:20:08.119 --> 0:20:10.320 South America. We're not in South America yet, but that's 0:20:10.320 --> 0:20:13.679 obviously a massive opportunity. So we expect our pipeline to 0:20:14.200 --> 0:20:17.000 certainly increase year a year. But we've got some really 0:20:17.040 --> 0:20:21.560 good momentum and a lot of engaged both existing franchises 0:20:21.640 --> 0:20:23.600 and prospects looking to get into the brand. 0:20:24.880 --> 0:20:27.560 Yeah, that's a very strong growth rate on not an 0:20:27.560 --> 0:20:32.080 insignificant number of stores, So that's that's great. How involved 0:20:32.119 --> 0:20:33.760 does Goncha with site selection? 0:20:35.960 --> 0:20:38.919 Well, we're more involved now with direct franchising. So with 0:20:39.000 --> 0:20:41.960 direct franchising, we're actually doing a couple of things. When 0:20:42.000 --> 0:20:45.879 we've we've partnered with some you know, industry experts, one 0:20:45.920 --> 0:20:49.480 of the leading software providers in terms of real estate analysis, 0:20:49.880 --> 0:20:54.880 as well as some outside consultancies around just doing deep 0:20:54.960 --> 0:20:58.320 dives into specific markets. So we have a very good 0:20:58.359 --> 0:21:00.760 sense of what the market potential is is for gun 0:21:00.840 --> 0:21:02.880 Cha as we go into a new market. Let's say 0:21:02.960 --> 0:21:05.919 for Phoenix or for Vegas or for Nashville. We know 0:21:06.000 --> 0:21:10.919 the market potential and so as we work with new franchisees, 0:21:11.280 --> 0:21:13.240 you know, we can determine we need to have one 0:21:13.280 --> 0:21:16.159 franchise e lead that market to be mean multiple and 0:21:16.200 --> 0:21:20.440 then specifically in site selection, you know, we're very involved. 0:21:20.440 --> 0:21:23.479 You know, we'll work with the franchise on what we 0:21:23.520 --> 0:21:26.320 believe are the top trade areas for them to start 0:21:26.320 --> 0:21:28.240 to go into to help kind of see the market, 0:21:29.440 --> 0:21:32.240 and then we'll provide them approval once they work with 0:21:32.280 --> 0:21:34.560 their own kind of real estate broker to find the 0:21:34.640 --> 0:21:39.040 actual location, whether it's an end cap, whether it's in 0:21:39.119 --> 0:21:42.480 line strip mall, whether it's inside of an indoor shopping mall. 0:21:42.880 --> 0:21:45.000 But we're certainly involved in the process, and then we'll 0:21:45.000 --> 0:21:47.000 work through them on the store design and layout. 0:21:48.600 --> 0:21:50.879 Great man, are there any unit economics that you'd like 0:21:50.920 --> 0:21:51.400 to share? 0:21:52.840 --> 0:21:54.119 I mean, all I can share is kind of what 0:21:54.119 --> 0:21:59.240 we disclose publicly in our FDD. You know, we're proud 0:21:59.240 --> 0:22:03.200 of our top line sales and our average is roughly 0:22:03.320 --> 0:22:07.360 you know, five hundred and twenty five thousand in the US. 0:22:07.560 --> 0:22:10.720 Obviously varies by market. Some markets can be you know, 0:22:10.800 --> 0:22:12.640 ten to fifty percent higher than that. You know, our 0:22:12.640 --> 0:22:17.520 top quartile of stores is typically north of eight hundred thousand, 0:22:18.119 --> 0:22:19.760 so that can make it for a really good kind 0:22:19.760 --> 0:22:22.920 of cash on cash return. You know, our store investment 0:22:23.000 --> 0:22:26.159 or build costs you may vary from one hundred and 0:22:26.200 --> 0:22:28.560 fifty thousand to three hundred and fifty thousand, just kind 0:22:28.600 --> 0:22:31.320 of depends on where you are and how big of 0:22:31.320 --> 0:22:33.879 a footprint, because again, it could be a kiosk that's 0:22:33.880 --> 0:22:35.560 two hundred and fifty square feet, or it could be 0:22:35.760 --> 0:22:38.200 a much bigger space with a lot more fornenturance seating. 0:22:39.480 --> 0:22:41.680