More than one-third of restaurants are above 2019 levels so far in April.
The spring season, filled with vaccinations, stimulus checks, and reduced dining restrictions, has triggered a surge in the restaurant industry.
For BJ’s Restaurants, the benefits have been remarkable. In January, the chain earned $66,000 in average weekly sales per restaurant as strict guidelines remained in place. This includes California, which houses 62 of the brand’s 209 open restaurants. It wasn’t until later in the month that California lifted stay-at-home orders.
In February, average weekly sales per restaurant lifted to $76,000 as outdoor seating became available in California. The momentum continued in March, but at a quicker pace. Average weekly sales per unit soared to $97,000, aided by the opening of dining rooms in the Golden State. Sales increased 50 percent in the span of Q1.
So far in April, restaurants are averaging $102,500 per week, which means same-store sales are within 7 percent of 2019 levels. More than 33 percent of restaurants actually have higher sales compared to the same period two years ago. These stores are accomplishing this with 70 percent seating capacity and late-night business still lagging behind.
Those particular obstacles have been offset by an off-premises channel that’s still bringing in $25,000 per week on average—still more than double pre-COVID numbers. In addition, outdoor patio seating has added roughly 10 percent to the effective seating capacity.
“Generally, I think what we see is those [restaurants] are in areas that have pretty loose restrictions, so that's given us, obviously, the ability to have greater capacity than other areas,” CEO Greg Trojan said during the brand’s Q1 earnings call. “And in some of those locations, like we have a few here in California that are comping on the positive side as well, and those generally have pretty large exterior or external patios right now that are temporary patios.”
“And then there's been a little bit of some late-night that's come back in there,” he continued. “And then these are restaurants that have really done some nice job on the off-premise. … And honestly, it's very mixed, as well. Like I said, there's some California in there. There's Texas in there. There's Arizona. It's a very broad geographic.”
To further explain the sales hurdles, BJ’s said some jurisdictions in Washington and Oregon have reduced available capacity from 50 percent to 25 percent. In markets where all restrictions have been eliminated, BJ’s is still practicing social distancing and keeping capacity to 70 percent to 75 percent in the near term.
In regard to late-night business, it usually earns $12,000 to $13,000 in average weekly sales per restaurant, or a 10 percent to 12 percent mix. CFO Greg Levin said vaccinations, stimulus checks, and the NCAA tournament gave customers a reason to stay out later in Q1, but the late-night daypart still has the largest decrease on a percentage basis year-over-year.
BJ’s believes sales will be range-bound until capacity returns to the 90 percent level and late-night returns to a better volume, which isn’t expected to happen until the latter part of 2021.
“Our weekly sales average, as much as we like where they are right now, I think they're a little bit range-bound until this next level of improvement, and improvement meaning more vaccines and the COVID cases come down,” Levin said.
The chain’s two biggest projects right now are the beer subscription program and the new virtual brand, Slo Roast, which are intended to boost in-restaurant sales and off-premises, respectively.
In March BJ’s expanded the beer subscription program to a majority of stores in California. As part of the Beer Club, customers pay $30 every two months to receive perks like exclusive beers, a free appetizer, free Pizookie, large pizza, and $5 growler refills to-go. So far, the subscription program is driving incremental visits and profit. Looking ahead, there has been progress with liquor laws that would allow BJ’s to offer the program in big markets like Florida and Texas. As of now, BJ’s has the ability to place it in roughly 70 percent of its stores, or in the 150-unit range.
“Right now, the Beer Club is showing incremental visits to us, and they tend to use the perks and spend up,” Levin said. “And it's, in that case, driving incremental revenue.”
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Slo Roast was expanded into roughly 30 restaurants across California and Texas earlier in April. Survey results have shown “top-tier” satisfaction scores and a “high level” of guest incrementality, Trojan said. BJ’s has used learnings from earlier tests to make adjustments to the menu, and the chain is now testing price points to optimize sales and profits.
BJ’s should be in a position to establish a broader rollout in the coming months.
“It doesn't have as much cannibalization against our own product in the analysis that we've done,” Levin said.”But we've kind of held back on giving specifics as we want to see how these things continue to grow over time in the test period.”
Levin noted that the real opportunity for BJ’s is not so much returning to 100 percent sales volume, but 105 percent or 110 percent compared to pre-pandemic figures. He said they’ll accomplish that by holding on to off-premises and continuing to grow the beer subscription club.
“I think that gives us really this opportunity to take sales above the $110,000 weekly sales average that was kind of our historic trend line,” Levin said. "And when we start to bring that above there, we're ultimately going to bring down more dollars down to the bottom line, and dollars is what we take to the bank. So I think there's that opportunity for more dollars per restaurant week coming to us as we grow our sales volumes.”
Though the environment is still hectic, BJ’s hasn’t taken its eyes off development. The restaurant is on track to debut two stores in Q2—one in Merrilville, Indiana, and another in Lansing, Michigan. A third location will open in Richmond, Virginia, in Q3. The long-term goal, according to Levin, is to return to minimum unit growth of 5 percent, which would be around 10 restaurants annually. Going into 2023, the idea would be to move into the low teens. BJ’s has an overall goal of reaching at least 425 domestic restaurants.
BJ’s has opened 18 restaurants in a year before, so Levin knows it’s possible. However, he emphasized that BJ’s will prioritize quality over quantity.
"We want to make sure we always have great quality sites and are building that pipeline,” Levin said. “And really, we've said this before, and I think there's a good opportunity for us to exceed this. But that would be somewhere in that 5 percent, 6 percent, 7 percent unit growth, start thinking about 2 percent to 3 percent comp sales and you get yourself to around 10 percent revenue growth. And then our ability to leverage in the middle of the P&L allows us to drive EBITDA earnings growth into the low-double digits.”
First-quarter revenues decreased 12.3 percent to $223.3 million year-over-year, and same-store sales declined 13 percent. BJ’s swung a net loss of $3.1 million compared to a net loss of $4.3 million in 2020, and earned an adjusted EBITDA of $12.7 million, compared to $15.1 million last year.