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Gong cha May Benefit as Bubble-Tea Sales Jump · Choppin’ It Up by Bloomberg Intelligence

• 0:23
  Speaker 1: Welcome to Chopping It Up. I'm your host, Mike Hallen,
• 0:25
  Speaker 1: the senior restaurant and food service analyst at Bloomberg Intelligence.
• 0:28
  Speaker 1: Today we're joined by Jeff Henry, president of the America's
• 0:31
  Speaker 1: at Goncho Global. Thanks for doing this.
• 0:33
  Speaker 2: Jeff, absolutely, it's a pleasure to be here.
• 0:37
  Speaker 1: And happy birthday. Man. It's a big one today.
• 0:40
  Speaker 2: Yep, it is a milestone for me. I can't believe
• 0:43
  Speaker 2: it's already been five oho, but it's been good.
• 0:45
  Speaker 1: Five Oh, that's cool man. Any plans tonight.
• 0:50
  Speaker 2: Plans for the weekend, so today is actually just a
• 0:53
  Speaker 2: little more arrest. Lots of travel lately, So I just
• 0:55
  Speaker 2: hoping they.
• 0:55
  Speaker 1: Take it a little easy today, Okay, So well, I'll
• 0:58
  Speaker 1: take it easy on you then I want to Yeah,
• 1:00
  Speaker 1: it's too hard, you know, all right? So gun Cha
• 1:05
  Speaker 1: I'm sure you know many of our listeners are unfamiliar
• 1:10
  Speaker 1: with the brand. I'm lucky enough to have one right
• 1:12
  Speaker 1: down the street in Montclair, New Jersey. But so, why
• 1:16
  Speaker 1: don't you tell everybody what gog Cha is, what it sells,
• 1:19
  Speaker 1: and what attracted you to the opportunity.
• 1:22
  Speaker 2: Yeah, so, Gungsha, we are the leading bubble tea franchise
• 1:28
  Speaker 2: concept we've got over twenty one hundred locations globally. I
• 1:33
  Speaker 2: think we're now in over twenty four countries. We sell
• 1:37
  Speaker 2: a wide variety of freshly brewed teas, but most of
• 1:41
  Speaker 2: our guests come in for what we call like a
• 1:44
  Speaker 2: milk tea or a bubble tea. So it's tea, it's milk.
• 1:49
  Speaker 2: It's toppings like pearls also known as boba. It can
• 1:53
  Speaker 2: be other toppings like jellies or coconut pearls, milk foams.
• 2:01
  Speaker 2: Basically a wide variety of way for our guests to
• 2:04
  Speaker 2: customize their bemverage. And you know, the category has been
• 2:08
  Speaker 2: around for over twenty years, starting in Asia, but it's
• 2:11
  Speaker 2: been really kind of taking off here in the US
• 2:14
  Speaker 2: the past seven or eight years. And you know, Gunchha
• 2:18
  Speaker 2: started in the Americas back in like twenty fourteen, and
• 2:23
  Speaker 2: we've now kind of grown to know well over four
• 2:25
  Speaker 2: hundred locations in the Americas. And I joined pretty recently.
• 2:28
  Speaker 2: I joined basically exactly a year ago. Spent the last
• 2:32
  Speaker 2: twenty years in beverages, but I've really enjoyed my time
• 2:35
  Speaker 2: here at Guncha. Just a fascinating brand, great category, and
• 2:40
  Speaker 2: I think just an exciting opportunity for both guests to
• 2:43
  Speaker 2: get a fantastic beverage, but also it's a great franchise concept.
• 2:48
  Speaker 1: Yeah, and beverages are hot, and cold beverages are hot,
• 2:52
  Speaker 1: right acciden, but popular, I should say cold beverages are
• 2:58
  Speaker 1: very popular. Yeah, all right, So about four hundred in
• 3:02
  Speaker 1: the United States? Where are those located? What states invavements
• 3:08
  Speaker 1: are you strong in?
• 3:09
  Speaker 2: So it's four hundred in the America. So we actually
• 3:12
  Speaker 2: currently have presence from Canada into the US, Mexico, and
• 3:15
  Speaker 2: all the way down to Panama. So in the US specifically,
• 3:19
  Speaker 2: we're we've got about two hundred and thirty locations. We're
• 3:23
  Speaker 2: in twenty states, big presence kind of in the Northeast
• 3:28
  Speaker 2: from Massachusetts down to Virginia, big presence in Texas, and
• 3:35
  Speaker 2: big presence in California and parts of the Midwest. In
• 3:41
  Speaker 2: the US specifically.
• 3:42
  Speaker 1: Okay, cool. So what percentage of the global store base
• 3:46
  Speaker 1: and the US or America's store base is franchised.
• 3:50
  Speaker 2: Yeah, it varies a little bit by region. So in
• 3:54
  Speaker 2: the US we're heavily franchised. We're basically ninety nine percent franchised.
• 3:59
  Speaker 2: You know in some markets, you know, like Canada, Mexico,
• 4:03
  Speaker 2: or one hundred percent franchised, but in some of our
• 4:07
  Speaker 2: larger markets in Asia, it's more like eighty five. So
• 4:11
  Speaker 2: it just kind of varies by region. But in the
• 4:15
  Speaker 2: Americas specifically, you know, we started with a master franchising model,
• 4:18
  Speaker 2: which kind of lends itself to heavily franchising and so
• 4:22
  Speaker 2: and we'll continue to be heavily franchised in the Americas.
• 4:25
  Speaker 1: How big is the box? And you know, what else
• 4:30
  Speaker 1: do you have on the menu besides the bubble teas? Yeah,
• 4:32
  Speaker 1: if you could and talk about like the service model,
• 4:35
  Speaker 1: you know, kind of how everything kind of stuck.
• 4:39
  Speaker 2: Yeah, yeah, So, I mean the great thing about gun
• 4:41
  Speaker 2: Cha and the category is that the footprints are extremely versatile.
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  Speaker 2: So you might find a gun Shaw, you know, in
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  Speaker 2: the middle of a shopping mall corridor where we have
• 4:51
  Speaker 2: a kiosk that's two hundred and fifty square feet, right,
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  Speaker 2: But you could also find one that's in a strip
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  Speaker 2: mall that perhaps is you know, a thousand square feet
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  Speaker 2: that's got seating for fifteen or twenty people. So we
• 5:03
  Speaker 2: definitely have flexibility and that folt. We're actually starting to
• 5:05
  Speaker 2: get into some drive through locations as well, which is
• 5:08
  Speaker 2: exciting for us, But it's a pretty simple operating model, right,
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  Speaker 2: So we've got a variety of teas and pearls that
• 5:16
  Speaker 2: we grew fresh multiple times per day. You know, in
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  Speaker 2: most of our locations, you can run the store with
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  Speaker 2: two team members. Obviously during peak time you might both
• 5:26
  Speaker 2: have to have three or four, but it's a pretty
• 5:29
  Speaker 2: simple model. We're investing into digital technology to make it
• 5:33
  Speaker 2: easier for the team members to focus on making beverages
• 5:36
  Speaker 2: as opposed to having to take orders. And so I
• 5:40
  Speaker 2: think in this environment, you know, with higher interest rates,
• 5:43
  Speaker 2: construction costs the way they are, you know, I think
• 5:46
  Speaker 2: one of the things that makes us appealing is our
• 5:48
  Speaker 2: versaal footprint. And we're actually starting to see some of
• 5:50
  Speaker 2: our franchisees kind of paired Gunsha with other franchise concepts
• 5:55
  Speaker 2: to do kind of almost like dual brand or try
• 5:58
  Speaker 2: brand locations.
• 6:01
  Speaker 1: Oh very cool, and I'm sure that's that's going to
• 6:02
  Speaker 1: accelerate growth, having those those that flexible store footprints. That's cool.
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  Speaker 1: Who are your customers and how often did they visit?
• 6:12
  Speaker 2: Yeah, so our our core guest is definitely uh younger
• 6:17
  Speaker 2: probably than you and I. You know, our core guest
• 6:20
  Speaker 2: is typically you know, a gen Z or a younger millennial.
• 6:26
  Speaker 2: It's very popular with high school college aid students. But
• 6:30
  Speaker 2: now that the category has been around for you know,
• 6:32
  Speaker 2: ten plus years, you're having the category starting to age
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  Speaker 2: up because of those college students from seven or eight
• 6:36
  Speaker 2: years ago are now in the working world, perhaps have
• 6:39
  Speaker 2: a young families, and so they're actually bring their you know,
• 6:42
  Speaker 2: their families in for a beverage on the weekends. But
• 6:46
  Speaker 2: it's definitely a younger audience. But you know, everyone likes
• 6:49
  Speaker 2: to feel youthful, right, so we actually have you know,
• 6:52
  Speaker 2: we do bring in, you know, people who are certainly
• 6:54
  Speaker 2: a couple of decades older than our core target. But
• 6:58
  Speaker 2: you know, the target for us is pretty similar for
• 7:00
  Speaker 2: who's drinking the category globally. I mean, bubble tea is
• 7:03
  Speaker 2: a global phenomenon, and so there's a big generational divide.
• 7:08
  Speaker 2: If you talk to somebody who's you know, thirty or under,
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  Speaker 2: they know exactly what bubble tea is, it's highly likely
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  Speaker 2: they've had it. It's also quite possible that they're a
• 7:16
  Speaker 2: regular consumer of it. If you talk to somebody who's
• 7:20
  Speaker 2: fifty or over fifty like me, now, it's highly likely
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  Speaker 2: that they haven't heard of it or haven't had it
• 7:26
  Speaker 2: unless they've got perhaps teenagers in the household. So it's
• 7:30
  Speaker 2: just fascinating to watch. What's one alm with this I
• 7:33
  Speaker 2: think global phenomenon because it really is bubble Tea in
• 7:36
  Speaker 2: gun Chaw very much at the center of it is
• 7:38
  Speaker 2: kind of the drink of this younger generation. You know,
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  Speaker 2: they don't necessarily want to be drinking everything that their
• 7:42
  Speaker 2: parents are drinking. And I think the personalization, customization aspect
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  Speaker 2: of it kind of lends itself really well to our
• 7:49
  Speaker 2: core target and to your earlier question about what's on
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  Speaker 2: the menu. Yeah, we sell tea, you know, so you
• 7:54
  Speaker 2: can get a hot tea, you can get a nice tea,
• 7:56
  Speaker 2: you can get a milk tea. We also sell slushies,
• 8:00
  Speaker 2: We sell creative series. We sell a few food items
• 8:02
  Speaker 2: like freshly made waffles. In some instances we have freshly
• 8:06
  Speaker 2: made doughnuts or cookies. But the vast majority of what
• 8:09
  Speaker 2: we sell is kind of made to order beverages.
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  Speaker 1: And it looks nice, right.
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  Speaker 2: It looks great. I mean again, it's these products. You
• 8:17
  Speaker 2: can have multiple layers, multiple colors, multiple textures, So people
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  Speaker 2: are coming in for the experience, right, They're coming in
• 8:25
  Speaker 2: because one the product tastes great. But the great thing
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  Speaker 2: about like if you order the top selling it in
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  Speaker 2: most of our locations is you know, our milk tea
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  Speaker 2: with pearls, and so if you're a young twenty year old,
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  Speaker 2: you're getting a lot of actual functional benefits. In addition
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  Speaker 2: to it tasting great and looking great, You're getting, you know,
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  Speaker 2: a little bit of caffeine from the tea. You're getting
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  Speaker 2: kind of a carbohydrate boost because the boba or the
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  Speaker 2: pearls you know, are a high carboed hybrid as well,
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  Speaker 2: so you're getting kind of that energy left. And then actually,
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  Speaker 2: if you've or had it, the pearls are kind of
• 9:01
  Speaker 2: chewing texture, so we actually can chew on the pearls
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  Speaker 2: and it's almost like a soothing mechanism, particularly for you know,
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  Speaker 2: university students maybe who are studying for an exam, so
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  Speaker 2: they can kind of sip on their melt tea while
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  Speaker 2: they're in the library studying for a few hours and
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  Speaker 2: it's kind of helps them keep them focused but also
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  Speaker 2: perhaps brings down their stress a little bit. So there's
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  Speaker 2: a lot of reasons I think why people are kind
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  Speaker 2: of gravitating to the product.
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  Speaker 1: Yeah, no, I've I've had a chance to try it.
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  Speaker 1: This stuff tastes great. Like I said, it looks great.
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  Speaker 1: So it's very instagrammable, which is which is important to
• 9:33
  Speaker 1: the younger generations. So what's the sales mix of digital
• 9:39
  Speaker 1: and delivery.
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  Speaker 2: Yeah, so we are, you know, we're leaning heavily into
• 9:44
  Speaker 2: digital again with our core guests being kind of that
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  Speaker 2: Generation Z younger millennial. You know, they're obviously gravitating towards
• 9:53
  Speaker 2: digital orders. In some case they prefer that because it's
• 9:56
  Speaker 2: just more kind of they're kind of first nature for
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  Speaker 2: So if you break down digital for us, we do
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  Speaker 2: about most locations do anywhere between you know, eight to
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  Speaker 2: ten percent in kind of delivery, and then another five
• 10:12
  Speaker 2: to ten percent what I would say is order ahead digital,
• 10:16
  Speaker 2: and then we're investing significantly into in store self order kiosks,
• 10:21
  Speaker 2: which for us have done phenomenally well. So I'm getting
• 10:23
  Speaker 2: back to like the beverage and the product. If you
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  Speaker 2: walk into a gun Char location, we've got a lot
• 10:29
  Speaker 2: of different things for you to choose from, right, both
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  Speaker 2: different categories of beverages melt teese, creative series, slushies, standard tees,
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  Speaker 2: but also a variety of topics. So the Kiosk does
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  Speaker 2: a great job of letting the guests kind of navigate
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  Speaker 2: the menu, and it's got great looking pictures of the
• 10:46
  Speaker 2: product and so therefore it just helps of the guests
• 10:49
  Speaker 2: find a beverage that they're looking for. And we tend
• 10:53
  Speaker 2: to see a slightly higher tickets well, you know, ten
• 10:55
  Speaker 2: to fifteen percent higher off of a digital Kiosk than
• 10:58
  Speaker 2: we do at the counter, and many of our locations,
• 11:01
  Speaker 2: you know, they quickly jumped to twenty five or even
• 11:04
  Speaker 2: as high as fifty percent within the first month of
• 11:07
  Speaker 2: launching a self order Kiosk in the store. So the
• 11:09
  Speaker 2: guest is basically naturally going to the Kiosk versus the
• 11:12
  Speaker 2: counter to kind of put in their customized beverage, which
• 11:16
  Speaker 2: is good also for you know, labor management, because then
• 11:19
  Speaker 2: the team members can focus more on making beverages versus
• 11:22
  Speaker 2: taking orders. Yeah.
• 11:24
  Speaker 1: That's great. Yeah, and it seems like you're on the
• 11:26
  Speaker 1: right side of the demographics, right, So I guess do
• 11:29
  Speaker 1: you have any industry data about how fast this category
• 11:33
  Speaker 1: is expected to grow?
• 11:37
  Speaker 2: Yeah? So, I mean, just going back in time, it's
• 11:39
  Speaker 2: interesting because you know, just personally for me in my career,
• 11:43
  Speaker 2: you know, ten years ago, I was with Coca Cola,
• 11:45
  Speaker 2: and I was running Coca Cola's kind of coffee and
• 11:47
  Speaker 2: tea business for North America, and most of our focus
• 11:50
  Speaker 2: was on iced teas, primarily you both in restaurants and
• 11:55
  Speaker 2: the bottle can side of it. But we were starting
• 11:56
  Speaker 2: to see bubble tea emerge in the US, and quite Franks,
• 12:00
  Speaker 2: they didn't know if there's going to be something that
• 12:02
  Speaker 2: was a fad or really going to stick, because again,
• 12:04
  Speaker 2: it had been around in ages since the early two thousand,
• 12:07
  Speaker 2: starting back in Taiwan, which is also where gungcha originated from.
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  Speaker 2: But the category, you know, if you read a lot
• 12:14
  Speaker 2: of different kind of analyst reports, you know it's expected
• 12:18
  Speaker 2: to at least double, if not triple in size here
• 12:21
  Speaker 2: to be. You know, I think north of five billion
• 12:24
  Speaker 2: in the next five to six years. And so I
• 12:26
  Speaker 2: think it's it's just a really attractive opportunity. Again, you've
• 12:30
  Speaker 2: got both, you know, the younger age demographic and as
• 12:34
  Speaker 2: it's it's a it's a category that get introduced to
• 12:36
  Speaker 2: consumers at a young age too, right, So it's high schoolers,
• 12:39
  Speaker 2: college students, and as they age up, they're continuing to
• 12:42
  Speaker 2: drink this beverage and introduce it to their kids as well,
• 12:45
  Speaker 2: because you can get a lot of you know, great
• 12:47
  Speaker 2: products that don't have caffeine and a gun cha, which
• 12:50
  Speaker 2: I think just makes for a great kind of family occasion.
• 12:54
  Speaker 2: So I think the reason there's so much excitement is
• 12:56
  Speaker 2: because I think there's just a lot of interest in
• 12:59
  Speaker 2: the category with this younger generation.
• 13:02
  Speaker 1: For sure. I think it's also interesting because you know,
• 13:06
  Speaker 1: typically we see US brands being exported, not international ones
• 13:11
  Speaker 1: being boarded. You know, were there any good examples of
• 13:14
  Speaker 1: brands coming into the US from Asia or other places
• 13:18
  Speaker 1: that you were able to study?
• 13:21
  Speaker 2: You know, I think to your point in terms of
• 13:24
  Speaker 2: our approach, you know, we've we've taken the master franchising approach,
• 13:29
  Speaker 2: right so in Asia, where we have fifteen hundred plus locations,
• 13:32
  Speaker 2: if you go to South Korea, we've got over nine
• 13:34
  Speaker 2: hundred locations. You know, we're pretty much everywhere in South
• 13:37
  Speaker 2: Korea and so and so we kind of perfected that
• 13:42
  Speaker 2: model for roughly ten years before we brought it to
• 13:47
  Speaker 2: this side of the world. But we started with a
• 13:50
  Speaker 2: master franchising model to really focus on select entrepreneurs who
• 13:56
  Speaker 2: were up for the challenge of managing operations, marketing in
• 14:00
  Speaker 2: addition to supply chain as well as franchise sales, which
• 14:04
  Speaker 2: is not the easiest thing to find in the US
• 14:07
  Speaker 2: because most multi unit franchises and developers want to focus
• 14:11
  Speaker 2: on operations and marketing, not managing end to end supply chain.
• 14:17
  Speaker 2: And so I think the approach we've taken was more
• 14:21
  Speaker 2: of the what model. Like you said, it's more of
• 14:22
  Speaker 2: the model that you would see if you were as
• 14:25
  Speaker 2: originally a US based company going overseas. We kind of
• 14:28
  Speaker 2: did the inverse in this sense, and so I think
• 14:32
  Speaker 2: we just kind of before we took it overseas and
• 14:34
  Speaker 2: overseas being the Americas, we perfected it back in Asia,
• 14:38
  Speaker 2: and I think continue to perfect it. And I've really
• 14:41
  Speaker 2: now had to even since I joined in the past
• 14:42
  Speaker 2: twelve months, stood up even more of a global operation
• 14:45
  Speaker 2: where we're leveraging best practices from Australia, from Japan and
• 14:49
  Speaker 2: from Korea and many of our markets around the world.
• 14:53
  Speaker 1: So let's dig into that a little bit more. That
• 14:55
  Speaker 1: shift to direct franchising. How are the agreements lined up?
• 15:00
  Speaker 1: Are you are you giving exclusive territories to certain states?
• 15:04
  Speaker 1: What is the typical size of the agreements that you're
• 15:06
  Speaker 1: signing any of that color would be helpful.
• 15:10
  Speaker 2: Yeah, So we literally just started direct franchising at the
• 15:13
  Speaker 2: start of the year, so we're still getting momentum. We've
• 15:17
  Speaker 2: got several new franchisees signed up. We've got a few
• 15:20
  Speaker 2: stores that are opening here in the next few weeks
• 15:22
  Speaker 2: in a couple of different states. So depending upon you know,
• 15:26
  Speaker 2: the market, we could be looking at the deals that
• 15:28
  Speaker 2: are you know, three to five stores to start with.
• 15:31
  Speaker 2: We've got some opportunities where they're starting with a handful
• 15:34
  Speaker 2: of stores with them potentially the opportunity to expand to
• 15:38
  Speaker 2: forty or fifty and have kind of exclusive rights over
• 15:42
  Speaker 2: that state or territory. But it really just depends upon
• 15:45
  Speaker 2: the market. We're trying to actually to try and grow faster.
• 15:49
  Speaker 2: So if we can have you know, one or two
• 15:51
  Speaker 2: experienced operators in a DMA kind of building in parallel
• 15:56
  Speaker 2: to kind of capture even more market share fat maybe
• 16:00
  Speaker 2: block out some of our competition, that's the approach we're
• 16:04
  Speaker 2: looking to go to, which is part of the reason
• 16:06
  Speaker 2: we're doing direct franchising, because before within master franchising, we
• 16:09
  Speaker 2: had to rely on the master to you know, find
• 16:12
  Speaker 2: subfranchises to make it work, which got us to a
• 16:16
  Speaker 2: great point in time here now. But I think we
• 16:18
  Speaker 2: can move even faster with the direct model because again,
• 16:21
  Speaker 2: that's what most US developers are used to dealing with.
• 16:25
  Speaker 2: They don't want to have to manage end to end
• 16:26
  Speaker 2: supply chain.
• 16:28
  Speaker 1: Yeah, and I like when chains, when franchise or is
• 16:31
  Speaker 1: opening up a territory to competition, it tends to motivate
• 16:35
  Speaker 1: the franchises a lot more because you know, in a
• 16:38
  Speaker 1: lot of instances, you know, development agreements tend turn into
• 16:42
  Speaker 1: you know, agreements not to the develop right right exactly.
• 16:46
  Speaker 1: They get to a they get comfortable, you know, with
• 16:48
  Speaker 1: a certain level of sales and earnings, and they're not
• 16:52
  Speaker 1: really motivated to build anymore.
• 16:55
  Speaker 2: Yeah, and we've got we've got some great master franchises
• 16:58
  Speaker 2: and we're going to continue to have them, you know,
• 17:01
  Speaker 2: lead and manage the states that we've sold them. But
• 17:03
  Speaker 2: we've got about fifty percent of the geographic US left
• 17:06
  Speaker 2: to sell and that's what we're doing kind of via
• 17:09
  Speaker 2: direct franchising.
• 17:11
  Speaker 1: All right, great, and how are you prioritizing markets?
• 17:16
  Speaker 2: We're prioritizing largely based upon kind of the I think
• 17:20
  Speaker 2: the category potential in those markets. So we're looking obviously
• 17:23
  Speaker 2: heavily at kind of population, population density, age demographics, and
• 17:29
  Speaker 2: certainly weather too. Right, So you know, having been in
• 17:32
  Speaker 2: beverages for twenty plus years, there's a lot of seasonality
• 17:36
  Speaker 2: in beverages, both in ready to drink beverages as well
• 17:40
  Speaker 2: as kind of made to order beverages, and so we're
• 17:44
  Speaker 2: looking at all those factors again, you know, population size,
• 17:48
  Speaker 2: age demographics, seasonality of weather. You know, historically the brand
• 17:54
  Speaker 2: in the US started more heavily in Asian communities, so
• 17:58
  Speaker 2: it maybe was a Chinatown or Korea town like in
• 18:02
  Speaker 2: New York City. But now that the category is becoming
• 18:05
  Speaker 2: a lot more kind of well known and i think
• 18:09
  Speaker 2: distributed across the country, you're seeing it in basically all
• 18:13
  Speaker 2: types of locations where perhaps it's even a very low
• 18:16
  Speaker 2: Asian population demographic, but there's already the awareness of the category,
• 18:22
  Speaker 2: and so versus five years ago, there's a lot more
• 18:25
  Speaker 2: markets that we're looking to get into today than we
• 18:27
  Speaker 2: did back then.
• 18:29
  Speaker 1: It's cool, excuse female, i'd assume too, right.
• 18:32
  Speaker 2: It does skew female. Yeah, it's about i'd say probably
• 18:36
  Speaker 2: typical split is maybe sixty forty, so it definitely skews female.
• 18:42
  Speaker 2: And again there is you know, the reasons for that,
• 18:45
  Speaker 2: I think are one because of the customization and the
• 18:49
  Speaker 2: different options that kind of the guests can get. There's
• 18:52
  Speaker 2: also you know, I think nutritional benefits. Again, you know,
• 18:55
  Speaker 2: the core product is tea. You know, t is the
• 18:57
  Speaker 2: number two beverage consumed in the world after water, and
• 19:00
  Speaker 2: there's obviously a lot of health benefits antioxidants associated with tea.
• 19:04
  Speaker 2: So while the majority of our beverages are kind of
• 19:07
  Speaker 2: on more the indulgence side, with the malteese or the
• 19:10
  Speaker 2: brown sugar milt teese, people do come in for just
• 19:13
  Speaker 2: a straight up great tasting tea as well.
• 19:16
  Speaker 1: Great And how's a pipeline looking What are your what
• 19:20
  Speaker 1: do you how many stores do you expect to develop
• 19:22
  Speaker 1: in the United States in twenty four and twenty five.
• 19:26
  Speaker 2: Yeah, I mean the pipeline's looking really good. We've got obviously,
• 19:29
  Speaker 2: our existing master franchisees have been working on a pipeline
• 19:33
  Speaker 2: here for a couple of years now. We are expanding
• 19:37
  Speaker 2: our direct franchising development pipeline. You know, we're targeting north
• 19:41
  Speaker 2: of one hundred openings in the America's this year, about
• 19:45
  Speaker 2: half those coming from the US. And you know, as
• 19:49
  Speaker 2: we continue to sell more territory. We expect that number
• 19:52
  Speaker 2: to increase r year because we're also now getting into
• 19:55
  Speaker 2: Central America. We'll have our first stores in Honduras up
• 20:00
  Speaker 2: and Guatemala opening up later this year, probably by by
• 20:05
  Speaker 2: early June, and then we're also looking to get into
• 20:08
  Speaker 2: South America. We're not in South America yet, but that's
• 20:10
  Speaker 2: obviously a massive opportunity. So we expect our pipeline to
• 20:14
  Speaker 2: certainly increase year a year. But we've got some really
• 20:17
  Speaker 2: good momentum and a lot of engaged both existing franchises
• 20:21
  Speaker 2: and prospects looking to get into the brand.
• 20:24
  Speaker 1: Yeah, that's a very strong growth rate on not an
• 20:27
  Speaker 1: insignificant number of stores, So that's that's great. How involved
• 20:32
  Speaker 1: does Goncha with site selection?
• 20:35
  Speaker 2: Well, we're more involved now with direct franchising. So with
• 20:39
  Speaker 2: direct franchising, we're actually doing a couple of things. When
• 20:42
  Speaker 2: we've we've partnered with some you know, industry experts, one
• 20:45
  Speaker 2: of the leading software providers in terms of real estate analysis,
• 20:49
  Speaker 2: as well as some outside consultancies around just doing deep
• 20:54
  Speaker 2: dives into specific markets. So we have a very good
• 20:58
  Speaker 2: sense of what the market potential is is for gun
• 21:00
  Speaker 2: Cha as we go into a new market. Let's say
• 21:02
  Speaker 2: for Phoenix or for Vegas or for Nashville. We know
• 21:06
  Speaker 2: the market potential and so as we work with new franchisees,
• 21:11
  Speaker 2: you know, we can determine we need to have one
• 21:13
  Speaker 2: franchise e lead that market to be mean multiple and
• 21:16
  Speaker 2: then specifically in site selection, you know, we're very involved.
• 21:20
  Speaker 2: You know, we'll work with the franchise on what we
• 21:23
  Speaker 2: believe are the top trade areas for them to start
• 21:26
  Speaker 2: to go into to help kind of see the market,
• 21:29
  Speaker 2: and then we'll provide them approval once they work with
• 21:32
  Speaker 2: their own kind of real estate broker to find the
• 21:34
  Speaker 2: actual location, whether it's an end cap, whether it's in
• 21:39
  Speaker 2: line strip mall, whether it's inside of an indoor shopping mall.
• 21:42
  Speaker 2: But we're certainly involved in the process, and then we'll
• 21:45
  Speaker 2: work through them on the store design and layout.
• 21:48
  Speaker 1: Great man, are there any unit economics that you'd like
• 21:50
  Speaker 1: to share?
• 21:52
  Speaker 2: I mean, all I can share is kind of what
• 21:54
  Speaker 2: we disclose publicly in our FDD. You know, we're proud
• 21:59
  Speaker 2: of our top line sales and our average is roughly
• 22:03
  Speaker 2: you know, five hundred and twenty five thousand in the US.
• 22:07
  Speaker 2: Obviously varies by market. Some markets can be you know,
• 22:10
  Speaker 2: ten to fifty percent higher than that. You know, our
• 22:12
  Speaker 2: top quartile of stores is typically north of eight hundred thousand,
• 22:18
  Speaker 2: so that can make it for a really good kind
• 22:19
  Speaker 2: of cash on cash return. You know, our store investment
• 22:23
  Speaker 2: or build costs you may vary from one hundred and
• 22:26
  Speaker 2: fifty thousand to three hundred and fifty thousand, just kind
• 22:28
  Speaker 2: of depends on where you are and how big of
• 22:31
  Speaker 2: a footprint, because again, it could be a kiosk that's
• 22:33
  Speaker 2: two hundred and fifty square feet, or it could be
• 22:35
  Speaker 2: a much bigger space with a lot more fornenturance seating.
• 22:39
  Speaker 2: But on average the store build is you know, two
• 22:41
  Speaker 2: hundred to two fifty. So you know it's when you
• 22:45
  Speaker 2: when you look at the AUV it's could be a
• 22:47
  Speaker 2: pretty good cash on cash return.
• 22:48
  Speaker 1: Yeah, for sure. It's a very strong sales to investment ratio. Okay, great,
• 22:55
  Speaker 1: And so obviously, you know you've talked already about how
• 22:58
  Speaker 1: the brand naturally attracts some of the younger generations. Is
• 23:02
  Speaker 1: there anything that you're doing specifically to try to attract
• 23:06
  Speaker 1: gen Z customers?
• 23:09
  Speaker 2: Yeah, I mean I think the so, I mean, this
• 23:11
  Speaker 2: category it's a really fun category, right, I mean, there's
• 23:14
  Speaker 2: lots of different toppings, there's colors, so we're always looking
• 23:17
  Speaker 2: to bring new news. So for instance, we did a
• 23:20
  Speaker 2: global campaign so back in November December we did a
• 23:24
  Speaker 2: little gingerbread series where we actually had a gingerbread flavored
• 23:29
  Speaker 2: tea and we actually had it served in a gingerbread
• 23:34
  Speaker 2: man bottle with a little milk foam topping, so you
• 23:37
  Speaker 2: can imagine a gingerbread man it you know, had kind
• 23:39
  Speaker 2: of a smiling face that the milk foam at the
• 23:44
  Speaker 2: top made his face white, and the rest of our
• 23:46
  Speaker 2: body was you know, gingerbread brown, so it was super cute.
• 23:48
  Speaker 2: You had a scarf, very very photographic, so you can
• 23:52
  Speaker 2: imagine just how many hundreds of thousands of pictures we
• 23:55
  Speaker 2: had in the social social sphere with our guests coming
• 23:58
  Speaker 2: in for that. So that was a huge, huge win
• 24:00
  Speaker 2: every market. We sold out much faster than we expected,
• 24:05
  Speaker 2: which is you know a good problem. We would obviously
• 24:08
  Speaker 2: would have loved to have even more, but so that's
• 24:09
  Speaker 2: certainly something we're looking to lean into even for twenty
• 24:13
  Speaker 2: twenty four and make it even bigger. But ltos are
• 24:16
  Speaker 2: part of the way that we know make news, you know,
• 24:19
  Speaker 2: limited time offerings. We just launched in the US on Monday,
• 24:25
  Speaker 2: a new partnership with Hershey, So we're actually doing kind
• 24:27
  Speaker 2: of a tea based cookies and cream based beverage. Delicious
• 24:34
  Speaker 2: looks great. It's off to a fast start for us,
• 24:37
  Speaker 2: and so we're doing that this spring and then this summer,
• 24:41
  Speaker 2: we've got some great innovations that we'll be doing around
• 24:44
  Speaker 2: the world that kind of incorporate flavors from different countries.
• 24:48
  Speaker 2: Because again, part of Guncha is our global footprints, so
• 24:51
  Speaker 2: we're getting inspiration from, you know, the twenty four plus
• 24:54
  Speaker 2: different countries that we already have a presence in. So
• 24:57
  Speaker 2: we're always looking to bring new news both to the
• 24:59
  Speaker 2: product and also on merchandising. You know, the gingerbread is
• 25:03
  Speaker 2: one example. What we also bring in a fun little swag,
• 25:06
  Speaker 2: whether it's tumblers or key chains or plushies. Like our
• 25:11
  Speaker 2: core guests, they just love the brand and they love
• 25:13
  Speaker 2: to collect things beyond just the product itself, so they
• 25:16
  Speaker 2: can kind of, you know, both bring it home and
• 25:18
  Speaker 2: also share it with their friends and social cool.
• 25:21
  Speaker 1: Is that what percentage of your business is that kind
• 25:24
  Speaker 1: of stuff?
• 25:26
  Speaker 2: You know, it varies by location. Some operators are kind
• 25:28
  Speaker 2: of lean into it. More than others. It's generally you know,
• 25:32
  Speaker 2: four to five percent for like merchandising, and then you
• 25:34
  Speaker 2: know the food mix can of again be another five
• 25:37
  Speaker 2: to ten percent depend upon the location. We are continuing
• 25:41
  Speaker 2: to look at more options for enhancing our food offering.
• 25:45
  Speaker 2: We've got a pretty simple kind of back of house,
• 25:48
  Speaker 2: and all of our products is currently delivered ambient. So
• 25:52
  Speaker 2: from a supply chain standpoint, you know, we manage our
• 25:55
  Speaker 2: supply chain to end from the tea farms, cultivating the tea,
• 25:59
  Speaker 2: fermenting the tea in the quality and then it's all
• 26:03
  Speaker 2: delivered from Asia to us here in the US and
• 26:08
  Speaker 2: all delivered via ambient. So as we work on kind
• 26:10
  Speaker 2: of more ways to expand the menu, we also have
• 26:13
  Speaker 2: to kind of continue to fine tune our supply chain model.
• 26:17
  Speaker 1: Cool and the Hershey's partnership sounds interesting. Are there more
• 26:22
  Speaker 1: CpG companies and partnerships in the pipeline?
• 26:27
  Speaker 2: Yeah, there's a few more. Can't kind of shure who
• 26:29
  Speaker 2: they are, but certainly we're looking to do a few
• 26:32
  Speaker 2: more things that are I think definitely unique, innovative, maybe
• 26:37
  Speaker 2: polarizing for some people. You know, the intent is maybe
• 26:40
  Speaker 2: some people will certainly love it, some people won't like
• 26:43
  Speaker 2: it at all, but that's kind of part of the intent,
• 26:45
  Speaker 2: is to kind of create some conversation, get the brand's
• 26:48
  Speaker 2: an aim out there, but also for those who love
• 26:50
  Speaker 2: it it is. You know, we're doing some fun stuff
• 26:52
  Speaker 2: that we'll do later this summer with some big US
• 26:56
  Speaker 2: and global brands, and then we're also leaning into some
• 26:59
  Speaker 2: more licensing opportunities, right, I mean again, because people love
• 27:03
  Speaker 2: to have you know, gung cha we call it a swag,
• 27:08
  Speaker 2: you know, to bring home. We are looking to partner
• 27:10
  Speaker 2: with some big global licensing brands to kind of marry
• 27:15
  Speaker 2: up our brand with a brand that we think fits
• 27:17
  Speaker 2: well to again just continue to delight and satisfy our
• 27:21
  Speaker 2: core guest.
• 27:23
  Speaker 1: Yeah, and it sounds like it's a good way to
• 27:24
  Speaker 1: build the brand, like create more brand awareness, right.
• 27:27
  Speaker 2: Yeah, absolutely, because again I mean just you know, versus
• 27:30
  Speaker 2: twenty five years ago in terms of how you build
• 27:33
  Speaker 2: brand awareness, so different now, right, Obviously, social media influencers
• 27:38
  Speaker 2: is much much much more important to kind of get
• 27:42
  Speaker 2: some traction and drive awareness, and so people are looking
• 27:46
  Speaker 2: obviously for great experiences for brands that kind of stand
• 27:51
  Speaker 2: for more than just a product. And hence, you know,
• 27:53
  Speaker 2: we're looking to elevate the entire brands proposition, but also
• 27:57
  Speaker 2: kind of more touch points, you know, more ways for
• 28:00
  Speaker 2: people to bring the brand home and enjoy it beyond
• 28:02
  Speaker 2: just once they finish the beverage.
• 28:04
  Speaker 1: Well along those lines, Is RTD on your radar.
• 28:09
  Speaker 2: Yeah, there's lots of things on our radar for sure.
• 28:12
  Speaker 2: RTD definitely. It's one of those things that we want
• 28:16
  Speaker 2: to make sure that we get it right. You know,
• 28:19
  Speaker 2: there's a lot of there are a lot of actually
• 28:20
  Speaker 2: emerging rt D bubble tea concepts out there. I've tried
• 28:26
  Speaker 2: a bunch of them. I'm not sure that they quality
• 28:29
  Speaker 2: would meet our standards, and so we don't want to
• 28:31
  Speaker 2: introduce something that's inferior to you know, the great quality
• 28:35
  Speaker 2: that you can get in a Gunshot store because we
• 28:37
  Speaker 2: you know, we make our tea fresh multiple times per day.
• 28:40
  Speaker 2: We make our pearls fresh multiple times per day. And
• 28:43
  Speaker 2: if you're really into this category, you know, rubble t
• 28:48
  Speaker 2: you are, it's much like wine. Like you come in
• 28:51
  Speaker 2: and you will basically examine and and and kind of
• 28:56
  Speaker 2: really look closely at the quality of the pearls, texture,
• 29:00
  Speaker 2: the chewiness, the temperature. And to do that right, you
• 29:04
  Speaker 2: got to make them fresh, right, and so that's hard
• 29:06
  Speaker 2: to do in an ARTD way. But we are looking
• 29:08
  Speaker 2: at the our RTD, but we're just.
• 29:10
  Speaker 1: Not there yet, gotcha. All right? Cool, well, listen, Thanks Jeff,
• 29:16
  Speaker 1: I appreciate your time, especially coming on here on your birthday.
• 29:20
  Speaker 1: Where can the audience go to find a nearby guncha?
• 29:23
  Speaker 1: And what social media platforms is the brand big on?
• 29:27
  Speaker 2: Yeah, so certainly you can go online to find any
• 29:31
  Speaker 2: of our locations in the US, you know, gun Cha
• 29:35
  Speaker 2: USA dot Com, we're you know, we're Instagram, Facebook, that's
• 29:41
  Speaker 2: kind of where those are our kind of two primary
• 29:43
  Speaker 2: social media channels. And again, we are opening locations every week.
• 29:49
  Speaker 2: We are in you know, twenty states currently in the US.
• 29:53
  Speaker 2: We've got almost one hundred in Mexico, almost one hundred
• 29:57
  Speaker 2: in Canada. And so if we're not in someone's neighborhood today,
• 30:03
  Speaker 2: hopefully we'll be later this year. And I've done this
• 30:05
  Speaker 2: year that hopefully next.
• 30:08
  Speaker 1: Yeah, listeners should go go check it out if they
• 30:10
  Speaker 1: have one nearby. That the stuff's fantastic. You know, I
• 30:13
  Speaker 1: wasn't a believer. I'm you know, forty seven, I'm not
• 30:16
  Speaker 1: your core market, but you know I had it and
• 30:19
  Speaker 1: the stuff is fantastic, So yeah. So I'd also like
• 30:25
  Speaker 1: to thank the audience for tuning in. If you liked
• 30:26
  Speaker 1: the episode, please leave us a rating and click the
• 30:29
  Speaker 1: bell if you'd like to subscribe. Check back soon for
• 30:31
  Speaker 1: a conversation with David Maloney. He's the founder and president
• 30:35
  Speaker 1: of datum FS, and we'll be discussing the commodity markets
• 30:38
  Speaker 1: and their impact on restaurant costs.