GEN Restaurant Group NASDAQ: GENK said first-quarter traffic remained pressured by macroeconomic headwinds, including higher fuel prices that management said weighed on discretionary spending, particularly in California, where the company has a large store base.
Chairman and CEO David Kim said same-store sales fell approximately 8.8% in the first quarter of 2026, an improvement from an 11.7% decline in the fourth quarter of 2025. Kim said about 45% of the company’s U.S. restaurants are in California, where gas prices have climbed to more than $6 per gallon.
“The economic challenges continued to impact customer traffic for all restaurant businesses,” Kim said, adding that higher fuel prices “reduced customer discretionary spending.”
GEN Slows Restaurant Development and Forms Chubby Cattle Partnership
Kim outlined several changes aimed at improving the company’s value proposition and profitability. In March, GEN entered into a partnership with Chubby Cattle International involving five restaurants. Under the arrangement, GEN will own 49% and Chubby Cattle will own 51% of the restaurants, which will be operated under the Chubby Cattle brand.
Kim said the joint ventures differ from restaurant closures because the locations will remain open and continue generating value. The first two conversions occurred on May 1, 2026, with two more scheduled for June 1 and the final conversion planned for August 1.
The transaction resulted in a $4.5 million write-down. Kim said the company anticipates no further liability from the deal and expects the five restaurants to generate EBITDA going forward, with GEN entitled to 49%.
GEN also said it has slowed restaurant development to five to seven openings for the full year of 2026 and suspended construction on six additional stores. Kim said the move reflects “disciplined capital allocation” intended to strengthen the balance sheet and reduce near-term expenses.
Margins Pressured by Food Costs and Lower Sales
Chief Financial Officer Tom Croal said cost of goods sold rose to 38% of company restaurant sales in the first quarter, compared with 33.6% in the prior-year period. He attributed much of the increase to inflationary cost pressures, along with more new restaurants in operation and a smaller effect from the company’s premium menu.
To offset higher meat prices, GEN implemented a $1 price increase at most restaurants during the quarter, which Croal said equates to an overall price increase of about 2.5%.
Payroll and benefits were relatively flat as a percentage of company restaurant sales, increasing to 32.1% from 31.7% a year earlier. Occupancy expenses rose to 10.7% of company restaurant sales, up 184 basis points from the first quarter of 2025, primarily due to higher rent at newer locations and lower same-store sales. Other operating expenses increased to 12% of company restaurant sales, up 169 basis points from the year-ago quarter.
General and administrative expenses, excluding stock-based compensation, were $6.2 million, compared with $5.7 million a year earlier. Croal said the increase was primarily due to marketing and professional fees.
GEN reported a net loss before income taxes of $7.5 million, or $0.22 per diluted share of Class A common stock, compared with a net loss before income taxes of $2.1 million, or $0.06 per diluted share, in the first quarter of 2025.
On an adjusted basis, the company reported an adjusted net loss of $4.5 million, or $0.14 per diluted share, compared with adjusted net income of $1.4 million, or $0.04 per share, in the year-ago quarter.
Restaurant-level adjusted EBITDA was $4 million, or 7.4% of total revenue, compared with $9 million, or 15.6%, in the first quarter of 2025. Total adjusted EBITDA was negative $3.2 million, compared with positive $1.2 million a year earlier.
Company Highlights Menu, Loyalty and Digital Initiatives
Kim said GEN is pursuing several operating initiatives to improve restaurant-level results. These include streamlining the menu in response to elevated food costs, enhancing restaurant manager incentive programs and testing new boba and soju drinks. He said the new beverages have shown promising sales during their launch.
The company is also exploring a new digital platform to improve the online customer experience and plans to roll out its GEN loyalty program in the second quarter. Kim said GEN has begun accepting cryptocurrency payments and is preparing to launch an enhanced e-commerce website with a broader selection of GEN-branded products.
In response to an analyst question about quarter-to-date trends, management said sales declines were similar to the first quarter, with continued pressure on consumers from fuel costs, especially in California. However, management said the company has seen “a lot of improvement” on the food cost side.
Retail and CPG Expansion Becomes a Focus
GEN also emphasized growth in consumer packaged goods, which management described as a key area of expansion. Kim said the company’s Costco gift card program has generated cumulative sales of more than $30 million since inception.
In October 2025, GEN created a new division to develop and sell CPG products to grocery stores. Kim said initial testing at more than 30 Southern California locations exceeded expectations, and the company is now confident in an estimated run rate of more than 2,000 supermarket locations across the country by the end of 2026.
The company’s retail lineup includes 56 SKUs across core frozen meats, beef jerky, frozen meats and sides, snack chips, sauces and seasonings, ready-to-drink beverages and soju sold under the GENJU brand. Kim said GEN has secured CPG placement with BevMo! and that Albertsons is launching a regional test of the company’s full shelf-stable product lineup across 150 stores at the end of May.
Kim also discussed Costco-related retail activity, including a roadshow demonstration series in Oregon, Washington, Alaska and Texas featuring ready-to-cook marinated meats. Separately, he said GEN received its first direct Southern California and Hawaii regional Costco purchase order, securing freezer aisle placement for one ready-to-cook marinated meat SKU in approximately 40 warehouse locations.
Kim said the company estimates its CPG products could be carried in 7,000 to 8,000 locations by the end of 2027. He reiterated that GEN believes the business can reach a run rate of more than $100 million in annual revenue in as soon as three years, with projected EBITDA margins in the high teens after slotting fees and promotional marketing investments.
Liquidity and Outlook
As of March 31, GEN had approximately $4.4 million in cash and cash equivalents, along with $15.5 million available under its revolving credit facility. Croal said the company expects to use a portion of the facility this year as it continues to open restaurants and grow its grocery initiatives.
Croal reiterated that GEN’s balance sheet includes $164 million in lease liabilities under ASC 842 lease accounting standards, which he said are not long-term debt but the accounting recognition of future lease commitments. He said those liabilities are offset by $140 million in operating lease assets.
For 2026, GEN expects to open five to seven stores, generate full-year revenue of $215 million to $225 million and achieve restaurant-level adjusted EBITDA margins of 15% to 15.5% in the second half of the year. Croal said the company anticipates reaching an annual revenue run rate approaching $250 million by the end of 2026.
About GEN Restaurant Group NASDAQ: GENK
GEN Restaurant Group, Inc, operating as Gen Korean BBQ House, is a restaurant operator specializing in an all-you-can-eat Korean barbecue dining concept. The company offers patrons a hands-on grilling experience with a selection of premium meats, seafood, and vegetables cooked tableside, alongside traditional Korean side dishes and beverages. Gen Korean BBQ House locations feature modern décor and a fast-casual service style designed to appeal to a broad demographic of consumers seeking experiential dining.
The company's restaurants serve a core menu of marinated and non-marinated proteins, including beef, pork, chicken and plant-based alternatives, complemented by signature banchan (side dishes), sauces and dessert offerings.
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