was due to stores opened in September through December 2004 and $25 million was due to stores opened in 2005. Average store sales for the trailing 12-month period
ended September 30, 2005 increased 3.0% to $1,406,000 from $1,365,000 for the trailing 12-month period ended September 30, 2004, driven primarily by comp store sales growth of 8.7% that
reflected increasing nationwide awareness of our brand, which also enabled new stores to open with higher average sales. A substantial majority of the comp store sales growth was due to an increase in
the number of transactions, and the remainder was driven primarily by menu price increases.
Food, Beverage and Packaging Costs. Food, beverage and packaging costs increased due to the increase in restaurant sales
because we used more ingredients and packaging as a result of the addition of new stores in the last three months of 2004 and the first nine months of 2005, comp store sales increases and increasing
sales at 35 stores opened in the first nine months of 2004 that were not in operation for 12 full months in the first nine months of 2005. As a percentage of total revenue, food,
beverage and packaging costs decreased slightly to 32.3% in the first nine months of 2005 from 32.5% in the comparable 2004 period. This decrease was due primarily to a decline in raw ingredient costs
and menu price increases, partially offset by increased fuel costs.
Labor Costs. The period-to-period increase in labor costs was due to the growth in our store base, as
our average number of hourly employees increased to about 9,900 in the first nine months of 2005 from about 7,900 in the comparable 2004 period. The effect was mainly due to the impact of staff hired
for stores opened throughout 2005 and the last quarter of 2004. As a percentage of total revenue, labor costs decreased to 28.5% in the nine first months of 2005 from 29.6% in the comparable 2004
period, largely due to improved employee efficiency resulting from an increase in the number of transactions, which did not require a corresponding increase in staff, and a gradual improvement over
time in staffing our stores with the most appropriate number of crew members for each store.
Occupancy Costs. The $8.3 million period-to-period increase in occupancy costs was primarily
due to an increase in rental costs relating to the opening of new stores, inflationary pressures on rents and the opening of stores in more expensive locations such as New York City. As a percentage
of total revenue, occupancy costs remained flat at 7.6%.
Other Operating Costs. The $13.3 million period-to-period increase in other operating costs resulted primarily from
the opening of new stores in the last three months of 2004 and the first nine months of 2005. As a percentage of total revenue, other operating costs declined to 13.1% in the first nine months of 2005
from 13.4% in the prior period, primarily due to the effect of higher average store sales on a partially fixed-cost base and improvements in store operations over time.
General and Administrative Expenses. The increase in general and administrative expenses primarily resulted from hiring more
employees as we grew. As a percentage of total revenue, these expenses decreased to 8.2% in the first nine months of 2005 from 8.5% in the comparable 2004 period, due primarily to the effect of higher
average store sales on a partially fixed-cost base.
Depreciation and Amortization. Depreciation and amortization increased primarily due to stores opened in the last three
months of 2004 and the first nine months of 2005. As a percentage of total revenue, depreciation and amortization decreased from 4.6% to 4.5%.
Pre-Opening Costs. Pre-opening costs decreased principally because there were fewer store openings in
the first nine months of 2005 than in the comparable 2004 period.
Loss on Disposal of Assets. The increase of $0.4 million in loss on disposal of assets was largely due to additional
write-offs associated with investigating potential store sites that we considered but subsequently rejected, as well as write-offs of obsolete equipment as a result of software