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Kura Sushi USA Inc (NASDAQ:KRUS)
Q3 2020 Earnings Call
Jul 14, 2020, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Kura Sushi USA, Inc. Third Quarter 2020 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode and the lines will be opened for your questions following the presentation. Please note that this conference is being recorded today, July 14th, 2020.

On the call today we have Jimmy Uba, President and Chief Executive Officer; Koji Shinohara, Chief Financial Officer; and Benjamin Porten, Investor Relations Manager.

I would now like to turn the conference over to Mr. Porten. Thank you. You may begin.

Benjamin Porten -- Investor Relations Manager

Thank you, operator. Good afternoon everyone and thank you all for joining. By now, everyone should have access to our fiscal third quarter 2020 earnings release. It can be found at www.kurasushi.com in the Investor Relations section. A copy of the earnings release has also been included in an 8-K we submitted to the SEC.

Before we begin our formal remarks, I need to remind everyone that part of our discussions today will include forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees of future performance and therefore you should not put undue reliance on them. These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. We refer all of you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition.

Also, during today's call we will discuss certain non-GAAP measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation nor as a substitute for results prepared in accordance with GAAP and the reconciliations to comparable GAAP measures are available in our earnings release.

With that out of the way, I would like to turn the call over to Jimmy.

Hajime "Jimmy" Uba -- President and Chief Executive Officer

Thank you, Ben, and thank you everyone for joining us today. As most of you know, our restaurants have been largely closed during our fiscal third quarter. As a result, we would like to spend today's call providing you with an update on our business operations and initiatives. If you have specific questions about our third quarter financial results, we will be happy to answer your questions during Q&A.

As we discussed on our last call, we entered 2020 with very solid momentum across our restaurants that continued into January and February of this year. March was a challenging month across the restaurant industry as the news about COVID-19 began to spread.

On March 18th as official guidelines featured mandatory shutdown of in-restaurant dining, we made the difficult decision to close all our restaurants systemwide. From the start of the pandemic, our primary concerns have been the safety of our guests, the ongoing health and the welfare of our team, our liquidity and our ability to quickly and efficiently resume operations when the time was right.

To support our team during this difficult time, we maintained payroll for all employees through equity to fixed and expanded the payroll for all the kitchen employees through May 9th. We have also continued to pay the full cost of health insurance for all of our furloughed employees and stayed connected with our furloughed team members throughout their absence.

In addition to our store managers, critical kitchen staff members have remained on payroll as we believed that the near-term expense of retention will be lesser than potential of a reduced sales due to under-staffing. Finally, all store-level employees that were furloughed in April were eligible for a return bonus in June to further incentivize their return to Kura. These actions have allowed us to bring back our people quickly and open our restaurants with minimal delays. Thanks to our team engagement efforts [Indecipherable] of our employees left the Company between the end of March to early July, which has positioned us to ramp up quickly as indoor dining restrictions are lifted and the seating capacity limitations are relaxed.

As official restrictions have been lifted across the country, we have opened our restaurants promptly and successfully, however at reduced capacity in accordance with local government requirements. We began the reopening process on May 22nd and by the end of May, we had already opened seven of our restaurants. 14 additional restaurants were opened throughout June and as of today, all Kura Sushi restaurants are opened for business.

However, as you are likely aware, Governor Newsom of California announced a restriction on all indoor dining on July 1st for a minimum of three weeks. As a result, all of our California stores, most of which had reopened with limited indoor dining, are currently open for to-go service only. We are now actively working on building out our off-premises business and the infrastructure for all of our restaurants. We have taken a number of steps to create a safer environment in our restaurants, such as providing personal protective equipment for our team members, enhancing the cleaning processes, maintaining social distancing and performing team member health checks before the start of each shift. The health and the safety of our guests and the team members will always be our top priority.

As part of our checkout process, we have a customer survey which is now focused on our COVID-19 safety procedures. I am pleased that by the end of June, we have received more than 15,000 guest responses and over 96% rated our efforts as four or five out of a five-point scale. Considering our restaurants were closed during most of the third quarter, I would like to discuss some results for the month of June. Overall, we've been pleased with the initial results of our openings. However, as you might imagine, subtleness of the reopening under the closing policy changes in our various markets as well as other COVID-19 related issues throughout the country have made recent sales trend more challenging to assess.

Due to our sudden [Phonetic] reopening schedule in May and June only seven stores were opened for the entire month of June. Of these seven stores, five stores were in our comp base and saw same-store sales decline of 48.6%, largely reflecting the 50% seating capacity restrictions for these stores. We are extremely encouraged by these comps which we feel illustrated the strong consumer demand for our unique dining experience. We believe our reopenings are moving in the right direction and reopening our valued room has allowed us to better manage our pandemic-related losses.

Now I would like to provide a brief update on our development efforts. As most of you know, we began the year with the expectation of opening six new restaurants in fiscal 2020. Two new restaurants Katy, Texas and Glendale, California opened during the fiscal Q2 prior to the temporary shutdown. However, as we mentioned during last quarter earnings call, our opening schedule has been filled due to the pandemic. All restaurants were under construction in mid-March, Fort Lee, New Jersey; Koreatown in Los Angeles, Washington, D.C. and Sherman Oaks, California.

After a brief interruption, all four have resumed the construction and we have started the work on our Bellevue, Washington site as well. Fort Lee and Koreatown are both very nearly complete although their opening dates will depend on the coronavirus situation in their respective areas. During our temporary closures, we also completed renovations for seven of our restaurants. By completing these renovations during the pandemic, we are able to avoid the sales losses associated with closures for renovations during non-pandemic periods.

I would like to announce the latest addition to our executive team, Robert Kluger, our first Chief Development Officer. Most recently, Robert was Senior Vice President of Development for Blaze Pizza where he oversaw the company's growth from 140 to 350 units. Prior to Blaze Pizza, he spent six years at Panera Bread ultimately becoming their Senior Manager of Franchise Development and 12 years at the Panda Restaurant Group where he was Vice President of Real Estate and Strategy. Robert has been responsible for over 1,000 store openings with nationally successful brands and we are incredibly excited about the impact we believe he can have on our long-term growth.

Speaking to our liquidity, despite the ongoing uncertainty, we are very fortunate to have entered this unique situation with a strong capital position. As of today, we have approximately $14 million in cash on hand and no debt. Our $20 million revolving line of credit from Kura Sushi Japan remains secure. Although we have not borrowed any amount against it, we will likely begin tapping our revolver to fund our capital expenditures during the upcoming fiscal year. We appreciate the support of Kura Japan and we have confidence in the long-term success of our business.

Considering Governor Newsom's announcement yesterday concerning additional COVID-19 prevention measures, which include more extensive dining prohibitions in California, it appears unlikely that we'll be able to reopen our California dining rooms prior to the end of our fiscal year. During our California dining room closures, we expect our weekly cash burn rate to be in the area of $800,000 to $850,000 which include $400,000 of capex. Once we are able to reopen our California restaurants, we would expect that this weekly burn rate to be reduced by approximately $50,000. Although, we've been able to reduce our operating losses by reopening our restaurants, these gains have been offset by the additional capital expenditures associated with the construction of five new units previously mentioned.

One final reminder, due to the uncertainty driven by COVID-19, we will not issue financial guidance for the remainder of fiscal year 2020 at this time. Thank you for joining us this afternoon and for your interest in Kura Sushi, USA. We were extremely excited about the potential of our business before the threat of COVID-19 and we remain equally confident that when this crisis passes, we have a long runway for opportunity ahead of us. Before we open the line for questions, I would like to thank all of our team members for their hard work, flexibility and support as we navigate this unchartered territory. This concludes our prepared remarks. We are now happy to answer any questions you have. As a reminder, during the Q&A session, I may answer in Japanese before my response is translated in English. Please bear with us. Operator, please open the line for questions.

Questions and Answers:

Operator

Thank you. At this time, we'll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Andrew Strelzik with BMO. Please proceed with your question.

Andrew Strelzik -- BMO Capital Markets -- Analyst

Hey, good afternoon. Hope everyone is doing well. My first question is just on the recent sales trends. It's helpful that you gave those June numbers, but I believe they were just the June numbers and I'm curious if you could maybe give an update on the stores that have remained open for dine-in that are in the comp base, how the sales have trended since or even those outside the comp base kind of how the trajectory has been more recently?

Hajime "Jimmy" Uba -- President and Chief Executive Officer

Sure, thank you, Andrew for your question. Please allow me to answer in Japanese. [Foreign Speech]

Benjamin Porten -- Investor Relations Manager

So looking at the -- our performance over June and July for the restaurants where we've had -- where we've been able to keep our dining rooms open with a 50% seating capacity limit, we've seen comps and sales levels be approximately half of pre-pandemic levels or the past year more or less mapping perfectly on to the capacity limits.

Hajime "Jimmy" Uba -- President and Chief Executive Officer

[Foreign Speech]

Benjamin Porten -- Investor Relations Manager

That being said, California is now currently -- all of our restaurants in California are currently open for to-go only. So, unfortunately, we have seen a sales decline in California relative to pre-pandemic.

Andrew Strelzik -- BMO Capital Markets -- Analyst

Okay, that's very helpful. I'm sorry, go ahead.

Benjamin Porten -- Investor Relations Manager

If I could just add a little more color. In terms of our to-go sales, one of the reasons that we decided to keep our to-go stores open this time as opposed to March is when we made our mid-March store closures, we kept a couple of our stores opened for to-go only, but our June's to-go sales even for our stores that were open for indoor dining were significantly outpacing those sales that we saw in March and so we are seeing an upward trend in that respect.

Andrew Strelzik -- BMO Capital Markets -- Analyst

Okay. So that brings me to my next question. I wanted to ask a little bit about the off-premise strategy generally. I mean it seems like a little bit more of a push behind to-go. How are you communicating that to the guests? I think you made some comments about some investments behind infrastructure there. Can you just talk about what that entails and have you changed your view or thinking at all around delivery. I know it has not been a priority. I'm just curious where that fits in the to-go -- in the off-premise picture for you at this point?

Hajime "Jimmy" Uba -- President and Chief Executive Officer

[Foreign Speech]

Benjamin Porten -- Investor Relations Manager

So to sort of answer your last question first, we'd like to reiterate that the core of our business remains the -- our indoor dining experience and we believe that it's, you know, it's still very popular with our guests as demonstrated by our sales in our reopened dining room areas.

Hajime "Jimmy" Uba -- President and Chief Executive Officer

Go ahead.

Benjamin Porten -- Investor Relations Manager

No, go ahead.

Hajime "Jimmy" Uba -- President and Chief Executive Officer

[Foreign Speech]

Benjamin Porten -- Investor Relations Manager

So, as we mentioned in our previous earnings call, because of our focus being primarily on the indoor dining experience, the last three months we focused on developing the projects that we've mentioned before being the touch panel drink order system and the table-side delivery, I'm sorry, table-side payment system and given that we've made significant process on both of those, we are -- we've decided to shift our energies toward off premises and again, while we think of this as a long-term addition to our business and if there is going to be incremental sales or profitability from that, there is absolutely no reason not to capture that.

Hajime "Jimmy" Uba -- President and Chief Executive Officer

[Foreign Speech]

Benjamin Porten -- Investor Relations Manager

So in terms of infrastructure investments, our ultimate goal is to build out our own online ordering platform, which would ideally be hosted in an all-in-one package that would include our waitlist app, our rewards program, then our online ordering system. That being said, given the sort of sudden -- the suddenness of the announcement from Governor Newsom has pushed the timeline forward and now our top priority is to roll out online ordering capabilities as soon as possible. So we're thinking just in the interest of time that we're going to use this period and we're going to use that third-party service to power our online ordering capabilities. Right know it's going to be less profitable than having our own in-house ordering system just because of service fees. But this is all -- we're treating all this as like an investment. It's a learning process. We're all -- everyday we're learning more things about how to operate off-premises and we're hoping that we can implement all these new learnings into the development of our online ordering system.

Hajime "Jimmy" Uba -- President and Chief Executive Officer

[Foreign Speech]

Benjamin Porten -- Investor Relations Manager

So in terms of your first question about advertising, right now our orders are limited to our in-store orders or phone orders. And so -- but the online ordering is the top priority because that would make things vastly more convenient and it's easier to advertise as well.

Andrew Strelzik -- BMO Capital Markets -- Analyst

Can you just -- I guess the question is where is take-out/to-go mixing right now and what is kind of the breakeven level there? Can you just give us any sense for how we should think about the economics of that piece of the business? And I'll leave it there.

Hajime "Jimmy" Uba -- President and Chief Executive Officer

[Foreign Speech]

Benjamin Porten -- Investor Relations Manager

So looking at June, and this includes our restaurants that were opened for indoor dining as well, our off-premises mix was 6.5% which is significantly higher than our historical mix, which is around 1%. Looking specifically at California, about half of our system had delivered our off-premise mixes of around 9% or more.

Andrew Strelzik -- BMO Capital Markets -- Analyst

Okay. Great. Thank you very much.

Hajime "Jimmy" Uba -- President and Chief Executive Officer

Thank you, Andrew.

Operator

Our next question comes from the line of James Rutherford with Stephens Inc. Please proceed with your question.

James Rutherford -- Stephens Inc. -- Analyst

Hey. Good afternoon and thanks for taking the questions. My first one is just on the various kind of ways you can reopen for indoor dining. My understanding is, in certain cases, you can open with the express belt only. In certain cases, it has to be table service only. So I'm just curious what impact those different statuses would be or those different levels of the operations on your comps or average check or really anything else that you care to speak to on that particular topic.

Hajime "Jimmy" Uba -- President and Chief Executive Officer

[Foreign Speech]

Benjamin Porten -- Investor Relations Manager

So in terms of average ticket, we haven't changed pricing as a result of not having the conveyor belts, but we've actually seen ticket growth year-over-year, which was a pleasant surprise for us.

Hajime "Jimmy" Uba -- President and Chief Executive Officer

[Foreign Speech]

Benjamin Porten -- Investor Relations Manager

So the most onerous restrictions in terms of our conveyor belts are in California. And so in those markets we're not operating our express belt and we did have incremental labor from the additional servers we needed to hire to run the food. But as everybody is aware, California is close for indoor dining now anyway. So it's kind of a moot point for us.

One thing that was really interesting is that people are very understanding and forgiving of not having the conveyor belts live just because it's the pandemic. But given that this is one of the signature features of our restaurant, we plan on bringing this back as soon as we think the timing is right. We don't want to lose something that's so core to our identity.

I spoke with a customer at a service department and luckily there is only one complaint and that was because a family had driven 30, 40 minutes for the excitement of the conveyor belt and they were a little bit disappointed that we weren't able to provide that. So if this were to -- if this use of the primary belt were to continue for a long time, we do think this would make us a little bit less attractive. But on the exact flip side, we think that the experience will make -- really positions as -- positions us as a destination restaurant.

James Rutherford -- Stephens Inc. -- Analyst

Great. That's helpful. And then my second question is on development. Understand there's a lot of moving pieces here, but I believe at one point you had said that the construction on a couple of the up and coming units are nearing completion. And so I'm just curious, your view on the possibility that Fort Lee or Koreatown would open this fiscal year or if those would be more likely to open kind of next year and beyond?

Hajime "Jimmy" Uba -- President and Chief Executive Officer

[Foreign Speech]

Benjamin Porten -- Investor Relations Manager

So in terms of the construction, both Fort Lee and Koreatown in Los Angeles are completely completed. Fort Lee just has its final inspection to go through. Koreatown is actively going through the inspection process. And so these stores are largely ready to open. Although, like again as everybody knows, in Fort Lee, New Jersey and Glendale in California indoor dining is prohibited. And so the gating factor for opening those stores remains these externalities.

And that being said, we are hopeful that we'll be able to open at least one of these stores this fiscal year. But again, this is going to depend on the indoor dining restrictions being lifted.

Hajime "Jimmy" Uba -- President and Chief Executive Officer

[Foreign Speech]

Benjamin Porten -- Investor Relations Manager

So we just wanted to give you some context behind the thinking around our store openings during the pandemic. And our calculations have indicated that as long as we're able to open for -- at a 50% seating capacity limit, we will be able to secure restaurant level operating profit from those stores. And so as long as we can have -- so that's one of the major considerations in terms of the opening timing for a given store.

James Rutherford -- Stephens Inc. -- Analyst

Great. Thank you, Jimmy, Koji and Ben. I appreciate it.

Hajime "Jimmy" Uba -- President and Chief Executive Officer

Thank you, James.

Benjamin Porten -- Investor Relations Manager

Thanks, James.

Operator

Our next question comes from the line of Peter Saleh with BTIG. Please proceed with your question.

Peter Saleh -- BTIG -- Analyst

Great. Thanks for taking my question. I just want to come back to the cash burn real quick. It looks like you guys burned about $10 million or so of cash over the course of the quarter. And if I heard you correctly, I think you're burning another call $800,000 to $850,000. I believe that was a weekly number that you guys provided. So what is the thought process behind the cash burn? If this continue -- if this environment continues longer than another, call it, three months, how do you guys plan to address that? Will we see a slowing of development, will you put a halt on development to kind of ease the cash burn or will you tap revolvers to kind of move forward on development?

Hajime "Jimmy" Uba -- President and Chief Executive Officer

Thank you, Peter. [Foreign Speech]

Benjamin Porten -- Investor Relations Manager

So we just want to make it really clear that the weekly cash burn we gave during the prepared remarks are not -- they are near term. We do not expect that cash burn rate to continue for the next 12 months.

Hajime "Jimmy" Uba -- President and Chief Executive Officer

[Foreign Speech]

Benjamin Porten -- Investor Relations Manager

So there are a couple of pressures on our cash burn rate. The first one would be that this burn rate reflects our 14 stores in California not being able to offer indoor dining. And so that is a pressure -- a downward pressure on our revenue. The other would be that we resumed construction on five new units.

And so we have a lot of capital expenditures because we've already executed these leases. These are in mid-construction before. But the capital expenditures will -- that remains a lever that we can pull at any point and the capex represents about $400,000 of that burn rate. So that would be a very material lever for us to pull. And then in terms of the dining capacities, we think it's extremely unlikely that indoor dining will be not allowed for four months -- four quarters. We're hopeful that it's going to be shorter than that so that pressure from the burn rate to be lifted as well when that happens.

Hajime "Jimmy" Uba -- President and Chief Executive Officer

[Foreign Speech]

Benjamin Porten -- Investor Relations Manager

So, again, in terms of managing the burn rate, capex is something that is completely within our control and so -- and it is also the most material bucket and so we think there is a lot of room in terms of our burn rate going forward if the situation were to get worse or it became clear that it's going to go on much longer than initially expected.

Peter Saleh -- BTIG -- Analyst

Understood. Okay and I appreciate that you guys gave the takeout mix I think in June or the off-premise mix if you will, but can you quantify that in dollars because I know there's a lot of moving parts here with pre-pandemic and post-pandemic AUVs. So can you quantify what the actual maybe dollar weekly sales were per restaurant in any way on off-premise?

Benjamin Porten -- Investor Relations Manager

So we're -- go ahead, sorry.

Hajime "Jimmy" Uba -- President and Chief Executive Officer

[Foreign Speech]

Benjamin Porten -- Investor Relations Manager

So in terms of absolute numbers, for July, we've only been operating to-go only for a couple of weeks and so our advertising pushes haven't really begun in earnest and this isn't necessarily reflective of where this can go. And in terms of June, just the nature of our staggered schedule means that every or staggered reopening scheduled means that every single restaurant has a different number of operating days. And so, giving you an absolute number for June as well would also not necessarily give you a meaningful look into what we can do in the future.

Hajime "Jimmy" Uba -- President and Chief Executive Officer

[Foreign Speech]

Benjamin Porten -- Investor Relations Manager

That being said, in terms of your modeling purposes, we do believe that we'll be able to capture 10% to 20% of our pre-pandemic sales through off-premises.

Peter Saleh -- BTIG -- Analyst

Okay, very helpful. Okay, just last question, are you seeing or getting any sort of rent concessions or any opportunities to lower your rent expense from landlords. Are you seeing any of that yet?

Hajime "Jimmy" Uba -- President and Chief Executive Officer

[Foreign Speech]

Benjamin Porten -- Investor Relations Manager

So our development team has been working very hard on this and having our new CDO Robert Kluger, join us has been huge, immensely helpful. We're very happy that he's on our team. And so we've been in ongoing negotiations since April. We've negotiated for April, May, June and we're currently negotiating for July, but for both May and June, we received modest abatements and then deferrals representing approximately half of the cash rent expense.

Hajime "Jimmy" Uba -- President and Chief Executive Officer

[Foreign Speech]

Benjamin Porten -- Investor Relations Manager

So, one thing we'd like to note is that because we use -- we book our rent on a straight-line basis, this is not going to, you know, these deferrals are not going to be reflected on a P&L level.

Peter Saleh -- BTIG -- Analyst

Understood. All right, thank you very much. That's all I got.

Hajime "Jimmy" Uba -- President and Chief Executive Officer

Thank you, Peter.

Operator

[Operator Instructions] Our next question comes from the line of Jeremy Hamblin with Craig-Hallum. Please proceed with your question.

Jeremy Hamblin -- Craig-Hallum -- Analyst

All right, thanks guys. Thanks for taking the questions and providing so much color. I wanted to just start with thinking about your average location and the level of sales like on an average weekly sales level that you need to breakeven. I think you said that you'd open if you had 50% seating capacity, but if you were to make that more granular and just look at the average weekly sales volume that you needed to do to breakeven at a restaurant level, could you give a range on where that would be?

Hajime "Jimmy" Uba -- President and Chief Executive Officer

[Foreign Speech]

Benjamin Porten -- Investor Relations Manager

So, our pre-pandemic AUVs are $3.5 million. If we're able to secure half of the pre-pandemic sales levels, that brings us to about a monthly revenue of $150,000, which would allow us to breakeven.

Jeremy Hamblin -- Craig-Hallum -- Analyst

Great, that's helpful. And then thinking about cash burn and moving forward and the five restaurants under construction, I just wanted to confirm that excludes Fort Lee and Koreatown. [Speech Overlap].

Benjamin Porten -- Investor Relations Manager

No, that does include Koreatown and Fort Lee. Sorry to interrupt.

Jeremy Hamblin -- Craig-Hallum -- Analyst

Okay, that's helpful. As we think about -- I know this is such a fluid situation and it's hard to forecast, but thinking ahead to fiscal '21 and the unit growth rate that you've maintained, is there a threshold on cash that you need to think about. We're going to back off the capex for new unit construction because this is just a prolonged recovery that we -- we hit, whether it's something that you're below $8 million, let's say, on your cash and you still haven't tapped your revolver. Is there a total level of liquidity where you say at this point we want to make sure that we have ample liquidity. We don't want to get in a situation where this is carrying on longer and we're not going to develop new units. Is there kind of a level or a range that you have in mind to -- before you make that difficult decision?

Hajime "Jimmy" Uba -- President and Chief Executive Officer

[Foreign Speech]

Benjamin Porten -- Investor Relations Manager

So, Jeremy, that's really been top of the mind I imagine -- it's top of the mind for pretty much any other player in the restaurant industry and it's certainly guiding our thinking and our development strategy going forward. One thing that we can say is that we're very confident that we'll be able to meet or beat the 20% unit growth CAGR that we've been discussing in the past.

Hajime "Jimmy" Uba -- President and Chief Executive Officer

[Foreign Speech]

Benjamin Porten -- Investor Relations Manager

So in terms of -- we realize that our development strategy is more aggressive in comparison to the rest of the restaurant space right now, but we have two main things that are really working in our favor and is driving us forward and one, what is the ongoing financial support from the parent and their very strong financial position and the other would be that our calculations have indicated that we're able to capture restaurant-level operating profit as long as we're able to open at 50% or more and so if one of these factors were to no longer be true, then we would certainly reevaluate.

Jeremy Hamblin -- Craig-Hallum -- Analyst

Understood. That's helpful. Last question is you've been I think very generous relative to your public company restaurant peers in how you've managed your staff providing full healthcare benefits and really have waited to furlough really any employees for extended periods. Is that another situation that you would reevaluate at some point? How much of your staff is furloughed at this point? But how do you make that decision moving forward as well?

Hajime "Jimmy" Uba -- President and Chief Executive Officer

[Foreign Speech]

Benjamin Porten -- Investor Relations Manager

So just to give you some context on the reasons why we were more generous than some of our peers. This was a financially strategic move by us where we believe that being able to maintain high retention rates and being able to reopen immediately when it was the right time to do so or reopen at the exact timing where we wanted to be able to reopen and capture those profits without having to worry about under-staffing the profits we'd be able to capture were more meaningful than the [Technical Issues].

Hajime "Jimmy" Uba -- President and Chief Executive Officer

[Foreign Speech]

Benjamin Porten -- Investor Relations Manager

And just as a reminder, our lack of furloughing anybody until early April was predicated on the assumption that we would be receiving the PPP loan.

Hajime "Jimmy" Uba -- President and Chief Executive Officer

[Foreign Speech]

Benjamin Porten -- Investor Relations Manager

And then the situation obviously changed and continues to change. So there has been a pretty material difference. So in May, we did another significant furlough, kitchen employees. We brought them back in June but July the number of shifts that we need has been significantly cut in California. And so, not every employees is working right now. But the cash support is largely done.

Jeremy Hamblin -- Craig-Hallum -- Analyst

Great. Thanks for taking the questions, guys, and providing all the detail. Best wishes for getting back to normal business soon.

Hajime "Jimmy" Uba -- President and Chief Executive Officer

Thank you, Jeremy.

Operator

Our final question comes from the line of George Kelly with Roth Capital. Please proceed with your question.

George A. Kelly -- Roth Capital Partners -- Analyst

Hi, everybody. Thanks for taking my questions. So just two for you. First I understand there is all sorts of barriers and kind of issues with getting your guests into a seat. But my question, you mentioned on the -- in response to a question that average ticket is growing. And I was just wondering if you could expand on that. And what do -- what's kind of changed versus February with an average customer? How is -- as an average guest, how do they look? Are they cautious in general or just what have you seen?

Hajime "Jimmy" Uba -- President and Chief Executive Officer

[Foreign Speech]

Benjamin Porten -- Investor Relations Manager

Sure. So in terms of the average ticket, while we have seen an increase, we haven't been able to draw a direct conclusion behind what's driving it. In terms of what our guests looks like, we've seen a modest shrinking of our average party size. We're no longer seeing large parties of five or six and -- so that's been driving that. It's possible that fewer kids are coming because there are fewer large parties and children bring down average tickets. And so not having as many children could be one of the reasons that I've heard.

George A. Kelly -- Roth Capital Partners -- Analyst

Okay. Okay, got you. And then second question for me is just about your development pipeline. So, you mentioned the 20% CAGR. But I was just wondering if you could be more specific for fiscal year '21. And can you talk about any of the sites that you're continuing to -- you mentioned Washington, D.C. and Sherman Oaks. But what else is on the -- are you continuing to invest in it with plans 2021 open?

Hajime "Jimmy" Uba -- President and Chief Executive Officer

[Foreign Speech]

Benjamin Porten -- Investor Relations Manager

So as some context for everything, we'd like to go over how -- right now, we have 10 leases that are executed. We expect to open one of those 10 stores this fiscal year and then for the remainder to be distributed over fiscal '21 and fiscal '22. And the pacing and the distribution is going to depend on what our burn rate looks like as a result of how we did as a result of our sales recovery.

Hajime "Jimmy" Uba -- President and Chief Executive Officer

[Foreign Speech]

Benjamin Porten -- Investor Relations Manager

And then looking directly toward fiscal '21, beyond the -- yeah, fiscal '21, beyond the five stores that are actively under construction now, we think these three stores would be the likeliest candidates for a fiscal '21 opening, which would be the Avenger of Florida; Troy, Michigan; and then the Stonestown Galleria Mall in San Francisco.

George A. Kelly -- Roth Capital Partners -- Analyst

Okay. Great. That's helpful. And I guess I do have one follow-up to that.

Hajime "Jimmy" Uba -- President and Chief Executive Officer

Sure.

George A. Kelly -- Roth Capital Partners -- Analyst

Any significant changes as you think just on average -- your average store and the construction? Does all this COVID related stuff cause you to rethink any of that, what the box looks like?

Hajime "Jimmy" Uba -- President and Chief Executive Officer

[Foreign Speech]

Benjamin Porten -- Investor Relations Manager

So every -- every construction we do is a 20-year investment given the 20-year leases and the pandemic is not going to last 20 years. So we're a little bit reluctant to make construction related changes related to the pandemic. That being said, and this was already part of our plan pipeline, but we are testing new models that are designed more toward off-premises, whether that means a dedicated make line in the kitchen or pickup racks in the front of the house. So that would be the main change that we're considering.

Hajime "Jimmy" Uba -- President and Chief Executive Officer

[Foreign Speech]

Benjamin Porten -- Investor Relations Manager

And on a cost level, there is not going to be a material difference between to-go -- a traditional store and a store that's geared more toward to-go.

George A. Kelly -- Roth Capital Partners -- Analyst

Okay. Got you. Thank you.

Hajime "Jimmy" Uba -- President and Chief Executive Officer

Thank you, George.

Operator

This concludes today's question-and-answer session. And I would like to turn the floor back over to Mr. Jimmy Uba for any closing remarks.

Hajime "Jimmy" Uba -- President and Chief Executive Officer

Thank you everybody for joining us today. Please take care and stay safe. Thank you very much.

Operator

[Operator Closing Remarks]

Duration: 47 minutes

Call participants:

Benjamin Porten -- Investor Relations Manager

Hajime "Jimmy" Uba -- President and Chief Executive Officer

Andrew Strelzik -- BMO Capital Markets -- Analyst

James Rutherford -- Stephens Inc. -- Analyst

Peter Saleh -- BTIG -- Analyst

Jeremy Hamblin -- Craig-Hallum -- Analyst

George A. Kelly -- Roth Capital Partners -- Analyst

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