Good afternoon, everyone. Welcome to the Dave & Buster's Entertainment, Inc. fourth quarter 2020 earnings results conference call. Today's call is being hosted by Brian Jenkins, Chief Executive Officer. He'll be joined on the call by Scott Bowman, Chief Financial Officer, and Margo Manning, Chief Operating Officer. I'd like to remind everyone that this call is being recorded and will be available for replay beginning later today. Now I'd like to turn the conference over to Scott Bowman for opening remarks.
Thank you, James, and thank you, all of you, for joining us today. Before we begin our discussion on the company's results, I'd like to call your attention to the fact that in our remarks and our responses to questions, certain items may be discussed which are not entirely based on historical fact. Any of these items should be considered forward-looking statements related to future events within the meaning of the Private Securities Litigation Reform Act of 1995. All such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Information on the various risk factors and uncertainties have been published in our filings with the SEC, which are available on our website at www.daveandbusters.com under the investor relations section.
In addition, our remarks today will include references to EBITDA, adjusted EBITDA, and store operating income before depreciation and amortization, which are financial measures that are not defined under generally accepted accounting principles. Investors should review the reconciliation of these non-GAAP measures to the comparable GAAP results contained in the earnings announcements released this afternoon, which is also available on our website. Now I'll turn the call over to Brian.
Thank you, Scott. Good afternoon, everyone, and thank you for joining our call today. As I close out a challenging 2020 fiscal year, I am pleased to report today that our business is on a clear path to recovery. Our stores are reopening, comp sales trends are improving, our financial performance is rebounding, and our liquidity remains strong. As I reflect back on the agility, the resilience, and resolve that our team has demonstrated over the past year, I am extremely proud of what they have accomplished. Dave & Buster's is a stronger company today because of the outstanding effort of our team, and for that, I am grateful. Following a temporary setback caused by the COVID resurgence over the holidays, our business recovery remains solid momentum. We concluded our fiscal year in January with 107 reopened stores.
Our fully operational reopened comp stores generated January sales at 67% of 2019 levels, representing our strongest COVID-impacted month in fiscal 2020. In January, 85 stores, representing approximately 80% of our reopened stores, achieved positive store-level EBITDA, enabling us to post our first month of positive enterprise-level EBITDA since the shutdown of our entire store base just over one year ago. Our operating and corporate teams continue to execute a lean operating model as our stores rebuild their business. When our revenues return to 2019 levels, we estimate the operational improvements we've implemented will drive approximately 200 basis points of incremental EBITDA margin over the rate we achieved in 2019, excluding the impact of cost pressures that may emerge over time. With improving COVID trends, higher seasonal sales, and stimulus-related demand, our recovery has continued during the first eight weeks of fiscal 2021.
Sales at our fully operational comp stores have achieved 74% of 2019 levels. Total sales reached approximately $150 million, and we posted our second consecutive month of positive enterprise-level EBITDA in February, the first full month of fiscal 2021. Also encouraging, the recent reopening of limited capacity dining and arcade operations at our 11 New York stores and limited capacity dining at 6 of our 16 California stores brings us very close to the complete reopening of our 141-store base. In turn, these positive developments give us confidence that we will achieve enterprise-level EBITDA profitability for the first quarter of fiscal year 2021, a significant achievement for our team and our company. Our accelerating recovery illustrates the resilience of the Dave & Buster's brand and the important role that good, clean fun plays in the lives of our guests.
It also validates the changes we made to our business model that have not only enabled us to navigate the challenges of the past year, but to emerge with a stronger, more competitive, and more profitable business. Our team is prepared, they're excited, and fully engaged, and we are optimistic about what the future holds in 2021 and beyond. At this time, I'm going to ask our CFO, Scott Bowman, to cover the results of the fourth quarter and to share some insights on our expectations for the first quarter. After that, our COO, Margo Manning, will join me to provide an update on our 2021 strategic plan. Scott?
Thanks, Brian. I'll first spend some time summarizing our fourth quarter performance and our liquidity position and then provide some insights on the first quarter in fiscal 2021. For the fourth quarter, our total revenues of $117 million reflected a 70% decline in comparable store sales. We ended the year with 107 open stores, including three new stores opened during the quarter. By month, overall comparable store sales were negative 69% in November, negative 78% in December, and negative 59% in January. January performance improved mainly due to the benefit from the COVID stimulus and the reopening of 14 comparable stores compared with December. Turning to the balance of the P&L, gross margin declined 11 basis points to 82.7% in the quarter, primarily due to inventory write-offs related to closed stores, which was substantially offset by a higher mix of amusement sales.
Operating payroll and benefit expense was 27.6% of sales, compared to 22.9% last year. This was mainly due to de-leveraging management labor due to lower sales and our decision to recall our core group of managers in New York and California to help ensure effective restart capabilities. Other store operating expense was 50.3% of sales, compared to 31.2% last year. Most of the deleverage was due to occupancy costs on lower sales, along with deleverage in areas such as utilities and repair and maintenance expense. Throughout the quarter, we continued to ramp up repair and maintenance expense to prepare our stores for reopening and expectation of higher sales across the chain. G&A expense of $11.6 million decreased 43% from prior year, primarily due to savings related to staffing reductions as well as lower consulting expense. Fourth quarter EBITDA loss was $20.1 million.
That said, we were pleased to achieve positive enterprise level EBITDA in January, driven by improving sales trends and additional store reopens. Turning to the balance sheet, we ended the quarter with $12 million in cash and $280 million of availability under our revolving credit facility, net of a $150 million minimum liquidity covenant and $10 million in letters of credit. Total long-term debt stood at $610 million at the end of the quarter, consisting of $550 million in senior secured notes and $60 million outstanding on our revolver. Additionally, at the end of the quarter, we had approximately $5 million in deferred vendor payables, which compares with approximately $17 million at the end of the third quarter. We plan to repay most of this deferred balance by the end of the second quarter of fiscal 2021.
Excluding revolver draws and repayments, our cash burn rate averaged $2.3 million per week during the fourth quarter. Deferred rent totaled approximately $52 million at the end of the fourth quarter, compared with approximately $48 million at the end of the third quarter. As a result of our continued negotiation with our landlords, we have further extended rent deferrals, resulting in an expected payback of approximately $20 million in fiscal 2021, $25 million in fiscal 2022, and $7 million thereafter. In addition, we expect to receive a tax refund of approximately $11 million either late in the first quarter or early in the second quarter of 2021, resulting from CARES Act legislation. We also expect to receive a tax refund of approximately $50 million late in the fourth quarter or early in the first quarter of 2022, related to the carryback of fiscal 2020 losses.
Turning to capital spending, we completed construction and opened three new stores in the fourth quarter. Overall, we had $54 million in capital additions for 2020 and $51 million net of tenant allowances. In summary, our operating results for the fourth quarter reflected encouraging sales recovery trends at reopened stores, and we were very pleased to achieve enterprise-level EBITDA profitability for the first month of January. Now, turning to our outlook for fiscal 2021, we will not be providing detailed full-year guidance at this time due to continued uncertainty in the operating environment. However, I would like to offer some insights for the first quarter of fiscal 2021. For the first eight weeks of the first quarter, we've seen continued improvement in sales trends with total revenue of approximately $150 million and comp sales down 47% compared to 2019.
As a housekeeping note, we will continue to report comp sales for 2021 against 2019 results, as we believe this is a more meaningful comparison versus the COVID-affected 2020 results. For the first quarter, we expect total revenues to be in the range of $210 million-$220 million, which assumes that the month of April will continue to be a seasonally low volume month as it has been historically. Importantly, as Brian noted earlier, we're also experiencing meaningful improvement in profitability and expect to achieve enterprise-level EBITDA profitability for the full quarter, reflecting another significant milestone in our recovery. Regarding liquidity, we had approximately $309 million of available liquidity under our revolving credit agreement as of the end of the first eight weeks of the first quarter, net of a $150 million minimum liquidity covenant and $10 million in letters of credit.
From a CapEx perspective, we will continue to invest in the business in fiscal 2021 to further strengthen our brand, concentrating on our strategic initiatives that Brian and Margo will discuss next, as well as a limited number of new store openings. We plan on being conservative on new store openings for the near term while our business continues to recover, but we will retain some flexibility to be able to begin construction on additional stores should the business improve more quickly than anticipated. Overall, we currently have 10 new store commitments in our new store pipeline, of which we plan to open four in fiscal 2021, along with the relocation of one additional store. We opened the first of those new stores in early February.
In total, we plan to invest $65 million-$70 million in CapEx in fiscal 2021, net of tenant allowances, while maintaining adequate liquidity to meet our operating needs and to position us to lower our debt profile over time. Finally, I'd like to provide some insight on the operational improvements and business model initiatives, which we estimate will drive approximately 200 basis points of EBITDA margin improvement. As we return to 2019 revenue levels, first, we expect to see leverage from hourly labor as we continue to invest in technology to improve efficiency. The main enablers of this deployment will be tablets for our servers, mobile ordering by our guests, and more effective scheduling of hourly staff based on anticipated daypart traffic.
We also expect to realize leverage from management labor as we adjust scheduling for peak and off-peak hours and utilize key hourly team members to provide coverage in certain situations. For G&A, we have scaled down the organization to be more nimble and will benefit from process improvements identified during the past year. From a marketing standpoint, we're planning on fewer, more strategically placed promos, targeting our spend in the key windows during the year. Finally, we will achieve savings from other P&L line items from opportunities realized through our zero-based budgeting approach as we continue to cautiously add back expenses at a slower rate than our sales recovery. While this model does not reflect the impact of cost inflation or other cost pressures that may emerge over time, we believe these initiatives will drive approximately $30 million of EBITDA improvement as we return to 2019 sales levels.
With that, I'll turn it back over to Brian and Margo to discuss our strategic initiatives.
Thanks, Scott. Well, we're very encouraged by the first quarter momentum that Scott just described to you and are confidently implementing our 2021 strategic plan built around four key pillars that really define the Dave & Buster's brand. The first is to offer novel food and drink to bring people together. The second is to offer the latest entertainment to enjoy together. Third is to deliver an integrated guest experience with an an aligned team. The fourth is to drive deeper guest engagement. Our COO, Margo, shared certain details of the first and third pillars during the last quarter's call. She will bring you up to date on our more recent progress, and then I'll follow up with an update on the second and the fourth pillars. Margo?
Thank you, Brian. I appreciate the opportunity to give an update on the progress we have made on our key initiatives. First, however, I do want to recognize our operating team. They are dedicated to bringing our stores up quickly and profitably. Successfully relaunching these stores takes great effort. They continue to deliver strong performance, and I'm incredibly proud of this team. As Brian shared, our team has been implementing and refining a number of initiatives under each of the strategic pillars that Brian just discussed. Under the first pillar, offering novel food and drinks to bring people together, our teams have been working to establish a stronger, differentiated food identity for the Dave & Buster's brand, exploring virtual kitchen concepts, optimizing back-of-the-house operations, and enhancing our bar menu.
Our new food identity, Inspired American Kitchen, is rooted in enhanced flavor and quality ingredients across a condensed number of menu items that we have priced to maintain our historic gross margins. This is the most extensive update to our food offering in more than 10 years, and it allows our guests to explore new flavors while offering a balanced selection of familiar dishes. Our stores have just completed the second phase of our menu initiative, taking our menu from 17 items to 22. Completion of the third phase of our menu by late May will bring us up to our final target of 28 items. This represents 33% fewer items than were on our pre-COVID menu. We expect our new menu to drive an improved guest experience and increase food attachment rates, all aimed towards increasing food and beverage sales.
By the end of April, we'll have completed the rollout of high-speed ovens at all stores, reducing cook times by more than 40% on approximately 1/3 of our menu. Additionally, we anticipate having the upgrades to our kitchen management system implemented in all stores by June, which will enable a more seamless flow of food and help reduce overall kitchen ticket time. Combined, our new menu, high-speed ovens, and new kitchen management system will enable our teams to deliver dishes to our guests hot and fast. To complement these operational improvements, our marketing department has designed a comprehensive internal and external marketing strategy to tell our guests about the new menu and to drive trial. Throughout our buildings, from this dining room to our WOW walls and video walls to on midway, guests will see mouth-watering pictures of awesome dishes from our new menu.
Guests will also experience a new digital menu that is visually appealing and easy for them to navigate. Our external advertising plan is equally compelling and, for the first time, allocates a majority of our spend towards digital channels to communicate with existing and with first-time guests. I'm particularly excited to see us partner with social influencers to help promote this new menu in a fun and relevant way. To further expand our reach and to leverage our kitchen capabilities, we have tested two ghost kitchen concepts that highlight specific food categories from our new menu. We have focused on concepts that can be rolled out nationally or regionally. Our most recent ghost kitchen test is a concept called Wings Out. It offers a narrow menu of wings and tenders with a variety of new and interesting sauces to select from.
We are excited about ghost kitchens as a new revenue stream. As we consider their potential impact, particularly in the context of our historically category leading $10 million EBITDA and a smaller store count than many of our competitors, we do understand that they will be a relatively small contributor to total sales. Our ghost kitchens, combined with our core D&B To-Go offerings, are currently generating approximately $50,000 per store. However, we are just beginning this journey. The next step, evaluating additional ghost kitchen concepts and third-party providers beyond DoorDash and Uber Eats, as well as working to optimize our promotional strategy to fully capture the revenue potential for these concepts.
The third of our four strategic pillars, delivering an integrated guest experience with an aligned team, includes evolving our service models to give guests more control over their in-store experience, growing our culture of social fun by freeing up our team members to engage more frequently to enhance the guest experience, and opening new stores with the new service model capabilities from the outset. This involves deploying a combination of a new service model, tablets, and a mobile web platform to enable a completely contactless order pay experience. In our test stores, we've seen an encouraging improvement in check turns. We have also been able to expand the size of server sections and reduce our staffing levels to be more efficient. We have implemented this new model in our reopened New York stores and are proceeding with a staggered deployment plan across the brand, targeting full deployment by late summer.
Lastly, as Scott mentioned, we have analyzed our lean operating models and identified where we can capture operating cost leverage. We're confident that our team will continue to apply the learnings from this past year to be an even better operating team in 2021. In summary, let me be clear, the overarching objective of our food and service model strategic initiative is to efficiently drive increased sales, improve the guest experience, and enhance our long-term profitability. Now, I'm going to turn the call back to Brian to talk about the two remaining strategic pillars: offering the latest entertainment to enjoy together and deepening guest engagement. Brian?
Thanks, Margo, and thank you for your leadership and your team's incredible commitment and dedication to this company. The two strategic pillars that round out our 2021 strategic plan are also central to enhancing the guest experience. The first is offering the latest entertainment to enjoy together. Over the past 12 months, our entertainment team has been working on several fronts to support this pillar, starting with six new games that will launch exclusively at Dave & Buster's this summer. This exciting lineup of new games includes titles such as Minecraft Dungeons Arcade, a four-player cooperative game based on the best-selling video game of all time. Hatchet Hero, which brings the excitement of competitive axe throwing to Dave & Buster's guests in a fun, safe, fast-paced arcade format. There's Hungry Hungry Hippos, which brings a life-size version of the classic board game for up to four players.
We'll add a brand-new VR attraction to our proprietary platform with the launch of Top Gun VR Arcade just prior to the release of the new Top Gun movie this summer. We also continue to explore a sports betting partnership to bring sports wagering and daily fantasy sports to D&B where allowed by law. We believe this could represent a meaningful accelerator to our appeal as a sports watching destination and better leverage our watch assets. We expect to bring our negotiations to a conclusion over the next several months. Finally, we are committed to broadening our entertainment offering by building a programming capability. We are investing in a dedicated entertainment programming function focused on creating compelling content-based events to drive broader reach and increase visit frequency.
The fourth and the final pillar of our 2021 plan is to drive deeper guest engagement to fuel our sales recovery and growth. We look to drive seasonal traffic by focusing on marketing into key media windows, highlighting new product news, limited time offers with a message that connects with our guests on an emotional level. Following a year of limited media spend, we have two campaigns planned for the remainder of 2021. The first campaign this summer will feature our new menu items, new limited time drinks, and our exciting lineup of new games. The second campaign, still under development, will target the November, December timeframe around the holidays. In response to changes in the media landscape that were accelerated during 2020, our plan also includes modernizing our media mix to reach guests where and how they consume content.
This includes shifting a meaningful portion of our media spend from traditional cable to a more flexible mix that leverages advanced TV, digital audio, and social channels. This individual approach provides us with the ability to flex spending up or down market by market, depending on near real-time results. Finally, even during COVID, our marketing and IT teams were pushing forward to complete the implementation of a new marketing technology stack. These investments now position us to deliver more personalized, targeted marketing messages through a wider variety of digital channels as we return to full operation. Before I close, I want to take a moment to thank retiring board chair, Steve King, for his vision and leadership over the past 15 years at Dave & Buster's. It has been an honor working alongside Steve over the years.
He has been a great mentor and friend to me and to many other members of the D&B family. His influence will be long-lasting, and he will be greatly missed. I want to congratulate Steve and his family on his well-deserved retirement. Steve will serve out the remainder of his term that ends this June with our annual meeting. At the same time, I want to congratulate Kevin Sheehan, who has been elected as the new chair of our board. As a member of the board over the past 10 years, Kevin has been instrumental in shaping our success, and I look forward to his continued guidance. He will be working closely with Steve to execute a smooth transition between now and the June annual meeting. I'll close today by reiterating how encouraged we are by the momentum we've seen during these early months of 2021.
We've achieved enterprise-level EBITDA profitability for two consecutive months in January and February, and believe we'll do so for the first quarter of 2021, a significant milestone in our recovery. We are laser-focused on our strategic plan and the execution of enhanced business model with the potential to generate approximately $30 million of incremental EBITDA as annual revenues recover to 2019 levels. We are optimistic that these efforts, along with the waning COVID challenges, will drive the D&B brand to new heights over time, and I am extremely proud of every member of the D&B team for their tenacity and their creativity that they've displayed over the past year through an unprecedented challenge. We are moving forward together confidently, excited to reopen the remainder of our stores and to thrive once again as a leader in the combined dining and entertainment space.
Now we'd like to open the call to your questions. James, you can open it up.
Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow us to monitor our equipment. We ask that you limit yourself to one question and one follow-up initially, then you may respond for additional questions if time permits. Again, press star one to ask the question. We'll take our first question today from Jake Bartlett with Truist Securities.
Great, thanks for taking the question and congrats on the improvement in the results here. Excited that we're getting beyond this. Brian or Scott, my first question is just on the trajectory of sales and the improvement. I think you said January was down 59% versus 2019, down 47% in the first eight weeks. How do those eight weeks look? Has it been a continual or sharp improvement month-over-month or week-over-week? What is the trajectory of the business?
Jake, hope you're doing well. Thanks for the question. First of all, we're super pleased with the recovery we've seen here as we got into the month of January. November, December were sort of tough months for us with the resurgence and a lot of volatility there. Since then, we've seen a very strong rebound, really. In January, as I mentioned, we hit a high water mark in terms of our comp sales index at 67% at our reopened, fully operational stores. That was really, as I said, a month period marked the best monthly theme in 2020. We do think that the economic stimulus that hit early in January, kind of for us, about a three-four week period, was impactful, and you probably heard that from others. We're really encouraged about how we've kicked off the new year.
Through the first eight weeks, we've achieved a 74% index off 2019. Comp sales were down 47%, again, now at new highs for us, and those numbers have been a bit higher in March. We think that we've seen some bolstered demand around the second wave of economic stimulus sparking demand a bit. The trends in COVID continue to be better, although it's leveled off here in the last week or so, and I think we're seeing a little bit of pent-up demand. March is a higher seasonal sales period for us, and we do have some spring breaks that have shifted a little bit into March. March is going to be better than we saw in the month of February.
And-
I'll just add on to that.
Sure.
Just one quick comment, Jake. If you look at weeks, the last couple of weeks, it was good timing with the stimulus checks coming out, starting in week seven and continuing into week eight. We had a fair amount of spring break activity in those two weeks as well, and so that just seemed to amplify that, and so it was good timing from that standpoint.
Great. I think one really interesting chart you guys put out was, I think it was in October, but it was the trajectory in various kind of stores in different states and how long they've been open for. Could you give us an update on how, for instance, your stores are performing in states like Florida or maybe the Southeast? At the time, they had been pretty close or at flat to 2019. What is the state of the sales in those markets now?
Another great question. First of all, we're seeing pretty broad strength right now over the first eight weeks.
Stronger in the southern states, Southeast in particular, Florida, if you really want to dive into it, is performing really well for us. A little less strength in some of the northern states and some of our Midwest stores. I think some of the pandemic restrictions or lack thereof in some cases are playing a bit of a factor in that. We're seeing, when I mentioned that we were at 74% as an overall brand in the concept, but for our top quartile is at 91%, so it's pretty broad. Our second quartile is around 78%, and our bottom quartile is running about 47%. We're pretty encouraged about where we sit right now. We just opened up our New York stores here and right with in the spring break week up in the Northeast. We're pleased with what we're seeing here early on.
It's obviously early days, but we're very encouraged about what we're seeing in terms of performance across this chain right now.
Great. I appreciate it.
You bet.
Next, we'll hear from Jeff Farmer with Gordon Haskett.
Great. Thanks. Good afternoon. I know you guys are reluctant to provide too much detailed guidance on 2021, I did want to drill down a little bit on G&A. It looks like your G&A dollars were down somewhere around 30% in 2020 versus 2021. From a big picture perspective, how should we be thinking about G&A in 2021 for the company?
It's a good question. I think as you think about G&A, we have made some pretty significant reductions in 2020 with COVID. I think the way to think about it going forward is we will add back some G&A, but we'll be very prudent in doing so. For example, as we talk about new programming initiatives that we want to do and some of the things to support our new initiatives for technology and so forth, we want to very prudently add some headcount to support those initiatives. We still want to retain most of the savings that we achieved in 2020. I think the overriding theme there is that we'll be very careful as we add expense back to G&A from the headcount standpoint, but also from other areas like consulting.
We plan on spending less consulting this year, especially than we did back in 2019, because we really have the plan in front of us right now. We have the initiatives, we have the plan to move forward. We'll need a little bit less of the consulting expenses here in the near term. It's more about executing the plan that we have in front of us.
All right. Just as a quick follow-up on that, and I did want to ask just one more quick question, but incentive comp, stock-based comp, anything from a true-up perspective that could potentially happen in 2021 that we need to be aware of for G&A?
Yeah. Stock-based comp, just depending on results, always can vary with results. I think that has the opportunity to be a little bit higher. That goes hand in hand with our performance.
Okay. Final question, I might have missed this. I apologize for that. In terms of that $210 million-$220 million revenue guidance, I wasn't quite sure what that implied or factored in terms of same-store sales level versus the 2019 level for the quarter and the number of stores that you expected to have open on average for the quarter. Those are two big drivers of that revenue number. I'm just curious if you can provide a little bit more detail.
Sure. I think the way to think about that is we'll open just a few more stores. We're getting close to the end on store openings, so there won't be a dramatic difference there. As you think about the remainder of the quarter, really there's two main things that you need to think about. Number one, April is a much slower sales volume month historically than either February or March. Just to give you a little perspective, March in 2019 was the highest volume month from an average weekly sales standpoint. February was the third highest. As you look at April, it's towards the bottom in terms of average weekly sales historically. A lot of it is just the seasonality impact. The other factor that I would consider is the effect of the stimulus.
We mentioned the stimulus had a pretty large effect, especially in the last couple of weeks seven and eight. It'll still have some visibility probably in the next couple of weeks, but it won't be to the extent that we saw in the first couple of weeks. Those will be the key drivers as we think about the revenue for the rest of the quarter.
Thank you.
Hey, Jeff, just one. You asked about what was the same box stores. Obviously, the big base of stores that we have left open right now is California. As you sit here today, we've got 130 stores of our 141 that are open. This is obviously up from where we were at the end of the fiscal year. It was around 107. Nine of the 130 are restricted. When I say restricted in this sense, I'm saying restricted from arcade use.
In California, the stores we have in California, we can't operate arcade, New Orleans, and Albuquerque. We've got about 121 stores out of 141 are fully operational today. We expect that to move to 138 total stores next week, so another eight are going to come online, and those are primarily out in our California stores. We are not projecting to have the California open fully operational with arcade use in the quarter. As you might expect, that makes it really hard to generate, for us, significant revenue.
All right. That's very helpful. Appreciate it. Thank you very much.
Next, we'll hear from Andy Barish with Jefferies.
Hey, guys. Hope you're doing well. Wanted to kind of dive into sort of the marketing side of things. I think on previous call, you highlighted sort of the summer was going to be more brand relaunch related. Is there a shift going on now to kind of focus more on the specific new food and game offerings?
Good question, Andy. Not really a shift. I think we have, along with our new creative agency, really been working on creative that will really bring our brand to life in the eyes of our guests and just create an emotional connection with the guests. I think we're going to be able to do that by actually featuring some of our great new games and some of our new food items. We're, as I said on the last call, we plan to try to get out big here. We've been relatively silent for 12 months, and we feel like summer's the right time to strike pretty hard. We're going to have 22 new food items. We're going to have six new games. It's going to be one of the bigger spends. We've also hadn't spent a whole lot on games in the last 12 months.
We have some great content. Of course, we're going to want to use that in our creative, we will be featuring some of that. We're not going to be particularly, and Scott mentioned this, we found that we're creating quite a bit of demand and recovery without discounting. It's not really our intent to discount as heavily and as frequently as we have in the past. I'm not going to say we won't do that some, we are going to be talking about our brand with a larger voice starting around June, it will have, as a part of that content and that message, feature a new game and some of the food. We're really excited about what we have in store here as we hit this June window. Late May, June.
Thanks. I appreciate the drivers behind the 200 basis points of the EBITDA margin associated with the revenue recovery. Is there an expectation that is starting to get built in that 2022 can be sort of a full revenue recovery year to look close to 2019? How are you guys kind of thinking about the ramp, obviously, given a lot of potential unknowns out there?
Yeah. I guess I'll answer it this way. We're in some ways taking it a little bit quarter by quarter. We're giving you what we think that we're going to see this quarter, and we're reluctant actually to guide full year sales. Number one, stuff gets stores open. We're extremely optimistic about the recovery. I think it's really difficult, Andy, to predict when we achieve 2019 levels. Again, we're fighting the battle quarter by quarter. We've got plans that I think are going to set us up really well in 2021. We're not planning to get back to a 2019 run rate in this year. Could happen, but we're not projecting that right now. I'm not looking to project 2022 either.
Fair enough. Thanks, guys.
We'll now hear from Andrew Strelzik with BMO.
Great. Thanks. Good afternoon, everyone. Obviously, the amusement side of the business has been quite strong relative to the F&B business here recently, but there's a lot that you're going to be working on F&B, it sounds like, going forward. I guess with respect to how you expect to exit the pandemic kind of longer term, do you think that the mix of the business will look different than it did pre-pandemic, and have you contemplated any of that in the EBITDA margin target that you've given?
I'll answer the first part of that and flip it over to Scott. In terms of the mix, we feel like the mix we're seeing, which has obviously shifted even further into amusement, is likely to continue over the near term. If you think about our brand, we know people, our guests, choose us, and the primary drivers for that visit to a Dave & Buster's is our games.
I don't think it's too surprising that we're seeing a bit of a mix shift here as people want to get back out to their lives and look for an entertainment or experience. I think we're going to see that mix be more heavily weighted for some period of time. That doesn't mean that the incredible efforts by Art Carl and Brandon Coleman that have been working so hard on our menu isn't going to pay some dividends over time. I think near-term, we're going to see a pretty significant and consistent mix shift in the amusements for the foreseeable future here. As you think about the few 100 basis points of improvement that we talked about, I did not include any favorability from that in that estimate.
The thinking behind that is we'll likely see other cost pressures along the way or inflation, that could help offset that. I did not. That's one of the main reasons I didn't include it in the few 100 basis points.
Okay, so that's helpful. Then my other question is going to be around the competitive environment and if you have any updates there. I know it's kind of difficult to ascertain broadly what's been going on with closures and things like that, but just any kind of the internal intel you've been able to gather would be helpful. Thank you.
Another good question. I don't know if anything's really changed materially since we spoke in December. Clearly, pre-COVID, we've seen a lot of massive competitive headroom, a lot of new names and accelerating store growth across that universe. As we sit here today, I think a lot of our competitors have clearly had to shift their attention, as we have, to the core business and managing through whatever liquidity pressures they have, in the face of store closures in some cases and certain softer demand that we're seeing, and they are as well, I'm sure. It's a bit of a mixed bag. You can go out to the website to see that our major competitors, Topgolf, Main Event, they're essentially fully open right now. How they're performing, not sure. Particularly Main Event has a pretty diverse product offering that has a more heavy labor-intensive profile to it.
I think what we're going to see is a bit of a lull here as people get their core business back on its feet. We can go out to the websites and see who's got coming soon, but how quickly those stores actually come back up and actually are built, I think remains to be seen a bit here. What we're going to do is concentrate on what we do best, and that's running our store scaling back on finance. I think we're doing an incredible job right now. We have a lot of liquidity. We have demonstrated, in my view, a clear path to profitability. We hit that point. We had an extremely attractive financial model pre-COVID and in my view, much more so than a competitive set. I feel really confident about our ability to compete. We have a great team.
We're prepared for this post-COVID world whenever it happens. We feel really good about where this brand stands.
Great. Thanks for the call and congrats on the progress that you're seeing.
Thank you.
Sharon Zackfia with William Blair has our next question.
Hi, good afternoon. I guess, Brian-
Hi, Sharon.
I wanted to follow up on a competitive question because you are obviously going to see a lot of fallout in this space, and you'll be a survivor. I mean, that's clear. I guess instead of taking these savings and flowing them through to the bottom line, have you thought about reinvesting more in the business to really extend a competitive moat coming out the other side? We all know competitive environments don't stay benign forever.
I mean, that's a really great question. If you think back to 2019, we had talked about some savings we had identified and set exactly what you just indicated, that our intent was to reinvest in the business. We are making reinvestments in the business right now around a programming engine, around some of our technology that Margo described a bit around the service model, really trying to rethink how we deliver the experience in our stores. We are thinking forward here, and we've got some meaningful capital in our budget to make progress in that regard. We're going to be very selective and focused on where we make those investments. I totally agree. We agree as a company that we need to invest in the future here, and that's our intent.
If I could sneak in another question. I'm really intrigued by the sports betting, but the parental side of me just wonders how do you balance that with being a family-friendly environment at the same time?
Another really good question. Obviously, we will venture into this over time. Today, we feel like sports betting could represent a meaningful opportunity for this brand. This is a wave that's really just kind of beginning. We think states are going to expand the legalization of that over time. We think it could be very complementary to our business. Our core target is adults 21 and up. We are actively looking to pursue that, and we're in negotiations. That said, as you look at the landscape today, we estimate we could offer online sports betting in about 13 locations of three states. There are five or so other states that have made an allowance for mobile sports betting, but present some liquor licensing challenges that we would have to work through. This is going to be a bit of a journey.
We see this market in the near term could be more like 27, 30 stores out of our chain. We're going to see how it works, but we think it's something that could be very complementary to what we do. We are pursuing it.
Thank you.
Next we'll hear from Chris O'Cull with Stifel.
Yeah, thanks. Good afternoon, guys. Scott, I apologize if I missed this, but how much of the operational improvements that are expected to improve the EBITDA margin by 200 basis points are already in place today?
Yeah, good question, Chris. I'll give it to you this way. This may help. If you look at the key drivers here, there's really three main drivers that drive almost 75% of these savings. The first one is hourly labor. We talked about some of the technology that we're rolling out with tablets and mobile order and pay, upgrading our kitchen management system, high-speed kitchen equipment. Really investing in that area to try to make our back of house and front of house more efficient. Also looking at scheduling improvements and off-peak day parts. Hourly labor is a big component of what we're talking about and the service model surrounding that. Also, from a management labor standpoint, we will have a reduction in the number of managers in our stores. In some cases, we'll augment with some hourly team members, our key hourly team members.
G&A expense that I mentioned as well. Yeah, G&A expense, I think comparing to 2019 is more of a like for like comparison. We'll see a fairly nice reduction from 2019 from the headcount standpoint and consulting. When you roll all those three together and you get about three-quarters of the savings. Aside from that, there's other things, other line items that add up the remainder that we've identified and we feel comfortable about. I think if you just think about it this way, if we were to come back to our 2019 annual volumes tomorrow, which we won't, but if we did, I feel very comfortable that we would achieve these savings because they really already have been identified and most of the structure has already been changed to accommodate these savings. We feel comfortable about the structural changes that we've made.
Great. Then my other question just relates to labor. I was hoping you could help us understand how labor will be impacted now that the New York stores are open and whether or not you have a sense where we could settle out on the intermediate term once they fully reopen, potentially conditioned on, I guess, a few levels of different index sales performance?
Yeah. No, good question. New York and then when California opens as well, they'll definitely raise the average on hourly labor. It'll definitely come up from where it is. We'll start to normalize as we get all of our stores open and fully operational. We got a little bit of runway before that happens. As that happens, we will settle out definitely at a higher level than we are today. Okay. During that timeframe, we'll also have some of this new technology and service model that will help us sustain a lower level of hourly labor as a percent of sales than we saw in 2019. It'll definitely be higher than it is today because of that.
Okay, great. Thanks, guys.
Thank you.
Brian Vaccaro with Raymond James has our next question.
Hi, thanks, and good evening. I wanted to circle back on the quarter to date. I think you said the $150 million in sales over the eight weeks. Could you give us how many operating weeks are reflected in that? Or maybe just help us level where weekly sales dollars are on the fully operational units in February versus March, just to make sure we're all on the same page.
How many operating weeks? You're asking the total number of operating store weeks?
Yes. Yes, because the definition gets a little confusing. The store is open, the store is closed. Obviously, California is open, but the sales are down. I was just trying to level set average weekly sales trends that's reflected in the $150 quarter t o date.
Brian, I'm not sure we have the store weeks here to share with you. I don't have that stat right now. Obviously, we do the average. Collectively, about 18 million or so a week. I don't have the store weeks here to provide to you.
Okay. All right. Maybe we can circle back after offline. I also wanted to clarify the quartile stats that you gave, Brian. I think earlier in the Q&A, the 91% top quartile, 78%, I think it was for second quartile, et cetera. Was that a quarter to date? That's over the full eight weeks, quarter to date period?
That's right.
Okay. All right. Okay, great. Then, just to shift gears a little bit to the margin recovery framework you provided, the $30 million in savings, the buckets there, does that include marketing efficiencies as well? Maybe you could just, the $30 million we've got labor, other OpEx, and marketing, maybe just ballpark how you expect that to fall over the different-.
Yeah. From a marketing standpoint, really, there's a few main things that we see in marketing is, number one, we're planning on doing fewer promotional discounts. It's really a change in thought and in strategy, to do more limited type offers versus always on type of promotional discounts. That will save us some money. That's one of the things that we've learned over the last few months, is that we've done significantly less discounting. We still see the sales come in, especially on the amusement side. We haven't really seen an impact there. Another smaller item, with our new menus. It's a one-page, paper-based type of menu. We'll save a lot of money there. The overall savings in marketing won't be the bulk of it, but those are areas that will help us.
A couple of other areas that I mentioned on our special events team, where we've really rethought the organizational structure of our special events team. We've invested in some technology there as well to make ourselves more efficient, thinking more from a centralized approach, using more tools to make us more efficient for that, will help us as well. Those are a couple other areas. The other three areas that I mentioned, the three-quarters of the savings, the G&A, hourly labor, and management labor.
Yeah. Okay. On the management labor side, I think pre-COVID, you had the general manager, and then I think the average store had eight managers per store. Where do you see that settling out in the post-COVID world on average?
Yeah. On average, it'll settle out about between seven and a half and eight or so.
Okay. That includes the GM?
Correct.
Okay, great. Lastly, can you just expand on what you said about the virtual brands? How many concepts are you currently running? I think I heard the Wings Out concept, but is there another one or perhaps that you're testing? What level of sales per week are you currently generating from the virtual brands? You may have said it on the call, but I missed it. Thank you.
Hi, it's Margo. We have two ghost kitchen concepts right now, the Wings Out that we have testing in seven of our stores. Then we have a concept, which is Buster's American Kitchen, which is basically the Dave & Buster's menu under Buster's American Kitchen concept. We have two ghost kitchen concepts right now, and we have one that we have planned to test in September. I don't have the weekly sales number right now, but what we had given is the three concepts combined, the Dave & Buster's To Go, the Wings Out, and then also the Buster's American Kitchen. We see that averaging at about $50,000 per store.
Annualized.
Annualized. Yep.
As far as that, we're early on here. We're getting our sea legs around promotional strategy. I think we've done three.
Right
Promotional windows, and we're seeing a pretty good kick up for the three concepts when we've done that. In our view, like Margo said, we view this as highly incremental here. We have 140 store chain. We don't have 1,000. Our volume is obviously heavily mixed towards entertainment. The impact that it can have on us versus a traditional casual dining is just, it does not have the same kind of potential to move the needle for us.
That makes sense. Okay, thank you. I'll pass it along.
We'll now hear from Brian Mullan with Deutsche Bank.
Hey, thanks. Just a question on development. Sounds like there's 10 stores that are in some form of planning now. Looking out beyond that big picture, do you expect Dave & Buster's to be a consistent unit growth concept once again? If you do, could you just talk about the longer-term opportunity? Would you do smaller formats than prior? Would you go slower than prior? Just maybe none of that, but how are you thinking about this topic?
Yeah. Good question. Even pre-COVID, we had communicated that we were looking to moderate our pace of store growth to pivot our attention, more attention towards the core brand, in the face of the competition we've seen. As we sit here today
Our challenge is to get our stalwart stores reopened and to rebuild that core business. In our view, that is the clearest and quickest path to recovery for our company's financial health. Not to mention, and this is a real issue, new unit growth at a rapid pace puts a lot of pressure on our store leadership, who are under a lot of pressure right now in the stores. We're not as deep as we once were. Near term, next year, 2021, we're going to be really measured. We're going to be conservative on new store development. As Scott mentioned, we had planned to do four stores. We've opened one of them already. That's one of our new small format stores in Gainesville, doing very well. We've got three more on tap. And that cadence for 2021 is going to be pretty equally weighted.
In that mix, there's two large, 35,000-ish sq ft. Again, Gainesville with less than 20,000 sq ft, and then one that's that medium 30,000 sq ft. It's going to be measured in 2021. We've got a pipeline of about 10 attractive stores that we have right now, and we're going to be pretty flexible on how we think about those 10, depending on how we recover and our people pipeline. We'd like to leave flexibility to flex up and/or down, depending on how our business recovers. My feeling right now is that there's going to be a time and place for us to really start to accelerate again on units. We feel very confident in our potential at that 230-250 North American potential. That's a much more likely consideration as we head into 2022 and beyond.
We're going to work hard to get this core business back online and performing well. That's our top priority.
Okay, thanks. Then just to follow up, Scott, I think you mentioned earlier you don't expect sales recapture to 2019 at any point this year. If you were to somehow be surprised by that this summer with this Roaring Twenties is real or anything like that consumer demand, is there a scenario where you could exceed 200 basis points of margin expansion if the revenue recapture is actually greater than 100%? If it's 105%, 106% this summer or even next year, or would there be costs that come back associated with that?
I think the way to think about it is, if we were all of a sudden to get back to 2019 levels of revenue much more quickly than we anticipated. I pointed this a little bit before. The changes that are required to get these savings have mostly been made. We've thought about the structure that is needed to achieve these savings, and in large part, we've already made those changes. It's really a matter of the revenue to increase to show the leverage against that new structure. For us, if we saw that happen sooner than later, I think we would see the savings come through sooner as well, because most of the work has already been done.
Okay, thank you.
Thank you.
We'll now hear from Joshua Long with Piper Sandler.
Great. Thank you for taking the question. When thinking about marketing and the shift to more digital, is that more of a strategic pivot here over the near term? As I think about the story over the last several years, incremental weeks and diving deeper into some of these different channels, whether it's Nickelodeon or other things in the TV category, has been a meaningful driver of sales. Just curious on how to contextualize the commentary around moving a significant piece of those dollars into digital, and if we should think about that as just a near term pivot, given that there's a little bit of a lead time in getting back into TV, or this is more of a structural shift longer term into really prioritizing the digital channel.
Well, I think 2020 kind of accelerated our plans. Obviously, when we hit COVID, we shut down every element of our media spend we could as our stores were shut down and canceled whatever we could out of our upfront buy on cable, and we had a little bit of media running for us in the third quarter. In this kind of environment, number one, locking into a more fixed cable buy is not something we're really wanting to do. Number one, we want to be pretty flexible with the media plan. Secondly, as I look at how our stores are recovering right now with limited media, we're super encouraged by that. We had a sort of always on strategy. We've gotten ourselves, as you point out, to being on TV on some channel virtually every week of the year.
The strategy this year as we come out of this COVID situation, and we're going to learn some things by it, is to pivot more heavily into digital channels. We spent a significant amount of effort during the COVID shutdown on developing out our marketing tech stack and a better attempt to utilize that to really reach our guests where they are, and that's not always on broadcast TV. We're going to lean into that much more heavily than we had anticipated pre-COVID. Number one, it gives us a lot of flexibility to cut it on and cut it off, and we're going to use this time. When you have disruption, you can use the time to think differently about a lot of things. We're going to do that here, and we're going to see what we can deliver.
That makes sense. I appreciate that color. Secondarily, thinking about guest engagement and really leaning into digital, can you talk about where you are on that journey in terms of understanding and developing more of that conversation or that one-to-one marketing opportunity with your guest set, either through your digital app or maybe with some of the forthcoming plans on investing in the digital channel?
As I mentioned, 2020 and really early into 2021, we worked hard to put in place a number of new tools within our tech stack. One was a new CDP system where we really can collect and organize, as you might imagine, our customer data into profiles, which gives us an ability to create targeting lookalike audiences and that sort of thing, and help reduce our media costs and improve our efficacy here. That's something we're looking to unlock. We've invested in a Salesforce Marketing Cloud and a CRM system. That's big for us. We did that in the teeth of COVID in July of 2020. We're really looking to integrate that with our CDP. That was a heavy lift for us in 2020. There's another whole slew of other tools, two other key ones.
I think our marketing team is really armed right now with the tools they need to really engage with our guests more on a one-on-one level, as opposed to what has historically been broadcast TV as the only real play in our playbook.
Thank you.
Our final question will come from Jon Tower with Wells Fargo.
All righty then. Well, I will not take much time. Most of the question's been answered. I was curious if you guys have had any chance to reach out to a number of your core customers that haven't been able to visit your establishment during the pandemic. First, what they've been doing to entertain themselves during the crisis, meaning have they decided to pick up their gaming elsewhere? Have they not really engaged in any sort of amusements the way that you guys offer them in your stores? Frankly, anything in the stores that you have reopened, what are you seeing with respect to amusement use within the stores? Meaning, are consumers staying away from highly contact games like Pop-A-Shot or are they moving back to that as quickly as you would have anticipated?
I'll take the latter part of the question and just let you know as the guests have been coming back, it's been great to see the stores fill up with guests that are excited to be back at Dave & Buster's and for us to welcome back to the fun. What we've seen is the guest has been really embracing just coming back and having the Dave & Buster experience the way they'd like to have it. We have done social distancing, not only in our dining rooms, but also in our midways. We have put a tremendous amount of effort into ensuring that we have sanitation stations and really on every shift, constant cleaning that's going on through the stores, including the midway, and including our games. What we found is the guest is coming back and enjoying all of the games.
We're thrilled by that, and we're thrilled to be able to provide the fun. We haven't seen any modification in their behavior in the midway.
I guess the first part of that question, which was maybe more around how we're staying in touch with the guests and getting feedback. The reality is this, in 2020, when we were looking to make significant reductions to our cost structure, we discontinued, well, a lot of things, and one of which was some of our guest surveys and all those sorts of things. Just recently, when I say recently, I'm talking about last month and the work that's ongoing right now, the implementation. We've reactivated with a new partner, a customer feedback and collection system that we actually feel a lot better about than what we had pre-COVID. To say we haven't commissioned, Jon, significant work and research, and/or our normal survey-type activity since COVID started, and we're really just right now starting to reinvest in that.
We think it's important, and we're spending money on that. Most of the stuff that we've been looking at over the last year are commission-type research by other third parties and not ourselves.
Got it. Thank you. Thanks a lot.
Thanks, Jon.
That will conclude today's question and answer session. I will now turn the conference over to Brian Jenkins for any additional closing remarks.
All right. Well, thank you for joining our call today. Sorry we ran a little long. We wish you and your families a safe spring. Hope you have a great one. I hope you'll come out to one of our Dave & Buster's locations really soon. They're gonna be open really soon. We've got a few left, but please come out and see us. Have a great night.
This concludes today's call. Thank you for your participation. You may now disconnect.