The chain plans to use the bulk of the $28.1 millionraised from its IPO for new restaurant development,Dempsey said. During the third quarter, Kona Grillopened two new restaurants in San Antonio andSugarland, TX. Next year, the chain, which offers menuitems such as baby-back ribs and sushi, will open fivemore restaurants.
"We will expand in new and existing markets," Dempseysaid, adding that Kona Grill prefers sites that are highprofile and located next to dense retail or officeprojects. The 2006 openings include two in suburbanChicago, one in Dallas, one in Houston and one inNaples, FL. "The expansions don't involve anyfranchises," he clarified.
For each new restaurant, the chain is budgeting$400,000 in pre-opening expenses with the expectationthat each new unit will do $4.5 million in volumewithin 24 months of doors opening, said Mark Robinow,executive vice president, secretary and CFO of KonaGrill.
During the company's first three months ofoperating as a public company, Kona Grill's revenueincreased 44% to $9.5 million, primarily because ofthe newly operating stores. Same-store sales increased3.4%. Average weekly sales for restaurants in thecomparable base were $110,600 during the third quarterof 2005, compared to $107,000 in the prior yearperiod. Average weekly sales for restaurants not inthe comparable base that were open the entire thirdquarter of 2005 were $81,700.
Kona Grill's operating profit during the third quarter increased 64.3% to $2.1 million or 22.2% of revenue, according to Robinow. "We probably have one of the highest restaurant level margins in the industry," he said. "We're very proud of that."
Overall, the chain lost $300,000 or 9 cents perdiluted share during the third quarter. According toKona Grill executives, the company expects to breakeven or lose somewhere between 1 cent to 5 centsper share.
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