The company has taken a conservative approach to pricing, opting for smaller and more frequent actions to limit guest impact. With commodity and labor costs up approximately 30 percent from 2019, menu pricing will continue playing an important role in the brand’s margin growth going forward.
BJ’s took an additional 3.7 percent of pricing in January and is finalizing plans to take another 2 percent or more this spring. It will have another opportunity for additional pricing this fall. Adding that up, Levin said the company could be in the “8 percent-plus” range for the full year.
To date, BJ’s hasn’t seen any meaningful changes pointing to a slowdown in spending at its restaurants.
“Our check-driving incidents for add-ons such as appetizers, drinks, and of course, our Pizookies, remain above pre-COVID levels,” Levin said. “We are not seeing negative mix shifts toward lower-priced or discounted items.”
Along with cutting costs and raising prices, BJ’s is focused on growing margins by driving sales. To that end, the company is pivoting its capital allocation strategy toward high ROI initiatives, namely its remodel program.
BJ’s remodel initiative is centered around upgrading the bar area and expanding seating capacity with the addition of three booths. The company plans to expand the initiative to 30 restaurants, or approximately 15 percent of its restaurant base, in 2023. Those investments will be evenly split between the bar and the booths, with some restaurants overlapping and receiving both upgrades.
At $500,000 to $700,000 per store, redoing the bar carries a higher price tag but generates more sales than adding booths alone, Levin said.
“The three additional booths cost only about $150,000,” he said. “The amount of incremental sales there, while successful and high in the sense that it gets us a good return on investment, doesn’t drive the same type of return that redoing the bar does.”
BJ’s opened six new restaurants in 2022, including three in Q4. It ended the year with 216 restaurants, compared to 212 at the end of fiscal 2021.
Average weekly sales for the class of 2022 restaurants were 20 percent higher than the rest of the BJ’s system in January. While new stores are delivering strong results, the cost of construction has moved higher than the company expected coming out of the pandemic. Last year, the cost for new stores was in the mid $6 million range. Now, bids for new stores are coming in at around $7 million.
“We are trying our best to bring those costs down,” Levin said. “And while our sales-to-investment ratio is actually pretty good at one-to-one, because our new restaurants have opened up really well and we are really pleased with them, we felt that the investment cost for our new restaurants versus having these high ROI remodels, this year it made more sense to pivot.”
The company plans to build five new restaurants in 2023, including moving one store to a new location in the same trade area. It will close two older restaurants in the first half of the year.
Full-year revenues grew 18.1 percent to $1.3 billion in fiscal 2022. Excluding the extra operating week, revenues were up 15.7 percent. Net income was $4.1 million, compared to a net loss of $3.6 million in fiscal 2021. Same-store sales were up 14 percent for the year.
Comps already are accelerating for Q1, driven by growth in dining-room traffic and the additional 3.7 percent menu pricing. If year-to-date sales trends continue, Q1 comps should be in the high-single digits, Levin said.