Rocky Mountain Chocolate Factory, Inc. Q1 FY2026 earnings call

Jeff Geygan discussed stabilizing the business over the past year, shifting to execution mode. Supply chain initiatives included waiving freight charges for franchisees/licensees, shifting to a flat monthly fee program for freight, product price adjustments, and ERP/POS system adoption. New store development: opened Charleston store, construction starting in Chicago, lease negotiations. Brand refresh: new packaging, signage, e-commerce relaunch. Team aligned, franchisees better supported with tools/insights, and momentum building.

Total revenue for the quarter was $6.4 million, essentially flat compared to the prior period. Product sales were $4.7 million compared to $5.3 million last year, and franchise and royalty fees were $1.7 million compared to $1.1 million. Total product and retail gross profit was $0.3 million compared to a negative $0.3 million. Costs and expenses were $6.5 million, down from $8 million last year. Net loss was $0.3 million or a negative $0.04 per share compared to a net loss of $1.7 million or negative $0.26 per share. EBITDA for the quarter was $2 million compared with a negative $1.4 million last year.

First quarter showed margin improvement and positive EBITDA, indicating the strategy is taking hold. Expect trend to continue in fiscal 2026, benefiting from margin discipline, strong franchisee support tools, and cost efficiencies.

Q: What early indicators are you watching to evaluate whether the flat fee freight charge is driving the intended shift in franchisee ordering behavior?

A: We're able to see order frequency, which under the previous scheme had started to fade, but by waiving the fee, we encouraged more frequent ordering which we can see through ERP and POS systems.

Q: As the ERP rollout stabilizes, what processes or decisions do you expect to look materially different 6 months from now?

A: The ERP data will give great insight into manufacturing efficiencies, order frequency, profitability and other issues, instrumental in decision-making across virtually every department.

Q: How does your online strategy differ from the past and how will success be measured?

A: The new e-commerce site is more elegant, contemporary, with improved user interface. Results will speak for themselves and be reported in the future.

Q: What operational levers are most likely to drive continued EBITDA expansion?

A: Improved pricing, SG&A discipline, factory level efficiencies, and continuing margin discipline and strong franchisee support tools.

Q: Could you talk about your capital needs, the need to raise money to fund your expansion?

A: Conversation ongoing with the Board, presently not planning to raise capital, but subject to Board review; likely for working capital.

Q: How are you developing the muscle to bring in new franchisees and improve processes for current franchisees?

A: Look to existing franchisees first, have sources for new franchisees; employed business consultants to visit stores, implement annual business plan reviews, use POS data to provide insights.

Q: How wide is the range of pricing variation now that you have data?

A: Franchisees have discretion to set prices, varies by location (high-traffic tourist vs. urban), we challenge them to set optimal prices balancing demand and profitability.

Q: Any color on why franchise and royalty fees were up?

A: Different pricing structures, more same-store sales generating higher royalty, and some catch-up on old collections.

Q: Any thoughts on the timing of permanent leadership?

A: Conversation ongoing with the Board, but no specific timeline yet