Black Rock Coffee Bar Q3 2026 Earnings Call Transcript

Quartr
Provided by Quartr
November 10, 2026

Key Takeaways

  • Positive Sentiment: Third-quarter revenue grew 29.7% to $66.8 million, same-store sales rose 5.8% and transactions increased 2.4%. Adjusted EBITDA grew 22.1%, and management expects fourth-quarter EBITDA growth above 30% while reaffirming its full-year outlook.
  • Positive Sentiment: Black Rock raised its 2026 opening target to 40 stores from 38, or about 22% unit growth, and finished the quarter with 211 locations. Management cited a growing pipeline, including plans for 15–20 California openings in 2027, and sees a long-term path to 1,000 stores by 2035.
  • Positive Sentiment: Management said extended hours, menu additions and targeted customer engagement are supporting traffic and check growth, with extended hours now permanent at about 70% of stores. Loyalty accounted for approximately 69% of transactions, while food attachment increased across dayparts.
  • Negative Sentiment: Store labor costs rose 110 basis points as the company staffed new openings and extended hours, and management said fourth-quarter margins may resemble the third quarter. The 2026 store cohort is costing about $800,000 per unit, above the previously expected $700,000–$750,000 average, though tenant improvement allowances offset some of the investment.
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Earnings Conference Call
Black Rock Coffee Bar Q3 2026
00:00 / 00:00

There are 10 speakers on the call.

Operator

Good afternoon, and welcome to Black Rock Coffee Bar's third quarter 2026 results conference call. Today's call is being recorded, and we have allocated one hour for prepared remarks and Q&A. At this time, I'd like to turn the conference over to Will MacIntosh, Chief Investor Relations Officer for Black Rock Coffee Bar. Thank you. You may begin.

Speaker 1

Good afternoon, everyone, and thanks for joining us for Black Rock Coffee Bar's third quarter results. Before we begin, we would like to remind you that this conference call may include forward-looking statements. These statements, which are subject to various risks, uncertainties, and assumptions, could cause our actual results to differ materially from these statements. These risks, uncertainties, and assumptions are detailed in this afternoon's press release, as well as our filings with the SEC, which can be found on our IR website. We undertake no obligation to revise or update any forward-looking statements or information, except as required by law. During our call today, we will also reference certain non-GAAP financial information. We use non-GAAP measures to assist investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our operating performance.

Speaker 1

The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. Reconciliations of GAAP to non-GAAP measures can be found in this afternoon's press release and in our SEC filings. Joining me on the call today is our CEO, Mark Davis, and our CFO, Rodd Booth. Following our prepared remarks, we'll open the call for your questions. With that, I'll turn the call over to Mark.

Speaker 2

Thank you, Will, and good afternoon, everyone. We appreciate you joining us today. I'm excited to walk you through an exceptional third quarter that once again reflects the strength of the Black Rock brand, the consistency of our operating model, and the disciplined execution of our team. In the quarter, revenue grew 30% to $67 million. Same-store sales accelerated to 5.8%, up from 4.2% last quarter, or 16.6% growth on a two-year basis. This marks our 15th consecutive quarter of positive same-store sales, and the two-year stack is trending higher, reinforced by the third quarter. Transactions increased 2.4%, or 8.5% on a two-year basis, as we lapped the one-time loyalty rollout activity that affected our first-half comparisons, while continued momentum from our customer engagement initiatives began to contribute more meaningfully to traffic growth. This brought our year-to-date same-store sales back above 5%, with transaction trends continuing to positively build.

Speaker 2

Importantly, we delivered these results against several of our most difficult comps of the year, including landmark days in the prior year where we saw same-store sales growth as high as 24% and transaction growth as high as 17%. Adjusted EBITDA grew 22%, 500 basis points better than the prior quarter. In quarter three, revenue growth outpaced EBITDA growth based upon public company versus private company comparisons, additional investments in our new stores, including our record-breaking California openings, and labor to support our extended hours initiative. I would add, we expect fourth quarter Adjusted EBITDA growth of more than 30%, well ahead of revenue growth and supporting our reaffirmed guidance. At the same time, we opened 11 new stores in the quarter and are now running ahead of our development plan.

Speaker 2

We now expect 40 new store openings for the full year, up from prior guidance of 38 openings, representing approximately 22% unit growth. Those additional stores and the investments made, particularly in California, are already contributing in the fourth quarter and set us up for an even stronger 2027. Our team is doing a tremendous job executing and delivering exceptional performance. Guests continue to be highly selective with their spending, and we are excited to say they continue to choose Black Rock. The strength of the brand is showing up in both sales and transactions, with strong momentum that is carrying into the fourth quarter, which we expect to be our strongest same-store sales growth of the year. With openings weighted to the back half of the year, the fourth quarter carries meaningfully more store weeks than the third.

Speaker 2

Together, with fully lapping our public company costs, we are reaffirming our full-year revenue and Adjusted EBITDA outlook. Our results continue to reflect the three strategic priorities that drive everything we do. Deepening customer engagement, which drives frequency, repeat visits, and same-store sales, strengthening our people-first culture, which supports guest satisfaction and operational consistency, and expanding our market presence to capture the significant white space in front of us. Let me take you through each. Customer engagement is what turns a first-time visit into a lifelong customer, and it's the single biggest driver of our comps. Menu innovation continues to be an important part of the strategy, helping us stay top of mind, creating new reasons to visit, and building demand across more occasions and dayparts. In particular, we're seeing encouraging opportunities to drive incremental visits in the afternoon and evening as we broaden our beverage and food platforms.

Speaker 2

We view our limited-time offerings as a programmatic platform that creates reasons to visit, helping to drive trial, check, and social engagement while keeping our menu fresh. This fall, campaigns like Pumpkin Passport delivered a more durable seasonal mix than last year. Our Cookie Butter Cold Foam was so popular that guests began adding it to other drinks, driving check growth through premium add-ons. Looking ahead, we see additional opportunities to build on that platform through specialized cold foams and other beverage enhancements that create new reasons to visit. Fuel and food continue to grow as a percentage of mix, with Fuel at 26.3% and food at 14.2% for the third quarter. We have grown food attachment across all dayparts each quarter of 2026. We expect both platforms to continue expanding over time.

Speaker 2

As these categories scale, they are helping broaden customer engagement beyond the morning daypart and drive additional visit occasions throughout the day. Recent menu additions, including our cake pops and grilled cheese, are supporting higher food attachment in the afternoon and evening. In particular, grilled cheese has performed well early on and reinforces our confidence in expanding savory offerings and food menu innovation. The strong response to our newly added cake pops also supported our decision to make it a permanent core menu item, complemented by rotating seasonal flavors. While we are pleased with the guests' response we have seen thus far, what excites us most is the opportunity ahead. Our innovation tests this year are creating a foundation for additional menu enhancements focused on a more unified sweet and savory food menu, with additional snackable offerings designed to support occasions later in the day.

Speaker 2

The first phase of our enhanced core menu is underway and has started rolling out this month. This is not a new direction for Black Rock. We have offered food since day one. What has changed is the success we are seeing from recent tests, which gives us confidence to expand our sweet, savory, and snackable offerings while continuing to use food LTOs to test, learn, and drive new occasions. Our lobbies further expand that opportunity, giving us a differentiated platform to build food occasions and deepen engagement across our afternoon and evening dayparts. Extended hours are another meaningful lever for expanding occasions beyond the morning daypart. While the initiative is still in its early stages, we are seeing encouraging sales and transaction trends, with particularly strong momentum in California. These early results reinforce our belief that staying open later can support increasing average unit volumes over time and driving incremental same-store sales.

Speaker 2

We have also made the decision to open new stores with the extended hours, which has been beneficial to both our customer base and the company. Our digital and loyalty platforms continue to strengthen that engagement. Loyalty represented approximately 69% of transactions during the quarter, holding steady even as we opened new locations and added guests to our customer database. That tells us we are not only attracting new guests, but converting them into loyalty members who visit more often and carry a higher lifetime value. We are now approximately 90 days into testing our customer data platform, which allows us to use point-of-sale data to reach non-loyalty guests with more relevant one-to-one communication. Early results have been promising and have provided valuable validation that we can more effectively engage both loyalty and non-loyalty guests and drive incremental traffic through more personalized communication.

Speaker 2

We also completed a regional programmatic media campaign across video, search, streaming audio, and connected television, which has supported awareness as we expand in our markets. Looking ahead to 2027, we see an opportunity to increase paid media investment to drive near-term traffic and transactions while building broader brand awareness over time. We will continue to do so in a data-driven and intentional manner as we also prioritize investments in our team and expansion strategy. Moving to our next priority, our people-oriented culture. None of our success happens without our people, and the results speak for themselves. Our turnover runs about half the industry average, our store lead turnover is well below industry norms, and 98% of our store leaders have been promoted from within. We believe those results reflect one of the most important competitive advantages we have, our people.

Speaker 2

Our ability to attract, develop, and retain team members continues to differentiate Black Rock and supports the guest experience, operational consistency, and growth that drive our financial results. Every day, our team creates the connection, speed of service, and welcoming experience that keeps guests coming back, drives transaction growth, and supports the strong same-store sales performance we've delivered over time. We continue to invest in our people by providing the tools, training, and career development opportunities that help our teams grow and succeed. By developing talent from within, building their business acumen, and creating clear pathways for advancement, we're reinforcing a strong culture, strengthening execution across the system, and further differentiating the Black Rock experience. That investment shows up in the guest experience. Guest satisfaction remains incredibly high, with strong results across speed, cleanliness, customer service, and product quality. Our people also power our growth.

Speaker 2

Our 2027 store lead pipeline is already in place, giving us confidence that new stores can open with experienced leaders who understand our standards and culture. That depth allows us to grow while ensuring the consistent experience that keeps guests coming back and supports store-level margins near 30%. Moving to our third priority, expanding our footprint. We opened 11 stores this quarter across California, Arizona, Colorado, and Texas, finishing the quarter with 211 stores system-wide. As of today, we have opened 35 stores with the balance of our updated 40-store target expected in the coming weeks. California is a clear proof point of the portability of our model and the runway still ahead for Black Rock. Our California expansion also illustrates how well our model can travel.

Speaker 2

We opened our first store in the Inland Empire during the quarter, a new market for Black Rock, and had a record-breaking early response thanks to the tremendous engagement of our team, and that has reinforced our optimism about the market and the openings still ahead. Just as importantly, we see a strong group of team members in the market who want to grow with Black Rock, supporting the leadership pipeline behind our development plans. With five California openings expected this year and more than doubling to 15 to 20 in 2027, we're confident in the runway ahead and in the team we have to support it. That portability is a big part of why we see a clear path to 1,000 stores by 2035. Our model is also built to win in competitive markets. We're built differently.

Speaker 2

Our lobbies, alongside the drive-through, combined with online ordering, allow us to serve more occasions and meet our guests wherever they are. Our menu has relevance across more of the day, and we're 100% company-operated, which helps us deliver a consistent barista experience that drives guest satisfaction on every visit. As the smaller, younger brand in most of our markets, we have real room to grow volumes as awareness builds. We're proud of where we stand today, and the momentum across the business positions us to finish 2026 strong and carry that strength into 2027. Looking ahead, our development and people pipelines are in place for 2027, and we're already building toward an exciting 2028. We're concentrating on our best markets, targeting new deals in areas we believe support AUV growth.

Speaker 2

Our strong unit returns, together with operating cash flow, tenant improvement contributions, and our revolving credit facility give us significant flexibility to fund that growth. Our sales momentum, our dynamic people, our pipeline, our consistent EBITDA performance, ROI on new units, and our differentiation, that is what gives us confidence in the durability of our long-term growth and success. Before I turn it over to Rod, to our team, thank you. You make all of this possible. To our guests and shareholders, thank you for your trust and your belief in what we are building. Rod, over to you.

Speaker 3

Thank you, Mark, and good afternoon, everyone. We delivered a strong third quarter with total revenue of $66.8 million, up 29.7% over the prior year. Same-store sales growth was 5.8% in the quarter, and on a two-year basis, our same-store sales growth was 16.6%. We opened 11 new stores in the quarter, 30 new stores through the first three quarters, and we now have 211 stores system-wide. Turning to same-store sales, transactions were up 2.4%, pricing contributed 2.4%, and check 1%. Against our highest comp from a year ago, our transaction growth for the quarter was strong, underscoring and reinforcing the underlying strength of our business. Our team, guest engagement, and innovation strategy is connecting with our existing guests and attracting new guests to come experience Black Rock.

Speaker 3

The early performance of our strategic initiatives, including menu innovation, targeted loyalty engagement, and expanded operating hours, continues to drive positive transaction growth and traffic trends. Now turning to profitability. Store-level profit grew 26.5% to $19.3 million, and store-level margin was a strong 28.9% during the quarter. Store-level margin was led by leverage in beverage, food, and packaging costs, down 100 basis points to 26.8% of revenue, driven by disciplined procurement and the consistent execution of our team against our strategic initiatives. Labor increased 110 basis points to 22.1% as we strategically invested in new store openings, as Mark alluded to, as well as additional hours around the afternoon and evening dayparts to support our team and drive meaningful guest engagement.

Speaker 3

These investments reflect our commitment to expanding our sales volumes and AUV, as we see significant opportunity to reach new guests and increase engagement with our existing customer base throughout the day. As traffic during our extended hours continues to build, we expect to drive improved productivity and leverage our labor investments over time. Occupancy increased 50 basis points to 8.3%, and other store operating expense increased 10 basis points to 13.9%. We are encouraged by the consistent execution of our teams and remain well-positioned to deliver strong store-level profitability in the fourth quarter and beyond. Adjusted SG&A was $8.9 million in the quarter, or 13.4% of total revenue, in line with the prior year, even as we now carry a full quarter of public company costs, and down from 15% in the fourth quarter of 2025, our first full quarter as a public company.

Speaker 3

Our approach to SG&A remains disciplined as we continue to invest in our key strategic initiatives, supporting sustained demand, long-term growth, and new store expansion. We also expect our SG&A to continue to leverage as we scale and grow. Consolidated Adjusted EBITDA was $8.5 million, up 22.1% over the prior year period, and an acceleration of approximately 500 basis points from the second quarter. Starting in the fourth quarter, we expect consolidated EBITDA growth to outpace revenue growth based upon the lap of prior year public company cost, improved new store opening processes, and continued growth and learning from our afternoon/evening dayparts. Pre-opening costs were $1.9 million, or 2.9% of total revenue. The increase over the prior year reflects accelerating our openings ahead of plan and our investments in grand opening support teams, primarily in California, which supports higher volume openings.

Speaker 3

These investments will drive both short and long-term growth. Turning to the balance sheet. We ended the quarter with $13.6 million in cash and cash equivalents and access to $21 million under a revolving line of credit, giving us ample liquidity to fund our growth. Our term loan balance was $19.5 million, and we drew $4 million on a revolving line of credit to balance working capital needs while collecting tenant improvement allowances associated with openings of our reverse build-to-suit locations. We remain focused on maintaining a disciplined balance sheet and supporting healthy operating cash flows. New unit development supporting our 2027 and 2028 pipeline remains key, as we continue to prioritize capital investments in expansion while maintaining a focus on thoughtful site selection, balancing build types, and driving returns to support our short and long-term growth targets.

Speaker 3

We continue to maintain flexibility in our approach to new store development and site selection, and as we have shared previously, we expect a near-term shift towards more reverse build-to-suit projects, enabling greater control over planning and our delivery of new stores. As Mark mentioned, the strength of our development pipeline continues to build. We now expect to open more stores in 2026 than initially anticipated, while the depth and quality of our 2027 pipeline gives us confidence in our ability to sustain that momentum. Turning to our outlook for the remainder of the year and updates on guidance. The momentum we are seeing across the business underscores the durability of our growth strategy and the substantial opportunity that remains ahead of us.

Speaker 3

Our strong results for the quarter are fueled by our ongoing focus on strategic execution, deepening customer engagement, and driving profitability, reinforcing our confidence that Black Rock is well-positioned to capitalize on the white space we see ahead as we scale the business and create long-term value for our shareholders. We now expect 40 new store openings, up from 38. We continue to expect total revenue in the range of $255 million-$257 million, representing 27% growth over the prior year, well ahead of our long-term growth algorithm. The additional units will have a negligible contribution to 2026, but position us for continued success in 2027. We are excited by our growth trajectory, which is supported by our strong pipeline of new stores and significant white space opportunity ahead. We continue to expect same-store sales growth in the mid-single digits.

Speaker 3

We continue to expect Adjusted EBITDA to be in the range of $34 million-$35 million, representing 24%-27% growth over the prior year. This implies fourth quarter Adjusted EBITDA growth of more than 30%, well ahead of revenue growth. We now expect CapEx of $47 million-$48 million, inclusive of tenant improvement allowances, or $64 million-$66 million excluding tenant improvement allowances of $17 million-$18 million. As a reminder, our capital is predominantly focused on new store development, supporting not only our 2026 pipeline of new stores, but also our 2027 pipeline, with approximately $14 million-$15 million of our total capital supporting growth in future years, and a meaningful portion of our 2027 openings are already funded and underway.

Speaker 3

Our differentiated guest experience, premium menu offering, engaged teams, and scalable expansion model gives us confidence that this momentum will continue into the fourth quarter and through 2027. We remain confident in our ability to deliver on our long-term growth targets of 20% annual unit growth, revenue growth of 20% or more, mid-single digit same-store sales growth, and Adjusted EBITDA growth that outpaces revenue. With that, I will turn it back to the operator to open the line for questions.

Operator

Thank you. We will now be conducting a question-and-answer session. We ask that you please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Please one moment, please, while we poll for questions. Our first question is from Chris O'Cull with Baird. Please proceed with your question.

Speaker 4

Great. Thanks, guys. This is Patrick on for Chris. Mark, you mentioned several drivers that are reaching new customers or opening up incremental new use cases across the dayparts. As we think about the transaction drivers as you move into 2027, can you help rack and stack those initiatives and how you think about the relative capacity of each to drive new guest growth from a magnitude perspective?

Speaker 2

Patrick, first off, thank you for joining us. I would reiterate that when you are thinking about our same-store sales and how it is trending, it is really strong. As you heard, we reiterated mid-single-digit comp guides. In the third quarter, we ran right at that 2.4 same-store transactions. When you think about that, we had given July, and we had talked about that, trying to be upfront and make sure that everybody knew how we were doing. Obviously, the trend was good in the third quarter, and we are really confident in the trend in the fourth quarter. I want to reiterate that on a two-year basis, the third quarter transaction growth was 8.5.

Speaker 2

More on a year-to-date, when you go back and you look at the first and second quarter where we were negative, we are now going to be positive in transactions for the year, which we feel really, really strong about. Regarding the drivers, Patrick, menu innovation is a big one, and we talked about that. I think the segmentation is a big driver as well. As we target loyalty, we are looking at daypart offers, specifically using paid programmatic media, and the extended hours has certainly been a positive for us as well.

Speaker 4

Great. That is helpful. Then, just a quick one on new units. Can you guys provide an update on how the 2026 cohort is tracking in terms of actual build-out costs per unit relative to the $650,000-$700,000 average that you have been targeting? Just give us a sense of the variability around that mean. I am assuming that a new unit in California is coming in quite a bit higher than a new unit in Texas. So, how is that geographic mix impacting the CapEx outlay?

Speaker 3

Yeah, I will take that one, Patrick. As far as the 2026 class and how the capital is coming in, you guys have heard us say this before, but we intend to and really are working real hard on continuing to be efficient with our capital. Our average cost to build last year was about $650,000. As we came into the year, we were looking at the average cost this year between $700,000 and $750,000, and the class is coming in around $800,000 per store. That is, of course, inclusive of those tenant improvement allowances that offset some of that cash or capital out for us. Then in terms of markets, across all of our markets, while yes, California would be a higher-cost market if we were doing those reverse build-to-suit deals or we are doing ground lease-type deals, we are actually balancing the capital in California with conversions, which are really helping.

Speaker 3

We are going to do that and have been doing that across all of our markets, but we really see that as a big opportunity in California, especially those, again, second-gen buildings that have the drive-through. It works really well for us. It allows us to prioritize the lobby, but also not go out and really see the capital grow substantially in terms of a per-unit cost in California. We are going to continue to balance it. We have modeled our capital to continue to grow as we grow, but still trying to be really efficient with our dollars.

Speaker 4

That is helpful. Appreciate the color. Thanks, guys.

Operator

Our next question is from Bryan M. Vaccaro with Raymond James. Please proceed with your question.

Speaker 5

Hi, thanks, and good evening. I wanted to circle back on the expanded hours, and I know it is still early, but could you elaborate just on what you are seeing in terms of the customer response and maybe help us frame a little bit the sales or comp benefit that you have seen since the system-wide launch in July?

Speaker 2

Sure. Thanks for joining us, Bryan. On the extended hours, I would start with reminding everybody, we started this right at the end of June, beginning of July. What we came across, and again, because it's so early, we came back and said, "Hey, it is driving not only same-store sales, it's driving same-store transactions," and we see it as a real positive for us. Bryan, we're about 70% of our stores running with the extended hours, and we have decided to make that permanent. A couple things I would say there, again, really pleased with the positive performance, and I think one of the things that has come out of it is we have broadened the food offering, and that menu innovation really has supported the check growth, which Rod will speak to later.

Speaker 2

The other thing that has been exciting is that when you look at the extended hours, while they are profitable and they are helping with the same-store sales and the transactions, another real positive is the hours prior to the hour that we added has been really beneficial and grown as well. The last thing I would bring up that I think is important, when you look at our new stores that we have opened, we open them with the extended hours, and what we're seeing is now not only higher AUVs and higher trends coming out of that new store, and again, the cohort, which has been exciting, but it has certainly helped drive some of the performance. I think when you look at California as an example, you've got Mackenzie, you've got Evie, you've got Grayson, and you've got Lauren.

Speaker 2

They have done an outstanding job, and what's occurred is we've had some record-breaking opening weeks because of it. Again, at the moment, we like it very much. It's been great for the company, great for the consumer, and we're going to continue to do it.

Speaker 5

All right. That's very helpful. Then back to the topic of segmentation and personalization. Can you elaborate just on how much engagement is up year-on-year? Is there anything you can share just around the percentage of customers that open or view your offers or that are redeeming your offers? If you could just broaden that part of the conversation, that would be great. Thanks again.

Speaker 2

Thank you, Bryan. We've never actually given the exact percentages, but regarding the segmented loyalty, we continue to scale the personalized offers. You're going to see continued leverage around the behavioral data. That's again what we're sending to our loyalty guests. We're trying to give them relevant, timely, and personalized offers. I think some of the things that's been really great, and Jessica and her team have done great with it, we have the triggered campaign journeys, which basically is based on real-time guest behavior. When we do that, as an example of a guest purchase food, we're able to automate an offer that drives them back in three days and reaffirms that behavior and attachment. I'd go a step further. We brought up the CDP, which is the gap between loyalty and non-loyalty. This has really been great from Jessica.

Speaker 2

What that has done is engage directly with non-loyalty guests who have previously visited. What it is a targeted offer. We move into personalized segmented offers, which builds obviously deeper relationships, and it's a top of the funnel initiative. We're going to continue to test and refine that platform, but it's been really great for us. As we said in the remarks, we're now pushing in the high 60s, almost 69% on the portion of transactions that are loyalty, and that's been really strong as well.

Speaker 5

That's helpful. Thank you.

Operator

Our next question is from Sharon Zackfia with William Blair. Please proceed with your question.

Speaker 6

Hi. Thanks for taking the question. I had a follow-up on extended hours. Can you kind of help us think about the margin profile of the extended hours? From a demographic standpoint, are you bringing in kind of a different kind of customer than you see during the rest of the day, and what does that beverage food mix look like during those later evening hours?

Speaker 2

Sharon, what we have tried to do on the extended hours, you brought up the demographic. It is certainly a younger demographic. When we made the decision to make them permanent, they are definitely profitable, they are contributing to the same store sales, and they are contributing to the transactions. I think when you look at food attachment, second part of your question, we are growing in every day part, and food has certainly been a benefit of the extended hours. I would also say to you that it is not as good as we want it to be, and I think we will continue to drive that. I think when we look at it, we have a peer group that is really successful in the afternoon and evening, and we see that as an opportunity.

Speaker 2

We see through our engagement, through our dining rooms, and certainly through the offerings we provide, including food, that it will continue to grow and be more successful.

Speaker 6

Thanks for that. Then a follow-up on food. You kind of mentioned a lot of runway to expand in sweet, savory snacks. Can you remind us of kind of how you test new food before you decide to roll it out more broadly, kind of what that process looks like, and what your key parameters are in terms of either attach or ease of operation?

Speaker 2

Absolutely. I think first off, you hit this right on the head, we want to have a menu that does not grow substantially. I think as we bring things on, we take things off. You specifically asked about prioritizing investments, and I think we want items that drive attachment, certainly ticket and day part expansion, and I think we want to strengthen the value and the relevance of our menu. I would go to grilled cheese. We are really encouraged by it. Again, when you look at the grilled cheese, when you look at the cake pops, really when you look at anything that we have added, we have always started with the LTO perspective. What that does is really drives the ability to see how it performs with the guests, but I think even more important, it allows us to see how we execute with the teams.

Speaker 2

Really what that does, when you are looking at, I will use the cake pops as an example, really we decided to put a cake pop on the menu that became part of that core menu, but then as an example, we dropped in rotational cake pops. They are great on the grab and go, great for the team because it is easy, and it gives our customers something new to try. We did the same thing with cold foams and things like that as well. The idea again is that through the LTO process, we are going to do our very best to make sure we iron out any kinks, we make sure that it is really relevant to the customer, and I think back to your point in the question, we are going to make sure the team can execute against it.

Speaker 6

Okay. Thank you.

Operator

Our next question is from Rahul Krotthapalli with JPMorgan. Please proceed with your question.

Speaker 7

Hey, guys. Thanks for all the detail. Mark, the question is on the new store productivity. I think we did see some more incremental drag versus the same store sales reported. Can you remind us some of the drivers there, given most of the stores are opened in Arizona and Colorado as expected? Then you did mention California were opening pretty strongly. I think even about $1.5 million-$1.6 million in the past. Can you help us reconcile how the rest of the stores were opening, and also if there is any densification headwind in Colorado and Arizona that we are still seeing today?

Speaker 2

Of course, Rahul. I appreciate you joining us very much. I think for starters, we opened 11 stores in the quarter. We did them in California, we did them in Arizona, we did them in Colorado, and we did them in Texas. One of the things that has worked out really well for us, I think, from a point of differentiation is that we are able to do a variety of build types, and that's really helped us with not only landlords, but site selection. I think when you look at the pipeline, we have had strength in all of those markets, and they're performing very well. I would say if you look at the opportunity in the quarter, when you look at where we opened them, we brought up that we had record-breaking that first week in the Inland Empire and Riverside, et cetera.

Speaker 2

That is a long way from San Diego. When you think about it, and you think about how we opened it, we brought in extra team members, and we wanted to make sure we provided the great experience and all the above, and it's worked out really well. I think what's been great, and again, Grace and Lauren McKenzie in that Los Angeles area, they continue to get leverage and get better every day. But I would say if you look at the third quarter, one of our opportunities is we went into Killeen, we went into Prescott, Arizona, we went into Los Angeles, and these are new markets for us, which caused us to fly more people in and make sure that the experience was great. That'll continue to leverage as we penetrate more, and I think we'll be in a really, really great place there.

Speaker 7

Thanks for that. Staying on the topic, the real estate market is just getting more and more competitive as we speak, and I think the gap between the areas like A or A+ sites are the ones that are most sought after is expanding versus the rest of the sites. How are you navigating this when you're approaching expansion in some of the nascent and highly competitive markets like California, or even in Colorado, where there's so much growth ahead? What kind of conversations or concessions are you having with landlord, and what are they able to accommodate in the current landscape?

Speaker 2

Thank you for the question. When you look at competition, we, as you know, Rahul, have had competition since we started. I think when you look at the new markets now, one of our very best advantages is, again, that we can come in and we can do a variety of build types. One of the things that has helped us in a big way is, as a smaller company, we're a little bit more nimble. When you think of yourself as a landlord, they want somebody that can come in, that can go through the permitting quickly, that can adapt and get that open and get it going. What that does for them is it allows them to charge rent faster. I think that's a big advantage for us, number 1.

Speaker 2

Then I think when you look at our lobbies, our drive-throughs, all the above, and again, you've seen some of these in California, but we have the ability to come in and take over a conversion, and we can convert that in a way, when you think about John, you think about Ted, you think about Tony, and the way we're converting these stores, we're able to make a variety of different sites work. As we see concepts go out and we take over those particular stores, not only are we quick in getting it designed and built and up and running, but I think, again, from a landlord standpoint, when you look at the peer group, there are very few out there that can do what we can do. That's been a significant strength of ours.

Speaker 7

Thanks for all the detail, Mark.

Speaker 2

Thank you.

Operator

Our next question is from Brian Harbour with Morgan Stanley. Please proceed with your question.

Speaker 8

Yeah, thanks, guys. Mark, just to that comment, what makes a good conversion? I guess, is that something that is more applicable specifically in California? Maybe talk about the real estate market there.

Speaker 2

Sure. I think, and you guys cover this, so you are aware of this every day, Brian. When you think about concepts that go out, you have landlords that are typically, "Hey, I want somebody to come in, can take it over, can design it, can make it relevant." I think us going public a year ago has certainly helped, and there are people that very much want that particular site to be a Black Rock. I think the second part is that when you look at it, because of our dining rooms, we do not need that long, long stack that comes with not having a dining room. So, what has occurred is that any time there is a conversion that comes up, Ted, John, and team are quickly getting those opportunities.

Speaker 2

Really, when you said, "What makes a great conversion?" we have gotten better at the follow-up prior to signing the lease. I think what that does is helps make sure that we are managing the costs appropriately, which again, is getting that great first year, 35% cash on cash, second year, 40% cash on cash. So I would say, if we have learned anything, our follow-up prior to signing the lease has been better, and that has helped with the cost of build.

Speaker 8

Okay, sounds good. You have had that kind of modest pressure on both labor and other operating. I mean, as you mentioned, some of this is this labor investment. Obviously, you have done a little bit more marketing. Is that something that we should It seems like that has worked well in your view. Is that something we should expect to continue as we think about 2027 and 2028 as well?

Speaker 3

Yeah, I will take that one, Brian. Thanks for the question. Yeah, we spoke to the 110 basis points of margin in terms of the third quarter of 2026 versus 2025. I think to Mark's point, and he mentioned it, but when we really invested in those, what we see as a giant opportunity, the afternoon and evening, particularly with the extended hour dayparts. Then again, you look at some of our openings, and we had more travel teams, and we had bigger grand opening teams, there was certainly some investment there in terms of labor. So, while the 110 basis points was more than you guys have typically seen from us in the past, we want to make sure we are showing up, supporting the team, and providing a great guest experience.

Speaker 3

I think that 110, we really see an opportunity for that to come down some, especially in those afternoon and evening dayparts as we continue to build the sales and leverage those sales into better margin. But I think generally, when you think about the fourth quarter margin, it is probably going to look pretty similar to the third quarter. Then again, when we look at the margin for the whole year 2026, we had said it before, but we ended 2025 at a 29.2, and we expect to be very similar to that this year as well.

Operator

Our next question is from Marshall Pittman with Jefferies. Please proceed with your question.

Speaker 9

Hey, guys. Great quarter. Just another follow-up on the labor line, partly, but it seems like compared to a few months ago, the opening cadence was perhaps a bit delayed than initially expected. Just wondering how much of an impact that had, not just on margins, but on revenues, and the full-year guide being reiterated given those strong comps.

Speaker 3

Yeah. Thanks for the question, Marshall. In terms of opening cadence, we've actually gotten better each quarter throughout each quarter. The third quarter, we were better than the second. I think, even going back to our comments in the past, more reverse build-to-suit stores giving us the chance to really be more predictable with the openings and the cadence there. In terms of overall revenue, 30% revenue growth in the third quarter, we were very pleased with that. We reiterated the $255 million-$257 million in sales for the year, and we expect to have a great fourth quarter as well. In terms of the comp 5.8%, we expect to have a really strong fourth quarter comp in comparison because we saw that momentum build through the third quarter.

Speaker 3

Really, I mentioned it in the remarks, but those incremental stores that we've added certainly are later in the quarter, and so there's not going to be a huge lift in terms of our benefit in terms of sales in the fourth quarter, but it's really going to get us off to the right start and benefit 2027.

Speaker 9

Great. Just a quick follow-up. Is there any update on your wage inflation rate and commodity inflation, which seems to be perhaps a bit benign, besides coffee still elevated? Is that all fair?

Speaker 3

Yeah. We haven't really seen throughout the entire year, and even the third quarter, any meaningful pressure in terms of inflation. The supply chain, we feel is very steady for us. I think our procurement teams are doing a great job balancing both purchasing of beans and everything else in that regard. No meaningful pressure. I mentioned earlier in the year, our coffee is about 3% of our sales, coffee purchases, and we've seen some relief there this year. I think I had mentioned in the past first quarter, we expected maybe 50 basis points in the second half of the year. We've seen about 30 basis points of that, so it's gotten better, and we're still lapping higher costs from a year ago.

Speaker 3

In terms of cost, inflation, labor's been pretty consistent every year the last couple of years, that 3%-4%, and then overall, cost of goods and supply chain, we feel strongly about.

Speaker 9

Thank you.

Operator

We have reached the end of the question-and-answer session. I would like to turn the floor back over to Mark Davis for closing comments.

Speaker 2

Thank you. I would start with a year ago that Black Rock became a public company, and I am really proud of what we have accomplished in that time. We have delivered this progress against a really tough consumer backdrop, with guests being highly selective about where they spend. They continue to choose Black Rock, and I think when you think about that, and again, the health of the consumer, it is obviously more challenging than it was a year ago, but I want to make sure that everybody hears this. When you think about our same-store sales in quarter one, we were at 5.2%, and the two-year trend was 14.4%, which was really strong.

Speaker 2

As you think about it as an investor, and again, the idea that you want to see that trend continue to get stronger, in quarter two, we were at 4.2%, but the two-year was a 15.1%, so up again from a 14.4%. If you thought about quarter three, we again just ran a 5.8% with a two-year of a 16.6%, and so 14.4%, 15.1%, 16.6% on a two-year. If you thought about how do we want to grow those same-store sales, we want to do it through transactions. Again, transactions were negative 0.6% in the first quarter with a two-year stack of 5.5%. In the second quarter, they were negative 2% with a two-year stack of 8.4%, and again, both of those were lapping the loyalty rollout.

Speaker 2

As everybody is aware, Rod and I tried to make sure that everyone knew how July looked on transactions. We were at 1.7%, and for the quarter, ended at 2.4%, which again shows a really strong trend, and that third quarter, again, with a two-year of 8.5%. I think the important thing that I want everybody to hear is we reaffirmed our guide, and if you do the math of the first three quarters, you will see that even with that strong trend on same-store sales and same-store transactions, we believe that the fourth quarter will be our strongest in both same-store sales and same-store transactions, which is exciting. Finally, I just want to thank our team members, our customers, and our stockholders for their continued support. We are beyond grateful for your trust, and we look forward to updating you on the progress next quarter.

Speaker 2

Thank you, and have a great day.

Operator

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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